What a labour dispute brought out in an international trade arena!

This is a post about a dispute adjudicated under the USMCA related to violation of labour rights between the United States and Mexico. A state to state dispute settlement, it involved the question whether certain certain labour rights were denied in Mexico which led to violation of Mexico's obligations under the USMCA.

International news about the high profile, labour related dispute that got Mexico to the dispute panel is found here.

The USTR statement on the dispute is here.

The panel findings under the USMCA is here. Fascinating discussion on what a covered facility is, how jurisdiction of the panel is determined and how labour disputes can end up in international trade dispute settlement.

The panel ultimately found that Mexico was not in violation of its obligations under the USMCA but the findings was not on the merits of the case. Though the Mines were decided to be "Covered Facility" under the USMCA, the panel found that it had no jurisdiction since the acts were not covered under the present laws of Mexico and hence Mexico had not violated its obligations under the free trade agreement.

Some observations:

1. For those free trade agreements which have labour related obligations linked to dispute settlement, a flavour of things to come. Measures that impact labour rights, labour disputes, issues of freedom of association and collective bargaining can be a subject of intense international questioning.

2. The panel decision had a fascinating discussion on whether all facilities that produce goods and services irrespective of whether they are exported to the other Party are covered by the agreement. The US did canvas this expansive definition. The panel linked it to benefits under the free trade agreement. In para 46, the panel stated that if parties are seeking special preferential tariffs, the parties are expected to follow rules - and hence there has to be a trade nexus. Either the facility should export to the other Party or the goods or services of the respondent party must compete with the goods of the other Party.

3. Another interesting discussion was on what amounts to "competition" in the trade agreement. What is the burden of proof required? Does it involve direct marketing campaigns against each other or is it sufficient to be like and substitutable goods bought and sold in the same market?

4. What is the learning for countries crafting their FTAs with different templates? Countries should be aware and fully equipped with dealing with the varied interpretations and likely consequences of having provisions that can make domestic action susceptible to international dispute settlement legal scrutiny. Some would argue that it is a good thing - in the interests of consumers and other stakeholders within the country. Some would argue it is against domestic, national business interest impacting competition.

For now, something to chew on in terms of what labour provisions can bring to the table in international trade!