When members of Congress return from their August recess, they’ll face one of the most important decisions of their political careers — whether to ratify President Trump’s new trade deal with Canada and Mexico.
The United States-Mexico-Canada Agreement (USMCA) isn’t perfect, but it’s far better than NAFTA, the pact which currently governs North American trade.
USMCA would strengthen labor protections, create jobs and discourage U.S. firms from outsourcing work abroad. Congress can do union members a favor by swiftly ratifying the new deal.
Unlike NAFTA, USMCA contains comprehensive, enforceable labor provisions. These protections will help prevent outsourcing, which costs American workers roughly 90,000 jobs each year.
NAFTA enabled giant corporations to outsource jobs. Auto companies were particularly egregious offenders. Back in 1994, when NAFTA first went into effect, the average American autoworker earned about $36 an hour in today’s dollars. The average Mexican autoworker, meanwhile, earned just $6.65 per hour.
U.S. auto companies shifted production en masse to Mexico to take advantage of this cheap labor. In 1994, auto factories employed about 100,000 Mexicans. By 2016, that figure had jumped to 767,000.
This explosive growth came at the expense of American workers. The number of Americans employed at auto factories dropped from about 1.1 million in 1994 to 940,000 in 2016. And their average wages dropped to about $28 per hour.
USMCA would combat this outsourcing in several ways.
For starters, the deal requires that nearly half of all car parts come from factories paying employees at least $16 an hour by 2023. Cars that don’t meet this threshold will be slapped with expensive tariffs. This will effectively force companies to keep jobs here rather than shipping them south of the border, where the prevailing autoworker wage doesn’t come close to meeting the $16 threshold.
USMCA also mandates that 75% of vehicle parts be made in the United States, Mexico or Canada — otherwise, companies will face tariffs. That’s up from NAFTA’s 62.5% requirement.
Taken together, these two provisions will boost demand for American-made cars and car parts. USMCA will spur an estimated $34 billion worth of investments into the U.S. automotive sector within five years.
Those investments will create excellent opportunities for American workers. In fact, over the next five years, USMCA is expected to create more than 76,000 new U.S. automotive jobs.
USMCA wouldn’t just help autoworkers. It would boost the fortunes of Americans laboring in multiple industries, especially manufacturing.
The pact gives Mexican workers the right to unionize and engage in collective bargaining. USMCA requires Mexico to create independent legal bodies dedicated to settling labor disputes in a timely manner. The deal also forces Mexico to protect workers from exploitative business practices — such as gender and racial discrimination and child labor.
As working conditions in Mexico improve and wages rise, multinational companies will have less incentive to outsource American jobs.
Unions have railed against NAFTA for three decades. Now, their allies in Congress finally have an opportunity to scrap that deal and replace it with a new agreement that protects American workers. It’d be a shame if they let the perfect be the enemy of the good.