Advancing worker-centred trade in the 2026 CUSMA review

The labour chapter of the Canada-U.S.-Mexico Agreement (Chapter 23) contains a number of significant developments compared to the labour provisions in any previously negotiated Canadian free trade agreement, including the North American Free Trade Agreement (NAFTA) and its labour side-agreement. An assessment of the functioning of these new provisions must take into account the CUSMA labour chapter improvements themselves, the important context of substantive labour law reforms in Mexico, and an account of labour-related CUSMA disputes to date.

The CUSMA labour chapter requires the parties to adopt and maintain robust labour standards in statutes, regulations and practices complying with the International Labour Organization (ILO) Declaration on Fundamental Principles and Rights of Work, as well as minimum wages, hours of work, and occupational health and safety protections (Article 23.3). The agreement also requires the parties to refrain from weakening or derogating from the enforcement of labour regulation in a manner affecting trade or investment (Article 23.4).

Chapter 23 also removes the obligation found in previous trade deals that required substantive violations of labour rights be committed through a “sustained and recurring course of action or inaction,” which had the effect of limiting the kinds of labour cases that could be filed.¹ Finally, while violations of labour rights must still be “in a manner affecting trade,” CUSMA now reverses the onus of establishing this connection; the agreement presumes labour violations will affect trade until the responding state can prove otherwise (Footnote to Article 23.4). CUSMA also contains new prohibitions against importing goods made by forced labour (Article 23.6), and new commitments related to violence against workers (Article 23.7), migrant workers (Article 23.8) and workplace discrimination (Article 23.9).

However, the most significant improvements over NAFTA relate to the enforcement of these labour rights and standards. Unlike NAFTA and many Canadian trade deals, labour disputes can be addressed under the main treaty dispute resolution mechanism in CUSMA, as long as the disputing parties have first attempted to resolve the issue through consultations (Article 23.17). This responded to broadly shared criticism of NAFTA’s labour side-accord, which “lacked sanctions for non-compliance, and rested on the requirement that each state enforce its own labour laws, rather than establishing common higher standards, and thus was an unpromising site for promoting labour rights in general, or the rights of women and gender-diverse people specifically.”²

Furthermore, the parties to CUSMA agreed to a new and innovative dispute resolution protocol called the Facility-Specific Rapid Response Labour Mechanism (Annexes 31-A and 31B). This new instrument (the “RRM”) provides a new complaint process when there is a “denial of rights” at a Mexican facility covered by the mechanism. Under the RRM, a “denial of rights” is limited to the denial of the right to freedom of association and collective bargaining.

The application of the RRM is, for all intents and purposes, limited to Mexico. The RRM can only apply in Canada or the U.S. if there is a denial of rights under an enforced order of the Canada Industrial Relations Board (the regulator of workplace rights in the federal jurisdiction in Canada) or the National Labour Relations Board (the federal labour dispute regulator in the U.S.) (see footnote 2 in Annex 31-A and 31-B). Neither of these scenarios is ever likely to occur.

Further, the RRM only applies at “covered facilities,” defined as a facility in a “priority sector” that produces goods or services traded between parties or competes in another party’s territory. A “priority sector” includes the production of manufactured goods, the supply of services, or involves mining. As a result, the RRM does not apply to most collective bargaining parties in Mexico.

The RRM provides an expedited complaint and adjudication mechanism in which complaints are investigated within 45 days and resolutions must be reached in a timely manner. A review panel may be appointed if no resolution is reached. The RRM panel has the authority to conduct onsite investigations and verifications, after which it has 30 days to make a determination.

Finally, the RRM also contains the possibility for real remedies. Upon delivering a complaint, the complaining party may delay the settlement of customs accounts related to goods from the covered facility. Remedies for violations can include the suspension of preferential tariff treatment or the imposition of penalties on goods or services from the covered facility. If the signatory is found to have committed repeated violations, the complainant can deny entry for goods produced at the facility. This provides a powerful incentive for the corporation that operates the covered facility to comply with the process.

Overview of Mexican labour law reform

For many decades, worker and trade union freedoms in Mexico have been undermined by so-called protection unions and contracts, which saw often corrupt employer-friendly unions “own” collective agreements without any consultation or involvement with the workers themselves. This system was aided and abetted by a corrupt and ineffective Mexican labour relations bureaucracy. The NAFTA side accord did little or nothing to address this entrenched labour relations system.

Change has occurred in the Mexican labour sector through a combination of domestic advocacy from the independent labour movement and its allies, and external pressure from its trading partners. Annex 23-A to the CUSMA labour chapter required that Mexico pass and implement a number of reforms to its labour laws to enhance the associational and collective bargaining rights of Mexican workers and unions. The labour law reforms mandated by Annex 23-A were adopted in 2017 and 2019, and the implementation of those reforms between 2019 and 2023 provides an important context to any assessment of the value of the new CUSMA labour provisions.³

Mexico enacted major amendments to its Federal Labour Law on May 1, 2019 to implement reforms to the Mexican Constitution adopted in 2017 in response to earlier pressure. The reforms addressed a number of longstanding obstacles to labour justice in Mexico, including protection contracts, the lack of democratic governance in some labour unions, and the lack of independence of government institutions responsible for labour relations and labour justice.

The May 2019 reform called for a four-year transition to fully implement the new labour justice system. The key transition mechanism required that all existing collective agreements must be reviewed and voted upon by workers at least once prior to May 2023,⁴ a deadline which was extended to July 31, 2023.⁵ Under this process, the incumbent union was required to schedule a legitimation vote, with at least 10 days notice to the affected workers. This process was to be combined with new union democracy procedures aimed at ending the decades long prevalence of protection unions in Mexico.

Although it is estimated that in that four-year period about 30,000 collective agreements were subject to legitimation votes of varying quality, it is likely the case that fewer than 20 per cent of existing contracts have gone through this process. Moreover, the legitimation processes that did occur came under heavy criticism, reflecting prior corrupt practices.

The question that arises is what will happen to the 80 per cent of collective agreements that have not been legitimated. The answer appears to be that all of those collective agreements are nullified and the workers covered by those agreements shall find themselves without collective bargaining coverage. Moreover, there have also been numerous challenges and problems in respect to the administration of the new labour reforms in Mexico, including the certification of vote results and the speed with which applications are addressed.

More generally, the ongoing implementation of Mexican labour law reforms, which form a key context to the rapid-response mechanism cases filed so far, have led to improvements in labour rights in Mexico, but have been subject to significant, continuing and systemic barriers to effective implementation.

The Mexican labour law reforms have had much more limited positive impact than what was hoped for. Mexican independent trade unions have reported systematic problems in labour adjudication procedures, lack of funding from the state in the implementation and adaptation to the new labour relations regime, and continued influence of company union federations and compromised labour relations actors, including adjudicators.

In short, Mexico still faces many challenges in the field of labour rights, particularly in connection with the rights to freedom of association and free collective bargaining.

Labour cases brought in the United States

Since CUSMA took effect on July 1, 2020, the vast majority of the complaints under the labour chapter have been filed by the United States against Mexican facilities under the rapid-response mechanism. Canada has filed one case involving a Mexican facility, and there have been no cases filed against Canadian or U.S. facilities for reasons already mentioned.

As of April 10, 2024, the United States had accepted 22 cases for review alleging a denial of workers’ rights in Mexico, triggering the RRM mechanism.⁶ It is not possible to summarize all 22 cases here, although there are a number of good sources that have done so including the United States Trade Representative web page.⁷ The Maquila Solidarity Network has also prepared an excellent summary of all cases filed up to December 2023.¹ Of the 22 cases accepted to April 2024, five had not yet been resolved or litigated and were in the process of being investigated as this report was concluded.

Of the cases accepted for review by the U.S., several patterns emerge. First, a substantial majority of the cases, including the first eight, have come from the Mexican auto or auto parts sector. In the last year or so, a number of cases have emerged from other sectors of the Mexican economy. One case came from the rubber sector (Goodyear) and another from the broader manufacturing sector (mining and construction equipment-maker Caterpillar). In addition, one case has been accepted from the garment sector, one from the airline sector, and one case from the service sector (a call centre in Hidalgo Mexico). Finally, a case accepted in February 2024 emerged from the food processing sector in Mexico.

Second, the facts of the cases also reveal certain common elements. The substantial majority of the early cases (12) involved freedom of association disputes between authentic trade unions and protection unions connected to the Confederación de Trabajadores de México (CTM). Seven of those cases revolved around disputes related to legitimation votes connected to the labour law reform process. Nine of the early cases led to successful election results for authentic trade unions in Mexico either through the legitimation vote process or a certification vote.

Finally, of the 17 cases that have so far been concluded, 12 have been resolved through formal settlement agreements, while two have been concluded following successful election results (many cases involved both agreements and successful election results). Further, according to an April 10, 2024 press release from the United States Trade Representative: “Eleven cases included backpay to workers, nine included reinstatements of workers…, and many resulted in successful negotiations for higher wages, workers’ rights trainings, and improved policies at the facilities.”⁹

Only two cases so far have not been resolved and resulted in RRM dispute settlement panels being appointed. The first case involves the complaint by the Mexican Mining Union (Los Mineros) over a longstanding strike at the San Martin Mine operated by Industrial Minera Mexico (IMMSA). That panel heard several days of evidence culminating in two days of submissions from the U.S. and Mexican administrations in Mexico City on February 28 and 29, 2024. The second RRM review panel, requested by the U.S. in mid-April 2024, involves the case at the Hidalgo-based call centre.

On May 13, 2024, the first RRM dispute settlement panel issued its determination in the San Martin Mine case.¹⁰ The panel found that it did not have jurisdiction over the dispute, which dates back to 2007. Specifically, the panel found that a denial of rights under the RRM can only be applied to events that took place after the entry into force of CUSMA (July 2020) and that are subject to the 2019 amendments to Mexican federal labour law. The panel found that the events alleged by the United States did not meet those criteria.

However, the panel rejected Mexico’s argument that the San Martin Mine was not a “covered facility” because it allegedly does not export product directly to the U.S. The panel found instead that the mine produced goods that compete with U.S. exports into the Mexican market, which was sufficient for a finding under CUSMA Article 31-A.15(ii) that the mine was a covered facility.

While this initial panel decision is disappointing in that it found that the RRM did not apply to disputes that commenced prior to 2020, the panel emphasized that the San Martin mine dispute was “highly unusual and unlikely to repeat itself.”¹¹

It is worth noting that only one case has been brought under the main dispute resolution mechanism under Chapter 23 of CUSMA. In March 2021, a complaint was filed in Mexico against the U.S. government for failing to enforce its labour laws against sex-based discrimination for migrant worker women on temporary labor migration visas, violating its obligations under Article 23 of CUSMA. The complaint was filed by a coalition of organizations led by the Centro de los Derechos del Migrante.

That case concluded with the signing of a memorandum of understanding in January 2023 between the U.S. and Mexican governments which included key provisions protecting migrant workers including the prohibition of discrimination in recruitment, making gender-related data publicly available, increasing access to justice for migrant workers, and ensuring they receive their contracted compensation.

The Frankische RRM case brought in Canada

In sharp contrast to the considerable activity under the RRM in the United States, only one case has been brought pursuant to the Canada-Mexico RRM mechanism in Annex 31-B. That case, which was filed in Canada by Unifor on behalf of the Mexican union SINTTIA, involved a clear denial of rights connected to SINTTIA’s campaign to organize the workers at the German industrial pipe manufacturer, Frankische.

SINTTIA was seeking to displace the incumbent protection union following a highly dubious legitimation vote. During the SINTTIA campaign, the employer and the incumbent CTM union engaged in intimidation, coercion and terminations of SINTTIA supporters. SINTTIA filed an application with the Mexican Labour Board in November 2022, but by March 2023 no progress had been made. As a result, the complaint under Annex 31-B was filed in March 2023, and was accepted for review by the Canadian government on March 13, 2023.

The Canadian government then proceeded to negotiate a resolution to the complaint. It reached an understanding with Frankische in May 2023, paving the way for a representation vote on June 26, 2023, which was won by SINTTIA. SINTTIA was recognized as the legitimate bargaining agent, and the Canadian government closed the file in July 2023.

Assessing CUSMA labour provisions to date

There were expectations that the substantially amended labour chapter in CUSMA, together with the new rapid-response mechanism, would represent a considerable step forward in the enforcement of labour rights compared to NAFTA. Based on the initial experience over the first number of years, it is fair to conclude that some of the expectations have been met.

Most notably, when and where it applies, the RRM has proved to be a relatively expeditious and effective mechanism for enforcing labour rights in certain circumstances in Mexico. Of the cases filed so far, many have led to positive results for Mexican workers seeking to assert their right to freedom of association and collective bargaining, leading to several successful organizing campaigns, representation votes and negotiated collective agreements.

In light of the early success of the RRM, U.S. officials have noted that the RRM mechanism could become a new template for the enforcement of labour rights under bilateral and multilateral trade agreements.¹² However, in order for the RRM mechanism to become a model moving forward, several problems with the mechanism would need to be addressed.

The most common proposed reforms fall into two categories:

1. Reforms to the existing labour chapter and rapid-response mechanism

2. Reforms that would expand the scope of protections under the labour chapter and expand the application of the RRM itself

While the RRM and CUSMA labour chapter represent a major improvement over previous labour provisions in trade agreements, they can be improved and could be given greater scope to operate to create just and equitable labour outcomes.

First, the central limitation of the current RRM is that, for all intents and purposes, it only applies to Mexico. There are substantial and significant violations of the right to freedom of association and collective bargaining in both Canada and the U.S. If the RRM mechanism is to become a template for more trade agreements moving forward, both Canada and the U.S. need to amend the mechanism such that it has meaningful bilateral application in all of the signatory countries. There are technical hurdles in applying the RRM in the U.S. and Canada that should be studied and recommendations made for overcoming them.

Second, the scope of application of the RRM is too limited. By limiting its application to only violations of the right to freedom of association and collective bargaining, the RRM does not address a wide range of critical labour rights that are also affected by trade, such as health and safety, migrant work and gender-based violence. Moreover, the fact that the RRM only applies to certain “covered facilities” is a significant limitation on the usefulness of the mechanism.¹³ The scope of complaints and the scope of application to economic sectors should be expanded to better reflect the integration of North American economies.

We also wish to identify a third concern from a uniquely Canadian perspective. It is no accident that there have been 22 cases filed in the United States and only one RRM case filed in Canada. In part, this discrepancy flows from the primacy of the economic relationship between the U.S. and Mexico. However, Canada and Mexico also have a significant trading relationship, and Canadian economic actors have significant operations in Mexico in, for example, the mining and auto parts sector. Further, Canadian unions, supported by the Canadian government, have invested significant resources in capacity building in Mexico in solidarity with the Mexican union movement.

In the U.S., a substantial infrastructure was created when the RRM was implemented to ensure that these cases could be received, evaluated, investigated and, if necessary, litigated. Moreover, significant consultative bodies were created in the U.S., in collaboration with the labour movement, to ensure that this new mechanism was used to the fullest extent possible.

The Canadian government has not made any similar efforts, either to create the infrastructure or the consultative bodies. The Canadian government’s role has largely been limited to funding important union projects in Mexico—but that has led to only one case being filed. Canada should share more of the burden and show stronger commitment to the cause of improving labour rights in Mexico and in the North American region.

Recommendations

1. Expand the application of the RRM to include labour rights violations in Canada and the U.S. by amending the conditions by which claims under the mechanism can be filed for an alleged denial of rights at facilities located in the United States and Canada.
2. Confirm and expand economic sectors to which the RRM applies. At the moment only those sectors involved in manufacturing goods, supplying services, or mining are defined as “priority sectors” covered by the RRM. The priority sectors should be confirmed and expanded to include energy, the broader service sector, agriculture and migrant workers.
3. Expand the definition of a “denial of rights” under the RRM from just freedom of association and collective bargaining rights to include discrimination on the basis of gender or sexual orientation or gender expression, gender-based violence, child labour, health and safety, and derogations from minimum standards of work.
4. Clarify the meaning and intent of footnote 2 in Annexe 31-B (the Canada-Mexico RRM annex) to confirm that the RRM applies to a denial of rights at any covered facility covered by any domestic legislation. This recommendation is important given that the RRM panel in the San Martin Mine case found that the identical footnote in the U.S.-Mexico annex (31-A) limited the application of the RRM to only a denial of rights that is subject to the 2019 Mexican labour law reform.
   
5. Clarify and promulgate more specific criteria and requirements for remediation agreements that resolve RRM complaints, including content (damages, etc.), timelines, and requirements for consultation with stakeholders.
   
6. Create a Canadian consultative body, similar to the Independent Mexico Labour Expert Board (IMLEB) in the United States, which would provide a dedicated contact point and expert independent advice and guidance to the Canadian government in respect of CUSMA labour matters.
   
7. A significant barrier to Mexican labour reform is lack of capacity and support for plant-by-plant organizing in Mexico. The Canadian government could assist with measures and resources to engage in co-operative capacity building under Chapter 23 of CUSMA to help Mexico strengthen labour law enforcement and inspection systems to encourage labour law compliance. Canada could also help fund an arms’ length oversight committee with a mandate that includes data collection and training to improve labour law enforcement in Mexico.
   
8. Implement meaningful Canadian enforcement measures to comply with the prohibition on the importation of goods produced using forced or compulsory labour found in Article 23.6. Include specific obligations regarding the resources devoted to enforcement agencies and practices, and enhanced reporting and transparency obligations.