While Canadian businesses are still reacting to changes wrought by the COVID-19 pandemic, the coming into force of the United States-Mexico-Canada Agreement (the "USMCA") on July 1st, 2020 may have an equally significant impact on recovery and expansion goals throughout this decade.
The USMSCA replaces the North American Free Trade Agreement (the "NAFTA"), and marks the end of years of uncertainty regarding the future of North-American trade.
In 2017, Foreign Affairs Minister Chrystia Freeland publicly commented that Canada was entering into negotiations with a goal of modernizing the NAFTA and creating a more progressive agreement. Accordingly, the USMCA through Chapter 23 of the agreement has sought to expand member state obligations with respect to labour rights and create a more-level playing field for conducting business in North America.
This article provides commentary regarding Chapter 23 of the USMCA (i.e. the labour chapter) and the future of intercontinental labour standards and trade.
The New Framework
Prior to the implementation of the USMCA, the member states previously established intercontinental labour standards by executing a companion agreement to NAFTA, the North American Agreement on Labour Cooperation (the "NAALC").
Similar to the NAALC, Chapter 23 of the USMCA obliges the member states to adopt and enforce domestic labour laws that comply with the principles and standards outlined in the agreement. However, the USMCA requires the parties to commit to labour laws more consistent with existing international human right commitments, and attempts to strengthen compliance and enforcement mechanisms.
Chapter 23 of the USMCA directly incorporates the International Labour Organization's Declaration on Rights at Work, and obliges each party to adopt and maintain these rights in its statutes, regulations, and practices. The parties have committed to safeguarding and promoting freedom of association, collective bargaining, the rights of migrant workers, prohibitions on child labour, the elimination of workplace discrimination, and the promotion of occupational health and safety, among other rights. The parties have also committed to an explicit non-derogation clause that prohibits the weakening of such rights for furtherance of trade goals.
Even more interesting is that the members states have agreed to the prohibition on importing goods with ties to compulsory or child labor manufactured anywhere in the world. This prohibition may result in enhanced Canadian laws and regulations regarding supply chain transparency and corporate social responsibility.
There is an equal possibility that the federal government, either in isolation or in conjunction with the provinces, will seek to enhance protections for migrant workers in light of having formalized existing commitments. Canadian businesses/sectors that rely on temporary foreign workers will likely face additional requirements prior to hiring temporary foreign workers and have additional obligations when the workers arrive in Canada.
Chapter 23 of the USMCA has also already resulted in Mexico establishing new labour laws and/or enhancing existing enforcement mechanisms. If Mexico remains committed to ensuring compliance with Chapter 23, this may create a more competitive market in North America for various sectors.
Compliance and Enforcement Mechanisms
While the member states have imposed greater obligations on themselves with respect to the adoption and maintenance of labour rights, it remains to be seen whether the enforcement mechanisms under Chapter 23 will ensure a level playing-field for labour standards.
In terms of disputes between member states, Chapter 23 provides dispute resolution options intended to encourage cooperative dialogue. Should the parties however fail to arrive at a mutually satisfactory resolution regarding labour standards, they retain the ability to bring complaints before an arbitration-style review panel.
Chapter 23 also provides an avenue for third parties to file complaints regarding the non-compliance of member states. Third parties may submit written complaints to the designated contact of the relevant member state, who has the responsibilities of reviewing allegations and reporting infractions to an appointed Labour Council. The Labour Council will most likely then review and provide recommendations related to any infractions. The Labour Council is further tasked with reviewing the effectiveness of Chapter 23's enforcement mechanisms every five years.
It remains to be seen whether Chapter 23 of the USMCA, or the USMCA more generally, will result in free and fairer intercontinental trade. That being said, Chapter 23 will likely result in new laws, regulations, and practices over the course of the next decade that will impact Canadian businesses with operations in North America and global supply chains.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.