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Why does Trump oppose Chapter 11, support higher wages for Mexican autoworkers?

Secretary of Economy Ildefonso Guajardo Villarreal, Foreign Affairs minister Chrystia Freeland, US Trade Representative Robert Lighthizer

While the Council of Canadians has campaigned for years against Chapter 11 – the investor-state dispute settlement provision in the North American Free Trade Agreement (NAFTA) – because it is most commonly used by transnational corporations to curb environmental laws and other public interest legislation, why does the pro-corporate Trump administration oppose it?

Initially, Trump officials used a chauvinistic sovereignty argument. In June 2017, US Trade Representative Robert Lighthizer told the Senate, “I’m always troubled by the fact that nonelected non-Americans can make the final decision that the United States law is invalid. This is a matter of principle I find offensive.”

While this may be Lighthizer’s perspective, the fact is the US has never lost a Chapter 11 challenge. The Globe and Mail has reported, “Canada has been particularly vulnerable to NAFTA arbitration suits. Since the treaty came into force some 25 years ago, U.S. companies have filed 39 claims against Canadian governments, winning or settling in eight cases that have cost taxpayers $215-million. Mexico has paid out more than US$200-million, while the United States has not lost a NAFTA Chapter 11 case.”

Subsequently, or additionally, the Trump administration argument has been about jobs. On March 21, the Canadian Press reported, “[Lighthizer] said his primary goal [in the NAFTA talks] is to steer back some manufacturing from Mexico, through several means: driving up wages in Mexico, new auto rules and weakening the investor-state protections that allow companies to sue foreign governments under Chapter 11.”

That article explains, “If an American company wants to move a plant from Texas to Mexico, and is frightened that, for example, socialist Andres Manuel Lopez Obrador might win the presidential election and discriminate against foreign companies, why, Lighthizer asked, should U.S. trade policy help provide reassurance?”

Furthermore, the Canadian Press reported yesterday evening, “Several sources in different countries say the U.S. has offered to drop its controversial demand for 50 per cent U.S. content in every car – but it comes with conditions attached. Sources say the U.S. still wants a higher level of North American content in vehicles, and is now suggesting rules that reward jurisdictions for offering salaries beyond a certain level.”

That article adds, “One American source familiar with the proposal told the Canadian Press the level in question involves incentives for a salary range between $13 and $17 an hour – which is significantly higher than the current average hourly wage [which this article reports is about $2.04 an hour] in Mexico. …The idea of driving up wages in Mexico is designed to reduce the gap in costs of production between the countries, and lessen the incentives for companies to shift jobs there.”

Lighthizer says, “The objective is to try to get wages up in Mexico – which makes the United States more competitive, but also creates customers for the United States.” A consideration here is that while unionized US autoworkers have traditionally been paid relatively well, Bloomberg has reported, “New autoworkers hired by the companies start at a wage of just $15.78 an hour.”

While Trump didn’t promise high-paying unionized auto sector jobs during the last election, he did pledge to bring auto jobs back to the US. In September 2016, the Detroit Free Press reported, “Trump has been using his free trade position to appeal to blue collar union workers in the Midwest and in states like Pennsylvania and West Virginia. ‘We will bring back your auto manufacturing business like you have never ever seen it before’, Trump said.”

The next round of NAFTA talks is expected to take place on April 8 to 18 in Washington, DC. This may well be the final round of talks before an ‘agreement in principle’ is signed by the three countries. The Trump administration has set a May 1 deadline on the talks – after which punitive steel and aluminum tariffs would be imposed on both Canada and Mexico if a deal isn’t reached.