US Democrat urges stronger USMCA rules on Chinese goods, factories in Mexico

By David Lawder

WASHINGTON, March 12 (Reuters) – The U.S. must renegotiate the North American trade deal to ensure that China cannot inflict a new “shock” to U.S. manufacturers via Chinese-owned factories in Mexico, Democratic Senator Ruben Gallego urged the Trump administration on Thursday.

Gallego, who is from Arizona, wrote in a letter to President Donald Trump and his trade representative, Jamieson Greer, that in an upcoming review, the U.S.-Mexico-Canada Agreement’s rules of origin need to be strengthened to ensure that government-supported Chinese firms cannot use USMCA as a “back door” to access the U.S. market.

“Chinese exports to Mexico and Chinese firms’ direct investment in Mexico raises the possibility of another China shock occurring in the United States via goods entering through the Southern border,” Gallego wrote.

He also urged Greer and Trump to demand a minimum wage in Mexico’s manufacturing sector, where auto workers average only $5.70 an hour compared with $35.30 in the U.S. A wage floor would provide Mexican workers with more stability, addressing a root cause of illegal migration to the U.S., he said.

Gallego, who voted to approve the USMCA deal in December 2019 as a member of the House of Representatives, said that some USMCA provisions had failed to deliver on their promises and needed to be strengthened, including a $16-per-hour labor value content requirement for certain automotive components.

He also called for restoration of the Department of Labor’s Bureau of International Labor Affairs agreements to help build up Mexico’s labor standards, which were cut by the Trump administration.

The letter comes as Greer and Mexican Economy Minister Marcelo Ebrard are scheduled to start negotiations next week on a six-year review of the USMCA trade pact that was required under the agreement. 

A USTR spokesperson did not immediately respond to a request for comment, but Greer has often raised concerns about China’s investment in factories in Mexico and other countries when it has growing excess manufacturing capacity at home, particularly in the steel and automotive sectors.

Such excess capacity in China and 15 other U.S. trading partners is the focus of a new unfair trade practices investigation announced by USTR on Wednesday that is aimed partly at rebuilding the Trump administration’s tariff pressure after a Supreme Court setback.

(Reporting by David Lawder in Washington; Editing by Matthew Lewis)