Trade Compliance

GHY discusses changes to international trade regulations and explores cutting-edge compliance strategies.

Driving Up Mexico’s Low Wages Key to Making Progress on NAFTA 2.0

Posted November 06, 2017


Despite a growing rift between the U.S. and Canadian negotiating teams, both appear to be in agreement that the wages paid to Mexican workers are unacceptably low under the North American Free Trade Agreement.

Following a recent meeting with U.S. Secretary of Commerce Wilbur Ross, Jerry Dias, president of Unifor, Canada’s largest private sector union and an informal adviser to the Trudeau government on NAFTA labour issues, said the U.S and Canada have agreed that “addressing the core issue of low Mexican wages is a key to breaking the impasse at NAFTA re-negotiations.”

“There is a clear understanding that Canadian and American workers have both been injured by the siphoning off of manufacturing jobs to Mexico,” said Dias after the meeting. “We agreed that Canada and the U.S. must work together to pressure Mexico to drive up wages significantly or face joint retaliatory measures.”

Unifor has repeatedly called on both the Mexican government and on international corporations to end the exploitation of Mexican workers and create a level playing field for workers in all three countries. Dias and Ross believe that a united front is needed to raise Mexican living standards and forge a path to a new trade agreement, Dias added in a statement.

According to a study of the 34 member countries of the Organization of Economic Cooperation and Development, the gap between wages and hours worked is larger in Mexico than in any other member country and the nation’s average wage of $15,311 (based on purchasing power parity) consistently ranks at the bottom of the OECD’s list. Mexican autoworkers currently earn roughly $4 an hour, which is about one-ninth of average wages north of the border.

Dias has previously argued that wages in the three nations under NAFTA should be equalized, but a top Mexican union leader, Carlos Aceves del Olmo, dismissed this notion as “a pipe dream,” claiming wages in Mexico can’t be compared to U.S. and Canadian salaries.

Even so, the Mexican Employers Federation (Coparmex), which represents 36,000 business leaders accounting for almost a third of GDP, has renewed its call that the minimum daily wage be increased from its current level of 73.04 pesos per day to 89.35 pesos before the end of 2017 (from US $3.54 to $4.33 at current exchange rate). The proposed 19% boost would cover the value of the “basic basket of goods” as it is defined by Coneval, the National Council for the Evaluation of Social Development Policy.

“Outside objections to the Mexican wage differential are an obstacle for the successful negotiation of the North American Free Trade Agreement,” said Coparmex president Gustavo de Hoyos.

“It’s time to give a sign that the country is moving forward… in the right direction in the evolution of its labour market, in combating growing inequality and that it is on the route toward social development.”