Academic journal article Law and Policy in International Business

The Impact of NAFTA on Labor Arbitration in Mexico

Academic journal article Law and Policy in International Business

The Impact of NAFTA on Labor Arbitration in Mexico

Article excerpt

On October 13, 1994, the United States National Administrative Office (NAO) issued its response to the first complaints filed under the labor side agreement to the North American Free Trade Agreement (NAFTA).(1) THE ruling engendered immediate criticism from union and business leaders alike. The unions charged that the hearings were "pro forma political handwashing."(2)

The International Brotherhood of Teamsters and the United Electrical Workers filed complaints alleging that the Mexican subsidiaries of Honeywell, Inc. and General Electric Co. fired workers for attempting to organize unions.(3) Because most of the workers named in the complaint accepted severance pay instead of asking the Mexican conciliation and arbitration boards to determine whether the dismissals were justified, the NAO held that it could not find that Mexico failed to enforce its domestic labor laws.(4) Therefore, the NAO did not recommend that the complaints be forwarded for ministerial review under NAFTA.(5) In response to criticisms of the ruling, NAO Secretary Irasema Garza argued that the hearings had indeed been productive.(6) A look at what the hearings did and did not accomplish provides insight into the effectiveness of enforcement mechanisms under the NAFTA side accord and the ability of these mechanisms to positively affect the process of labor arbitration in Mexico.


Although NAFTA was not originally intended to specifically address labor issues, labor became a highly controversial clement of the agreement. In response to the concerns of U.S. legislators and labor leaders that NAFTA would lead to the loss of U.S. jobs and diminished workplace standards,(7) the Clinton administration negotiated a parallel agreement designed to enforce labor rights and standards.

The side agreement establishes a trinational Commission for Labor Cooperation that is designed to promote mutual cooperation in areas such as occupational health and safety, protection of children and migrant workers, general working conditions, and resolution of labor conflicts.(8) The agreement further requires that all parties enforce their own labor laws, particularly those laws dealing with occupational safety and health, child labor, or minimum wage technical labor standards.(9) Any party who believes another party has persistently failed to enforce such laws may file a formal complaint, which could lead to arbitration and ultimately the imposition of fines on the offending party.(10)

Even with the side agreement, however, U.S. labor movements continued to oppose NAFTA. For example, Teamsters President Ron Carey called the accord a "political smokescreen" and warned that it did not contain the needed safeguards to prevent NAFTA from becoming "an agreement to expand exploitation in Mexico and job loss in the U.S. and Canada."(11) Despite the great amount of debate over NAFTA's probable impact on U.S. and Mexican labor, and despite the specific provision in the side agreement for the use of arbitral procedures in resolution of labor disputes stemming from NAFTA, critics have given little attention to the effect NAFTA is likely to have on the Mexican system of labor arbitration. This Note explores the competing pressures created by NAFTA on the Mexican system of labor arbitration and assesses the likelihood that NAFTA will result in the export of U.S. arbitration procedures to Mexico. Part II of the Note describes the current system of labor arbitration in Mexico, outlining the substantive and procedural laws affecting arbitration of labor disputes and briefly tracing its history in Mexican law. In order to highlight possible strengths and weaknesses of the Mexican arbitration system, Part III discusses some comparative differences between the system of labor arbitration in Mexico and the U.S. system. Part TV explores NAFTA's provision of dispute resolution and arbitration procedures. Finally, Part V assesses the impact NAFTA is likely to have on current arbitration procedures and substantive labor law in Mexico and draws some conclusions about the future of labor arbitration in Mexico. …

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