On May 15 and 16, the second panel convened under the USMCA/TMEC/CUSMA Facility-Specific Rapid Response Labor Mechanism (RRM) held a hearing in Mexico to review the arguments of Mexico and the United States concerning worker rights at Atento Servicios, S.A. de C.V. (MEX-USA-2024-31A-01). This panel proceeding stems from the United States’ request that Mexico review the collective bargaining situation at Atento nearly a year-and-a-half ago. USTR requested the establishment of a panel more than a year ago.
The Atento situation is noteworthy for several reasons. First, this is the first state-to-state free trade agreement (FTA) panel hearing of the Trump Administration, but it is of course not a traditional FTA dispute. The RRM is a special tool under the USMCA, and this is only the second RRM panel to reach the hearing stage. Last year, another panel agreed with Mexico concerning a mining facility that there was no qualifying denial of rights (or that the panel did not have jurisdiction, depending how you view the panel’s commentary).
Second, unlike the last panel convened under the RRM, this panel is reviewing alleged labor violations in the context of the services sector, specifically in telecommunications, which creates new considerations for the penalties that the parties may impose.
Third, this panel includes one member who also served on the first panel by chance, although there are repeat players across several RRM panels currently underway. The most recent panel convened under the RRM, for instance, is made up entirely of panelists who have previously served, suggesting that perhaps some members of the roster are opting out from selection.
Let me review in brief the primary arguments of the parties concerning Atento.
Overview of the primary arguments
The Atento panel is charged with making a determination “as to whether there is a Denial of Rights” at the relevant call centers per Article 31-A.8 of the USMCA. In this instance, like the last, the United States and Mexico disagree about whether there has been a qualifying “Denial of Rights” under the terms of the USMCA.
Mexico again characterizes its position as jurisdictional: it claims that the panel does not have jurisdiction over the situation at Atento because this particular call center is not a “Covered Facility”, whereas the United States claims that the call center is a Covered Facility under the USMCA and that there are three Denials of Rights that have not been cured despite the Mexican government’s involvement with the firm.
Mexico sought during the first RRM panel proceedings and now this one to delineate a boundary that the United States cannot cross under the current language of the Agreement. Mexico has argued twice that the RRM is not a blank check for the United States to act as labor police for all of North America. Rather, the USMCA demarcates a trade-related sphere in which the two governments are intended to work together on labor matters. There is necessarily a limit to where the United States has a say. The first RRM panel agreed with Mexico on this point and drew those boundaries fairly narrowly. Here again, Mexico asks this panel to find the RRM inapplicable to the Atento call center in question.
The United States’ response is to reject Mexico and the first RRM panel’s definition of Covered Facility. Although it accepts that there is a boundary, USTR argues that this call center is covered by the Agreement and the prior RRM panel got the meaning of Covered Facility wrong.
With a broader definition in mind, the United States then goes on to argue that Mexico’s intervention at the relevant call centers to remediate the labor rights violations was necessary but not sufficient under Mexican law to remedy the workers’ collective bargaining rights. By contrast, Mexico maintains that if the panel finds that the Atento call center is a Covered Facility, there is no ongoing Denial of Rights there – anything that might have been a Denial of Rights has been remediated.
With each RRM situation that goes to a panel, the panels and the parties are forging new ground in their elaboration of the processes intended by the Agreement – an agreement which is otherwise very much under fire and under scrutiny. For instance, we learned at the hearing that the panel and the parties spent time earlier in the week speaking with workers as part of the verification process that is envisioned by the Agreement. The Labor Chapter and engagement between the parties under the Labor Chapter appear to be proceeding somewhat apace since the start of the Trump Administration.
As we wait for the panel’s decision in the coming weeks, I will just flag three interesting exchanges from last week’s hearing in case you couldn’t dedicate your Thursday and Friday to Zooming in.
Covered facilities and “manner affecting trade” -- again
Let’s take a closer look at the “Covered Facility” discussion. Mexico repeatedly argued that the United States was trying to turn the RRM into an appellate court and to “go beyond what was agreed by the parties in the USMCA” by trying to extend the panel’s jurisdiction to facilities not covered by the Agreement. This exchange of arguments between the parties led to yet another discussion of the phrase “manner affecting trade” in the USMCA and the footnote accompanying that language in the Labor Chapter which is the origin of the foundational language for the meaning of “Covered Facility”.
Labor and trade friends and family know that this phrase has a fraught history. It was the language on which the United States lost its first labor dispute under an FTA, and it was language that was “corrected” in the Trans-Pacific Partnership Agreement negotiations at the last minute – that “correction” was then carried over to USMCA. (I described a similar exchange from almost exactly a year ago when the first RRM panel, dealing with a mine called San Martín, struggled with the same question.)
In the San Martín situation, the panel concluded that a complainant Party must show that the facility in question produces a service that is “exported to the complainant Party’s market” or produces a service that “competes with a service of a Party in a Party’s territory” (i.e., “a like or substitutable . . . service is exported by the complainant into the respondent Party’s territory”). If the Atento panel were to apply the same standard, the United States appears to concede that it would lose. Consequently, as noted above, it rejects this definition and is trying to re-litigate the matter, including in its closing arguments on Friday when it argued that the purpose of this language is “to ensure that [the panel is] . . . not covering labor activities or labor violations that do not have a relationship to trade. An example of that would be . . . if a case was brought to us about government workers or workers in a hospital that . . . aren't working in a sector or an industry that is involved in North American trade and therefore having this necessary link to the trade agreement.” We will see if this panel considers the prior panel’s report to be influential in its own thinking.
The role of the RRM panel
The two governments have struggled in both the first RRM proceeding and now this one to define what the scope of the panel’s work ought to be. At the hearing last week, the United States argued that the panel’s role “is to determine whether Mexico has complied with its international obligations” – an argument Mexico repeatedly rejected.
As noted above, the USMCA is clear that the panel is charged with determining whether there has been a Denial of Rights (stemming from any source) at a work site, assuming the work site is covered by the Mechanism in the first place. The hearing followed a “verification” in which the panel spoke directly with affected workers from at least one call center run by Atento.
Mexico’s position is that the reformed labor relief process in Mexico has been activated and it played out at the call centers; there is no evidence of any USMCA-qualifying Denial of Rights today and the United States simply wants too much from the Mechanism. The fact of the matter may be that the United States designed a tool for facility-specific purposes though it lacks facility-specific data.
Checks and balances on the RRM process
Mexico also expressed concern at the hearing that Mexican workers are getting confused about the Mechanism and what it affords them: “Some of the workers expressed the expectation of obtaining benefits that go beyond the powers of these panels.” In reality, the roles of each of the parties have evolved as both have experimented under the RRM. With each situation that comes before them, the entities involved learn more about what each side intends and how it will carry out its work. The hard part remains trying to figure all that out from the outside if you are an employer or worker seeking to exercise your rights in the face of the Mechanism when so little is made publicly available.
To be sure, the Mechanism is not a substitute for the Mexican labor reforms. Here I do think the parties are on the same page, but adversarial environments like these panels may not be helping, especially if the United States demands more from the reformed labor process in Mexico than it is entitled.
But look at their track record of some success. With nearly three dozen cooperative efforts between the parties to address alleged denials of rights at facilities in Mexico, including three begun in the Trump Administration, the two governments have no doubt done a lot to ensure that workers’ rights are protected and the playing field leveled multiple times over, including where they have had a deterrent effect. (We reviewed many of these successes, and the ongoing challenges, at a recent event held at Georgetown Law together with El Colegio de Mexico.)
That does not mean there is no room for improvement. It might help if the parties were to convene the panelists as required by the USMCA and its Rules of Procedure to “coordinate the drafting of the report on the functioning of the [Mechanism]” per Article 31-A.3.6 and 31-A.B.6. A couple different less official reviews are underway that one hopes will be of use to all three parties in their upcoming re-evaluation of the Agreement, but the future of how the United States views the relationship between trade and labor will no doubt also be affected by the major cuts the Trump Administration has made to the Bureau of International Labor Affairs at the U.S. Department of Labor. If the Trump Administration wants to continue to be assertive in its stance with Mexico on trade and labor issues, it will have to find new ways to support its work under the Mechanism and the many supporting cast members across the government.
