International Economic Law and Policy Blog

Second USMCA Rapid Response Labor Panel Hears Arguments in Mexico

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.

The First CPTPP Panel Report

The first CPTPP panel report, in the Canada - Dairy TRQs case, was just circulated. A case on similar issues has already been litigated under the USMCA, and a new USMCA case is currently being litigated.

At this point, I have just two small things to note about the panel report.

First, there was some disagreement about the role that the prior CUSMA (i.e. USMCA) panel report on similar issues should play here:

49. ... New Zealand contended that the decision by the Canada-United States-Mexico Agreement (CUSMA) panel in Canada –Dairy TRQ Allocation Measures is “highly pertinent” to this Panel’s determination, given the nearly identical provisions on limiting access to an allocation to processors (the “Processor Clause”) in the CUSMA and the CPTPP.³² Canada responded that the CUSMA dairy panel determination is both not relevant to this Panel’s interpretation of the CPTPP Processor Clause and is flawed.³³ Australia, as a third-party participant, agreed with New Zealand that the CUSMA decision is highly pertinent because the obligation with respect to processors is identical in the two treaties, and because of the need to avoid contradictory decisions.³⁴ Another third party, Japan, cautioned the Panel to ensure that its decision was made in reliance on VCLT Articles 31 and 32.³⁵

50. The Panel took note of the CUSMA panel report and found it to be informative, but notes that the CUSMA report is not binding on the Panel, nor have any of the provisions in CUSMA been incorporated into the CPTPP. The Panel conducted its own assessment of the claims made under the CPTPP following the requirements of Article 28.12(3) of the CPTPP to render determinations in accordance with Articles 31 and 32 of the VCLT. ...

So you have New Zealand and Australia saying the CUSMA panel report is "highly pertinent"; Canada saying it is "not relevant"; and Japan saying rely on the VCLT. Out of that mix, the panel reached what seems like a middle ground by finding that the CUSMA report was "informative," although "not binding."

Second, there was a separate opinion/dissent in this report, with one of the panelists saying he/she would have found violations under two additional provisions.

First CPTPP Panel Composed

As noted on the blog here, in May 2022 New Zealand filed the first ever CPTPP consultations request, relating to Canadian measures "concerning the allocation of dairy tariff rate quotas (TRQs) under CPTPP (dairy TRQ allocation measures)." A panel request was filed in November 2022.

On March 9, 2023, the panel was composed as follows:

• Jennifer Hillman, Chair
• Petros Mavroidis
• Colleen Swords

In January 2022, there was a USMCA panel ruling circulated on similar measures. My sense is that the Canadian measures have evolved a bit since then (in response to the USMCA ruling), and of course the CPTPP obligations are not identical to the USMCA obligations. Nevertheless, I can imagine that the USMCA ruling will be cited by the parties and the panel in the CPTPP dispute, and it will be interesting to see exactly how the parties and the panel see that ruling in terms of the level of persuasion/precedent it provides. 

With regard to the timing of these proceedings, under Article 28.17 of the CPTPP:

3. The panel shall present an initial report to the disputing Parties no later than 150 days after the date of the appointment of the last panellist. In cases of urgency, including those related to perishable goods, the panel shall endeavour to present an initial report to the disputing Parties no later than 120 days after the date of the appointment of the last panellist.

And under Article 28.18:

1. The panel shall present a final report to the disputing Parties, including any separate opinions on matters not unanimously agreed, no later than 30 days after presentation of the initial report, unless the disputing Parties agree otherwise. After taking any steps to protect confidential information, and no later than 15 days after the presentation of the final report, the disputing Parties shall release the final report to the public.

The First CPTPP Dispute: New Zealand vs. Canada on Dairy

New Zealand has just filed the first ever CPTPP consultations request, relating to Canadian measures "concerning the allocation of dairy tariff rate quotas (TRQs) under CPTPP (dairy TRQ allocation measures)." The request states:

2. Canada’s dairy TRQ allocation measures encourage chronic underfill of its dairy TRQs, reduce their commercial value for exporting CPTPP Parties, and undermine the market access that was negotiated under CPTPP.

3. Canada maintains 16 dairy TRQs under CPTPP.1 Canada’s dairy TRQ allocation measures allocate the entire quota available under each TRQ into up to three ‘pools’. These ‘pools’ can only be accessed by specific importer groups, in accordance with rules set out in Canada’s dairy TRQ allocation measures. Each importer group is defined under Canada’s dairy TRQ allocation measures, and importers that do not fall within a relevant pool are not eligible to apply for, or be allocated, quota. In addition, under Canada’s dairy TRQ allocation measures, retailers are not eligible to apply for an allocation under Canada’s dairy TRQs.

The claims of violation are as follows:

5. Canada’s measures appear to be inconsistent with several provisions of CPTPP, including Canada’s obligation to:

a. ‘progressively eliminate its customs duties on originating goods in accordance with its schedule to Annex 2D’ under Article 2.4(2), and Appendix A of Canada’s Schedule to Annex 2-D;

b. ‘ensure that its procedures for administering its TRQs … are fair and equitable’ under Article 2.28(2);

c. ‘ensure that its procedures for administering its TRQs … are no more administratively burdensome than absolutely necessary’ under Article 2.28(2);

d. ‘administer its TRQs in a manner that allows importers the opportunity to utilise TRQ quantities fully’ under Article 2.29(1);

e. not ‘introduce a new or additional condition, limit or eligibility requirement on the utilisation of a TRQ for importation of a good, including in relation to specification or grade, permissible end-use of the imported product or package size, beyond those set out in its Schedule to Annex 2-D (Tariff Commitments)’ under Article 2.29(2)(a);

f. ‘ensure that … any person of a Party that fulfils [Canada’s] eligibility requirements is able to apply and be considered for a quota allocation under the TRQ’ under Article 2.30(1)(a) and paragraph 3(c) of Appendix A of Canada’s Schedule to Annex 2-D;

g. ‘ensure that … it does not allocate any portion of the quota to a producer group’ under Article 2.30(1)(b);

h. ‘ensure that … it does not ... condition access to an allocation on the purchase of domestic production’ under Article 2.30(1)(b);

i. ‘ensure that … it does not ... limit access to an allocation to processors’ under Article 2.30(1)(b);

j. ‘ensure that … each allocation is made in commercially viable shipping quantities and, to the maximum extent possible, in the amounts that importers request’ under Article 2.30(1)(c); and

k. ‘ensure that … if the aggregate TRQ quantity requested by applicants exceeds the quota size, allocation to eligible applicants shall be conducted by equitable and transparent methods’ under Article 2.30(1)(e).

The official CPTPP text, with all of the relevant provisions noted above, is here.

We are tracking FTA disputes on WorldTradeLaw.net (still a work in progress, but see here and here -- the New Zealand complaint is not up there yet). There's an obvious parallel between this New Zealand complaint and the U.S. dairy complaint against Canada under the USMCA (that consultations request is here). The  U.S. complaint starts off this way:

Canada’s dairy TRQ allocation measures set limits on the quantity of certain dairy products1 that may be imported at a lower (within access) rate of duty. Furthermore, through the dairy TRQ allocation measures, Canada, sets aside and reserves a percentage of those within access quantities for particular importer groups. For all of its dairy TRQs, Canada sets aside and reserves a percentage of the quota for processors, and for ten of the TRQs2 an additional percentage is reserved for so-called “further processors.”3

And of course the USMCA panel found a violation. As I understand it, Canada and the U.S. are currently trying to work out a resolution, and I'm just going to speculate a bit here and note the possibility that New Zealand perhaps wants to put some pressure on Canada so as to make sure that the resolution does not hurt New Zealand exporters.

TPP Roster of Panel Chairs

From Australia DFAT:

Expressions of Interest: Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) Roster of Panel Chairs

The Australian Government is seeking expressions of interest from suitably qualified individuals to be considered for nomination to the roster of panel chairs pursuant to the dispute settlement chapter of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Under the CPTPP dispute settlement chapter panellists must:

• have expertise or experience in law, international trade, other matters covered by the CPTPP or the resolution of disputes arising under international trade agreements
• be chosen strictly on the basis of objectivity, reliability and sound judgement
• be independent of, and not affiliated with or take instructions from any CPTPP Party, and
• comply with the Code of Conduct¹ [PDF] in the Rules of Procedure² [PDF].

Suitably qualified individuals wishing to be considered for nomination to the CPTPP roster of panel chairs, should complete the attached template CV [DOCX] and email it, together with an expression of interest of no more than 200 words, to [email protected] by 1700 AEDT Monday 11 March 2019.

Individuals deemed suitable for nomination will be subject to a vetting process prior to nomination. Nomination does not guarantee appointment to the CPTPP roster of panel chairs.

Indian Journal of International Economic Law: Call for Papers

The Indian Journal of International Economic Law (IJIEL) is a law journal published by National Law School of India University, Bangalore (NLSIU) under the patronage of the Indian government sponsored chair on WTO Law. The Journal is oriented towards publishing academic work that considers the legal issues in the field of international economic law from a comparative perspective and/or the perspective of the developing world. The IJIEL accepts academic submissions in the form of articles, notes, comments or book reviews. IJIEL is now inviting submissions for Volume 8(1) and 8(2).

Volume 8(1):

Continuing with the past tradition, Volume 8(1) will be a general edition dealing with a host of legal issues in the field of international economic law, which includes multidisciplinary research concerning the WTO, trade laws at various levels of government, financial institutions, regulatory subjects such as taxation and competition policy, various services sectors such as banking and brokerage, linkages to human rights and cultural problems and international commercial arbitration.

Volume 8(2):

This year, considering the contemporary relevance of the Trans Pacific Partnership, IJIEL is coming up with a special issue on the “Implications of the Trans-Pacific Partnership”. The Trans-Pacific Partnership is expected to reshape business practices and trade law regime across the world. We have already received a very enthusiastic response for this issue and hope the student community would also want to contribute to the scholarship on this contemporary topic.

IJIEL is now accepting submissions for both the issues under the following categories:

1.  Articles (5000 to 12000 words) must deal with a theme of interest or importance comprehensively and are expected to show an extensive coverage of existing literature and a high level of analysis.               
2. Essays for the Law in Focus section (3000 to 5000 words) must concisely analyse contemporary legislations, landmark treaties or other specific issues in international economic law of a contemporary nature.
3. Case Notes, Legislative Comments and Book/Article Reviews (2000 to 7000 words).

The Editorial Board invites submissions for Volume No.8(1) and 8(2) of 2016. The Journal follows a rolling submissions policy and the deadline for the forthcoming volume is 25th March, 2016. Please send in your queries or submissions to [email protected].

Financial University Organizes Conference on Russia and the WTO

On 19-20 May 2015, the Financial University of the Russian Federation held its first international conference on the topic of "WTO Law in the Legal System of the Russian Federation: Problems of Application and Teaching."  To my knowledge, this was the first international legal conference held to address the Russian Federation's 2012 accession to the World Trade Organization (WTO) and the current role of the Russian Federation in the WTO.  The Financial University under the Government of the Russian Federation (Finuniversitet) is a leading publicly-funded institution of higher professional education (whose roots go back to the early 20th century).  The conference was supported by a grant from the U.S. Russian Foundation for Economic Advancement and the Rule of Law (USRF).

The conference consisted of over two dozen presentations regarding international trade law and policy and the trade law of the Russian government. 

Among the main lecturers on the first day of the conference were: Jan Bohanes, senior counsel of the Advisory Centre on WTO Law (Geneva), who lectured on constructed normal value in antidumping; Professor Steve Charnovitz of George Washington University Law School (Washington, D.C.) who lectured on the WTO-plus provisions in the Russian WTO accession package; Professor Anatoly Kapustin, Head of the Legal Comparative Research Centre who lectured on Russia and WTO Law; Professor Vasilka Sancin of the University of Ljubljana who lectured on models for an appellate mechanism in investor-state dispute settlement; Anait Smbatyan, Senior Expert at the WTO Expertise Center (Moscow) who lectured on WTO implementation; Eric M. Solovy, partner at Sidley Austin LLP (Washington, DC) who lectured on the obligations of and caselaw under the WTO Agreement on Trade-Related Intellectual Property Rights (TRIPS) and the WTO Agreement Subsidies and Countervailing Measures (SCM).  Excellent additional presentations were made by Mark G. Pomar, President of USRF and by Professor and Deputy Rector Dmitry Sorokin of Finuniversitet.

On the second day of the conference, two parallel workshops were held featuring scientific presentations by leading academics and practitioners from Moscow and other Russian cities.  Several presentations addressed the challenges and opportunities of teaching international economic law to Russian students.  In addition, Professor Alexey N. Ruzhin of the Russian Foreign Trade Academy gave a lecture on the enforcement of international trade and customs law in the Russian economy.

Organizing a major global conference on WTO law is a difficult task and Financial University Associate Professor Igor Shulyatyev is to be commended for planning and carrying out a landmark conference on key policy and technical challenges facing the Russian government in its WTO membership.  In the future, the Financial University should consider building on its success and holding a second annual conference in 2016.