DP18528 The Rapid Response Labor Mechanism of the US-Mexico-Canada Agreement
The US-Mexico-Canada Agreement (USMCA) introduced a new compliance institution for labor rights in trade agreements: the facility-specific Rapid Response Labor Mechanism (RRM). The RRM was developed to tackle one particular thorn in the side of North American integration—labor rights for Mexican workers—which had had detrimental, long-term political-economic consequences for the two countries’ trade relationship. This paper reviews the unique political-economic moment in the United States and Mexico that prompted the creation of this tool. It describes how the RRM works and the considerable financial and human resources the two governments have brought to bear to operationalize it. The paper then reports a number of stylized facts on how governments used the RRM during its first three years, largely in the auto sector. It proposes paths of potentially fruitful political-economic research to understand the full implications of the RRM and concludes with preliminary lessons as well as a discussion of the potential for policymakers to transpose facility-specific mechanisms for labor or other issues, such as the environment, into future economic agreements.