Congressional Democrats, blaming Mexico for not living up to labor promises in the current North American Free Trade Agreement, have asked the Trump administration to beef up labor rules in its new version of the deal, known as the U.S.-Mexico-Canada Agreement, or USMCA.
The pact was signed by the U.S., Mexico and Canada in 2018, but it awaits U.S. and Canadian legislative approval.
House Democrats asked U.S. Trade Representative Robert Lighthizer last year for changes to allow Washington to challenge Mexican labor practices that would involve cross-border inspections at Mexican factories.
House Speaker Nancy Pelosi and other Democrats have been working with U.S. labor unions and Lighthizer on a revised version of the pact. Lighthizer is seeking Mexico's approval of the changes.
But Mexico's business community rejects the idea. The Trump administration is worried that Mexico won't accept the Democratic proposal that would give the U.S. government the ability to unilaterally launch labor cases that result in the dispatch of inspectors to Mexican facilities, with only limited opportunity for bilateral consultations, says a person familiar with the matter.
President Andrés Manuel López Obrador said Tuesday that Mexico opposes such workplace inspections, but would agree to labor dispute panels under the trade agreement. He also recalled that Mexico changed its labor laws to meet new provisions of the USMCA and has allocated funds in next year's budget to ensure enforcement of the new labor laws.
"We said no. That is, inspectors no," López Obrador said. "But yes to resolving disputes through the creation of what are called panels involving specialists proposed by the countries under equal conditions."
The Mexican government's trade negotiator, undersecretary for North America Jesús Seade, traveled to Washington Tuesday for further meetings.
"We want the treaty to be approved and we don't want more time to pass because of the effects of the [U.S.] electoral process," López Obrador said. "I hope it can be resolved."
Mexico's biggest business chamber, the CCE, said Monday that it finds some U.S. proposals on labor matters to be "extreme in nature and completely unacceptable," putting at risk supply chains and the competitiveness of Mexico and its partners in the region.
"It would seem that some U.S. actors are putting the agreement at risk," the CCE said.
López Obrador said his administration would consult with Mexican senators on any changes to USMCA, which the Mexican Senate has already ratified, but would have to approve any changes.
Democratic aides in the U.S. say some industries in Mexico are already subject to inspections, so Mexico City shouldn't object to adding similar rules to other industries.
Mexican business leaders worry that too many rules on labor matters and inspections could scare away foreign investment in manufacturing.
On the U.S. side, farm groups and business leaders are concerned that time is running out to pass USMCA before the end of the year. A possible impeachment trial in the Senate and the increasingly divisive 2020 election season could also prevent passage next year.
"There's very serious negotiations going on, not only between Lighthizer and House Democrats, but also the involvement of Canadian and Mexican negotiators in Washington," Sen. Chuck Grassley (R., Iowa), chairman of the Senate Finance Committee, told reporters Tuesday. An agreement is needed by the end of this week if it is to have much chance of passage this year, he added.
Vice President Mike Pence said on FOX Business Network that "USMCA has been sitting on Speaker Pelosi's desk for all of that time, awaiting congressional action."