August 2021 Volume 3

WASHINGTON UPDATE

Labor Rights Enforcement As noted previously, Ambassador Tai, while chief trade counsel for the Ways and Means Committee, was the architect of the changes to the USMCA that got Democrats on board with the updated trade deal. Possibly the most important change was the inclusion of the “Rapid Response Labor Mechanism” (RRLM), which she also touted in her recent AFL-CIO speech, stating, “[t]he Rapid Response Mechanism will help to protect the rights of workers, particularly those in low-wage industries who are vulnerable to exploitation. Because when we fight for workers overseas, we are fighting for workers here at home.” As Ambassador Tai suggests, the RRLM is not a symbolic change to NAFTA – it has teeth. Under the mechanism, violations of workers’ rights can be quickly investigated and if verified, sanctions can be imposed on the goods when the producer seeks to try and export them. These sanctions include tariffs, additional penalties and even import bans. The U.S. has already initiated two RRLM cases, one involving General Motors’ Silao truck assembly plant and the other involving auto parts maker Tridonex’s facility in the Mexican state of Tamaulipas. While the latter investigation is still ongoing, Mexico has already agreed to a remediation plan that revolves around a new union election at the GM plant. The detailed plan includes a new worker vote on whether to approve the collective bargaining agreement; that vote will be monitored by Mexican officials as well as International Labor Organization observers. It also requires GM to issue a statement of “neutrality and zero-tolerance policy for retaliation.” In announcing the plan, USTR stated “[if ] after the agreed-upon date for remediation, the U.S. determines that the Denial of Rights has not been remediated, the U.S. may decide to impose further remedies.” The handling of the GMcase underscores that USTR isn’t messing around. AWorker-Center Inclusive Trade Policy and Climate How a worker-centered inclusive trade policy interacts with the overall Administration’s climate goals will be born out over time. But so far, the facts suggest that while President Biden has identified climate as one of the two existential threats the United States faces – an ascendant China being the other – reducing greenhouse gas emissions has not necessarily taken precedence over the Administration’s worker-centered goals when the two policies cannot be advanced simultaneously. For instance, in June, despite the adverse impact it might have on solar panel supplies and the adoption of green energy in the U.S., the Administration added polysilicon used to make solar panels from Xinjiang, China to the Department of Labor list of goods made with forced labor. It also blocked the import of polysilicon manufactured by Hoshine Silicon Industry Co. and solar panels made with Hoshine polysilicon. Explaining the decision, Department of Homeland Security Secretary Mayorkas said, “Our environmental goals will not be achieved on the backs of human beings in a forced labor environment…We're going to root out forced labor wherever it exists."

Similarly, in the section of the White House’s June supply chain report discussing lithium-ion batteries, rather than pull out all the stops and propose steps to get lithium-ion batteries into cars and trucks in the U.S. and capture the associated climate benefits as soon as possible, the Administration saddled these efforts with a number of additional worker-centered, inclusive policy riders. The report calls for the localization of lithium-ion battery supply chains to promote supply chain resiliency. It recommends the protection of the rights of battery production workers to unionize and proposes tighter Made in America requirements for electric vehicle government procurement. It suggests ensuring that any lithium-ion battery-related workforce opportunities are equitable, including for communities “historically underserved, marginalized, and adversely affected by persistent poverty and inequality.” The addition of these recommendations to the report seems to demonstrate the willingness of the Administration to prioritize their worker-centered agenda over their climate policy aims, at least up to now. The Congress and its Trade Priorities We’ve talked a lot about the Administration, but what about the Congress? Enactment of the American Recovery Plan, bipartisan infrastructure talks, and the prospect of a second budget reconciliation package are consuming much of the oxygen on Capitol Hill, but there has been some trade activity as well. In June, the Senate passed the S.1260, U.S. Innovation and Competitiveness Act, a massive bill designed to ensure that the U.S. can out compete and out innovate China. Hundreds of pages long, the bill includes a wide range of provisions, including ones designed to promote advanced manufacturing and strengthen supply chain resiliency. S.1260 also included several trade provisions crafted by the Senate Finance Committee, which has jurisdiction over trade issues, including provisions enacting the Miscellaneous Tariff Bill (MTB), retroactively reauthorizing the Generalized System of Preferences and reopening the Section 301 tariff exclusion process and extending certain expired exclusions for goods imported fromChina. Despite pressure to take up the Senate bill, the House is now going through the process of crafting its own version of the China competition legislation and it is unlikely that the House and Senate will agree on common language until the fall, and even that may be optimistic. It should be noted that while Ways andMeans Committee Ranking Member Kevin Brady expressed strong support for the Senate- passed trade provisions, the Ways and Means Trade Subcommittee Chairman Earl Blumenauer has since released his own package of trade bills, which includes alternative versions of the Senate- passed MTB, GSP renewals and updates, and reauthorizes the Trade Adjustment Assistance program. Notably absent was any mention of the Section 301 exclusion language the Senate passed, but we are hearing that many Democratic members have been pushing for the process to be reopened. Importantly, virtually no one in the Administration or Congress – Democrat or Republican - is calling for lifting all the 301 tariffs on Chinese imports -- these

6

FIA MAGAZINE | AUGUST 2021