Washington Insider-- Tuesday

U.S. Labor Brings First USMCA Challenge

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Bipartisan Carbon Tax Bill Would Replace Federal Fuel Taxes

A bipartisan bill in the House would tax carbon emissions, send 70% of the revenue to the Highway Trust Fund and eliminate the federal gas tax. According to text obtained by CQ Roll Call, the bill would levy a $35 per-metric-ton tax on fossil fuels--specifically coal, oil and gas--a charge that would begin in 2023 and increase by 5% every year, indexed to inflation.

Reps. Brian Fitzpatrick, R-Pa., and Salud Carbajal, D-Calif., introduced the bill in the previous Congress. The bill's reintroduction Friday comes as some conservative-leaning industry groups have warmed to the prospect of pricing carbon emissions while elected GOP politicians continue to drift away from the concept.

The measure calls for the remaining 30% be spread across other projects. The bill would also extend tax credits under Treasury's so-called 45Q program for carbon-capture technology, a method of trapping emissions before they enter the atmosphere, from 2026 to 2028.

Friction Between Food Suppliers and Retailers Increasing

Big buyers including Walmart and Sysco are starting to fine suppliers over late food deliveries or incomplete orders, as tight labor conditions, supply constraints and higher freight costs course through distribution channels, the Wall Street Journal reported.

The paper said that penalties revive programs that were suspended during the pandemic, when sudden upheaval in consumer buying patterns triggered widespread supply shortages. Retailers say they are trying to keep shelves stocked in a rebounding U.S. economy, but suppliers like Pillsbury owner Hometown Food say their supply chains are still challenged by soaring raw materials costs and tight transportation capacity.

The higher costs are filtering through to consumers. A new reading on inflation at the consumer level will arrive this week along with an update on wholesale inflation levels.

Washington Insider: US Labor Brings First USMCA Challenge

The U.S. labor union AFL-CIO has filed a complaint against a Mexican auto-parts factory over working conditions at the plant that is just across the border from Brownsville, Texas.

The Tridonex plant in Matamoros is facing the first complaint brought under provisions in the U.S.-Mexico-Canada Agreement (USMCA). The groups are utilizing what is called a rapid-response mechanism that was put into place as part of the USMCA deal that replaced the North American Free Trade Agreement (NAFTA).

"USMCA requires Mexico to end the reign of protection unions and their corrupt deals with employers," said AFL-CIO President Richard Trumka.

The AFL-CIO said workers at the plant had been "harassed and fired over their efforts to organize with an independent union, SNITIS, in place of a company-controlled union," according to the New York Times. Susana Prieto Terrazas is a Mexican labor lawyer and leader of SNITIS and was jailed last year. Prieto was only released after she agreed to internal exile in another Mexican state and was banned from appearing in labor court.

Under USMCA, the Times reported that Mexico was required to make major changes to its labor system which the paper said included actions like putting "sham collective bargaining agreements known as protection contracts" in place, actions which lock in low wages.

Under the rapid-response system that was put in place by USMCA, complaints about labor violations can be brought against an individual factory and penalties can be applied to that factory.

Under USMCA, Mexico was pushed to improve labor conditions and pay for workers in Mexico, something which backers of the provisions said would aid American workers as it would not encourage companies to shift operations to Mexico with cheaper labor.

Tridonex is a subsidiary of U.S.-based Cardone Industries, controlled by Canadian-based Brookfield Asset Management. Cardone moved its brakes division to Mexico in 2016 and laid off some 1,300 workers in Philadelphia, the Times noted.

Agriculture is among the industries that have been eyeing the USMCA for action, with an initial complaint filed against Canada over their dairy import actions and implementation of provisions in USMCA that would grant the U.S. more access to the Canadian market. That case is still pending.

Under USMCA, the dispute settlement processes put in place have a relatively short timeline for resolution. So neither the labor complaint nor the dairy complaint are expected to become protracted actions that take months or even years to resolve.

Indeed, the rapid-response mechanism on labor was billed in a fact sheet for the agreement as "providing for monitoring and expedited enforcement of labor rights to ensure effective implementation of Mexico's landmark labor reform at particular facilities while respecting sovereignty and due process."

And from the U.S. side, one of those intimately familiar with those provisions is none other than U.S. Trade Representative Katherine Tai. She was chief counsel for the House Ways and Means Committee when the Trump administration worked with Congress to put together the implementing language for USMCA. And, Tai has made clear that U.S. trade policy under the Biden administration will be more worker oriented.

So we shall see. The administration now has two complaints to manage under USCMA even though they are disparate issues--labor and dairy. Still, these represent some of the initial examples of how the new trade deal will run. Ag interests should follow both of these cases closely as they unfold, Washington Insider believes.

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