Unfulfilled promises: Why the USMCA joint review must deliver for workers

The upcoming 2026 U.S.-Mexico-Canada Agreement (USMCA) joint review presents a critical opportunity to evaluate whether the agreement is promoting workers’ rights and fair competition in the North American marketplace.

Unlike its predecessor, the North American Free Trade Agreement (NAFTA), the USMCA contains a “sunset clause,” which provides that the agreement will expire after 16 years unless the parties agree to extend it. Starting in July 2026, the parties will meet annually to review the performance of the deal, discuss possible improvements, and ultimately decide whether it merits a 16-year extension.

When the USMCA came into force in 2020, workers were promised a different economic model from NAFTA: one based on respect for workers’ rights and fair competition rather than a corporate-driven race to the bottom. In particular, the agreement required Mexico to implement reforms to eliminate its corrupt system of “protection contracts,” where employers sign bogus collective bargaining agreements with illegitimate, undemocratic trade unions that do not represent workers’ interests. For decades, the protection contract system—coupled with Mexico’s weak labor justice institutions—have kept Mexican workers’ wages artificially low, encouraging corporate offshoring and dragging down wages across North America.

Unfortunately, more than five years since the USMCA was passed, it is clear that the agreement is failing to deliver on its promise to address systemic labor exploitation in Mexico and end the corporate offshoring of good, union jobs. The U.S.-Mexico trade deficit has exploded, Mexico is failing to effectively enforce its new labor laws, and wages in its export manufacturing sector remain unconscionably low. Accordingly, the AFL-CIO opposes a 16-year extension of the agreement without major changes to address the challenges outlined below.

Trade deficits and offshoring

The USMCA was supposed to rebalance North American trade flows and narrow the United States’ chronically large, traded goods deficit with Mexico. Yet the opposite has happened: Since the USMCA came into force, the United States bilateral trade deficit with Mexico has exploded from $101 billion in 2021 to $171.5 billion in 2024.¹ This alarming data point tracks with announcements by major multinationals like Stellantis,² John Deere,³ and Case New Holland⁴ to close U.S. plants and offshore production to Mexico. Simply put, if a measure of its success is a reduction in trade deficits, the USMCA has failed.

Mexican labor reform and the wage gap

Another primary goal of the USMCA was to raise wages and working conditions in Mexico to reduce the incentive for corporations to offshore jobs from the United States (and Canada) to Mexico. Here, too, the agreement is failing to deliver the change workers were promised. Despite some increases in the minimum wage floor, the vast majority of workers in Mexico’s export manufacturing sector have not seen meaningful wage gains under USMCA and still make roughly a tenth of what their American counterparts earn.⁵

While the Mexican government has largely fulfilled its obligation to establish new labor justice institutions, these entities are failing to effectively defend Mexican workers’ fundamental rights to organize trade unions and bargain collectively. For example, the newly created Federal Center for Conciliation and Labor Registration⁶ (CFCRL), the federal agency tasked with enforcing Mexican workers’ new rights to democratic and independent trade union representation, does not have the legal authority to issue fines on employers who violate the law.⁷ On top of this, the Mexican government has consistently underfunded the CFCRL and slashed the budget of the newly created labor courts, undermining the ability of these new entities to carry out their core enforcement functions.

Given the serious nature of these failures, the joint review must focus on creating a labor action plan with clear, timebound implementation benchmarks for the Mexican government to come into full compliance with its obligations under the USMCA’s labor chapter, including by agreeing to adequate minimum funding levels for the new labor justice institutions.

Rapid Response Labor Mechanism

The USMCA’s rapid response labor mechanism (RRM) is a major innovation in trade enforcement that has proven effective at holding companies accountable for respecting workers’ rights at specific facilities in Mexico. Over 40 RRM cases have been initiated by the United States with many of these resulting in tangible wins for workers, including democratic union representation, wage increases, and new collective bargaining agreements.⁸ Despite this success, in some cases the RRM has struggled with delays and failed to address common forms of employer union busting, including “blacklisting” of union supporters and failing to engage in good faith bargaining. The joint review should identify ways to strengthen the mechanism and broaden its impact, including by addressing barriers to accessibility and improving coordination with petitioners on developing meaningful remediation plans.

China

Since the USMCA came into effect, Chinese investment into Mexico has more than doubled, raising concerns the agreement is being used as a backdoor for unfairly traded goods to enter the North American market.⁹ Duty free access to the U.S. market has made Mexico an attractive location for Chinese companies looking to sidestep tariffs the U.S. has imposed to address pervasive state subsidies, dumping, intellectual property theft, and other unfair trade practices. During the joint review the parties must adopt strengthened border measures, including coordinated tariffs, stronger rules of origin, and enhanced investment screening, to address this economic and security threat to the development of strong and resilient North American supply chains.

Forced labor imports

The USMCA required all three parties to adopt and implement a ban on the import of goods made with forced labor.¹⁰ While all three countries have adopted some form of an import ban, the Canadian and Mexican governments have done little to enforce it in practice.¹¹ The joint review must yield commitments from all three parties to strengthen their respective import bans, including by developing formal channels for enforcement agencies to share information and coordinate on enforcement actions.

Conclusion

As we approach the 2026 joint review, we agree with United States Trade Representative Jamieson Greer that the “[USMCA’s] shortcomings are such that a rubber stamp of the agreement is not in the national interest.”¹² The Trump administration must be ready to use the leverage created by the sunset clause and joint review process to insist on improvements to the agreement so that it delivers on its promise to promote dignity and fair competition for workers across North America.