From NAFTA to USMCA: Labor Market Effects in Mexico

Work in progress

In 2020, the trade agreement that replaced NAFTA wrote a minimum wage for autoworkers and a requirement for genuine union representation directly into its text, an unusual move for a trade deal. This project traces whether those provisions actually changed employment and pay in Mexico, using detailed records that link workers to their employers.

Work in progress

USMCA wrote labor standards directly into a trade agreement. This project measures whether the wage and bargaining provisions moved employment and pay, or only paperwork.

What the project does

The United States-Mexico-Canada Agreement replaced NAFTA in 2020, updating trade rules for one of the world’s largest free trade zones. Key changes include stricter rules of origin, a labor value content requirement that sets a wage floor in the automotive industry, and a requirement for genuine worker representation in collective bargaining in Mexico. I estimate the effect of these provisions on employment and wages using administrative employer-employee matched data.

Why it matters for policy

The labor chapter was the most contested part of the renegotiation and is now a template other agreements are copying. Evidence on whether wage floors written into trade rules bind in practice is thin, and it matters for how Mexico approaches the scheduled review of the agreement.

• Draft available on request