The following blog post was co-authored by R Street Research Assistant Randy Loayza.

As the United States, Canada and Mexico continue to renegotiate the North American Free Trade Agreement, political posturing and protectionism hinder progress toward modernization and trade liberalization.

The question of labor unions has come to the forefront of Canada’s concerns. Specifically, Canadian trade representatives claim that the “right-to-work” laws in 28 American states provide an unfair advantage to individual states over Canadian provinces by allowing states to curb the collective bargaining power of unions. Canada also seeks higher labor standards in Mexico as part of this protectionist push toward a more aggressive international harmonization of labor laws.

It is not surprising that Canada feels compelled to address state’s right-to-work laws, as these prevent unions from mandating dues payment from employees who opted not to join the industry’s union. Canadian labor laws allow for “a majority vote of the bargaining unit employees” to decide whether unions can collect mandatory dues from employees. This is also the standard for American states without RTW laws.

Canadian trade representatives hope to persuade the United States, as well as Mexico, to ratify the eight core conventions of the International Labor Organization (ILO) and various labor chapters from the Canada-EU Comprehensive Economic and Trade Agreement (CETA). Canadian trade representatives are even advocating federal legislation to bar RTW states from enforcing such laws, which would override the United States’ system of federalism.

Although it is conjecture to assume that Canada’s protectionist pleas are solely in response to fear of certain disadvantage if their labor markets compete with U.S. markets that operate under these RTW laws, it is not farfetched. The very notion that RTW laws provide an  to individual states is a testament to the value of open and free choice. In fact, states with RTW laws provide a better environment for investment opportunities and are less conducive to adversarial employer-employee relations. Moreover, states that mandate union membership as a condition of employment have seen labor migrate to states with RTW laws.

Labor unions see RTW laws as fundamental risks to their already declining membership base. The AFL-CIO, for instance, is extremely hostile toward states that employ such laws, citing collective bargaining leverage, as well as wage benefits. As such, workers’ right are at the forefront of the AFL-CIO’s concerns. Under the National Labor Relations Act, it is illegal in the United States for labor unions to mandate membership as a condition of employment. States without RTW laws do allow labor unions to bargain collectively with employers to mandate both membership and due payment from any employee, although most arrangements only require the latter.

Supporters of Canada’s position on U.S. RTW laws focus narrowly on union membership as the largest contributing factor in wages and labor-participation rates. In reality, other factors like emerging markets, the Great Recession, modernization of integrated supply chains, globalization and the move toward higher-skilled industries arguably have led to greater changes in American employment and wages. Also, varying productivity rates determine wage rates in the labor market and across countries. Wage rates also drive immigration among countries—as trends in U.S.-Mexico migratory patterns have shown.

Evidence from around the globe has shown that economic development through increased international trade fosters higher labor standards. While there may be some concerns over unfair labor practices that disadvantage unions, such cases should not be used to threaten the progress made through NAFTA. Larger problems of inequality and contemporary productivity-wage disparities should also concern both NAFTA supporters and skeptics alike. But such concerns will not be addressed through international labor mandates. Instead, renegotiation toward a stable, modernized, market-driven and rules-based NAFTA must respect the sovereignty of domestic labor laws.

Image by DarwelShots


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