Impacts of the North American Agreement on Labor Cooperation (NAALC)

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  • 0:04 International Trade Agreements
  • 1:13 NAFTA
  • 2:17 NAALC
  • 3:51 Lesson Summary
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Lesson Transcript
Instructor: Beth Loy

Dr. Loy has a Ph.D. in Resource Economics; master's degrees in economics, human resources, and safety; and has taught masters and doctorate level courses in statistics, research methods, economics, and management.

Learn more about the North American Agreement on Labor Cooperation and how it's linked to a trade agreement between Mexico, Canada, and the United States. This amendment details labor rights, including unionization, for workers in each country.

International Trade Agreements

Benito works for a large heavy equipment manufacturer named BillyCat in Texas. As a native of Mexico, he is charged with overseeing trade among the United States and Mexico. BillyCat wants some of its smaller equipment to be made in Mexico, so they need Benito's input on how that might work. Having just graduated from college, he has a lot to catch up on. As Benito begins his research, he first looks at the trade agreements between the United States and Mexico. Let's see what he learns.

International trade agreements used to stand alone. In other words, they were negotiated by leaders of countries and strictly laid out how trade occurs between countries. In the agreements, you would just find information on trade-related subjects like taxes, tariffs, and quotas. The NAALC changed that, as we will see below.

Whether or not they stand alone, international trade agreements can be made bilaterally, between two countries, or unilaterally, among many countries. For example, Iran has a bilateral agreement with only one country in the world, Venezuela. The United States, on the other hand, has bilateral and unilateral agreements with many countries.


In order to help BillyCat start manufacturing smaller equipment in Mexico, Benito realizes that he needs to know more about something called the North American Agreement on Labor Cooperation (NAALC), which is a supplement to an international trade agreement that details labor standards. That trade agreement is the North American Free Trade Agreement (NAFTA), and it was the first international trade agreement associated with a supplemental agreement tackling issues that are more indirectly related to trade.

NAFTA, which went into effect January 1, 1994, reduced the red tape and tariffs on trade among Canada, Mexico, and the United States. The goal of NAFTA was to make trade among the countries much easier, helping companies like BillyCat move into Mexico quickly. The NAALC, on the other hand, was written as a side agreement to address the working conditions of workers in the three countries. Benito wants to make sure everything is in order for BillyCat's new workers before he can move forward. Let's look into how the NAALC affects industrial relations.


The goal of the NAALC is to enforce labor standards in the three countries named in NAFTA. To do so, the agreement makes it possible to sanction a country for not enforcing labor laws. Specifically, the NAALC is a cooperative agreement that is used to enforce safety, child labor, minimum wages, and the formation of unions. Benito needs to know more about how NAALC affects labor relations because BillyCat is a unionized workplace.

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