UPDATE 4-Mexico, U.S. seek to dispel tension over labor tweak to trade deal

The U.S. and Mexican governments on Monday sought to defuse a controversy over Washington's plan to monitor Mexican labor standards under a new regional trade deal, with Mexico saying it was satisfied by U.S. assurances it was not sending inspectors.

Mexico, the United States, and Canada on Tuesday agreed to revised terms for the United States-Mexico-Canada Agreement (USMCA), the deal due to replace the 1994 North American Free Trade Agreement (NAFTA) which underpins commerce in the region. That same day, the U.S. Congress set out how the United States planned to send attaches south to monitor the application of Mexican labor laws, which Democratic lawmakers worry are too lax.

Over the weekend, the Mexican government raised objections to the plan. On Monday, U.S. Trade Representative Robert Lighthizer met with Mexican deputy foreign minister Jesus Seade in Washington and said in a letter that the use of attaches was a common practice and that Mexican legislation would be upheld. "This person will not be 'labor inspectors' and will abide by all relevant Mexican laws," Lighthizer said in the letter released by his office.

Asked whether the letter satisfied Mexico's concerns, Seade told reporters in Washington: "Absolutely." "Ambassador Lighthizer was completely in the right... in saying sorry," Seade said, adding that Mexican officials had not identified anything else "questionable" in the U.S. plan.

At an earlier news conference, Mexican Foreign Minister Marcelo Ebrard said the spat would not put the USMCA at risk, and that it would be up to Mexico whether to give accreditation to proposed labor attaches on its territory. "The attaches are authorized by Mexico," he told reporters. "No country can assign attaches in Mexico but us."

Critics see the labor provision as the latest in a string of concessions granted by the administration of President Andres Manuel Lopez Obrador to his U.S. counterpart Donald Trump following agreements on migration and security. An annex for implementing USMCA presented in the U.S. House of Representatives on Friday envisaged designating up to five U.S. experts to monitor compliance with a Mexican labor reform.

At the weekend, Seade, the Mexican official in charge of USMCA negotiations, criticized the plan, saying it was not part of the accord signed by the three countries. In his letter, Lighthizer said any "good faith questions about whether workers at a particular facility are being denied labor rights" would be investigated by an independent, three-person panel chosen by both parties, not the labor attaches.

The row is the latest outbreak of tensions over trade in North America triggered by Trump's decision to renegotiate NAFTA after he took office in 2017. Concerns about North American trading arrangements have cast a shadow over Mexico's economy, which sends about 80% of its exports to the United States.

Trump has worked to leverage Mexico's dependence on its northern neighbor to push Lopez Obrador into tightening Mexico's borders and accepting migrants seeking asylum in the United States while their cases are heard in U.S. courts. Mexico's peso on Monday strengthened to less than 19 per dollar, its strongest level against the greenback in more than five months.