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(Adds Panasonic's comments, details on pay increase)
WASHINGTON, July 14 (Reuters) - The United States and Mexico announced a resolution to a dispute at a Panasonic auto parts plant in Mexico on Thursday, with workers receiving an above-inflation pay rise after the firm rejected an agreement with a union that lacked lawful bargaining authority.
The agreement involved the Panasonic Automotive Systems facility in the northern border city of Reynosa, Mexico, "where workers were previously denied their freedom of association and collective bargaining rights," the U.S. Trade Representative said (USTR) said in a statement.
Workers are set to get a 9.5% salary increase under a contract negotiated by a recently elected independent union, coming as Mexican annual inflation is running at a 21-year high of nearly 8.0%.
The agreement marks the second time that a case scrutinized under the two-year-old United States-Mexico-Canada Agreement (USMCA), has helped workers achieve salary increases after bringing in an independent union of their choice.
Workers at General Motors in the central Mexican city of Silao scored an 8.5% raise in a negotiation between the company and their new union earlier this year.
In addition to scrapping a bargaining agreement with a union that lacked authority, the Panasonic plant agreed to remove the union, reimburse workers for union dues deducted from paychecks, and recognize an independent union, SNITIS, USTR said. Panasonic also hired back 19 workers who had been dismissed after what they said was a reprisal for backing SNITIS.
"We are pleased with the fact that USTR has terminated the proceeding under the rapid-response labor mechanism of the USMCA, and that the United States and Mexico are in agreement that there is no ongoing denial of our employees’ rights," Panasonic North America said in emailed comments.
Panasonic said it fully supports its employees’ rights of freedom of association and collective bargaining.
Mexico's Labor Ministry said all of the issues raised in the investigation had been resolved, and that it would monitor the plant to ensure the re-hired workers could freely support the union of their choice.
U.S. Trade Representative Katherine Tai in May asked the Mexican government to review the matter under the USMCA's Rapid Response Labor Mechanism.
"Today’s announcement is yet another example of the Biden-Harris Administration’s commitment to defending the rights of workers, including those that live beyond our borders," Tai said in the statement.
The incident marked the third U.S. labor complaint under a new trade deal that aims to improve workplace conditions in Mexico. (Reporting by Doina Chiacu in Washington, Daina Beth Solomon in Mexico City; Editing by Leslie Adler, Nick Zieminski and Diane Craft)