Dispute Settlement in a North American Free Trade Agreement

Abstract

As the movement toward liberalization has succeeded in reducing or eliminating visible border barriers to trade, interest in and use of dispute settlement mechanisms have grown. For a North American Free Trade Agreement (NAFTA), the general model will be the 1988 U.S.-Canadian Free Trade Agreement. Broad institutional and dispute settlement provisions along the lines of Chapter 18 of the U.S.-Canadian accord have already been agreed on in the NAFTA negotiations. More problematic is the extension of Chapter 19 to NAFTA. This special binational mechanism for dealing with antidumping and countervailing duty determinations depends for its success on the similarity of the U.S. and Canadian systems. Mexico has a different tradition and method of making such determinations. It is not clear whether the differences can be bridged. In other areas, such as standards—perhaps including the environment and labor—the U.S.-Canadian binational review principle or binational monitoring might be adapted to NAFTA. The outcome of the NAFTA negotiations on dispute settlement will probably be the model for other Western Hemisphere free trade agreements, although arrangements with groups of countries may be more difficult to adapt.

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References

1. For a recent report, see U.S., Congress, Senate, Committee on Finance, Subcommittee on International Trade , Structural Impediments Initiative (SII), Joint Statement for the Record, 3 Mar. 1992.

2. Understanding on Rules and Procedures Governing the Settlement of Disputes under Articles XXII and XXIII of the General Agreement on Tariffs and Trade, Draft Decision, pp. S.1-S.23, MTN.TNC/W/FA, 20 Dec. 1991.

3. U.S., Congress, House , U.S.-Canada Free Trade Agreement, Communication from the President of the United States transmitting the Final Legal Text, 100th Cong., 2d sess., House Document 100-216, 26 July 1988.

Financial Times, 24 Mar. 1992.

5. Press Release, Binational Secretariat, Washington and Ottawa.

6. Recommendations for Dispute Settlement under NAFTA, U.S. Council of the Mexican-U.S. Business Committee, 28 Feb. 1992.

7. Response of the Administration to Issues Raised in Connection with the Negotiation of a North American Free Trade Agreement, transmitted to the Congress by the President on 1 May 1991.

8. While this announcement was expected on the occasion of Chilean President Aylwin's visit to Washington on 18 May 1992, it has been deferred, presumably until the NAFTA results are submitted to the U.S. Congress.