[CTC] Trump team mulls call to drop binding dispute settlement from NAFTA

[Arthur Stamoulis]

PRO TRADE REPORT: Thursday, Sept. 21, 2017
Trump team mulls call to drop binding dispute settlement from NAFTA

By Doug Palmer

Senior U.S. trade officials have crafted a proposal for the upcoming round of NAFTA talks that would eliminate the practice of having independent panels impose binding decisions in trade disputes and would instead shift to a softer advisory system, sources following the talks said.

That would be a major move away from a decades-old push by the United States to build an international system of enforceable trade rules, and is raising concern across the executive branch and on Capitol Hill. The idea was contained in a batch of proposals sent to Congress for review ahead of the third round of NAFTA talks, set to begin in Ottawa, Canada, on Saturday.

NAFTA, which took effect in 1994, was one of the first free trade agreements. The pact's binding dispute settlement system allows NAFTA countries to impose retaliatory duties in an effort to force compliance with a panel ruling, if another member balks.

The Office of the U.S. Trade Representative did not respond to a request for comment, and the White House referred NAFTA queries to USTR.

The proposals also include a "sunset provision," which would automatically terminate NAFTA after five years unless the three countries decide to renew it. Commerce Secretary Wilbur Ross said last week that such a provision would give countries the opportunity to make periodic course corrections if the pact is not working as expected. But critics of the concept, which has been opposed by both Canada and Mexico, say it would undermine one of the principal benefits of free trade agreements: providing long-term certainty to foster business investment. 

The Trump administration has already signaled its desire to eliminate the so-called Chapter 19 dispute settlement mechanism, which provides a forum for NAFTA countries to challenge each other's anti-dumping and countervailing duty decisions. Those disputes account for most of the trade litigation among the three countries. 

Another more general dispute settlement mechanism is contained in NAFTA's Chapter 20, which Mexico successfully used to challenge U.S. barriers to cross-border trucking. To prod Congress into action after winning a dispute settlement case, Mexico threatened retaliation against more than $2 billion in U.S. exports. 

Finally, Chapter 11 of NAFTA created a system for allowing private investors to sue governments over actions that they believe unfairly discriminate against their investment. That provision is unpopular with many Democrats, who feel it undermines the ability of governments to regulate. The administration's proposal would allow countries to opt into the system, essentially making it voluntary.

Earlier this week, U.S. Trade Representative Robert Lighthizer spoke longingly of the non-binding system of dispute settlement that prevailed internationally before the creation of the WTO in 1995.

"There was a system where you would bring panels and then you would have a negotiation," Lighthizer said, recalling his time as deputy USTR in the 1980s during the Reagan administration. "And, you know, trade grew and we resolved issues eventually. ... It's a system that, you know, was successful for a long period of time."

President Donald Trump, in a speech on Tuesday at the United Nations, also seemed to take aim at binding international panel decisions.

"For too long the American people were told that mammoth multinational trade deals, unaccountable international tribunals and powerful global bureaucracies were the best way to promote their success," Trump said.

Both Canada and Mexico have insisted that strong dispute settlement provisions remain part of the pact.

"A strong and transparent dispute settlement is important for free trade," a Canadian government spokesman said. "Canada believes that an effective dispute settlement mechanism for anti-dumping and countervailing duties is essential to the success of NAFTA. As such, it is critical that it remains a part of NAFTA." 

Victoria Guida contributed to this report.
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://lists.citizenstrade.org/pipermail/ctcfield-citizenstrade.org/attachments/20170922/a401ba9c/attachment.htm>