International Economic Law and Policy Blog

Panel Appointments and Rosters in the New NAFTA

As I've blogged about before, there was a problem with getting panels appointed under NAFTA Chapter 20, and Chapter 31 of the new NAFTA (USMCA) doesn't look like it fixes the problem. But there is a small tweak to the rules relating to rosters that is worth mentioning.

NAFTA Article 2009 says the following:

Article 2009: Roster

1. The Parties shall establish by January 1, 1994 and maintain a roster of up to 30 individuals who are willing and able to serve as panelists. The roster members shall be appointed by consensus for terms of three years, and may be reappointed.

USMCA Article 31.8 reads slightly differently:

Article 31.8: Roster and Qualifications of Panelists

1. The Parties shall establish by the date of entry into force of this Agreement and maintain a roster of up to 30 individuals who are willing to serve as panelists. The roster shall be appointed by consensus and remain in effect for a minimum of three years or until the Parties constitute a new roster. Members of the roster may be reappointed.

And then relatedly, USMCA Article 30.2 says this: 

Article 30.2: Functions of the Commission

1. The Commission shall:
...
(f) review the roster established under Article 31.8 (Roster and Qualifications of Panelists) every three years and, when appropriate, constitute a new roster.

These weren't USMCA innovations, as they were borrowed from the TPP. (Interestingly, however, the USMCA did not borrow the TPP provisions on panelist appointment, which which might have helped to avoid the blocking these appointments.)

Let's think about the impact these changes might have on panel appointments. Under the old NAFTA, the consensus requirement made it difficult to get a roster appointed, and because the terms only lasted three years, there was the problem of frequent reappointment and thus difficulty in maintaining a roster. I don't have a full understanding of what happened with the Chapter 20 roster, but from what I can gather, during one of the reappointment processes the parties were not able to agree on a new roster, and the roster was therefore not filled. That made blocking the appointment of a panel possible in Mexico's complaint against U.S. sugar restrictions.

So how will things change under the USMCA? One key change is that the roster will "remain in effect for a minimum of three years  or until the Parties constitute a new roster." Could that mean terms of more than three years? It seems like that would be permitted, but not required. If the parties appointed people to the roster for a term of ten years, that would help, because they would have to agree on a new roster less frequently.

However, the approach to roster terms may be affected by Article 30.2, which call for the USMCA Free Trade Commission to "review the roster ... every three years." If this review is to take place every three years, does that suggest that the parties will establish terms of three years to keep things synchronized? That would leave us in the same place we were with the NAFTA rosters.

Sometimes there isn't a lot of transparency about these roster appointments, so it can be hard to follow from the outside, but to the extent we can get information, it will be interesting to see how this is all implemented.

The Legalization of the Non-Violation Concept in the GATT/WTO System

This is a timely piece from Graham Cook:

For those interested here is a new paper called "The Legalization of the Non-Violation Concept in the GATT/WTO System". The abstract:

Article XXVIII:1(b) of the GATT refers to "any benefit … being nullified or impaired" by the application of any measure "whether or not it conflicts with the provisions of this Agreement". This paper suggests that the evolution of GATT/WTO law and practice relating to the non-violation concept is an interesting example of "legalization", in the sense of indeterminately vague treaty terms being incrementally made more precise, and sculpted into a workable legal test which is capable of being applied in the context of binding third-party adjudication. It begins by showing how GATT adjudicators transformed this open-ended concept into a workable legal test, generally covering measures with a close nexus (in terms of timing, product coverage, and effects) to specific market access commitments (Section I). It then briefly reviews how the non-violation concept spread to regional trade agreements, taking the CUSFTA and NAFTA as examples. (Section II). Following a closer look at the key non-violation provisions in the text of the Uruguay Round Agreements (including the DSU, GATS, SCM Agreement, and TRIPS Agreement), it surveys the relevant WTO case law and shows that adjudicators have not strayed very far from the traditional legal standard developed under the GATT (Section III). It suggests that the traditional legal test aligns the non-violation concept to various concepts of general international law, and to GATT safeguards provisions and the "close nexus" test developed in the context of WTO compliance proceedings (Section IV). It concludes with an overall assessment (Section V).

Conference: "The Era of Disintegration. Taking Stock of the Dynamics of International Economic Governance in the First Two Decades of the 21st Century," Erasmus School of Law, Nov. 16, 2018

This is from the Erasmus School of Law, Erasmus University Rotterdam:

On November 16, 2018, from 9.30 am to 5.30 pm, the Erasmus School of Law (Erasmus University Rotterdam) is hosting a conference on "The Era of Disintegration. Taking Stock of the Dynamics of International Economic Governance in the First Two Decades of the 21st Century," with the support of the Erasmus Initiative for Dynamics of Inclusive Prosperity.

This conference will explore the legal, socio-political, and economic dynamics set in motion by the current model of international economic integration. Whilst promising to smooth out divergences and remove barriers, the intended integrationist architecture of international and regional economic regimes seems in fact to be both sustaining and nurturing patterns of disintegration. Brexit, the Euro crisis, the US challenges to multilateralism, environmental disruptions, and resource-cursed States are only a few examples of how disintegration dynamics are unfolding rapidly at various levels. Academics and practitioners from the fields of law, economics and philosophy of economics will analyze these patterns of disintegration, trying to discern the paradox by which the very instruments and mechanisms that were introduced with the aim of achieving an ever-closer integration may have actually spurred centrifugal and structural fragmenting tendencies.

See additional details and register here. A flyer for the event can be viewed here. 

The Progressive Parts of the New NAFTA

Article 23.9 of the USMCA text as it stands now says:

Article 23.9 Sex-Based Discrimination in the Workplace

The Parties recognize the goal of eliminating sex-based discrimination in employment and occupation, and support the goal of promoting equality of women in the workplace. Accordingly, each Party shall implement policies that protect workers against employment discrimination on the basis of sex, including with regard to pregnancy, sexual harassment, sexual orientation, gender identity, and caregiving responsibilities, provide job-protected leave for birth or adoption of a child and care of family members, and protect against wage discrimination.

A Politico article on this provision says the following:

However, the Office of the U.S. Trade Representative, which led the negotiations with Canada and Mexico, made no effort to highlight the measure in a series of fact sheets issued after the deal was concluded. It also made only a terse statement on Monday, when asked about the measure.

...

The administration's quiet approach could reflect concern about pro-sovereignty conservatives "expressing outrage at a treaty that tells us how to define males and females," especially if HHS' rumored policy change goes forward and is seen as putting the U.S. in violation of its new USCMA commitment, said Bill Reinsch, a senior trade adviser at the Center for Strategic and International Studies.

"Shall implement policies" may give a bit of discretion as to what exactly is required; also, it's hard to imagine Canada and Mexico bringing complaints here (and if they did, there is still the issue of panel appointments being blocked). Nevertheless, it will be interesting to see how socially conservative Republican members of Congress react to the inclusion of this provision.

Speaking of progressive things that conservatives might hate, there are also rights for "non-national" migrant workers:

Article 23.8 Migrant Workers

The Parties recognize the vulnerability of migrant workers with respect to labor protections. Accordingly, in implementing Article 23.3 (Labor Rights), each Party shall ensure that migrant workers are protected under its labor laws, whether they are nationals or non-nationals of the Party.

Non-Violation Claims and Exceptions

In response to the recent post by Nicolas and the subsequent comments, as well as some twitter and email exchanges on the issue, I wanted to offer a few thoughts on the role of WTO exceptions in the context of non-violation claims.

To state the obvious, WTO obligations are not relevant for non-violation claims. These claims are about nullification or impairment of benefits, which exists regardless of whether an obligation has been violated. And if obligations are irrelevant, then exceptions to those obligations could also be seen as irrelevant, as exceptions are invoked when there is an allegation that an obligation has been violated.

On the other hand, one element of the legal standard for non-violation claims is that there must be a "benefit accruing under the relevant agreement." The Japan - Film panel elaborated on this element as follows:

10.76 ... in order for expectations of a benefit to be legitimate, the challenged measures must not have been reasonably anticipated at the time the tariff concession was negotiated. If the measures were anticipated, a Member could not have had a legitimate expectation of improved market access to the extent of the impairment caused by these measures.

While obligations and exceptions are not directly applied in non-violation claims, could there nonetheless be a role for WTO exceptions when considering the reasonable anticipation of measures noted by the Film panel? In this regard, when examining whether a particular measure could have been "reasonably anticipated," you could look at whether it was tied to a public policy objective, such as conservation of exhaustible natural resources under GATT Article XX(g). Where a measure is justified under GATT Article XX, perhaps there is an argument that it should have been reasonably anticipated by the complaining government, as that government was on notice that other governments might take such measures. In this way, the underlying concerns of WTO exceptions could be taken into account in the context of a non-violation claim, even if you cannot invoke these exceptions directly as a defense to such claims.

In my view, however, while reference to the exceptions is a factor that could be considered, any such consideration should not be determinative for a non-violation claim. Even if the measure is justified under an exception, it is not necessarily the case that the complaining government should have anticipated that kind of measure or that particular measure. To illustrate this, let's look at the context of environmental measures. New environmental problems are discovered over time, and it may not be appropriate to expect governments to anticipate that any or all of their exports could be subject to environmental regulation for issues that were unknown at the point in time when a concession was made. Let's say the responding government made a concession on a product in 1947, and the product was discovered to be harmful to human health in 2000 and then banned. I don't think it is reasonable to anticipate product-specific harms, and measures taken in response, that we have no inkling of yet.

Of course, as hinted at above, you could argue that every measure justified under GATT Article XX should be reasonably anticipated, simply by virtue of its justification under that provision. The different approaches are just policy choices, and I don't think it would be a disaster for the system to take an approach that gives primacy to Article XX and other exceptions. Nonetheless, in these situations, the rebalancing that I think non-violations claims are designed to encourage is appropriate.

The EC - Asbestos panel tied these issues to the burden of proof:

8.281 Furthermore, in the light of our reasoning in paragraph 8.272 above, we consider that the special situation of measures justified under Article XX, insofar as they concern non-commercial interests whose importance has been recognized a priori by Members, requires special treatment. By creating the right to invoke exceptions in certain circumstances, Members have recognized a priori the possibility that the benefits they derive from certain concessions may eventually be nullified or impaired at some future time for reasons recognized as being of overriding importance. This situation is different from that in which a Member takes a measure of a commercial or economic nature such
as, for example, a subsidy or a decision organizing a sector of its economy, from which it expects a purely economic benefit. In this latter case, the measure remains within the field of international trade. Moreover, the nature and importance of certain measures falling under Article XX can also justify their being taken at any time, which militates in favour of a stricter treatment of actions brought against them on the basis of Article XXIII:1(b).

8.282 Consequently, the Panel concludes that because of the importance conferred on them a priori by the GATT 1994, as compared with the rules governing international trade, situations that fall under Article XX justify a stricter burden of proof being applied in this context to the party invoking Article XXIII:1(b), particularly with regard to the existence of legitimate expectations and whether or not the initial Decree could be reasonably anticipated.

I'm not sure exactly what the panel had in mind, but it may be close to my view, where justification under an exception becomes a factor to consider, but is not determinative by itself.

Limiting The Appellate Body's Power By Giving It More Power

This is from a new paper by former Canadian government official Rob McDougall:

the Appellate Body could be given the authority to decide which appeals, or which parts of appeals, to hear (certiorari), based on broadly defined circumstances such as when panel reports risk creating inconsistency, demonstrate evidence of manifest legal error, involve matters of significant public interest or of systemic interest to the trading system, or disputes over imprecise obligations.

People like to feel acknowledged and heard, so I understand why governments want to make sure their arguments to the Appellate Body are addressed. But where the Appellate Body has examined an appellate argument, and is certain that it plans to reject it because it agrees with the panel's reasoning, is there much value in having the Appellate Body go through the same reasoning that the panel did? Would it be enough for the Appellate Body to simply uphold the panel's finding without further comment?

Call for Papers: PluriCourts Annual Workshop on The Political and Legal Theory of International Courts and Tribunals 2019

PluriCourts Annual Workshop on The Political and Legal Theory of International Courts and Tribunals 2019:

Multilevel Separation of Authority - Autonomy and International Courts

June 24-26, 2019, University of Oslo

Deadline: 1 December, 2018

Homepage: https://www.jus.uio.no/pluricourts/english/news-and-events/news/2018/workshop-on-the-political-and-legal-theory-of-inte.html

Call for Papers

PluriCourts announces a workshop that brings together scholars of philosophy, political theory and legal theory who study one or more regional and international courts and tribunals (ICs), and in particular issues concerning the multi-level ‘horizontal’ and ‘vertical’ separation of authority, or questions concerning autonomy.

States have established manifold regional and international ICs to resolve disputes, interpret treaties, and deter illegal behavior. These ICs cover a range of issues including, human rights, trade, investment, border disputes, and international crimes. ICs’ competences, level of authority, method of interpretation, and geographical reach widely vary. ICs’ increase in number and influence has spawned controversy and complaints, often phrased as charges that they are illegitimate. We especially invite papers that address one or more such ICs concerning the following themes. The workshop welcomes both abstract and practice-focused perspectives. Some travel grants are available upon request.

The vertical and horizontal allocation of authority

Brexit, African exits from ICC and other recent challenges against ICs urge renationalization of authority now placed at a regional or international level. States have delegated or pooled some sovereign rights to an IC in an issue area for various objectives: to enhance the state’s commitments, to coordinate better, or to manage cross border concerns. Such challenges of IC demanding the renationalization of authority are directed at the ‘vertical’ authority of ICs over states. The ‘horizontal’ allocation of authority among ICs, and between ICs and other international bodies is also questioned. With what right should ICs review other bodies and contribute to international enforcement? What are we to make of recent challenges concerning the ‘fragmentation’ among the IC: how states now create ‘competing’ regional ICs; and ICs resistance and resilience against formal harmonization – as between the European Court of Human Rights and the Court of Justice of the European Union?

Autonomy

The autonomy of individuals has been one fundamental normative value and standard to evaluate and challenge the justice and legitimacy of political institutions. The autonomy of political communities, collective self-determination, is also widely praised as an important normative ideal. Is autonomy – individual or collective - a good guide to normatively assess international courts? In what way does the legitimacy of ICs depend on them protecting or promoting individual autonomy? Is the authority of IC necessarily in conflict with the collective self-rule of states? Or is horizontal delegation of power compatible with, perhaps even necessary for, effective collective autonomy in our globalized world? Can the political or collective autonomy of peoples justify a space that international authorities such as ICs should – or should not – interfere with? Or is collective autonomy different from individual autonomy in providing such limits?

We invite papers that relate to either one of these two topics or the theory of legitimacy of ICs more general. The following indicate some of several possible issues:

• The concept of legitimacy for ICs
• The appropriate legitimacy standards for ICs from the perspectives of history of ideas and/or contemporary legal and political theory, such as human rights, transparency, or rule of law
• Their multilevel separation of authority, and its impact on adjudication
• Subsidiarity principles guiding the allocation of authority between ICs and the national level
• Specialization and fragmentation in ICs
• The relevance of protecting individual or collective autonomy for the legitimacy of ICs
• The limits placed on IC authority by collective autonomy
• Law and morality in international adjudication
• Norm-indeterminacy and international adjudication
• The comparative advantages of ICs
• Best practices and models for ICs
• IR theory perspectives on ICs

Timeline

December 1, 2018 Expression of interest with provisional paper title, abstract (max. 400 words), upload here: https://www.jus.uio.no/pluricourts/english/news-and-events/news/2018/workshop-on-the-political-and-legal-theory-of-inte.html

January 10, 2019 Decisions on acceptance of proposals and travel grants announced

May 15, 2019 Draft papers due

June 24-26, 2019 Workshop

JIEL Call for Papers: “Trade Wars”

The Editorial Board of the Journal of International Economic Law is seeking papers for a forthcoming special issue on ‘Trade Wars’, planned for publication in late 2019.

This special issue seeks to take stock of the current trade wars, provide an explanation of their causes and conditions of possibility, and offer reflections on the best responses to them, both in the short term and looking further ahead. Starting from the premise that the structure of the international economic order may be at a point of inflection, it both aims to set this moment in context, and to offer ideas for what international economic law could and should look like looking ahead.

One of the aims of the special issue is to produce a coherent set of papers which collectively takes a broader view than much of the existing literature. While each paper would include a focus on specific pragmatic issues, they would ideally do so with an explicit appreciation of, and reflection on, the broader systemic issues which may underlie them.

It is currently envisaged that the Special Issue will be organized around three broad themes. First, what is happening this time around, how is it differentiated historically, and what new concerns arise? Second, what are some of the economic, political, and systemic conflicts that triggered the current crisis? Third, at the systemic level, what new rules are needed in order to address the current conflicts? Indicative topics and questions include:

• How does the current set of trade wars compare to similar periods in history, both in terms of the instruments used, and their likely economic and other effects?
• How has the political economy of protectionism been transformed by the transnationalisation of production and the multi-decade consolidation of global value chains? Can we still understand the politics of protectionism within the classical political economy story of trade? Or do we need to rethink the model by incorporating new variables, or by enriching it with insights from behavioral economics?
• If US-China trade frictions are at the heart of the present problems, the deeper issue may be the emergence of new market and quasi-market forms across the globe. How has the global economic order dealt with institutional diversity of this kind before? How can it, and how should it, do so now?
• What may be the larger systemic consequences of the emergence of China’s Belt and Road initiative, particularly in the context of the potential disintegration of the multilateral system? How are these two trends likely to play out, and what might be the structure of the new order which is emerging?
• For the first time, at least since WW2, trade wars are now bound up with larger geopolitical struggles involving both economic and national security dimensions. How has this changed the politics and dynamics of the current trade wars? What does the national security framing mean for the possibility of negotiated solutions?
• The United States is re-orienting its export control regime in order to deal with concerns over the transfer of technology to potentially hostile countries. Doing so unilaterally has raised questions of effectiveness and cost for American companies. How was the multilateral export control regime negotiated and managed during the cold war, and are there lessons for today? How might such export controls play out from a development perspective?

 

Proposals of no more than 750 words should be submitted by email to [email protected] by 30 November 2018. For those proposals accepted, completed manuscripts of 6000-8000 words are to be submitted for peer review by 1 June 2018. Selected authors will also have an opportunity to present their paper at the G2 (Georgetown Law – Graduate Institute) Annual WTO Conference in Geneva, planned for June 7-8, 2019.

Proposals are specifically encouraged from scholars working in the global South.

Anne van Aaken

Chad Bown

Andrew Lang

(Editors of the Special Issue)

Call for Papers: Trade Law & Development

This is from the Managing Editor of the student-run journal Trade, Law and Development:

Founded in 2009, the philosophy of Trade, Law and Development has been to generate and sustain a constructive and democratic debate on emergent issues in international economic law and to serve as a forum for the discussion and distribution of ideas. In keeping with these ideals, the Board of Editors is pleased to announce Trade Facilitation as the theme for its next Special Issue (Vol. XI, No. 1).

Manuscripts may be submitted via e-mail, ExpressO, or through the TL&D website. For further information about the journal and submission guidelines, please visit www.tradelawdevelopment.com.

In case of any queries, please feel free to contact us at: editors[at]tradelawdevelopment[dot]com.

The last date for submissions is: 15TH FEBRUARY, 2019.

See the full call for papers here. 

 

Deadline Extended— The GNLU International Moot Court Competition (GIMC)

This is from Gujarat National Law University:

Gujarat National Law University is glad to inform you that preparations are currently underway for yet another edition of the GNLU International Moot Court Competition (GIMC). The 11th edition of the GIMC is scheduled to take place from February 13-17, 2019 in Gandhinagar, Gujarat (India). The moot problem of this edition revolves around the Agreement of Subsidies and Countervailing Measures. 

For more details please visit the website here. The full announcement is also available here. The deadline has been extended to November 25, 2018. 

Guest Post: Why WTO Members Should Bring Pure Non-Violation Claims Against National Security Measures

This is a guest post from law professor Nicolas Lamp:

There is no doubt that, over the past year, trade officials in WTO Members have spent countless hours agonizing over the appropriate response to Trump’s national security tariffs on steel and aluminium. They have come up with a number of options: negotiating voluntary export restraints, imposing unilateral retaliation, treating the measures as safeguards, and bringing WTO disputes. Each of these options has its own combination of advantages and drawbacks: VERs have the advantage of keeping (some) trade flowing, but they represent a surrender to US demands and set a trade-restrictive and WTO-illegal precedent for the settlement of future disputes; imposing unilateral retaliation is a fast and hard response that makes the use of national security measures economically (and politically) painful for the imposing country, but it also hurts the retaliating countries’ economy and represents a further step out of the rules-based trading regime. Bringing WTO disputes superficially reinforces the rule of law in international trade, but actually has the potential to undermine it even further: whatever a panel decides on the question of the justiciability of the GATT Art. XXI exception will be deeply problematic for many WTO Members. WTO dispute settlement proceedings also take a long time, which is why many Members have imposed unilateral retaliation while they wait for their dispute to run its course. 

However, there is an option for responding to national security measures that avoids many of the drawbacks of the courses of action that WTO Members have actually chosen: bringing pure non-violation complaints. Pure non-violation complaints are superior to violation complaints and unilateral retaliation for at least five reasons: 

1. The complainant can’t lose

Non-violation complaints are failsafe: almost by definition, trade measures imposed for national security reasons will nullify or impair benefits under the GATT 1994 or the GATS. The only question that needs to be settled in dispute settlement is the amount of the nullification or impairment, which will determine the amount of compensation to which the complaining member will be entitled as part of a “mutually satisfactory adjustment”. By contrast, bringing a violation complaint against a national security measure might result in a finding that the measure is saved by the national security exception, in which case the complainant is left with no recourse.   

2. The complainant should get a ruling fast

Non-violation complaints should be much faster to adjudicate than violation complaints: since there is no assessment of the legality of the measures adopted by the respondent, the only issue on which a panel will have to rule is the question of whether benefits accruing to the complainant have been nullified or impaired by the respondent. The appeal stage could be avoided altogether (presuming a minimum of good faith on the part of the respondent). Similarly, there would be no need for compliance proceedings; pursuant to DSU Art. 26.1(c), the only remaining stage would be Article 21.3(c) proceedings to determine the level of nullification or impairment (and potentially Art. 22 proceedings regarding the amount and form of retaliation). 

3. The complainant doesn’t upset anyone

Bringing a violation complaint against another Member’s national security measure will inevitably be perceived as confrontational: such a complaint necessarily implies an accusation that the respondent has not adopted the measure in good faith. By contrast, a non-violation complaint is merely an attempt to restore the balance of concessions that existed before the national security measures were imposed, while respecting the national security determination made by the respondent. In fact, the US has admitted that non-violation complaints remain available for national security measures. 

4. The complainant preserves the rules-based trading system

There are good reasons why the national security exception has not been litigated to date: everyone knows that the result will be explosive, in one way or another. If the panel decides to review the national security rationale provided by the respondent, many WTO Members will find it to be an unacceptable intrusion into their sovereignty. On the other hand, if the panel decides that the national security exception is non-justiciable, it will give carte blanche to WTO Members to impose measures on national security grounds and thereby shield them from WTO challenges. A non-violation complaint sidesteps these highly charged questions entirely: It allows WTO members to address their conflicts using WTO procedures and thereby reinforces the rules-based trading system without burdening panels with legal questions for which there are no good responses. 

5. The complaint focuses on what really matters

One could argue that the question of whether a national security measure is WTO-legal or illegal is beside the point: a Member who imposes a measure for national security reasons is unlikely to remove the measure because the WTO DSB recommended that it do so. Given that withdrawal of the measure is not a realistic outcome of WTO proceedings, the only benefit of such proceedings is an authoritative assessment of the amount of compensation to which the complainant is entitled or the retaliation that the complainant can implement, which corresponds to the amount of nullification or impairment. If that is the case, why not go straight to the question of nullification or impairment of benefits by bringing a pure non-violation complaint? 

Mexico's View of the Problems with the NAFTA Panel Appointment Process

This is from Inside US Trade: 

In addition to the cultural carveout, [Jesús] Seade, [the chief NAFTA negotiator for Mexican president-elect Andrés Manuel López Obrador], touted the USMCA’s dispute settlement system, particularly Chapter 20 state-to-state dispute resolution, along with the deal’s provisions for small and medium-sized enterprises and those pertaining to labor, environment and anti-corruption.

“Who benefits from a stronger dispute resolution system? The big guy, or the one trading with the big guy? Of course it’s the one trading with the big guy,” he told Inside U.S. Trade. “Dispute resolution is for the small country. So Mexico is particularly interested.”

He acknowledged that USMCA did not address whether the parties could block the establishment of panels under Chapter 20, but said it was a necessary compromise to get the U.S. to back off its demand to be able to veto Chapter 20 decisions.

“There were two heavy proposals, contentious for somebody. One was Mexico seeking to remedy that and there was the U.S. trying to introduce veto power for the executive,” he told Inside U.S. Trade. “And when I discussed -- this was something that fell to me -- this with Lighthizer. [I said,] ‘We have to eliminate your poison pill.' He said, ‘Okay, but we leave the panels alone.’”

“I said okay, because in the history of the NAFTA this has been a problem only once. The sugar case,” he added, referring to a dispute brought by Mexico in 2000 in which the U.S. blocked the establishment of a panel. “It has been a problem once. If the issue is very politicized, you may have a problem, but it’s not something that will happen frequently, so we said okay.”

One way to look at the problem with Chapter 20 is that, as Seade says, it was only one case. But another way to look at the situation is this:

In the beginning, the NAFTA dispute mechanism worked well enough. From 1995 through the middle of 2000, there were 18 complaints filed, with panels ruling on three of those complaints. But then in late 2000, in a claim filed by Mexico against U.S. restrictions on sugar, the United States blocked the appointment of the panel.

Since that time, NAFTA complaints have essentially dried up. From 2001 until today, there have only been four complaints, none of which have gone to a panel. 

Of course, as we noted: "Proving cause and effect is difficult, and it is possible that the decline in NAFTA complaints is unrelated to the blocking of the panel appointment process. Perhaps the NAFTA governments simply did not have many complaints about each other's behavior during this later period."

It's still not clear to me how NAFTA dispute settlement under the new Chapter 31 will function in terms of panel appointments. I've heard it suggested that the parties will try to fix the roster problems. We'll see if that happens, and we'll also whether the parties have disputes and, if so, whether they will be heard.

Regulatory Issues in the New NAFTA

The chapter on "Good Regulatory Practices" (Chapter 28) was concluded early on in the NAFTA renegotiations, but until last week there were a lot of unanswered question as to what it would include. On first read, it appears that this chapter goes beyond anything we've seen so far in similar chapters found in the CPTPP (Chapter 25) and CETA (Chapter 21). Below I provide a few highlights and some initial thoughts. I expect to do a more detailed analysis in the coming weeks.

To start, the scope of the chapter seems very similar to the CPTPP, which similarly reads:

2. Accordingly, this Chapter sets forth specific obligations with respect to good regulatory practices, including practices relating to the planning, design, issuance, implementation, and review of the Parties’ respective regulations.

The CPTPP includes a provision encouraging the creation of an OIRA-like body to coordinate regulatory policy (Article 25.4):

1. The Parties recognise that regulatory coherence can be facilitated through domestic mechanisms that increase interagency consultation and coordination associated with processes for developing regulatory measures. Accordingly, each Party shall endeavour to ensure that it has processes or mechanisms to facilitate the effective interagency coordination and review of proposed covered regulatory measures. Each Party should consider establishing and maintaining a national or central coordinating body for this purpose.

There is similar language in the USMCA (Article 28.3), with a slight tweak:

The Parties intend to maintain their respective central regulatory coordinating bodies, within their respective mandates and consistent with their law.

This is an expected adjustment, as the CPTPP regulatory coherence chapter was largely aimed at developing countries with relatively underdeveloped regulatory regimes.

Some expanded and new items, however, are worth noting. For instance, there are a set of provisions on transparency that address some long-standing issues for the United States, which it has tried to address not only in its FTAs, but also at the WTO. For example:

Article 28.5: Information Quality

1. Each Party recognizes the need for regulations to be based upon information that is reliable and of high quality. To that end, each Party should adopt or maintain publicly available guidance or mechanisms that encourage its regulatory authorities when developing a regulation to:

(a)  seek the best, reasonably obtainable information, including scientific, technical, economic, or other information relevant to the regulation it is developing

(b)  rely on information that is appropriate for the context in which it is used; and

(c)  identify sources of information in a transparent manner, as well as any significant assumptions and limitations.

And there are also provisions that resemble an "early warning system" for new regulation, so that the Parties have enough time to provide feedback on proposed measures:

Article 28.6: Early Planning

Each Party shall publish annually a list of regulations that it reasonably expects within the following 12 months to adopt or propose to adopt. Each regulation identified in the list should be accompanied by:

(a)  a concise description of the planned regulation;

(b)  a point of contact for a knowledgeable person in the regulatory authority responsible for the regulation; and

(c)  an indication, if known, of sectors to be affected and whether there is any expected significant effect on international trade or investment.

Entries in the list should also include, to the extent available, time tables for subsequent actions, including those providing opportunities for public comment under Article 28.9.

Throughout the chapter there is an emphasis on science-based risk assessment, and no mention of the word "precautionary" in any form (the same is true for the SPS chapter). On early planning, it is worth pointing out this is a process that is already covered by WTO notification requirements, but, to my knowledge, members do not tend to go into great detail about about the sectors affected by proposed measures (though they do often list products covered) and do not provide analysis of the expected impact on trade. These are issues that usually are raised later by the countries affected by a proposed measure in the TBT and SPS committees.

Other transparency provisions, such as Article 28.9 (Transparent Development of Regulation) seem generally similar to what's in the CPTPP. These provisions focus on impact assessment, providing a rationale for the measure, and an explanation of the data used in the impact assessment. 

There is also mention of regulatory cooperation initiatives that are more similar to the CETA in their expansive coverage than the CPTPP. For instance, Article 28.17 provides:

 3. The Parties recognize that a broad range of mechanisms including those set forth in the WTO Agreement, exists to help minimize unnecessary regulatory differences and facilitate trade or investment, while contributing to each Party’s ability to meet its public policy objectives. These activities may include, as appropriate to the particular circumstances:

(a) early stage formal or informal exchange of technical or scientific information or data, including coordinating research agendas, to reduce duplicative research;
(b) exploring possible common approaches to the evaluation and mitigation of risks or hazards, including those potentially posed by the use of emerging technologies;
(c) wherever appropriate, regulating by specifying performance requirements rather than design characteristics, to promote innovation and facilitate trade;
(d) seeking to collaborate in relevant international fora;
(e) exchanging information, such as of technical or practical nature, on regulations that each Party is developing to maximize the opportunity for common approaches;
(f) co-funding of research in support of regulations and implementation tools of joint interest;
(g) facilitating the greater use of relevant international standards, guides, and recommendations as the basis for regulations, testing, and approval procedures;
(h) when developing or implementing regulations, considering relevant scientific or technical guidance documents developed through international collaborative initiatives;
(i) considering common approaches to the display of product or consumer information;
(j) considering the development of compatible platforms or formats for industry submission of product information for regulatory review;
(k) coordinating in the implementation of regulations and sharing compliance information, including, as appropriate by entering into confidentiality agreements; and
(l) periodically exchanging information, as appropriate, concerning any planned or ongoing post-implementation review or evaluation of regulations in effect affecting trade or investment.

Now, it's not entirely clear to what extent this replaces the current regulatory cooperation initiatives already in place, mainly the Canada-U.S. Regulatory Cooperation Council (RCC). The U.S. and Canada signed an MOU in June this year recommitting themselves to the work of the RCC, so it is entirely possible that the RCC will continue in parallel, but only to address bilateral regulatory issues between the U.S. and Canada. The U.S.-Mexico High Level Regulatory Cooperation Council (HLRCC) has been far less successful than its Canada-U.S. counterpart (both were founded in 2011), so the inclusion of regulatory cooperation in the new NAFTA may be a way to bring Mexico back in to the fold, and allow for trilateral cooperation where possible. That is a good thing. At the end of the day, however, the extent to which regulatory cooperation initiatives will be pursued is entirely up to the parties, and the hortatory language used in these provisions supports this conclusion.

Finally, the item that really piqued my interest is a provision that makes the chapter subject to dispute settlement:

Article 28.20: Application of Dispute Settlement

1. Recognizing that a mutually acceptable solution can often be found outside recourse to dispute settlement, a Party shall exercise its judgement as to whether recourse to dispute settlement under Chapter 31 (Dispute Settlement) would be fruitful.

2. Chapter 31 (Dispute Settlement) shall apply with respect to a responding Party as of one year after the date of entry into force of this Agreement for that Party.

3. No Party shall have recourse for dispute settlement under Chapter 31 (Dispute Settlement) for a matter arising under this Chapter except to address a sustained and recurring course of action or inaction that is inconsistent with a provision of this Chapter.

This is surprising for a few reasons. First, in the CPTPP, Article 25.11 states that the Parties do not have recourse to dispute settlement "for any matter arising under" the regulatory coherence chapter. Given the mixed levels of development among the CPTPP parties, along with the fact that the provisions in the regulatory coherence chapter generally focused on procedural aspects of domestic regulatory reform as opposed to cooperation, it was not surprising that the chapter would not be subject to dispute settlement. What is interesting is that the U.S. departed from the CPTPP model of regulatory coherence, and has instead built something that incorporates some aspects of the CPTPP, but also relies heavily on learned experience from the U.S.-Canada RCC process. Second, this is also a departure from Canada's obligations in CETA, which does not include a provision on dispute settlement at all in its regulatory cooperation chapter, but does emphasize that "The Parties may undertake regulatory cooperation activities on a voluntary basis." The inclusion of the word voluntary, which does not appear anywhere in the Good Regulatory Practices chapter of the USMCA is also a notable difference.

But before we get all worked up about the potential disputes that may be filed in the coming years, I also want to highlight another little nugget in Annex 28-A, which states:

1. The following entities are not a regulatory authorities for the purposes of this Chapter:

   1. (a)  for Canada: the Governor in Council; and

   2. (b)  for the United States: the President.

Leaving aside the fact that enforcing some of the regulatory process requirements, such as scientific risk assessment, early notification, and trade impact analysis will be difficult under any circumstances, I find it curious that the entities listed above were specifically carved out of the chapter. Let's say the President of the United States decides to take some regulatory action that does not comport with the procedural and other notification requirements of this chapter, say by enacting a trade restrictive regulation overnight, then that is not subject to dispute under this chapter. I suppose we will still need to rely on the WTO to deal with these matters.

Overall, while the Good Regulatory Practices chapter is a novel innovation that builds upon long standing shared practices between Canada and the United States, it remains to be seen how it will function, and what, if any, outcomes it will produce to reduce the burden of regulatory barriers in North America.

Guest Post: Protecting Indigenous Rights in the United States-Mexico-Canada Agreement

This is a guest post from Risa Schwartz, a sole practitioner based in Canada focussing on the intersections between international trade and investment law and Indigenous rights (@risaschwartzlaw, [email protected])

The United States-Mexico-Canada agreement includes a new provision for the protection of the rights of  Indigenous peoples.  This exception, found in Chapter 32, Exceptions and General Provision, was included at the behest of Canada, but is drafted to apply to all three parties of USMCA.

Found at Article 32.5, the new exception reads:

Indigenous Peoples Rights

Provided that such measures are not used as a means of arbitrary or unjustified discrimination against persons of the other Parties or as a disguised restriction on trade in goods, services, and investment, nothing in this Agreement shall preclude a Party from adopting or maintaining a measure it deems necessary to fulfill its legal obligations to indigenous peoples. United States-Mexico-Canada Agreement             

Canada takes the position that “Canada’s obligations to Indigenous peoples under the Canadian Constitution cannot be superseded or undermined by commitments under a free trade agreement”[1].  However, the addition of a general exception language to USMCA makes it clear to states and foreign investors that USMCA parties are free to meet their legal obligations to Indigenous peoples without concern that such actions may run afoul of trade or investment rules.  Perhaps most importantly, this exception will apply to all three states, which is a confirmation that Canada, Mexico and the United States have affirmed their commitment to Indigenous rights in an international economic agreement. 

The general exception provision for Indigenous peoples is a first for North America but it is not the exception for Indigenous peoples in a free trade agreement.  The Treaty of Waitangi exception was developed by New Zealand in 2001 for a bilateral free trade agreement with Singapore and is found in all New Zealand trade agreements, including the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).  According to New Zealand’s Foreign Affairs and Trade website, “Nothing in this new Agreement will prevent the Crown from meeting its Treaty obligations to Māori. As with all of New Zealand’s contemporary trade agreements, CPTPP includes a specific provision preserving the pre-eminence of the Treaty of Waitangi in New Zealand.”[2]   The Treaty of Waitangi exception  allows for the “…adoption by New Zealand of measures it deems necessary to accord more favourable treatment to Maori in respect of matters covered by this Agreement, including in fulfilment of its obligations under the Treaty of Waitangi.”[3] 

Similar to the USMCA exception, a measure taken by New Zealand cannot be “used as a means of arbitrary or unjustified discrimination…or as a disguised restriction on trade in goods and services or investment…” .   As well, the measure must be deemed necessary by New Zealand, and the exception is drafted in a manner that is self-judging. The arbitrary and unjustified discrimination language is a clear reference to the chapeau of GATT Article XX. Trade policy analysts and trade lawyers may be comfortable with this language and find it to be protective, but there were concerns by many Māori groups that the exception language did not go far enough to protect their interests, especially in the CPTTP, which includes an Investment chapter with Investor-State Dispute Settlement.  A challenge to whether the exception was protective of Māori interests was the subject of a Waitangi Tribunal Report issued in 2016[4].  The Tribunal concluded that the exception offered a reasonable degree of protection to Māori interests. However, they were concerned by the language that limited the exception to measures that accord more favourable treatment.

The USMCA has done away with the limiting language of “…to accord more favourable treatment” as it can apply to any measures that the Parties take to fulfil their legal obligations to Indigenous peoples, as long as the measure is not arbitrary or unjustifiable discrimination.

Canada has included a footnote, which is added as a clarification, which specifies Canada’s legal obligations to Indigenous peoples. Mexico and the United States did not add any footnotes to Article 32.5. The Canadian footnote reads “For greater certainty, for Canada the legal obligations include those recognized and affirmed by section 35 of the Constitution Act, 1982 or those set out in self-government agreements between a central or regional level of government and indigenous peoples”.   Section 35 of the Constitution Act, 1982 recognizes and affirms existing Aboriginal and treaty rights and rights acquired through land claims.  The legal obligations listed in the footnote should not be seen an exhaustive list, as noted by the use of the word “include” in the footnote. Arguably, legal obligations applicable to Indigenous peoples Canada, as well as in Mexico and the United States, include Indigenous rights in the United Nations Declaration on the Rights of Indigenous Peoples which was adopted by Mexico in 2007 and subsequently endorsed by the United States and Canada

 

[1]   Government of Canada, “Trade and Indigenous peoples issue summary” online: http://international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/usmca-aeumc/indigenous-autochtones.aspx?lang=eng

[2] New Zealand Foreign Affairs and Trade, “Protections” online: https://www.mfat.govt.nz/en/trade/free-trade-agreements/free-trade-agreements-concluded-but-not-in-force/cptpp/understanding-cptpp/protections/

[3] New Zealand Foreign Affairs and Trade ,The Agreement between New Zealand and Singapore on a Closer Economic Partnership (CEP) 1 January 2001. Article 74. Online: https://www.mfat.govt.nz/assets/FTAs-agreements-in-force/Singapore-FTA/NZ-Singapore-CEP-full-text.pdf

[4] Waitangi Tribunal Report on the Trans-Pacific Partnership Agreement (Wai 2522, 2016). Online: https://forms.justice.govt.nz/search/Documents/WT/wt_DOC_104833137/Report%20on%20the%20Trans-Pacific%20Partnership%20Agreement%20W.pdf

What If National Security Tariffs Spread To Other Countries?

This is a question from an Inside US Trade reporter to U.S. Trade Representative Robert Lighthizer:

Q Yeah. Thank you, Ambassador. My name is Anshu, with Inside U.S. Trade. ... And then in a broader sense, on the use of 232, the President sort of said that he made the "economic security is national security" argument -- we need a thriving economy, strong manufacturing base. 

My question is that, in the broader sense, if other countries start using that justification -- that economic security is national security -- and consistent with your view that Article 21 is self-judging, like what recourse would the U.S. have if other countries started imposing national security on tariffs on us? Thanks.

AMBASSADOR LIGHTHIZER: Well, I would say, first of all, I think every country in the world that sits down and thinks about it believes that economic security is national security. It's completely self-evident.

The only thing amazing to me is that it took, really, President Trump to put it in his national security objective. Every -- if you look, go back through the last President, every one of them fundamentally believed that. Nobody thought that our national security wasn't, in fact, based on our economic security. It's been true as far as you can go back -- and not just in the United States, with every other country in the world, right? I mean that -- that's -- there's a million quotes that all of us know with every major person that says that. So it doesn't surprise me.

This was a great question, and it doesn't seem like Ambassador Lighthizer really answered it. What are the chances that other countries will start applying economic/national security tariffs to U.S. products? How would the U.S. react if they did?

Call for Papers from the ANZSIL International Economic Law Interest Group

This is from the ANZSIL International Economic Law Interest Group:

CALL FOR PAPERS FOR AND INVITATION TO 2019 WORKSHOP

Background

The ANZSIL International Economic Law Interest Group (IELIG) was established in 2011 to provide a forum for those interested in international economic law, especially international regulation of trade, investment, intellectual property, and monetary law. The work of the Interest Group covers all areas of international economic law and its implementation in domestic law, embracing both theoretical and practical aspects. The IELIG aims to maintain relevance for government, practitioners and academics alike and encourages discussion andexchange of ideas among all those involved in this field.

2019 Workshop

The 2019 IELIG Workshop will be held in Christchurch at the University of Canterbury Staff Club on Friday, 15 February 2019. The workshop is kindly sponsored by Chapman Tripp. Its aim is to provide an informal setting for discussion of topical issues and works in progress. The programme will include a dedicated session for the presentation of current PhD research.

We invite paper proposals from ANZSIL members, practitioners in the field as well as staff from MFAT, DFAT, and the Attorney-General's Department. We particularly encourage PhD students and early career practitioners and academics to submit a proposal. Paper proposals may be on any topic within the work of the IELIG. All speakers are invited to publish their paper in the New Zealand Yearbook of International Law.

We also invite ANZSIL members and MFAT/DFAT/AGD staff to attend the workshop, even if not presenting a paper. For reasons of space, places for attendees may be limited, and will be allocated in order of RSVPs.

Submission of proposals

If you wish to submit a paper proposal, please submit an abstract of 300 words by email to [email protected] or [email protected] by Friday, 14 December 2018.

Please include the heading on your email message ‘ANZSIL Conference IELIG Workshop
Proposal: [Your Name].

Registration

There is no charge to attend the Workshop. For catering purposes and to ensure we hold a space for you, please RSVP by email to [email protected] by Friday, 11 January 2019.

Best wishes,

Dr Chris Riffel (University of Canterbury) and Anna Kirk (Bankside Chambers)
IELIG Co-Chairs

The U.S.-Mexico-Canada (AKA the New NAFTA) Trade Deal: Trucking Services

Back in 2001, a NAFTA Chapter 20 panel ruled that certain U.S. restrictions on Mexican trucking services violated U.S. commitments under the NAFTA. Implementation of this ruling by the U.S. has seen some stops and starts. The new NAFTA clarifies and limits the U.S. obligation:

Notwithstanding Annex I-US-8, the United States reserves the right to adopt or maintain limitations on grants of authority for persons of Mexico to provide cross-border long-haul truck services in the territory of the United States outside the border commercial zones if the United States determines that limitations are required to address material harm or the threat of material harm to U.S. suppliers, operators, or drivers.1 The United States may only adopt such limitations on existing grants of authority if it determines that a change in circumstances warrants the limitation2 and if the limitation is required to address material harm.3 The Parties shall meet no later than five years after the entry into force of this agreement to exchange views on the operation of this entry.

1 For purposes of this entry, “material harm” means a significant loss in the share of the U.S. market for long-haul truck services held by persons of the United States caused by or attributable to persons of Mexico.

2 For greater certainty, a substantial increase in services supplied by the grantee may constitute a change in circumstances. 

3 The Parties confirm their shared understanding that current operations under existing grants of authority as of the date of entry into force of this Agreement are not causing material harm. 

While I don't agree with Global Trade Watch's view of this issue, their explanation is helpful:

... The text includes a fix for a longstanding problem related to environmental and safety concerns with Mexican-domiciled long-haul trucks that were provided access to roads throughout North America by NAFTA. The Clinton administration decided not to allow access beyond a limited border zone based on a series of Department of Transportation Inspector General reports on safety and environmental problems with the vehicles. Mexico challenged this policy before a NAFTA dispute settlement tribunal and won. The Bush administration provided access, which Congress then reversed. After a NAFTA tribunal authorized Mexico to impose $2.4 billion in trade sanctions against U.S. imports for failure to comply with the NAFTA terms, the Obama administration approved access for Mexican-domiciled trucks despite the failure of a pilot program that was established to test whether the vehicles complied with U.S. safety and environmental rules. The revised NAFTA text includes new U.S. exceptions to the old NAFTA trucking obligations that allow the U.S. government to limit grants of the authorizations required to provide cross-border long-haul trucking services.

Does this effectively resolve the dispute, with both sides comfortable with the current degree of market access and the "safeguards" in the new NAFTA? Are there other safeguards for services imports out there? How will the U.S. process for determining threat of material harm work?

The U.S.-Mexico-Canada (AKA the New NAFTA) Trade Deal: Withdrawing from the New NAFTA

The original NAFTA withdrawal provision, Article 2205, said this:

A Party may withdraw from this Agreement six months after it provides written notice of withdrawal to the other Parties. If a Party withdraws, the Agreement shall remain in force for the remaining Parties.

The new NAFTA withdrawal provision, Article 34.6, adds a sentence in the middle:

A Party may withdraw from this Agreement by providing written notice of withdrawal to the other Parties. A withdrawal shall take effect six months after a Party provides written notice to the other Parties. If a Party withdraws, the Agreement shall remain in force for the remaining Parties.

For comparison, the TPP withdrawal provision, Article 30.6, has a version of this added sentence as well:

1. Any Party may withdraw from this Agreement by providing written notice of withdrawal to the Depositary. A withdrawing Party shall simultaneously notify the other Parties of its withdrawal through the overall contact points designated under Article 27.5 (Contact Points).

2. A withdrawal shall take effect six months after a Party provides written notice to the Depositary under paragraph 1, unless the Parties agree on a different period. If a Party withdraws, this Agreement shall remain in force for the remaining Parties.

An important question under U.S. law is, who in the U.S. government has the authority to provide the written notice of withdrawal? Surely a letter from the Speaker of the House would not qualify. What about a letter from the President? Arguably, the President alone does not have this power either, as Congress has authority here as well. It will be interesting to see if the Statement of Administrative Action tries to clarify this point. 

Guest Post: The U.S.-Mexico-Canada (AKA the New NAFTA) Trade Deal: Labor

This is a guest post from law prof Kathleen Claussen:

The USTR fact sheet released in late August previewed that the USMCA labor provisions would be the “strongest of any trade agreement.”  To evaluate this statement, rather than look at the agreements in force or the status quo on the NAFTA (the North American Agreement on Labor Cooperation (NAALC), which was a side agreement to the NAFTA), the better point of comparison is the TPP Labor Chapter.

Putting to one side the widely-discussed increase in wages for certain auto workers in the Rules of Origin chapter, the draft USMCA labor text closely tracks the TPP with a small handful of notable exceptions.  The most widely anticipated change is the addition of several footnotes to respond to the U.S.-Guatemala labor case panel report, the release of which post-dated the TPP negotiations.  The U.S.-Guatemala panel report was criticized by Democrats and Republicans for having misunderstood some of the key language found in recent U.S. trade agreements, particularly the phrases “through a sustained or recurring course of action or inaction” and “in a manner affecting trade between the Parties.”  USMCA adds “for greater certainty” footnotes each time those phrases appear:

8 For greater certainty, a “sustained or recurring course of action or inaction” is “sustained” where the course of action or inaction is consistent or ongoing, and is “recurring” where the course of action or inaction occurs periodically or repeatedly and when the occurrences are related or the same in nature. A course of action or inaction does not include an isolated instance or case.

9 For greater certainty, a “course of action or inaction” is “in a manner affecting trade or investment between the Parties” where the course involves: (1) a person or industry that produces goods or provides services traded between the Parties or has investment in the territory of the Party that has failed to comply with this obligation; or (2) a person or industry that produces goods or provides services that compete in the territory of a Party with goods or services of another Party.

The same footnotes appear in the environment chapter, although they do not appear in all chapters that use the “manner affecting trade” phrase (see, e.g., Article 27.8 on Anticorruption) – perhaps that will be changed in the scrub.

It is unsurprising that negotiators sought to clarify rather than change these politically delicate (May 10) phrases, especially since those phrases appear in TPA.  It remains to be seen whether this additional language will help if any disputes materialize under this chapter.  At least the “manner affecting trade” clarification should help claimant parties reach the necessary evidentiary threshold more easily than the U.S.-Guatemala panel permitted.

Apart from some small changes in the labor chapter on the process for consultations in potential labor disputes, as Simon noted, the state-to-state dispute settlement chapter, applicable also to labor disputes, looks pretty much the same as in the past.  Improvements to the dispute settlement mechanism could enhance the enforceability of labor and other trade-plus provisions – a central outstanding criticism of Democrats.  There may still be an opportunity to make important procedural modifications in the drafting of rules of procedure down the road.

In addition to these “for greater certainty” footnotes, three new articles feature prominently covering violence against workers, migrant workers, and sex-based discrimination in the workplace.  The article on forced labor was also strengthened from the version in the TPP draft text to say that the parties “shall prohibit” (rather than “shall . . . discourage”) importation of goods produced by forced labor.  Presumably, these changes were facilitated in part by the limitation of the agreement to Mexico and Canada and the exclusion of the Asian partners that were the focus of considerable labor-related attention in TPP (e.g., Vietnam, Malaysia).  Not all is new, though; for example, the USMCA labor chapter does not include a corporate social responsibility article like that which appeared in TPP.  (It appears that article may have just been moved to the end of the Investment chapter -  Art. 14.17).

A final notable feature is the annex requiring Mexico to make a series of labor law reforms by January 1, 2019, or risk delaying the entry into force of the agreement.  Still, just as the problem in the U.S.-Guatemala case was not the law on the books but rather its successful implementation and enforcement, it will take more than the passage of legislation to make these provisions effective in achieving the goals of labor advocates.

The U.S.-Mexico-Canada (AKA the New NAFTA) Trade Deal: Non-Violation Claims

As part of a quest to find the most obscure aspect of the new NAFTA, I point you to the scope of non-violation claims. This is from the new NAFTA:

Article 31.2: Scope

1. Unless otherwise provided in this Agreement, the dispute settlement provisions of this Chapter shall apply:

...

(c) when a Party considers that a benefit it could reasonably have expected to accrue to it under Chapter 2 (National Treatment and Market Access for Goods), Chapter 3 (Agriculture), Chapter 4 (Rules of Origin), Chapter 5 (Origin Procedures), Chapter 6 (Textile and Apparel Goods), Chapter 7 (Customs Administration and Trade Facilitation), Chapter 9 (Sanitary and Phytosanitary Measures), Chapter 11 (Technical Barriers to Trade), Chapter 13 (Government Procurement), Chapter 15 (Cross-Border Trade in Services), or Chapter 20 (Intellectual Property), is being nullified or impaired as a result of the application of a measure of another Party that is not inconsistent with this Agreement.

And here is the TPP: 

Article 28.3: Scope

1. Unless otherwise provided in this Agreement, the dispute settlement provisions of this Chapter shall apply:

...

(c) when a Party considers that a benefit it could reasonably have expected to accrue to it under Chapter 2 (National Treatment and Market Access for Goods), Chapter 3 (Rules of Origin and Origin Procedures), Chapter 4 (Textile and Apparel Goods), Chapter 5 (Customs Administration and Trade Facilitation), Chapter 8 (Technical Barriers to Trade), Chapter 10 (Cross-Border Trade in Services) or Chapter 15 (Government Procurement), is being nullified or impaired as a result of the application of a measure of another Party that is not inconsistent with this Agreement. 

And here is the KORUS:

Article 22.4: Scope of Application

Except as otherwise provided in this Agreement or as the Parties otherwise agree, this Section shall apply with respect to the avoidance or settlement of all disputes between the Parties regarding the interpretation or application of this Agreement or wherever a Party considers that:

...

(c) a benefit the Party could reasonably have expected to accrue to it under Chapter Two (National Treatment and Market Access for Goods), Three (Agriculture), Four (Textiles and Apparel), Six (Rules of Origin and Origin Procedures), Twelve (Cross-Border Trade in Services), Seventeen (Government Procurement), or Eighteen (Intellectual Property Rights)1
is being nullified or impaired as a result of a measure that is not inconsistent with this Agreement, except that neither Party may invoke this subparagraph with respect to a benefit under Chapter Twelve (Cross-Border Trade in Services) or Eighteen (Intellectual Property Rights) if the measure is subject to an exception under Article 23.1 (General Exceptions).

1. Neither Party will invoke subparagraph (c) with respect to a measure affecting benefits under Chapter Eighteen (Intellectual Property Rights) during any period for which WTO Members have agreed not to initiate complaints of the type provided for under subparagraph 1(b) of Article XXIII of GATT 1994 under the TRIPS Agreement.

Given how few FTA disputes there are in general, and thus how unlikely any of this is to come up, it's interesting to see variations in the scope of non-violation that one country or another apparently cares about. SPS and IP seem to be the main battleground here.

The U.S.-Mexico-Canada (AKA the New NAFTA) Trade Deal: Limits on FTAs with NMEs

Article 32.10 of the new NAFTA says:

Article 32.10: Non-Market Country FTA

1. At least 3 months prior to commencing negotiations, a Party shall inform the other Parties of its intention to commence free trade agreement negotiations with a non-market country. For purposes of this Article, a non-market country is a country that on the date of signature of this agreement at least one Party has determined to be a non-market economy for purposes of its trade remedy laws and is a country with which no Party has a free trade agreement.

2. Upon request, the Party shall provide as much information as possible regarding the objectives for those negotiations.

3. As early as possible, and no later than 30 days before the date of signature, that Party shall provide the other Parties with an opportunity to review the full text of the agreement, including any annexes and side instruments, in order for the Parties to be able to review the agreement and assess its potential impact on this Agreement. If the Party involved requests that the text be treated as confidential, the other Parties shall maintain the confidentiality of the text.

4. Entry by any Party into a free trade agreement with a non-market country, shall allow the other Parties to terminate this Agreement on six-month notice and replace this Agreement with an agreement as between them (bilateral agreement).

5. The bilateral agreement shall be comprised of all the provisions of this Agreement, except those provisions the relevant Parties decide are not applicable as between them.

6. The relevant Parties shall utilize the six-month notice period to review the Agreement and determine whether any amendments should be made in order to ensure the proper operation of the bilateral agreement.

7. The bilateral agreement enter into force 60 days after the date on which the parties to the bilateral agreement have notified each other that they have completed their respective applicable legal procedures.

This provision adds some conditions and burdens for a NAFTA party trying to negotiate an FTA with an NME (Canada and China come to mind). I was intrigued by the remedy in para. 4, which is an interesting variation of the Article 34.6 withdrawal provision. It looks like it would involve a mini-renegotiation. Seems unlikely we would get to this, though, as FTAs with China would be challenging for both Canada and Mexico. But if this is now part of the U.S. FTA template, it will be interesting to see how any future FTA negotiating partners react.

I also wonder what constitutes a "free trade agreement negotiation." Would the talks between Japan/EU and the U.S. that have been announced recently count? (Not that those countries are NMEs, of course).

The U.S.-Mexico-Canada (AKA the New NAFTA) Trade Deal: State-State Dispute Settlement

Inu and I had a recent article in which we explained how NAFTA Chapter 20 state-state dispute settlement hasn't been working because of problems with appointing panelists (in large part because the roster of panelists was not filled). It doesn't look like this article made much of an impression on the negotiators, because the relevant provisions in the the new NAFTA trade deal, now in Chapter 31, look pretty much the same as what was in Chapter 20.

This is a real shame, and Congress should look at this closely. Presumably, most people in all three countries who pushed for particular obligations want those obligations to be enforceable. There needs to be a way to ensure that panels get appointed when needed.

Now, the problem noted above was the result of the U.S. blocking appointments, and maybe people in the U.S. assume that Canada and Mexico would never do such a thing. Regardless, if I were Congress, I would ask tough questions about how it can be guaranteed that panels will be appointed.

As for Canada and Mexico, who are most likely to be affected by this, I wonder if they got any assurances about how the U.S. would act in this regard.

The U.S.-Mexico-Canada (AKA the New NAFTA) Trade Deal: Investment Protection/ISDS

As has been expected, in the new NAFTA deal, the Trump administration has significantly scaled back the investment protection/ISDS provisions, which are now found in Chapter 14. One way to think about what happened is that there is no more general recourse to ISDS, but there are three ways you can still use it. In this regard, Article 14.2.4 explains:

For greater certainty, an investor may only submit a claim to arbitration under this Chapter as provided under Annex 14-C (Legacy Investment Claims and Pending Claims), Annex 14-D (Mexico-United States Investment Disputes), or Annex 14-E (Mexico-United States Investment Disputes Related to Covered Government Contracts).

Annex 14-C, para. 6 says:

(a) “legacy investment” means an investment of an investor of another Party in the territory of the Party established or acquired between January 1, 1994, and the date of termination of NAFTA 1994, and in existence on the date of entry into force of this Agreement;

However, the Annex also says:

1. Each Party consents, with respect to a legacy investment, to the submission of a claim to arbitration in accordance with the provisions in Section B of Chapter 11 of NAFTA 1994 and this Annex alleging breach of an obligation under:

(a) Section A of Chapter 11 of NAFTA 1994;
(b) Article 1503(2) (State Enterprises) of NAFTA 1994; and
(c) Article 1502(3)(a) (Monopolies and State Enterprises) of NAFTA 1994 where the monopoly has acted in a manner inconsistent with the Party’s obligations under Section A of Chapter 11 of NAFTA 1994.20 21
...
3. A Party’s consent under paragraph 1 shall expire three years after the termination of NAFTA 1994.

Without consent to arbitration, there is no automatic right to have your ISDS claim heard, so investment lawyers should take note that legacy investment claims need to be brought soon. I can imagine we will see a rush of filings to beat that deadline.

As for the Annex 14-D claims between the U.S. and Mexico, there are some serious limitations, including this:

Article 5: Conditions and Limitations on Consent

1. No claim shall be submitted to arbitration under this Annex unless:

(a) the claimant (for claims brought under Article 3.1(a) (Submission of a Claim)) and the claimant or the enterprise (for claims brought under Article 3.1(b)) first initiated a proceeding before a competent court or administrative tribunal of the respondent with respect to the measures alleged to constitute a breach referred to in Article 3 (Submission of a Claim to Arbitration);

(b) the claimant or the enterprise obtained a final decision from a court of last resort of the respondent or 30 months have elapsed from the date the proceeding in subparagraph (a) was initiated; 

Finally, Annex 14-E applies to particular government contracts, including for oil and natural gas.

There's more to it, but I'll leave it to others to flesh it all out, and just close with a point about politics. Can Republican members of Congress accept scaling investment protection/ISDS in this way? And do the changes go far enough to pick up any Democratic votes?

The U.S.-Mexico-Canada (AKA the New NAFTA) Trade Deal: The Sunset Clause

The text of what is being called the United States-Mexico-Canada Agreement (USMCA) has been released. It would be much easier to call this agreement NAFTA, rather than some unwieldy new name that someone thought was preferable for public relations purposes. We'll see what practice develops here. I will probably alternate between the two for a while.

There's a lot in here to talk about, and as you might expect, I will be doing some blogging on it (I encourage others to do so as well!).

Let's start with the sunset clause. It was reported that the Trump administration was proposing a sunset clause under which the agreement would expire after 5 years unless all three parties affirmatively agreed to continue it. That proposal has been revised and appears in the final provisions chapter as follows:

Article 34.7: Review and Term Extension

1. This Agreement shall terminate 16 years after the date of its entry into force, unless each Party confirms it wishes to continue the Agreement for a new 16-year term, in accordance with the procedures set forth in paragraphs 2 through 6.

2. No later than the sixth anniversary of the entry into force of this Agreement, the Commission shall meet to conduct a “joint review” of the operation of the Agreement, review any recommendations for action submitted by a Party, and decide on any appropriate actions. Each Party may provide recommendations for the Commission to take action at least one month before the Commission’s joint review meeting takes place.

3. As part of the Commission’s joint review, each Party shall confirm, in writing, through its head of government, if it wishes to extend the term of the Agreement for another 16-year period. If each Party confirms its desire to extend the Agreement, the term of the Agreement shall be automatically extended for another 16 years and the Commission shall conduct a joint review and consider extension of the Agreement term no later than at the end of the next six-year period.

4. If, as part of a six-year review, a Party does not confirm its wish to extend the term of the Agreement for another 16-year period, the Commission shall meet to conduct a joint review every year for the remainder of the term of the Agreement. If one or more Parties did not confirm their desire to extend the Agreement for another 16-year term at the conclusion of a given joint review, at any time between the conclusion of that review and expiry of the Agreement, the Parties may automatically extend the term of the Agreement for another 16 years by confirming in writing, through their respective head of government, their wish to extend the Agreement for another 16-year period.

5. At any point when the Parties decide to extend the term of the Agreement for another 16-year period, the Commission shall conduct joint reviews every six years thereafter, and the Parties shall have the ability to extend the Agreement after each joint review pursuant to the procedures set forth in paragraphs 3 and 4. 

6. At any point in which the Parties do not all confirm their wish to extend the term of the Agreement, paragraph 4 shall apply.   

So there are two components here: A mandated review, plus eventual automatic expiration if the review does not confirm the parties' desire to extend the agreement.

In my view, this provision is completely unnecessary. You can always review a trade agreement, as shown by the review of the existing agreement that led to this new U.S.-Mexico-Canada/NAFTA text, so there is no need for such a review provision. And this sunset-ish clause could in theory trigger the agreement's expiration in 16 years, although that seems unlikely.

Now, you can imagine that at the first 6 year review, which will almost certainly take place after Trump is no longer in office, the three parties review the agreement and make one and only one change: Take out this sunset clause. So maybe it won't be a big deal in practice. Nevertheless, it does create a bit of a risk.

There is also the issue of what Congress will think of it. I suspect they will not like it, but even if they accept it in principle, they better weigh in on how it is supposed to operate in the U.S. political system. The agreement references "the Parties," but does not make clear who within each Party has the responsibility here. Paragraph 3 states that "each Party shall confirm, in writing, through its head of government," but that's just who notifies, as opposed to who decides the question. So which U.S. government branch gets to decide on whether the agreement should be extended as part of this review? What is the role of Congress here? Congress has ceded a lot of power to the President on trade over the years, and if it allows this provision to stay in, it better make sure that it has a full say on whether to confirm that the United States wishes to extend the new NAFTA deal as part of the review.