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.
