This question (asked by Senator Ron Wyden) is from the U.S. Senate Committee on Finance Questions for the Record for Ambassador Robert Lighthizer, as part of a recent hearing:
Question 15
The revised NAFTA includes some clear improvements over the status quo, especially in the Digital Trade chapter. But I remain concerned about the deal’s enforceability. The agreement does not resolve all of the flaws in the state-to-state dispute settlement chapter in the current NAFTA. This includes loopholes that allow parties accused of violating their obligations to delay or even block the formation of a panel. Under NAFTA, no dispute settlement panel has been formed since 2000, and the dispute settlement system generally has been ineffective as a tool to ensure compliance with the agreement. Without effective enforcement, American workers, farmers, and businesses will not see the benefits of this new deal.
Recent trade agreements have avoided the NAFTA loopholes with improved dispute settlement procedures. For example, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) closed these loopholes, ensuring that parties cannot unreasonably delay or avoid the formation of a panel. Both Mexico and Canada have ratified the CPTPP.
Would you be opposed to clarifying that the text of Chapter 31 of the revised NAFTA is not meant to allow panel blocking?
Here is Ambassador Lighthizer's answer:
Answer: The text of Chapter 31 of the United States – Mexico – Canada Agreement (USMCA) is not meant to allow panel blocking. Indeed, panels have been successfully formed under Chapter 20 of the NAFTA (its precursor). As we move forward with Congressional consideration of the USMCA, we look forward to discussing this and any other issues related to enforcement with you and your colleagues.
Recall that three panels were successfully formed under NAFTA Chapter 20, until the U.S. blocked one in 2000, and then no more panels were formed.
As for what Chapter 31 was "meant" to do in terms of panel blocking, that gets a little philosophical, but it seems clear based on the text that under USMCA Chapter 31, a party could use various means -- for example, preventing establishment of the roster -- to block formation of a panel if it wanted to do so. That can be fixed easily enough, and from what I can tell, Canada, Mexico, and the U.S. Congress would all like to see it fixed. I've seen it suggested that the Trump administration resisted any fixes during the negotiations. I hope the pressure from Congress and others convinces the administration to go along with the necessary changes now. Ambassador Lighthizer's response indicates that he is willing to discuss this, so that's good news. If they did fix the panel blocking problem, it could go a long way towards generating support for USMCA from people who normally support trade agreements but are on the fence about USMCA.
