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Email this citationCIAO DATE: 04/05
NAFTA Dispute Settlement Systems
Jeffrey J. Schott and Gary Clyde Hufbauer
November 2004
Abstract
Building on the 1989 Canada-US Free Trade Agreement (CUSFTA), the NAFTA contains dispute settlement provisions in six separate areas. NAFTA Chapter 11 is designed to resolve investor-state disputes over property rights; Chapter 14 creates special provisions for handling disputes in the financial sector via the Chapter 20 dispute settlement process (DSP); Chapter 19 establishes a review mechanism to determine whether final antidumping and countervailing duty decisions made in domestic tribunals are consistent with national laws; and Chapter 20 provides government-to-government consultation, at the ministerial level, to resolve high-level disputes. In addition, the NAFTA partners created interstate dispute mechanisms regarding domestic environmental and labor laws under the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC), respectively. This chapter examines the first four dispute settlement systems; the NAAEC and NAALC systems are evaluated in the environment and labor chapters of this book.
Before analyzing the framework for each NAFTA chapter, a brief review of the reasons for creating the NAFTA dispute settlement systems may be helpful. As a nation that trades heavily with the United States, Canada was primarily concerned about ensuring open access to the US market when it negotiated the CUSFTA.1 Put succinctly, Canada wanted to ensure that Canadian exports to California (for example) would face barriers no greater than New York exports to California. Following the Tokyo Round (1979), Canada become increasingly concerned about the threat of unilateral US antidumping (AD) and countervailing (CVD) duties-provoked by adverse rulings on timber, fish, and pork.2 While the United States wanted to preserve its trade remedies to redress both Canadian public subsidies and private dumping, Canada wanted an agreement that would curtail overzealous application of trade measures against Canadian exports.
