Dispute Settlement in a North American Free Trade Agreement

As the movement toward liberalization has succeeded in reducing or eliminating visible border barriers to trade, interest in and use of dispute settlement mechanisms have grown. For a North American Free Trade Agreement (NAFTA), the general model will be the 1988 U.S.-Canadian Free Trade Agreement. Broad institutional and dispute settlement provisions along the lines of Chapter 18 of the U.S.-Canadian accord have already been agreed on in the NAFTA negotiations. More problematic is the extension of Chapter 19 to NAFTA. This special binational mechanism for dealing with antidumping and countervailing duty determinations depends for its success on the similarity of the U.S. and Canadian systems. Mexico has a different tradition and method of making such determinations. It is not clear whether the differences can be bridged. In other areas, such as standards—perhaps including the environment and labor—the U.S.-Canadian binational review principle or binational monitoring might be adapted to NAFTA. The outcome of the NAFTA negotiations on dispute settlement will probably be the model for other Western Hemisphere free trade agreements, although arrangements with groups of countries may be more difficult to adapt.