From NAFTA to USMCA: Providing Context for a New Era of Regional Investor-State Dispute Settlement

Abstract

In October 2018, Trump, alongside his Mexican and Canadian counterparts, delivered what many have dubbed “NAFTA 2.0.” But the new U.S.–Mexico–Canada Agreement (USMCA) adopts not only a new name, but also a new approach to ISDS within its Chapter 14. On November 30, 2018 the leaders of all three nations signed the USCMA and now it is up to the legislatures of each country to ratify the Treaty. It remains to be seen whether Chapter 14’s ISDS scheme will remain intact during the ratification process. Regardless, NAFTA is now a historic relic and we face a new era in regional ISDS. This raises salient questions on motivation and timing. Criticisms of NAFTA are not new. Indeed they have been around since its very early days. So why the focus on renegotiating now and what does the shift from NAFTA Chapter 11 to USMCA Chapter 14 mean for the future of regional ISDS (and, indeed, global dispute resolution)?

These developments and questions are considered in three parts. Part I reviews NAFTA’s Chapter 11, including its substantive protections, dispute resolution mechanisms, and general criticisms after twenty-five years of experience. Part II presents context for the emergence of USMCA, followed by an analysis of its Chapter 14 identifying key changes from the former NAFTA regime. Finally, Part III provides concluding remarks and attempts to place USCMA within broader regional and global shifts in international affairs, trade, and dispute resolution.

Keywords: Trump, dispute resolution, NAFTA, USMCA, arbitration, trade, international arbitration, international affairs, foreign policy, international law, global affairs, ISDS, investor-state dispute settlement

JEL Classification: K33; K41; F1