Expanding the NAFTA Chapter 19 Dispute Settlement System: A Way to Declaw Trade Remedy Laws in a Free Trade Area of the Americas?
41 Pages Posted: 7 Mar 2009 Last revised: 2 Sep 2010
Date Written: March 5, 2009
Chapter 19 of the NAFTA transfers judicial review of U.S., Canadian, and Mexican government investigations under the controversial anti-dumping and countervailing duty (AD/CVD) laws from national courts to binational panels of private international law experts. The system stands as a unique surrender of judicial sovereignty to an international body, a hybrid of national courts and international dispute settlement with as yet no parallel in the world of international trade or other international law regimes. Binational panel decisions have been controversial because agencies chafe at their intimate examination of agency findings and supporting evidence. Panels also are viewed as substantially more likely to overturn agency conclusions than national courts. Given the record of chapter 19 NAFTA panels, the paper examines whether the system created to fill a unique need among the NAFTA parties may have broader utility, albeit one perhaps less true to its original purpose.
U.S. recalcitrance on proposed changes to its AD/CVD laws (and its agricultural subsidies) were the principal reasons that Brazil forced Free Trade Area of the Americas (FTAA) talks onto the back burner to await the Doha Round results on these issues. The United States is unlikely to condone major changes to the WTO Anti-Dumping and Subsidies Agreements, which will become the final sticking point for reaching agreement after members resolve the agriculture issues now blocking conclusion of the Doha Round of multilateral trade negotiations. Thus, trade remedies will again surface as major issues once FTAA talks resume. Studies indicate that binational panels reverse agency decisions at a greater rate than national courts and that existence of the system has reduced the rate of filing of industry requests for AD/CVD investigations.
Rather than attempting to finding an elusive middle ground of substantive revisions to these laws, might changing the method of review of agency determinations furnish a missing piece in the puzzle of FTAA negotiations? Although Brazil's (and other FTAA country) officials may at first glance see nothing in a Chapter 19 process that addresses their substantive AD/CVD conflicts with the United States in such cases as orange juice and steel, reflection may reveal that Chapter 19 has demonstrated yet again what good lawyers have always known, that procedure can become substance in the twinkle of an eye. In short, more than one way exists to reduce the trade-restricting effect of U.S. AD/CVD investigations. Improvements would have to be made, including introduction of an automatic and effective right of appeal whose absence arguably undercuts the credibility of the process by awarding enormous power to panels.
Adoption of a system such as NAFTA's chapter 19 on a 34-nation basis not only may ameliorate long-intractable conflicts over trade remedy laws, but implementation of such a system also will have substantial positive effects for civil society in general. Dispute settlement systems promote timeliness, inclusive record keeping, and impartiality in the administrative decisional process. They improve governmental accountability on several levels. By improving participation of all levels of society in their governance, international trade dispute settlement systems strongly promote the rule of law.
Keywords: NAFTA, trade remedies, anti-dumping, countervailing duties, dispute settlement, dispute resolution, FTAA
JEL Classification: F02, F13, K33, Q17, F15
Suggested Citation: Suggested Citation