What Can the Negotiations of NAFTA 1.0 Teach Us About the Fate of NAFTA 2.0?

Abstract

To inform current efforts to renegotiate the North American Free Trade Agreement (NAFTA), this paper compiles a digital negotiation history of 42 NAFTA Chapter 11 drafts – the only NAFTA preparatory texts publicly available. Using text-as-data techniques, we distill four lessons learned from these negotiations. First, no country “won” the initial NAFTA negotiation. Instead, in a give-and-take process, each NAFTA party had to let go of some of its original preferences. Second, no alliances were formed during the initial NAFTA negotiations. Rather, each country championed its own interests. Third, distances between initial country positions did not determine how quickly consensus was reached. Political will to close the deal thus mattered more than initial disagreement. Finally, countries tackled Chapter 11 substance (Section A) first building trust before moving on to the more controversial investor-state arbitration provisions (Section B). Applying these lessons to current renegotiations, parties should stay away from a “winner-takes-it-all” mentality, avoid alliance-building, recognize that political will matters more than poison pills, and start negotiations with low-hanging fruits before tackling controversial issues.

Keywords: NAFTA, investment law, negotiation, negotiation history, renegotiation, text-as-data, computational analysis

JEL Classification: K33, F60