WASHINGTON: A little used facility to resolve disputes among the three countries in the North American Free Trade Agreement could become a key sticking point in the talks to renegotiate the pact that open Wednesday.
- What is Chapter 19? -
The mechanism allows for any country to request a dispute settlement panel to review a decision on AD and CVD against particular products. The panels include one judge chosen by each party to the dispute from an established roster of judges, and a third selected by one of the involved parties who "decide by lot which of them shall select the third member."
In NAFTA's first decade, 94 reviews were requested; in the past decade, only 27 -- 70 percent filed by Canada and Mexico against the United States -- but those included politically sensitive steel and softwood lumber cases, according to a report by the Peterson Institute for International Economics. The report said Chapter 19 procedures "reflect an awkward political compromise over the proper role for antidumping and countervailing duties."
While Washington has said there already is a dispute settlement procedure in the World Trade Organization, the report notes that "a big advantage of Chapter 19 is that a favorable resolution under that chapter leads to a retroactive refund of wrongly imposed AD or CVD duties. Retroactive relief is not available under the WTO dispute settlement system."
- US position -
The NAFTA negotiating goals released last month call for eliminating Chapter 19, and to "Preserve the ability of the United States to enforce rigorously its trade laws, including the antidumping, countervailing duty and safeguard laws." US lumber interests have lobbied for Chapter 19 removal since the system was incorporated into NAFTA. Commerce Secretary Wilbur Ross complained that the process is unfair, citing a 2005 case over softwood lumber in which Canada chose two of the judges, and the panel voted 2-1 to overturn the US decision.
- Canada's position -
Canada Prime Minister Justin Trudeau said last month that "a fair dispute resolution system is essential for any trade deal that Canada signs on to and we expect that that will continue to be the case in any renegotiated NAFTA." Foreign Affairs Minister Chrystia Freeland recalled that Canada walked away from trade talks with the US in 1987 "over the Reagan administration's initial refusal to agree to binding binational review of anti-dumping and countervailing duties." "Our government will be equally resolute. Just as good fences make good neighbors, strong dispute settlement systems make good trading partners," she
- Mexico's position -
While Mexico has less at stake in this argument, its Congress passed a resolution last month calling for negotiators to resist any move to eliminate the mechanism.
- Possible compromise -
Given the likely surge in US AD and CVD cases under Commerce Secretary Wilbur Ross, Canada and Mexico likely will resist any attempt to jettison Chapter 19, but the sides could agree to new procedures for selecting the three-member panel to avoid bias. Canada and the United States also could find a permanent solution to perennial disputes over softwood lumber, which US producers say is unfairly subsidized.