The Future of NAFTA's ISDS and AD-CVD Dispute Settlement Mechanisms in the Trump Era and their Role in NAFTA Renegotiation

• Author: Abbye West
• Position: Abbye West is a candidate for Juris Doctor at SMU Dedman School of Law, May 2019. She earned her B.A. in International Studies and Spanish from the University of Mississippi in 2016. Abbye would like to thank her parents, Deb and Garnett West, for their endless support throughout her academic career.
• Pages: 629-654

The Future of NAFTA’s ISDS and AD-CVD

Dispute Settlement Mechanisms in the Trump

Era and their Role in NAFTA Renegotiation

A

BBYE

W

EST

*

I. Introduction

The North American Free Trade Agreement (NAFTA) seeks to

“eliminate barriers to trade in, and facilitate the cross-border movement of,

goods and services between the territories of the Parties,” and “create

effective procedures for the implementation and application of this

Agreement . . . for the resolution of disputes.”

1

By entering into an

international trade agreement, states surrender “a certain measure of its

sovereign freedom of action by committing itself to do, or not to do, certain

things;” states surrender even more sovereign freedom “when that

agreement provides for compulsory binding arbitration of disputes . . . .”

2

But incorporating formal dispute resolution mechanisms into trade

agreements is advantageous to parties to the agreement in the sense that

they may “preserve the agreement and [ ] promote its smooth functioning.”

3

Two categories of disputes arising under NAFTA are subject to resolution by

binding arbitration: investor-state disputes under Chapter 11

4

and Chapter

19 disputes regarding the antidumping or countervailing duty laws.

5

The future of these arbitration mechanisms is uncertain considering the

current renegotiation and threats by the U.S. to withdraw from NAFTA.

This comment will first define the context in which these dispute resolutions

now stand, considering briefly their future should the U.S. withdraw from

NAFTA. Then, because these arbitration mechanisms are a significant and

contentious part of the current NAFTA negotiations, it is important to

highlight key criticisms of these provisions and compare the two

mechanisms for enforcement of NAFTA principles and resolution of

* Abbye West is a candidate for Juris Doctor at SMU Dedman School of Law, May 2019.

She earned her B.A. in International Studies and Spanish from the University of Mississippi in

2016. Abbye would like to thank her parents, Deb and Garnett West, for their endless support

throughout her academic career.

1. North American Free Trade Agreement, Can.-Mex., U.S., Dec. 17, 1992, 32 I.L.M. 289-

397, 605-779, art. 102(a), (e) (entered into force Jan. 1, 1994) [hereinafter NAFTA].

2. O. Thomas Johnson, Jr., Alternative Dispute Resolution in the International Context: The

North American Free Trade Agreement, 46 SMU L. R

EV

. 2175, 2182 (1993).

3. Id.

4. NAFTA, supra note 1, art. 1136.

5. Id. art. 1904(9).

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disputes among parties to NAFTA. Turning back to the current relevance of

these provisions, this comment will explore how scholars’ criticisms are

playing out during NAFTA renegotiation, evaluating the Parties’ objectives

and exploring how their concerns may be ameliorated. Though Mexico,

Canada, and the United States are likely motivated by political pressures or

the desire to secure leverage in negotiating these issues, legal criticisms

about these dispute resolution mechanisms are useful in evaluating the

signatories’ proposals to the extent that their proposals would improve the

issues raised by this criticism.

II. The Context of Uncertainty: Procedures for U.S. Withdrawal

from NAFTA

Since the beginning of his presidential campaign, President Trump has

repeatedly criticized NAFTA and threatened to terminate NAFTA. During

his campaign for presidency, Trump tweeted “I will renegotiate NAFTA. If

I can’t make a great deal, we’re going to tear it up. We’re going to get this

economy running again. #Debate.”

6

In one of the presidential debates

against candidate Hillary Clinton, then-Republican nominee Trump

memorably classified NAFTA as the “worst trade deal maybe ever signed

anywhere, but certainly ever signed in this country.”

7

The following year,

President Trump brought his campaign focus into action, with the first

round of NAFTA renegotiation beginning August 16, 2017.

8

He

demonstrated his continued threat to withdraw from the agreement,

tweeting “We are in NAFTA (worst trade deal ever made) renegotiation

process with Mexico & Canada. Both being very difficult, may have to

terminate?”

9

As to the question of procedure for withdrawal of NAFTA, article 2205

states: “[a] Party may withdraw from this Agreement six months after it

provides written notice of withdrawal to the other Parties. If a Party

withdraws, the Agreement shall remain in force for the remaining Parties.”

10

Scholars are far from unanimous regarding the legality of unilateral action to

withdraw from NAFTA taken by President Trump.

11

For the purposes of

6. Donald Trump (@realDonaldTrump), T

WITTER

(Oct. 19, 2016, 6:45 PM), https://

twitter.com/realdonaldtrump/status/788919099275390976?lang=en.

7. Patrick Gillespie, Trump hammers America’s ‘worst trade deal’, CNN M

ONEY

(Sept. 27,

2016), http://money.cnn.com/2016/09/27/news/economy/donald-trump-nafta-hillary-clinton-

debate/index.html.

8. Elena Holodny, Here’s what you need to know as NAFTA negotiations begin, B

US

. I

NSIDER

(Aug. 16, 2017), http://www.businessinsider.com/nafta-negotiations-round-1-begins-2017-8.

9. Donald Trump (@realDonaldTrump), T

WITTER

(Aug. 27, 2017, 6:51AM), https://twitter.

com/realdonaldtrump/status/901804388649500672?lang=en.

10. NAFTA, supra note 1, art. 2205.

11. See Gregory Husisian, The Future of NAFTA in the Trump Administration, I

NT

. T.L.R. 29,

30 (2017) (“Although NAFTA was approved by Congress, it is technically not a treaty. Rather,

it is a Congressional-Executive agreement approved by a majority vote of each house of

Congress (as are the WTO Agreements). NAFTA was put in place pursuant to the Trade Act of

THE INTERNATIONAL LAWYER

A TRIANNUAL PUBLICATION OF THE ABA/SECTION OF INTERNATIONAL LAW

PUBLISHED IN COOPERATION WITH

SMU DEDMAN SCHOOL OF LAW