CHAPTER 19, THE MECHANISM TO HANDLE TRADE DISPUTES THAT CANADA REFUSES TO GIVE UP IN NAFTA NEGOTIATIONS, HAS BENEFITED AMERICAN EXPORTERS AS MUCH OR MORE THAN CANADIANS.
As the NAFTA talks churned toward a dramatic climax Friday, one of the biggest stumbling blocks was reportedly Canada’s fight to save a dispute-resolution section that American negotiators wanted killed.
The U.S. has said its own courts, not bi-national panels, should be the sole arbiters of disagreements over American anti-dumping and anti-subsidy duties.
But the history of the “Chapter-19” NAFTA dispute courts tells a surprising story: American exporters have arguably benefited from the tool as much as or more than their Canadian counterparts.
Using the mechanism has helped the U.S. agriculture sector, especially, in combating duties imposed by Mexico, one of industry’s biggest export markets.
In a letter to key figures in the Trump administration, major agricultural groups called chapter-19 an effective and “fair and well-reasoned” mechanism that has gotten “unlawful threats to their market access” struck down in Canada and Mexico.
Without the tool, barriers to farm goods could be raised by those countries arbitrarily, said the letter from the U.S. Food and Agriculture Dialogue for Trade.
“Some in Canada think chapter 19 is mainly for Canadians,” echoed Gary Horlick, a Washington, D.C. trade lawyer who had argued many NAFTA cases. “But U.S. exporters to Mexico and Canada need it too.”
Yet getting rid of Chapter 19 has been a goal of U.S. Trade Representative Robert Lighthizer since the talks to revamp the North American Free Trade Agreement began more than a year ago.
It’s a stance strongly supported by the U.S. lumber industry, which says the panels often just rule along national lines, include judges with conflicts of interest and undermine U.S. sovereignty.
In the ongoing battle over Canadian softwood lumber imports, this country has usually won Chapter-19 cases.
In the wide-ranging NAFTA deal it struck with the U.S., Mexico has reportedly already agreed to do away with tool, designed specifically to adjudicate appeals of anti-dumping and countervailing (anti-subsidy) duties.
But Canadian negotiators anxious to preserve the section have made it a red-line issue.
Chapter 19 is “the jewel in the crown of NAFTA,” the only way to combat unfair American trade barriers, Avery Shenfeld, an economist at CIBC, told Global News recently.
The tool has undoubtedly helped Canadian industry, especially during the repeated episodes where the U.S. imposed duties on imported softwood lumber, said Toronto-based trade lawyer Riyaz Dattu.
But Chapter 19 has also been used “quite actively” by American companies over the last two decades and with considerable success, he said.
“It’s somewhat puzzling to understand that the U.S. has been so adamant that chapter 19 must go,” said Dattu.
Horlick provided statistics that indicate the U.S. has won 14 cases as a defendant — more than either of the other two NAFTA partners — lost 18 and had 12 split, partial wins. Canada has won 11 and had five splits, while Mexico has won eight and lost eight.
The panels are comprised of five members — two from each country and a chair from one of the nations.
Both he and Horlick said the evidence indicates that, despite complaints, there is no evidence that the courts rule along the lines of the country that has the majority on a given case.
In fact, 80 per cent of the rulings have been unanimous, the agricultural industry letter notes.
While the States has usually lost to Canada in Chapter 19 cases involving lumber imports, the panels have proved invaluable for Americans fighting duties imposed by Mexico on agricultural exports such as beef, pork and corn, said Horlick.
And the millions of people in the US who work in farming — for whom Mexico is one of their biggest export markets — dwarf the numbers employed by the US lumber producers, he said.
One observer said the U.S. is pushing to scrap chapter 19 largely because Lighthizer is deeply skeptical of multilateral bodies — like the NAFTA panels and the World Trade Organization — ruling on American trade disputes.
“He hates any form of decision making from outside the US telling Americans what to do,” said the NAFTA expert, who asked not to be named. “So we can tell other people what to do, but other people can’t tell us what to do.”
As well, extensive lobbying has helped both the lumber and steel industries and their priorities dominate the U.S. Commerce Department and the U.S. Trade Representatives’ office, agencies which drive the NAFTA talks, the observer said.
As a result, the two agencies “don’t care as much about farmers.”
WE CONTINUE TO WORK VERY HARD AND WE ARE MAKING PROGRESS. WE’RE NOT THERE YET. WE KNOW THAT A WIN-WIN-WIN AGREEMENT IS WITHIN REACH. — CHRYSTIA FREELAND