NAFTA’s Chapter 19 unlikely to be deal-breaker
OTTAWA • As NAFTA negotiations unfold over the course of several months, the trade deal’s much-discussed Chapter 19 will be used for negotiating leverage but won’t likely prove a dealbreaker, experts say.
The chapter sets out mechanisms for binational panels, rather than national courts, to resolve challenges to anti-dumping and countervailing duties. These panels have been a venue for the ongoing Canada-U.S. feud over softwood lumber, in which Americans accuse Canadians of dumping below-market-price goods into the U.S. market.
Having a binational review process for disputes almost derailed original Canada-U.S. free trade negotiations in the 1980s. Canada walked away from the negotiating table in 1987 amid American resistance to such measures, but ultimately they made a deal. That system ultimately became the North American Free Trade Agreement’s Chapter 19.
Now that the deal has been reopened, U.S. President Donald Trump’s administration is trying anew to remove the measures, which it views as unfair to Americans. Canadian and American officials both confirm the Americans raised this as an objective (along with others) during the first round of trade talks, which wrapped up Sunday.
That the Americans would bring up Chapter 19 as parties set out their objectives this week was a surprise to no one, said an official from foreign minister Chrystia Freeland’s office.
“It’s no secret that they want to get rid of it,” the official said, adding it’s also no secret that “an effective dispute resolution mechanism is really important to Canada.”
Canada is making the case to American counterparts that having a dispute process to challenge anti-dumping and countervailing duties provides stability and consistency for businesses.
“We’re not at a point where we can talk about red lines,” the official said.
Canada and Mexico want to keep Chapter 19 more than the U.S. wants to delete it, said Patrick Leblond, from the University of Ottawa’s Graduate School of Public and International Affairs — partly because it saves companies from a slow, costly American court system.
“I’d be very surprised that the talks would fall over Chapter 19 and if they did ... I would expect Canada and possibly Mexico to say, in that case, ‘We’re walking away,’ ” Leblond said.
But even a feigned walkout could be more of a “lever” for the two smaller parties. “I just don’t see why the Trump administration would basically be ready to sacrifice the deal, potentially, on Chapter 19,” he said. Besides, Leblond added, Trump would be hard-pressed to explain such a scenario to the public in a tweet.
Yohai Baisburd, a Washington, D.C.-based trade lawyer who has represented Canadian softwood lumber producers, wasn’t as quick to dismiss the Americans’ commitment to the idea.
“In my view, this is a key priority for the U.S. administration and one that has consistently been near the top of their list,” he said. “It’s hard to say what are the real red lines that people won’t cross.”
Baisburd said, however, “I don’t think Chapter 19 ends up being the one sticking point that kills the agreement or kills the renegotiation. And I don’t think there’s any one particular issue that would.”
Canadians aren’t the only ones benefiting from Chapter 19. American and Mexican producers also avoid court processes this way. Canada has won 15 out of 19 challenges to U.S. antidumping and countervailing duties; the U.S. has won six out of 13 against Canada. Mexico has won 13 of 20 cases against the U.S.; the U.S. 10 of 12 against Mexico.
Toronto trade lawyer Lawrence Herman bluntly concluded for a recent C.D. Howe Institute paper that reviews involving Canadian products are “a minor factor in the overall scheme of things.”