Canada accepts U.S. demand for NAFTA on dispute settlement
United States wants process to become ‘opt-in’ system, wants partners to stay in
OTTAWA— Canada has made a bold offer to accept a controversial U.S. demand at the NAFTA talks about how to resolve commercial trade disputes, the Star has learned.
It involves the current binding trade dispute settlement process used to resolve lawsuits by investor companies against North American governments. Binational tribunals adjudicate complaints, and their rulings are final.
The U.S. wants it to become an “optin” system or, as one Canadian official called it, a voluntary system.
Canadian officials say the U.S. has signalled it would “opt out” of the system while expecting its two partners would still “opt in” to the binational tribunals that decide complaints by companies who feel harmed by government regulations.
But Canada has effectively said, “Wait a minute.”
Instead, the Canadian team has proposed that Canada and Mexico would agree to a dispute settlement process between their two countries alone — to be outlined in an annex to NAFTA, according to a Canadian official who spoke to the Star on a background basis.
In effect, Canadian NAFTA negotiators are taking a gamble on whether the Americans can take “yes” for an answer when it comes to rewriting NAFTA rules.
Canada and Mexico agree there should be a mutually binding arbitration system to resolve disputes between trading partners.
But if the U.S. wants complaints against American companies to be resolved in domestic courts, Canada is saying to the Americans that it’s a two-way street. American corporate complaints against the other two countries would also be decided in their respective courts.
It’s one of three different “creative” suggestions that, according to Canadian officials here, are intended to resolve negotiating impasses at the sixth round of talks to rewrite the 24-year-old agreement.
American chief negotiator John Melle told the Star there was “not a chance” he would comment on the talks here.
Canada’s chief negotiator, Steve Verheul, did not scrum with reporters but on Tuesday said “we’re hoping when we bring flexibility to the table we’ll see that reciprocated on the other side.”
However, Mexico’s chief negotiator Kenneth Smith Ramos told the Star Wednesday afternoon there had been no movement “as of yet” in the discussion on investor-state dispute settlement, which comes under chapter 11 in the current NAFTA.
Rules for how state-to-state disputes involving an industry such as softwood lumber or aerospace come under chapters 19 and 20.
“We’re still working on that,” said Ramos. “We hope” movement is possible, he added.
The other two huge areas of contention boil down to this:
How much is North-American-enough? “Rules of origin” in NAFTA dictate how much of the things we buy and sell tariff-free on this continent should made in North America — and whether the U.S. demand that half of it be made in the United States should fly.
And what should be the best-before date on a new NAFTA? A “sun- set” clause, proposed by the U.S., would see the agreement expire automatically in five years if it isn’t formally reapproved by all three partners. Canada is open to discussing a periodic review of NAFTA, but not a hard and fast “sunset” clause. Canada has proposed a new requirement for a periodic review that would require “meaningful” public consultations that could identify areas for improvement, but that would not automatically require a formal reapproval, said a Canadian source with knowledge of the closed-door talks.
The “rules of origin” discussion is a high-stakes and complicated one, especially when it comes to the automotive industry.
The U.S. wants the current requirement of 62.5 per cent North American content in cars and trucks be raised to 85 per cent, with a 50-percent-made-in-U.S. guarantee.
Canadian officials told the Star Wednesday all three partners at least are open to discussing a higher regional content requirement, but a country-specific requirement is not feasible for highly integrated supply chains, and would damage the auto industry.
Overhanging all the discussions is the news that broke a day earlier that Canada and Mexico had reached agreement with eight other Pacific Rim countries on a wide-ranging free trade deal that excludes the U.S.
The Americans withdrew from the Trans-Pacific Partnership (TPP) after Donald Trump became president, prompting the remaining 11 nations to work toward a revised deal without the U.S.