Levels of Economic Integration

Early Development • Free trade as an alternative of annexation. • Elgin-Marcy Treaty of 1854—free trade agreement

between U.S. and Canada. Not implemented because of civil war.

• In 1911, U.S. proposed trade agreement, but rejected by the Canadian Parliament.

• Protectionism in the 1920s-1930s. Trade negotiations after WWII was not successful.

• GATT (1947) provided alternative that discouraged trade talks between U.S. and Canada.

From CFTA to NAFTA • In 1986, Uruguay Round was initiated, but seemed endless. Frustrated with the

progress, the two countries began to engage bilateral trade negotiation. • CFTA took effect January 1, 1989. • After CFTA, Mexican Government looked for alternatives, but without success.

Finally decided to negotiate with the U.S. Negotiation

– 1n 1991, the negotiations to create NAFTA began. – In 1992, President Bush (lame-duck) signed the NAFTA agreement. – Clinton added two supplemental agreements: Labor and Environment.

Ratification – U.S.: In 1993, the Senate ratified the agreement over fierce opposition: Public

Law No. 103-182 The NAFTA Implementation Act expressly provides that the NAFTA agreement does not modify U.S. law except as provided for the by the Act.

– Canada: Mulroney Government approved the NAFTA agreement before it lost election.

– Mexican: No difficulty at all.

Impact of NAFTA

• Canada: unemployment • U.S.: Labor and Environment • Mexico: Maquiladoras

– Rules of Origin

NAFTA• Goods

– Deadlines for elimination of tariffs on goods: • U.S. and Canada, 1998• Mexican, 2003 • By 2008, all North American trade in goods is duty free.

• Services– CFTA— “Positive List”; NAFTA –- “Negative List” (broader)– Foreign Legal Consultants – NAFTA Business Visas: preferential treatment for citizens in three countries.

• Investment – Article 11

• Minimum Standard of treatment • Prohibition of expropriation

– Metalclad Corp. v. United Mexican States

• IP– Copyright, patent, trademarks

Dispute Settlement

• Chapter 19—antidumping and countervailing duty disputes

• Chapter 20 general dispute settlement procedures

• Chapter 11 investor-state arbitration procedures

• Chapters 6, 9, 10 Environmental and labor cooperation disputes

Panels

• Binational panels• Each party to the dispute chooses two

panelists; the fifth is chosen either by agreement or by lot if no agreement.

Research

• NAFTA Agreement • Panel Decisions• Domestic Cases• Arbitration Rule and Cases