NAFTA Dispute Settlement Mechanisms and the Constitution

Abstract

The United States, Canada, and Mexico are renegotiating the North American Free Trade Agreement (NAFTA). If the three countries do reach a new agreement, constitutional issues raised by any dispute settlement mechanisms (DSMs) deserve careful consideration. Congress’ hearings prior to approving NAFTA failed to consider serious constitutional questions, particularly about the DSMs and more generally about U.S. sovereignty. As between Canada and the U.S., the real stumbling block in the NAFTA renegotiations is not a substantive one. It concerns process and enforcement. When disagreements occur about how one country interprets or enforces the provisions of the agreement, NAFTA contains three provisions for resolving those disputes. NAFTA’s Chapters 11,19, and 20 include three distinct DSMs. The United States Trade Representative has favored changes for all three. It remains to be seen whether, in whole or in part, the NAFTA DSMs will be retained as-is, altered, or abolished. This paper contends that the constitutionality of NAFTA’s Chapter 19 binational panel system for settling antidumping and countervailing (AD/CVD) disputes should be more apparent by now than possibly it was when it was first adopted as part of the Canada-U.S. Free Trade Agreement (CUSFTA). NAFTA is not a treaty, but an executive-congressional agreement, which complicates the constitutional analysis. The paper, however, does not directly consider the constitutionality of using an executive-congressional-agreement rather than a treaty. Part I of this paper provides the background for the dispute over NAFTA’s dispute settlement processes. Next, Part II addresses the Constitutionality of Chapters 11 and 19. Finally, in Part III, the paper discusses whether NAFTA promotes the Rule of Law or only the Rule of Rules.