Chapter 2 Nafta’s Institutional Vacuum Anthony Velardi

Introduction: NAFTA and the EU The EU has a formal governing body with an executive, legislative, and judicial branch. NAFTA was a treaty meant to set regional rules and norms the three member states (USA, Mexico, and Canada) agreed upon. The norms and rules themselves were intrusive to each country’s trade laws, and the members had to make changes to domestic laws in order to comply with the rules. NAFTA itself did not force the countries to make these changes; they changed the laws in order to honor their agreements During the decision making process, US was rule maker and Canada and Mexico were the rule takers. Introduction: NAFTA and the EU

NAFTA’s “Constitution” In the past, military agreements between Canada and the US had had constitutionalizing effects for both countries. Same for US-Mexico treaties designed to manage flows of goods across the border. Because the states are obligated to honor their provisions in NAFTA, the norms and rules in the treaty overbear over domestic legislatures

NAFTA’s “Executive” When the treaty was originally written up, there was supposed to be an official secretary who was to make sure all of NAFTA’s rules were being implemented and the countries were abiding by them North American Free Trade Commission consists of trade ministers from each of the three members. When they meet (only as required) the trade ministers oversee the further elaboration of NAFTA, resolve disputes, further its liberalization, and supervise the work of CWG’s

NAFTA’s “Legislature” No formal legislative institution was established with NAFTA The NAFTC can issue interpretive instructions for judgment by investor-state dispute panels International norms and rules, such as new trade delegations from the WTO when the members come together for negotiating round, can affect NAFTA’s norms/rules.

NAFTA’s “Judiciary” NAFTA does not have any formal courts or judges During the creation of NAFTA, a number of provisions for handling disputes were written into the text Chapter 20, for resolving general disputes about the agreement Chapter 19, for mitigating disputes over trade harassment through AD or CVD Chapter 11, aggrieved companies can sue member govt’s Chapter 6, settles conflicts concerning energy Chapter 14, settles conflicts concerning financial institutions

NAFTA’s “Beauracracy” Because a secretary who was supposed to implement the various chapters and settle disputes for the member states was never established, Committees and Working Groups (CWGs) were established to do this instead These are inter-governmental groups designed to exchange information, implementing or overseeing the implementation of the agreement, resolve conflicts and disputes related to NAFTA, harmonize regulations, and to relay information between the governments and interested parties

Two examples of why WCGs were ineffective for contentious issues 1. North American Energy Working Group: The NAEWG was established separately from NAFTA. Handle meaningful but politically unrisky tasks, such as information exchange about energy policies and new energy, and harmonization of statistical methodologies so all countries are on the same page Energy is controversial yet central to each of these member states interests, and the fact the NAEWG was set up after and separately from NAFTA highlights how NAFTA could not handle contentious issues.

Cont. The Mexico-US trucking Dispute The US, during the negotiations of NAFT, agreed that Canadian and Mexican trucking companies could have access to the US market Due to domestic pressure, the US did not honor this agreement The WCG responsible for trucking had little to do with the resolve of this issue, it was mostly due to executive will Highlighted how ineffective WCGs were for large and contentious issues within NAFTA, and how the rules of NAFTA were not completely binding to the member states. Instead of government, governance.

NAFTA Enforcement There is no large governing body which holds the US, Canada, or Mexico accountable for honoring the treaty. The rules are rules because the three members believe a common economic region is more of a positive than negative, and see it is in their best interest to self enforce and honor the rules and provisions of NAFTA

Conclusion/Summary NAFTA has strong rules, but weak institutions, which dampens the effectiveness of the rules US wanted NAFTA for better access to its market from local neighbors, and to help their multi-national corporations Canada wanted to formalize a longstanding relationship with the US, and desired better access to its market for its national corporations Mexico wanted to enter into the free market and remove the monopoly the state had on business NAFTA is much more binding to Canada and Mexico, as the structure of their economies have had to undergo major changes to be in tune with this new regional economic landscape.

Works Cited Does North America Exist? Chapter 2: NAFTA’s Intitutional Vacuum http://www.jstor.org.offcampus.lib.washington.edu/stable/p df/10.3138/9781442687905.5.pdf