“NAFTA and the Future of Trade Governance” “Innovations and Innovating Processes in Trade Governance” Mark D. Nguyen Woodrow Wilson Center, Washington D.C. March 13, 2006

GATT to WTO: Weak Framework to an “Innovative Institution” GATT : A framework agreement facilitating market access for agriculture and goods, with limited enforcement. WTO : Conclusion of Uruguay Round in 1993 created a rules-based institution with new disciplines on services and IPR rights, and stronger dispute settlement. WTO 2001-present: Launch of “Doha Round” negotiations in 2001 aims to strengthen rules and expand liberalization; possible reform to governance mechanisms and other “innovations.”

WTO Policymaking: Negotiations Market Access: Improve liberalization commitments on wider range of cross-border and internal measures. Rules: New rules to address “incompleteness” for disciplines on subsidies, services, dispute settlement, trade remedies, trade facilitation, development flexibilities, etc. Decision-making: 149 Members (and 30 accession candidates) with equal decision-making power, though not influence, in the Ministerial Conference, General Council and subsidiary bodies.

WTO Policymaking: Implementation Review bodies: Council on Goods, Services and TRIPs and their subsidiary bodies routinely review Members’ implementation of market access commitments and consistency with WTO rules. Granting flexibility: Ministerial or General Council can extend flexibility or exemptions from rules (e.g., transition periods for subsidies, IPR protection for developing countries). Secretariat/technical assistance: Staff and other bodies offer resources to assist with implementation of commitments.

WTO Policymaking: Compliance Trade Policy Review Mechanism: Periodic review of Members’ trade regimes conducted by other Members and the WTO Secretariat (innovation: China Transitional Review Mechanism). Dispute Settlement Mechanism: Binding Dispute Settlement Understanding (DSU); nearly 350 complaints since 1994; more than triple the number during the GATT era. Bilateral efforts: Members can opt to settle disputes bilaterally and outside the WTO mechanism; also, refrain from challenges due to preferential agreements like NAFTA.

WTO: Strengthening Governance IssueRecommendations*Outlook for “Innovation” Non-discrimination and preferential trade Restrain from, and subject RTAs to stringent reviews Proliferation continues, but RTA rules under scrutiny in Doha Round Engaging civil society Members themselves should take an active part, and WTO should develop clear objectives Public support can grow as WTO becomes more transparent; but, opposition to free trade is growing Reinforce dispute settlement Improve procedures, including public hearings and for the submission of amicus briefs DSU reform is on Doha agenda, though public hearings is a controversial proposal Decision-making process Reevaluate consensus process; re-examine plurilateral approach Doha Round impeded to some extent by consensus; resistance to plurilaterals Political guidance Annual Ministerials and frequent meetings of ministers and leaders; also establish a senior officials’ consultative body Since 2004, ministers have met frequently in support of the Doha Round Consultative body initiative lacks support Secretariat support Stronger, defined role especially to support negotiations; also, less political selection of DG New Director-General Lamy aims to strengthen role of Secretariat; proving to be a capable leader * See: “The Future of the WTO: Addressing Institutional Challenges in the New Millennium.” 2005

Other Agreements: NAFTA NAFTA “unfinished”: A model trade agreement in 1994, but little reform has taken place since and thus it is “unfinished business” compared to more recent U.S. FTAs Problem of governance: (i) difficult to amend; (ii) and lack of institutions to expand on framework agreements. Lack of political will: Little political will among countries to “deepen” NAFTA; benefits eroded by other preferential FTAs

Other Agreements: U.S. FTAs Proliferation: Since NAFTA, new U.S. FTAs with Jordan (2001), Singapore and Chile (2003), Australia (2004), Morocco (2004), DR-CAFTA (2005), Andean (2006) and other partners. Comprehensive: US FTAs are more comprehensive and “innovative” including on TRIPS/SPS/TBT-plus provisions, investor-state rights, competition policy, transparency, labor and environment provisions, etc. Innovative?: U.S. FTAs have annual FTA Review Councils to assist on implementation; and envisions a framework for further cooperation and expansion of benefits

Comparison of Trade Governance Models AgreementDecision-making bodiesNew RulesOutlook: Sustainable? GATT/WTO Ministerial Conference General Council and subsidiary bodies (e.g., Dispute Settlement Body) Key Member groupings Yes, Doha Round should establish new disciplines on subsidies, trade remedies, facilitation, services, RTAs, etc. But, difficult to include new rules on investment, competition, other issues Yes, but decision- making difficult due to consensus approach Susceptible to being undermined by Doha Round collapse or other problems NAFTA Periodic meetings of leaders and ministers Self-implementing, with ad-hoc dispute panels No, except for rules of origin and a few limited areas Perhaps, but limited prospect for deeper reform of rules or the institution U.S. FTAs post- NAFTA Annual and sectoral review commissions Issue-specific bodies and arbitral/dispute panels Current rules are very comprehensive (WTO/NAFTA+) and go farther on investment, competition, IPR, etc. Yes, given wide coverage, though limited plans to deepen

Thank You Mark D. Nguyen Senior Policy Adviser, International Trade Bryan Cave, LLP 120 Broadway, Suite 300 Santa Monica, CA Tel: (310) ; DC: (202)