Queen's University School of Policy Studies1 Decision-making and Negotiations: comparisons with WTO Robert Wolfe “NAFTA and the Modern Tools of Global Trade Governance” The Canada Institute and the Mexico Institute, Woodrow Wilson International Center for Scholars, Washington (DC) March 13, 2006

Queen's University School of Policy Studies 2 Trade governance issues How to make decisions on matters not specified in the treaty (a generic contractual problem) 1.Self-executing endogenous modification (political delegation?) 2.Dispute settlement (judicial delegation?) 3.New negotiations (consensus needed)  But do “decisions” emerge in new legal texts, or organically, through practice?

Queen's University School of Policy Studies 3 Does WTO have lessons for NAFTA?  WTO a forum for all 149 Members  to understand the intentions of all other Members (transparency)  to learn about complex new issues (new consensual knowledge for the public and officials)  where all Members have a voice (legitimation) WTO challenge: squaring circle of formal equality and practical inequality in capacity of Members to participate.

Queen's University School of Policy Studies 4 Result: Multilayered decision process Ministerial Conferences Formal  General Council  Trade Negotiations Committee  Negotiating groups Informal  Mini-ministerials  Senior officials  Coalitions  Bilaterals  Others  North America has a richer mix?

Queen's University School of Policy Studies 5 NAFTA additions to 270+ Canada-US bodies Free Trade Commission Dispute settlement process Commission for Labor Cooperation North American Agreement on Labor Cooperation North American Commission for Environmental Cooperation Border Environment Cooperation Commission North American Development Bank  Not to mention….

Queen's University School of Policy Studies 6 Annex : Committees and Working Groups (mostly a dead letter?) 1. Committee on Trade in Goods (Article 316) 2. Committee on Trade in Worn Clothing (Annex 300-B, Section 9.1) 3. Committee on Agricultural Trade (Article 706) Advisory Committee on Private Commercial Disputes Regarding Agricultural Goods (Article 707) 4. Committee on Sanitary and Phytosanitary Measures (Article 722) 5. Committee on Standards Related Measures (Article 913) Land Transportation Standards Subcommittee (Article 913(5) ) Telecommunications Standards Subcommittee (Article 913(5) ) Automotive Standards Council (Article 913(5) ) Subcommittee on Labelling of Textile and Apparel Goods (Article 913(5) ) 6. Committee on Small Business (Article 1021) 7. Financial Services Committee (Article 1412) 8. Advisory Committee on Private Commercial Disputes (Article 2022(4) ) 1. Working Group on Rules of Origin (Article 513) Customs Subgroup (Article 513(6) ) 2. Working Group on Agricultural Subsidies (Article 705(6) ) 3. Bilateral Working Group (Mexico - United States) (Annex 703.2(A) (25) ) 4. Bilateral Working Group (Canada - Mexico) (Annex 703.2(B) (13) ) 5. Working Group on Trade and Competition (Article 1504) 6. Temporary Entry Working Group (Article 1605)

Queen's University School of Policy Studies 7 Security and Prosperity Partnership Working Groups Manufactured Goods & Sectoral and Regional Competitiveness Movement of Goods Energy Environment E-Commerce & Information Communications Technologies Financial Services Business Facilitation Food and Agriculture Transportation Health And then there’s Cross Border Crime Forum, Smart Borders….

Queen's University School of Policy Studies 8 Puzzle: Why is NAFTA difficult to amend? If all those groups don’t work… No trade agreement is self-executing, so all formal changes to any agreement require ratification Domestic success usually requires a big package (e.g. Single Undertaking in WTO)--any deal hard to modify piecemeal Limited amount of trade covered by most regional deals a problem

Queen's University School of Policy Studies 9 Should NAFTA be amended?  Maybe it works well, and more not needed?  More fundamental? Decision process on trade agreements shaped by 1. Modalities 2. Type of issues 3. Number of players

Queen's University School of Policy Studies 10 Effect of modalities Rules and domestic policies inherently MFN, thus multilateral  Reducing domestic subsidies cannot be done bilaterally  Dumping rules apply to all Principal Supplier rule vs Formula approach  Request and Offer limits interest of large market Members in market access negotiations with small market Members--original motivation for the FTA, now gone  Request and Offer especially problematic for GATS, investment, competition policy, trade rules Implication: changes in ‘behind the border’ policies apply to all trading partners, which limits scope of regional deals among economies of disparate size

Queen's University School of Policy Studies 11 How complete is NAFTA, relative to WTO? Belanger indicator: balance between political and judicial modification Example: NAFTA Article 712 is less “complete” than the WTO SPS Agreement, but…  Disputes rare, even on PEI spuds  One mad cow closed Canada-US border. Resolved in bureaucratic networks, though trade and OIE principles relevant Even in WTO, let alone NAFTA, dispute settlement relatively insignificant…

Queen's University School of Policy Studies 12 Great Pyramid of WTO SPS order 4 Appellate Body reports on SPS matters (end 2004) 21 ‘matters’ raised in dispute settlement system 204 ‘specific trade concerns’ in SPS committee [BSE, avian flu, aflatoxins] Many clarification and elaboration issues in cttee [regionalization, transparency, equivalence] 4100 ‘notifications’ to WTO Tens of thousands of informal interactions among officials, producers, consumers, standards bodies

Queen's University School of Policy Studies 13 Further research on governance What sorts of “decisions” are taken at each level of the pyramid? Why?  What if “decisions” emerge in new legal texts, or organically, through practice?  To what extent must the lower levels be visible for officials (and scholars!) to have confidence that the system works? Does NAFTA still have critical mass? “critical mass represents a negotiated level of participation based on the share of world trade that interested Members determine should be covered in order for those Members to be willing to reduce rates in a given sector.”