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LAW 724 (44)

Chapter 5 North American Free Trade Agreement.docx

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Ryerson University
Law and Business
LAW 724
Alyssa Brierley

Chapter 5 North American Free Trade Agreement Objectives - Similarities between provisions in NAFTA and WTO - NAFTA rules for trade in goods - NAFTA energy and water provisions - Why Canadian culture might not be protected under NAFTA - NAFTA rules for trade in services and movement of labour, and how protection for trade and labour developed - Dispute settlement methods and the facts behind the softwood lumber dispute - The debate about the rights of foreign investors in Canada Canada & U.S. free trade agreement (CFTA) - Effective Jan 1989 - Created partially out of frustration with lack of progress in General Agreement on tariffs and trade (GATT) with talks in Uruguay rounds - Because Canada and the U.S are dependent economies, they sped things up and created their own shit NAFTA - Mexico entered talks with Canada and the U.S. to add on to CFTA and NAFTA was created Jan 1994 - Canada participated so that the U.S couldn’t form trade agreement alone with Mexico so it would have more influence on the trading corner and U.S. would gain bargaining power over Mexico - Both GATT and NAFTA are similar as; o Both agreements national treatment rule (originated from GATT)  Once goods, services, or investments are imported into a member country, they must be treated in the same way as domestic goods, services, or investment - NAFTA purpose: to create free trade area characterized by national treatment, most favoured nation (MFN) treatment, and transparency. More specifically, the agreement intended to; o Facilitate cross border movement of goods and services within the free trade area o Promote conditions of fair competition within the free trade area o Protect intellectual and property rights o Create effective procedures for joint administration of the agreement o Create effective mechanisms to resolve disputes o Establish a framework for further cooperation to expand and enhance the benefits of the agreement Rules relating to trade in goods Tariffs - Each country retains its own external tariffs for non-member countries but levies a lower tariff or no tariff to member countries - All prior tariffs from the CFTA were eventually phased out in 1998 between U.S. and Canada for outgoing goods o Some tariffs remain in place for certain products from Canada’s supply-managed sectors (eggs, dairy, poultry) and the U.S. (sugar, dairy, peanuts, cotton) - Canada and Mexico tariffs eliminated in 2003 - Mexico had historically a high tariff and strict controls on imports and since has led to a massive penetration of imports into the Mexican market Rules of origin - Favourable treatment referred to as “area treatment”; being territories in Canada, U.S. and Mexico - CFTA = 10 pages of rules vs NAFTA = 180 pages - 4 rules will be examined in particular whether a good qualifies as an originating good within NAFTA area and therefore is eligible for preferential tariff treatment; o Good is wholly obtained or produced entirely in North America o Good is substantially transformed within nafta country with the result that the tariff classification has changed o Each of the non-originating goods used in the production of the good has undergone a change in tariff classification as a result of production in North Amreica o The finished good has not achieved a tariff classification change but the good contains sufficient regional value content Harmonized commodity description and coding system (HS) - Basis for tariff classification under NAFTA and has been adopted by most of the worlds major trading countries - Developed by the customs cooperation council; system comprises of 21 sections / into 99 chapters o HS committee meets at 4-5 year intervals to ensure that the text is current and reflects technological change and the changing patterns of international trade - Coding system ensures that non-originating materials as well as finished goods are properly classified under HS o Importers require certificate of origin o Exporters need to be aware of potential legal liability for certificates that are improperly completed Customs and border procedure - Security trumps trade in the mind of U.S. and Canadians have to accept that we are more depended on the U.S than they are on us. - After 9/11 Canada and the U.S. agreed on creating a border that facilitates security as well as the flow of people and commerce o Canada has created a new Canada Border Services Agency in order to integrate the customs function s from Canada Customs and Revenue agency  The previous intellivence function undertaken by Citizenship and Immigration,  Import functions carried out by the Canadian Food Inspection Agenct • Both now under CBSA - Importers cannot claim area or preferential treatment unless they possess a valid certificate of origin o Importer must make a written declaration, based on the certificate of origin , that the good qualifies as originating and they must posess a certificate of origin at the time the declaration is made o Certificates responsibility of exporter but it may be the producer that completes them - Three countries have a standard certificate for either single imports exceeding value of $1000 and multiple imports of identical goods within a 12 month period - Three parties have agreed that; o Each country must provide for the speedy issuance of advance rules of originating rules o Each country must provide exporters from other nafta countries with the same review and appeal right and advance rulings as are available to exporters within its own territory o They will cooperate in administering the rules of origin and establish a working group to address future amendments to the rules of origin Technical barriers to trade and technical standards - Three countries have agreed not to use standards-related measures to create any unnecessary obstacles to trade among the countries - Three countries have also agreed to work jointly to enhance level of safety and protection of human, animal and plant life and health, environmental and consumers - Nafta countries are free to adopt individual measures relating to safety on the above measures - Committee on standards-related measures has been established with representatives from each country. Functions include; o Monitoring the implementation and administration of Nafta provisions on standards related measures, including the progress of the working groups and subcommittees o Facilitating the process of making measures compatible o Providing a forum for members to consult on standards matters include the provision of technical advice and recommendations o Enhance cooperation on standards-related measures and considering standards- related measure of other organizations, including the GATT Sanitary and phytosanitary measures (SPS) - Measures taken by governments to protect humans, animals, plants from pests, diseases, or contaminants - NAFTA does not provide specific standard but framework that these measures can be adopted as long as they are not disguised measures for trade protection - Each country can set standard if there is scientific evidence to support measure Selected areas of interest of controversy Anti-dumping and countervailing duty provisions - As we know anti-dumping and subsidies are looked down upon but are not illegal by the WTO - WTO; importing countries are permitted to levy duties on goods that are dumped or subsidized according to the domestic law of the importing country, which is expected to conform to the overall prescription of the WTO - U.S has a history of bowing to pressure from industry lobby groups and using anti- dumping (AD) duties and countervailing duties (CVD) o Canada had to ensure during the CFTA negotiations that they obtained an agreement to adopt common definitions of dumping and subsidies and a common AD and CVD law o Difficult due to power of industry in U.S. as these measures allowed their industries to remain  Compromise reached that allowed both countries to retain their AD and CVD laws  Bianary panels would be developed to oversee the competent investigating authorities in each country and determine wither they were applying their own law fairly to the situation. Energy - Apply to crude oil, natural gas, refined products, basic petrochemicals, coal, electricity, and nuclear energy - Canada being the largest energy supplier to the U.S. made these negotiations critical - CFTA talk goals for Canada were
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