North American Free Trade Agreement: Dispute Resolution Procedures* – Vol. 2 No. 4

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AuthorR. Edward Ishmael Jr.**

Published: December 1991


Description: On December 17, 1992, President Bush, President Salinas, and Prime Minister Mulroney signed the North American Free Trade Agreement (referred to herein as “NAFTA” or “Agreement”). The Agreement calls for the creation of a free trade zone encompassing the three signatory countries (collectively the “Parties” or singularly “Party”). Each Party must now submit the Agreement to its legislature for ratification.

The existence of an agreement regulating trade among three independent sovereigns raises many questions and concerns. These concerns include discrimination by one Party against investors of another Party, favoritism and protectionism for a Party’s own products or industries, environmental issues, and job flight. The United States-Canada Free Trade Agreement (“FTA”), which in many ways served as the pattern for NAFTA, raised many of the same concerns. Enforcing such agreements is particularly troublesome. Disputes will inevitably arise. The NAFTA negotiators realized this fact, as did the FTA negotiators, and attempted to address it with procedures for resolving such disputes. Many of the NAFTA dispute resolution provisions are verbatim, or nearly verbatim, adoptions of FTA provisions. It is envisioned that Canada and the United States will agree to suspend the FTA’s operation as to each area of the FTA also covered by NAFTA, so long as NAFTA is in effect and both countries remain parties to NAFTA. Certain NAFTA provisions call for amendments to FTA provisions which conflict or potentially conflict with NAFTA.

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*Current Developments
**Associate, Baker & McKenzie – Dallas, Texas. The author wishes to thank Randy Osborne for his assistance in the preparation of this article.