Second Conference in International Inter-Tribal Trade at Thompson Rivers University, Faculty of Law (Kamloops, BC - November 12, 2016). Presented by Michael Woods, Partner – Woods LaFortune LLP.

1. Free-Trade / Fair Trade
From the 20th Century to 21st Century
Part I
Second Conference in International Inter-Tribal Trade
Thompson Rivers University - Faculty of Law
Kamloops, BC - November 12, 2016
Michael Woods, Partner – Woods LaFortune LLP

2. Woods, LaFortune LLP
Woods, LaFortune LLP is an innovative, flexible and proactively cost-effective boutique
law firm that focuses on international trade and business, investment, customs,
government procurement and government relations. We provide a wide range of services
to our clients including advocacy before domestic and international courts and tribunals,
strategic advice and analysis, business planning and analytical research.
Michael Woods
woods@wl-tradelaw.com
613.355.0382
www.wl-tradelaw.com

3. From the 20th Century
to the 21st Century
“There was a time in this fair land
when the railroad did not run
When the wild majestic mountains
stood alone against the sun
Long before the white man and
long before the wheel
When the green dark forest was
too silent to be real”
Gordon Lightfoot

4. Free Trade – Fair Trade
“The ground on which we stand is sacred ground. It is the
dust and blood of our ancestors.”
Chief Plenty Coups, Crow (1848-1932)

5. Free Trade – Fair Trade
“Suppose a white man should come to me and say,
Joseph, I like your horses. I want to buy them.
I say to him, no, my horses suit me; I will not sell them.
Then he goes to my neighbor and he says, pay me
money, and I will sell you Joseph's horses.
The white man returns to me and says, Joseph, I have
bought your horses and you must let me have them.
If we sold our lands to the government, this is the way
they bought them.”
Chief Joseph, Nez Perce (1840-1904)

6. Free Trade – Fair Trade
•Free Trade Agreement
“An agreement among two or more countries (more specifically, customs territories) to drop all
internal trade barriers as among the countries. Each party to an FTA, however, retains its own
separate schedule of tariffs for imports from third countries, thus making the FTA a less
economically integrated entity than a customs union.
[…]
The North American Free Trade Agreement (NAFTA) is the
quintessential example of a FTA.”
Raj Bhala,
Dictionary of International Trade Law

7. What is Free Trade?
• Economic Strategy and Doctrine
• Free exchange of goods and
services and investment
• Assumption: the more country
exchange, (goods, services,
capital) the more they creates
wealth
• Requires elimination of barriers to
trade
• Comparative advantage

8. What is Free Trade?
Arguments in favour:
• Promotes peace and economic development
• Encourage competitiveness
• Creates employment
• Increases global wealth

9. What is Free Trade?
Arguments against:
• Employment in areas that are less effective will disappear
• The opening of global market can create an important adjustment
• In exchange, a much larger global wealth is created. Some indicate that
this wealth allows to mitigate the negative effect of job loss in areas
that a relatively less effective.
• Opening of markets – painful adjustments, employment threatened.

10. What is Free Trade?
Arguments against:
•Foods security
•Protection of Environment
•Developing countries exploited (North-South)

11. KEY GATT Articles
• Article I – Most Favoured Nation (MFN)
• Articles II – Tariff Concessions
• Articles III – National Treatment
• Articles XI – Elimination of Import /
Export Restriction
• Articles XX – General Exceptions
• Articles XXIII – Dispute settlement
• Articles XXIV – Customs Unions / FTAs

12. History of Free Trade
•21st Century:
• RTA made their apparition in the late 20th Century, but by
the 21st , they were dominating as the go to trade
agreement
• NAFTA, came into force in Jan 1, 1994
• Asia Pacific Trade Agreement – APTA, came into for Jan 1, 2002
• EU-US TTIP – still under negotiation
• EU-Canada (CETA) – provisional application 2017
• Trans-Pacific Partnership (TPP) – still under negotiation

13. From the 20th Century
to the 21st Century
NAFTA

14. The North American
Free Trade Agreement - (NAFTA)
• Tri-lateral free trade agreement
• Binding upon U.S.A., Canada and Mexico (“the Parties”)
• For U.S. and Canada, extension of pre-existing FTA
• Coverage:
• Goods (Tariff and Non-Tariff)
• Investments
• IP rights
• Services
• Government Procurement

15. What is the NAFTA?
• A snapshot of its scope:
• In 1993, trilateral trade within the North American region was
US$288 billion. In 2014, Canadian’s total trilateral merchandise trade
exceeded US$1.12 trillion.*
• As of 2014, the prosperity and development of the North American
economy has more than doubled in size since 1994. The combined
gross domestic product (GDP) for Canada, the U.S., and Mexico
surpassed US$20.0 trillion in 2014 up from nearly US$8.0 trillion in
1993.*
*Global Affairs Canada

16. What is the NAFTA?
•A snapshot of its scope (continued):
• Created world’s largest free trade area
• Links 450 million people producing $17 trillion in goods and services*
• U.S. had $918 billion in two-way trade in goods and services with its
NAFTA partners in 2010 alone*
*Office of the U.S.T.R.

17. What is the NAFTA?
•What is in the NAFTA?
• National Treatment
• Most-Favoured-Nation Treatment
• Tariff Elimination
• Import and Export Restrictions
• Investment provisions

18. NAFTA – A Comprehensive
Protection Plan
NAFTA also provides:
• A reduction of trade barriers
• Creation an expanded market for goods and services produced
in North America
• Implementation of intellectual-property protections
• Creation of dispute-resolution mechanisms
• Implementation of regional labor and environmental
safeguards

20. NAFTA Chapter 11
•Designed to:
• Establish a more stable and predictable
• Enhance prosperity by increasing FDI
• Ensure that investment policies are held to uniform
standards

21. NAFTA Chapter 11
•Mechanism:
• Establish obligations for the Parties’ treatment of NAFTA
investors and their investments
• Investors can seek to have these standards enforced by
bringing a claim under Ch. 11
• Where a Tribunal determines that Ch. 11’s standards
been breached, the investor may be entitled to recover
damages

22. NAFTA Chapter 11 Claim Procedure
•Standing:
• In order to commence a Ch. Claim, a party must be an
“investor of a Party”
• Can be any citizen (corporate or individual) of any of
the three countries, who has an investment in one of
the other countries

23. NAFTA Chapter 11 Claim Procedure
•Consent to arbitration and jurisdiction:
• NAFTA Parties bound by general consent to Arbitrate in
Article 1122
•Therefore, an investor need only bring a claim to
commence arbitration
•Claimant must not pursue other judicial or quasi-judicial
remedies, other than for injunctive and other extraordinary
relief

24. Article 1102 – National Treatment
•Article 1102: National Treatment
“Each Party shall accord to investors of another
Party treatment no less favorable than that it
accords, in like circumstances, to its own investors
with respect to the establishment, acquisition,
expansion, management, conduct, operation and
sale or other disposition of investments.”

25. Article 1102 – National Treatment
•Same protection is extended in 1102(2) to
“investments of investors”
- Article 1102 requires a host state to provide NAFTA
investors and investments with treatment that is no
less favorable than the treatment they provide to
domestic investors and investments in like
circumstances.

26. Article 1102 – National Treatment
1. Treatment “no less favorable”
- Host state must provide to qualifying NAFTA
investors/investments treatment that is at least as
advantageous as that provided to its own
investors/investments

27. Article 1102 – National Treatment
2. In “like circumstances”
- To trigger 1102 protection, NAFTA investor/investment
must be in “like circumstances” to a domestic
investor/investment receiving more favorable
treatment:
- For example:
- Same industry
- Same economic sector
- In direct competition

28. Article 1102 – National Treatment
3. With respect to the establishment, etc.
- Treatment complained of must concern any of the
enumerated actions related to the investment:
- Establishment
- Acquisition
- Expansion
- Management
- Conduct
- Operation
- Sale or other disposition

29. Article 1103 – MFN Treatment
•Article 1103: Most-Favored Nation (MFN)
“Each Party shall accord to investors of another
Party treatment no less favorable than that it
accords, in like circumstances, to investors of any
other Party or of a non-Party with respect to the
establishment, acquisition, expansion, management,
conduct, operation, and sale or other disposition of
investments.”

30. Article 1103 – MFN Treatment
• Same protection is extended in 1103(2) to
“investments of investors”
• Imposes the same obligation upon NAFTA Parties
as Article 1102, but extends the comparators
beyond domestic investors and investments to
third-party investors and investments as well

31. Article 1103 – MFN Treatment
Same principles apply as in Art. 1102, except that
group of possible comparators is broadened to
include not only domestic investors but investors
of other non-Parties as well.

32. Article 1105 – Minimum
Standard of Treatment
•Article 1105: Minimum Standard of Treatment
“Each Party accord to investments of investors of
another Party treatment in accordance with
international law, including fair and equitable and
full protection and security.”

33. Article 1105 – Minimum
Standard of Treatment
• This obligation imposes an absolute (rather than
comparative, as in 1102, and 1103) baseline with respect to
the standard of acceptable treatment that must be provided
to foreign investors and their investments, which includes:
• Treatment in accordance with international law
• Fair and equitable treatment
• Full protection and security

34. Article 1105 – Minimum
Standard of Treatment
Treatment in accordance with international law :
•Denial of justice, arbitrary
•grossly unfair treatment
•outright and unjustified repudiation of
obligations)

35. Article 1105 – Minimum
Standard of Treatment
Fair and equitable treatment:
•Detrimental reliance upon legitimate
expectations
•Certainty, transparency and stability of host
state’s regulatory regime

36. Article 1105 – Minimum
Standard of Treatment
Full protection and security:
•Protection from discriminatory treatment
•Government’s adherence to its own laws and
regulations

37. Article 1106 –
Performance Requirements
Article 1106 – Performance Requirements
“ No Party may impose or enforce any of the following requirements, or enforce any
commitment or undertaking, with respect to the establishment, acquisition,
expansion, management, conduct or operation of an investment of an investor of a
Party or of a non-Party in its territory:
• To export a given level or percentage of goods or services;
• To achieve a given level or percentage of domestic content;
• To purchase, use or accord a preference to goods produced or services provided
in its territory, or to purchase goods produced or services provided by persons in
its territory
• […]”

38. Article 1106 –
Performance Requirements
“Performance requirements” refers to an array of requirements
put in place by a host state concerning the performance of
foreign-owned enterprises in its territory.
• Art. 1106 sets out those performance requirements that are
prohibited under NAFTA, as well as a list of exceptions.

39. Article 1110 – Expropriation
and Compensation
• Article 1110: Expropriation and Compensation
“No party may directly or indirectly nationalize or expropriate
an investment of an investor of another Party in its territory
or take a measure tantamount to nationalization or
expropriation of such an investment (“expropriation”), except:
(a) for a public purpose;
(b) on a non-discriminatory basis;
(c) in accordance with due process of law and Article 1105(1); and
(d) on payment of compensation in accordance with paragraphs 2
through 6.”

40. Article 1110 – Expropriation
and Compensation
Nationalization : The state takes ownership of property or
investments across a sector or industry
Direct Expropriation : Taking physical possession of an investment
or property by transfer of title or seizure of property
Indirect Expropriation: Taking measures which have the effect of
destroying the ability to manage and control the investment, or
have the effect of depreciating substantially the value of the
investment

41. NAFTA EXEMPTIONS
Indigenous peoples were not present at the NAFTA negotiations but
Canada, USA, & Mexico each inserted specific language or "non-
conforming measures" within NAFTA that exempt specific sectors from
operation of the treaty.
Canada - Annex II (reservations or exemptions) exempted "Aboriginal
Affairs” sector Canada reserves the right to deny investors or "another
Party" the rights or preferences provided to "aboriginal peoples" in five
areas: national treatment, most-favored-nation treatment, local
presence, performance requirements, and senior management and
boards of directors.

42. NAFTA EXEMPTIONS
US exemption under "Minority Affairs” included indigenous
interests within its borders with non-indigenous minorities and
reserves the right to adopt or maintain rights or preferences to
what are termed "socially or economically disadvantaged
minorities." The USA reserves these rights in the same areas as
Canada with the exception of MFN.
Mexico also exempted sector "Minority Affairs," obscuring the fact
that only 10% of its minority population can arguably be termed
non-indigenous. Reserved these rights in only the two areas of
national treatment and local presence.