Wolfe

1. Queen's University School of Policy Studies 1
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

2. 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?

3. 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.

4. 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?

5. 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….

6. Queen's University School of Policy Studies 6
Annex 2001.2: 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)

7. 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….

8. 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

9. 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

10. 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

11. 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…

12. 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

13. 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.”