Resolution of Trade Disputes under NAFTA's Chapter 19: The Lessons of Extending the Binational Panel Process to Mexico

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I. INTRODUCTION

When the North American Free Trade Agreement(1) (the NAFTA) became effective, it extended to Mexico an arbitral mechanism--a binational panel process--that provided for review of national anti-dumping and countervailing duty administrative determinations as a substitute for review by the federal courts of the three NAFTA nations. In few contexts (other than the predecessor United States-Canada Free Trade Agreement (CUSFTA)),(2) has an international agreement created a structure that entrusts international arbitral panels with decisions governed largely by national, rather than international, substantive law.

Forty antidumping and countervailing duty actions have been referred to the Chapter 19 NAFTA dispute settlement mechanism during the first four years and six months of the NAFTA, twenty-six of which have been definitively resolved or withdrawn (ten).(3) Despite the complexities of the process and other challenges facing the panelists, the binational panels have been able to complete their tasks without significant disagreement among the panelists in all but one case. The governments have complied with the panels' rulings. The private parties--domestic producers, importers, and foreign manufacturers--participating in antidumping and countervailing duty proceedings have been afforded the review of national administering authority determinations in what is intended to be a more objective, speedy, and less costly proceeding than utilization of national courts. The three national secretariats that are responsible under the NAFTA for administration of the panel process in each nation have demonstrated great patience, flexibility, and resourcefulness in dealing effectively with panelists, interested parties, and the governments.

However, the experience of extending the panel process to Mexico has not been without its difficulties. The problems, this Article suggests, are those of a system characterized by non-national lawyers and law professor panelists interpreting and applying national trade laws; the maintenance of a complex, redundant judicial system for review of antidumping and countervailing duty disputes alone; inconsistent panel decisions due in part to the lack of an appellate process; possible, albeit unsuccessful to date, constitutional challenges in Mexico and the United States by the courts and commentators;(4) and a probability of actual or apparent conflicts of interest of ad hoc panelists who may be trade attorneys practicing before the same national administering authorities they are judging. Some of these shortcomings could be corrected through amendment of the NAFTA or even through informal agreement of the NAFTA parties. Others are inherent in the binational process and must be tolerated unless the NAFTA governments are willing to alter the process.

This Article is a pragmatic, hopefully objective, description and assessment of the legal and practical problems raised by the binational panel process, particularly its extension under the NAFTA beyond the United States and Canada to Mexico. NAFTA's Chapter 19 was adapted with relatively minor changes from Chapter 19 of the CUSFTA. The extension of the process to Mexico and its utilization between common law jurisdictions (United States and Canada) and a civil law jurisdiction (Mexico) have provided challenges to the panelists and to the process that did not exist under the CUSFTA, or have exacerbated weaknesses that were already present. This analysis focuses on the structure, operations, and dynamics of the panel process, including but not limited to the author's observations and experience as a panelist.(5) Particular attention is given to the five binational panel decisions in review of administrative decisions of the Mexican "administering authority," the Secretariat of Commerce and Industrial Development (SECOFI).

The analysis aims to serve several purposes. Of immediate concern are problems relating to the efficient functioning of the Chapter 19 process among the NAFTA parties and their citizens. …