An Economic Evaluation of the DSMs in
the Canada-U.S. FTA: Chapter Nineteen
The dispute settlement mechanisms of Chapter Eighteen and Chapter Nineteen of the Canada-U.S. Free Trade Agreement (FTA) described in Chapter 4 formed the cornerstones that permitted Canada to sign the FTA (Canada 1988f and United States 1988f). 1 Any indication of the dispute settlement mechanisms (DSMs) failure has been used by the opponents of free trade with the United States to argue that Canada is still being subjected to the trade- disrupting actions of U.S. subsidy-countervail and anti-dumping duty cases. This chapter and the next review the DSM cases that have occurred to date to see if they are living up to the expectations that were projected for them prior to the signing of the original Canada-U.S. FTA. Any review, however, raises the question as to precisely what objectives Chapters Eighteen and Nineteen should be serving. This review of the workings of the DSMs will consider their relationship to the general underlying economic aim of any free trade agreement -- increased consumer welfare. 2
The framework used m this chapter to analyze the DSMs is outlined in Diagram 5.1. This diagram consists of a set of overlapping concentric circles, each representing the incrementally higher aims of policy under the FTA. At the heart of the diagram is the legal process. Its purpose is to facilitate the realization of the objectives represented by the other concentric circles of this hierarchical framework -- namely the DSMs, the Canada-U.S. FTA -- and ultimately the goal of increased consumer welfare ( Gatland 1986). As John C. Crosbie, Canada's ex-Minister of International Trade, putit, "[l]ower consumer prices, additional new jobs and real income gains will be realized in each region of our country as a direct result of this agreement (Canada 1988e).
The DSMs are instruments created to serve broader objectives than simply the efficient and fair resolution of conflict between Canada and the United States over trade issues. These broader objectives are represented by the concentric circles which are larger than that representing the DSMs. The same