Meeting of the Free Trade Commission On 11 December 1996, at the request of Mexico and in keeping with Article 2006(4) of NAFTA, the NAFTA Free Trade Commission (FTC) convened to negotiate an agreement between Mexico and the US. On 12 December 1996, Mexico complicated negotiations by imposing retaliatory tariffs amounting to an estimated $1.4 million cost to the US economy. After the requisite 30 days of negotiation had elapsed and no agreement had been reached, Mexico asked on 14 January 1997, that an arbitration tribunal be organized under the rules set out in Article 2008.
Convening of the tribunal NAFTA arbitration tribunals under Chapter 20 were convened when negotiations failed to resolve an ongoing dispute. Such a tribunal consisted of five members drawn from a list of "30 individuals who are willing and able to serve as panelists" maintained by each member nation. Potential panelists were "appointed by consensus for terms of three years, and may be reappointed." Article 2009 provided that these panelists: • have expertise or experience in law, international trade, other matters covered by this Agreement or the resolution of disputes arising under international trade agreements, and shall be chosen strictly on the basis of objectivity, reliability and sound judgment; • be independent of, and not be affiliated with or take instructions from, any Party; and • comply with a code of conduct to be established by the Commission In accordance with these guidelines, five arbiters were selected:
Chief: Paul O'Connor
Arbiters: Raymundo Enriquez, Dionisio Kaye, John H. Barton, Robert E. Hudec
Submission of arguments Rather than sending litigants to argue their cases before the tribunal, parties to a NAFTA arbitration submitted written arguments for review. For both parties the arguments hinged on two significant points: • Did the tribunal have legitimate jurisdiction in this case? • The legal definition of the term "like product" as established in
GATT and
WTO provisions and incorporated in Article 308.3 of NAFTA.
The US argument • The US argued that the NAFTA tribunal did not have jurisdiction in the dispute, as the term "like product" did not appear word for word in NAFTA, and that while both the US and Mexico were signatories to GATT and members of WTO, the tribunal was not empowered by WTO and therefore did not have jurisdiction in disputes originating from WTO. Therefore, Mexico ought to have taken the case directly to WTO rather than NAFTA. • Following this same line of argument, the US argued that the "word 'like', while not synonymous with the word 'identical', did call for a greater degree of similarity than is commonly associated with the English word 'similar,
The Mexican argument • Mexico argued that the NAFTA tribunal did have jurisdiction in this case, largely because Articles 802, 803.3, and 805 adopted much of the WTO and GATT language regarding "like products", even if they weren't phrased identically. They also noted that Article 2005(1) "generally gives parties the right to initiate dispute settlement either in GATT or in NAFTA whenever a dispute involves a matter 'arising under both this Agreement and the General Agreement on Tariffs and Trade. Finally, Mexico noted that Article 2005(6) required that once either a NAFTA or GATT dispute settlement method was chosen, another could not be engaged to resolve the dispute, so agreement by the US to FTC negotiation had precluded Mexico's ability to arbitrate the case under WTO. • Mexico also argued that, because the GATT principles were already present at least in intent in Articles 802, 803.3, and 805, the definition of "like product" should be interpreted as it had been interpreted by WTO and GATT. Mexico cited several cases wherein "like product" was defined broadly to include products that "though not 'like' the imported product, are nonetheless commercially interchangeable or substitutable for it". In this case, that would have meant "US-made plastic brooms were 'like' the imported broomcorn brooms under investigation", and therefore the impact of US imports of Mexican broomcorn brooms had a negligible effect on the overall US broom market. == Final outcome ==