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Posted: October 6, 2018

Dispute Resolution Provisions of the new USMC

By David B Savage

On Oct. 1 Canada, Mexico and the United States have agreed to the terms of a USMC Agreement.

Canada has stood strong to retain and improve the dispute resolution provisions (Chapter 19 of the current NAFTA). As we await the details and the language of the agreement and then the trilateral government approvals over the next six months, I offer you my insights on the Dispute Resolution provisions as we understand them.

Trump bullies. Mexico compromises. Canada holds its key priorities.

Special thanks to Canada’s Chrystia Freeland and the lawmakers in the US who understand international trade.

“Lawmakers from both parties have urged the White House to include Canada in any revised NAFTA, warning that excluding Canada, which is America’s largest export market, could disrupt supply chains, cost jobs and slow the United States economy. Companies and business groups, including the U.S. Chamber of Commerce, have repeatedly called on Mr. Trump to ensure Canada remains part of the pact, which has become critical for industries across North America, including automakers, agriculture and manufacturers.” New York Times, October 1, 2018.

About 2003, members of the North American Free Trade Agreement Dispute Resolution Committee were in Calgary and asked me to meet with them to discuss my entrepreneur’s small business perspective on the agreement and how it can better serve people and businesses like me.

My background in this area includes being a founder of the Company to Company Dispute Resolution Council C2CADR, Collaborative Global Initiative CGI, the Calgary Chamber of Commerce Appropriate Dispute Resolution Committee, the Global Negotiation Insight Institute, and other initiatives DavidBSavage.

My summary recommendations to the NAFTA DR representatives in 2003 were that;

a) An independent (ie. non-American) dispute tribunal is critical.

b) The Committee should include more business and, especially, entrepreneurs.

c) Dispute resolution processes (litigation, arbitration, NAFTA,…) too often place power in the hands of those that already have power. Grind the bastards, the “bigger dick” approach, run them over, out last them with deep pockets…).

d) For many businesses (large and small), the NAFTA dispute resolution processes consume far too much time and money. While the process is a good DR and legal framework, it must be far more industry focused. There is no point for shareholders to see their company has won the battle yet gone bankrupt doing it.

e) There should be protection for businesses and industries that win their disputes from further international trade bullying (tariffs, limits, blockages…) (think about the Softwood Lumber circus… drag Canada’s industry for years, Canada wins, US producers launch new and repeated claims …). Makes the DR provisions weak to see the repeated abuse of the agreement.

As we learn about the terms of the USMCA 2018 deal, my recommendations and my review will be based on the same issues.

“NAFTA had three kinds of dispute settlement systems. The new deal will see two remain basically unchanged, but renamed, according to senior White House officials. State-to-state dispute settlement — formerly in Chapter 20 — is being kept. It has many critics, particularly in the labour community, because panels often get blocked and disputes linger for years. The old NAFTA’s so-called Chapter 19 dispute-settlement mechanism — which hears bi-national anti-dumping and countervailing duties cases — remains untouched in the new agreement, the officials said. Canada dug in to save those. Investor-state dispute settlement, formerly in Chapter 11, will be phased out between the U.S. and Canada but remain in place for certain key sectors — such as oil and gas, infrastructure and telecommunications — between the U.S. and Mexico, according to the White House officials.” – Bloomberg News October 1, 2018 Bloomberg

Here is a link to the USMC Agreement; USMCA October 1 2018

Refer to Chapter 10 Remedies and specifically Annex 10 B4 USMCA October 1 2018Trade Remedies. Note the bilateral dispute resolution provisions between the US and Canada are stronger for Canada than those provisions for Mexico in the US Mexico Annex.

The new USMC Agreement language appears to focus on improving a number of the issues mentioned in my points c) and d) above.

Also importantly, the new deal appears to block US companies from making claims against Canada for Canada’s often better environmental protection. PS Out of date business paradigms see business as “Trumping” (pun intended) our environment and communities. PPS let’s learn to Create Shared Value.

Creating Shared Value Short Video

“Companies could bring business and society back together if they redefined their purpose as creating “shared value”—generating economic value in a way that also produces value for society by addressing its challenges. A shared value approach reconnects company success with social progress. Firms can do this in three distinct ways: by reconceiving products and markets, redefining productivity in the value chain, and building supportive industry clusters at the company’s locations.” – Harvard Business Review, January – February 2011 issue How To Fix Capitalism, Michael E. Porter and Mark R. Kramer.

International trade is good for almost everyone except the uncompetitive.

Dispute Resolution terms and processes are improving.

Yet, there is nothing better than getting the right people with the right resources at the right time to meet in person and create better and more innovative outcomes.

What are your insights on international trade, the USMCA and

dispute resolution? Let’s talk.

David B. Savage is an East Kootenay-based negotiation, collaboration and business development expert, author and owner of Savage Management Ltd.


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