Seeking Common Ground: Canadau.s. Trade Dispute Settlement Policies In The Nineties [1 ed.] 0367286998, 9780367286996

Table of contents :
Contents
Acknowledgements
Tables, Diagrams and Figures
1 Corporations and the Capture of Trade Policy
2 Domesticating the GATT: The Design and Use of the U.S. and Canadian Trade Law Systems
3 Discriminatory Practices in the U.S. and Canadian ''Unfair'' Trade Law Systems
4 Resolving International Trade Disputes: The GAlT Multilateral and the Canada-U.S. FTA Bilateral DSM Processes
5 An Economic Evaluation of the DSMs in the Canada-U.S. FfA
6 North American FfAs, Consumer Welfare, and the Resolution of General Trade Disputes
7 An Examination of the 1994 GATI' Subsidies Code Procedures
8 Prioritizing an Agenda for Trade Dispute Settlement in North America
Bibliography
Author, Company and Subject Indices
Acronyms
About the Author
About the Book

Citation preview

Seeking Common Ground

The Political Economy of Global Interdependence Thomas D. Willett, Series Editor Seeking Common Ground: Canada-U.S. Trade Dispute Settlement Policies in the Nineties, Andrew D.M. Anderson The Challenge of European Integration: Internal and External Problems of Trade and Money, edited by

Berhanu Abegaz, Patricia Dillon, David H. Feldman, and Paul F. Whiteley

The Political Economy of European Monetary Unification, edited by Barry Eichengreen and Jeffry Frieden International Economic Sanctions,

William H. Kaempfer and Anton D. Lowenberg

The European Monetary System and European Monetary Union, Michele Fratianni and }tlrgen von Hagen

Profit-Making Speculation in Foreign Exchange Markets, '

Patchara Surajaras and Richard J. Sweeney

The Political Economy of International Organizations: A Public Choice Approach, edited by Roland Vaubel and Thomas D. Willett

Speculation and the Dollar: The Political Economy of Exchange Rates, Laurence A. Krause

Crossing Frontiers: Explorations in International Political Economy, Benjamin J. Cohen FORTHCOMING

Growth, Debt, and Politics: The Political Performance of Governments and the Third World Debt Crisis, Lewis W. Snider Capital Controls in Emerging Economies,

edited by Christine Ries and Richard J. Sweeney

Seeking Common Ground Canada-U.S. Trade Dispute Settlement Policies in the Nineties Andrew D.M. Anderson

To the memory of my Brother

Neil Anderson

First published 1995 by Westview Press Published 2019 by Routledge 52 Vanderbilt Avenue, New York, NY 10017 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Routledge is an imprint of the Taylor & Francis Group, an informa business Copyright © 1995 Taylor & Francis All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe A CIP catalog record for this book is available from the Library of Congress. ISBN 13: 978-0-367-28699-6 (hbk)

Contents Acknowledgements Tables, Diagrams and Figures

1

2

viii ix

Corporations and the Capture of Trade Policy

Canada-U.S. Trade Policy in the Late 1980s, Anti-Dumping and Countervailing Trade Laws, The Protectionist Nature of the Use of AD and CVD Trade Laws, The Theory of Strategic Trade Policy, Overview of the Book, Conclusions,

Domesticating the GATI: The Design and Use of the U.S. and Canadian Trade Law Systems.

Domesticating the GATT AD and CVD Codes, U.S. Trade Law Procedures, U.S. CVD and AD Actions Against Canada, U.S. "Unfair" Trade Law Actions Against Canada Prior to 1980, Canadian Trade Law Procedures, Canadian Anti-dumping and Countervailing Duty Cases, Summary and Conclusions,

3

Discriminatory Practices in the U.S. and Canadian ''Unfair'' Trade Law Systems

GATT Rules on "Unfair'' Trade Practices, Increases in the Use of Non-GATT Sanctioned Procedures, Differences Between U.S. and Canadian Administrative Practices, Economic and Legal Costs of U.S. "Unfair" Trade Laws, Implementation Structure for Government Trade Policy, Summary and Conclusions, v

1 1 7 9 10 26 28

32 32

35 42

51 51 52 62

75 75

71

81 90 96

99

vi

4

Resolving International Trade Disputes: The GATT Multilateral and the Canada-U.S. FfA Bilateral DSM Process. 103

Seeking a Resolution to the AD and CVD Problem: The New DSMs, Part One: Canada-U.S. Trade Dispute Resolution Under the GAIT, The GAIT and Dispute Resolution, DSMs in the GAIT Articles XXll and XXlli: The GAIT Tokyo Round and Dispute Settlement, GAIT Dispute Panels, Part Two: DSMs in the FTA, Chapters Nineteen, Eighteen and Eleven, Chapter Nineteen: AD and CVD Bilateral DSM, Chapter Eighteen: General Dispute Resolution, Chapter Eleven: Emergency Action (Escape Clause or Safeguard Actions), Conclusions,

5

An Economic Evaluation of the DSMs in the

Canada-U.S. FfA: Chapter Nineteen

An Economic Framework for Analyzing the DSMs,

Incorporation of Consumer Welfare in Trade Law, Chapter Nineteen and Consumer Welfare, . Chapter Nineteen Cases, Specific Cases, The U.S. Reviews and Decisions, The Canadian Reviews and Decisions, Outcome of Remands Made by the Chapter Nineteen Dispute Panels, Improving the DSM Process: Incorporating Consumer Welfare, Chapter Nineteen and the GAIT DSMs, Conclusions,

6

North American FfAs, Consumer Welfare, and the Resolution of General Trade Disputes

Chapter Eighteen and Consumer Welfare, Chapter Eighteen Issues and Cases, Chapter Eighteen Arbitration Panel Cases, Introducing Consumer Welfare to Chapter Twenty,

103 104 105 107 111 122 123 123 129 131 133 136 136 139 139 142 149 157 174 180 181 184 185 191 191 192 197 203

vii The Flexibility of Present Institutions in Canada and the United States, Expanding on the Strengths of Cultural Diversity, Use of and Growth in Chapter Twenty, The Future of Chapters Twenty and Nineteen, Appendix 6.1: An Overview of NAFTA, Conclusions,

7

An Examination of the 1994 GATI' Subsidies Code Procedures

Searching for a Revitalized Subsidies Code, Part One: Track IT Issues, Part Two: Track I Issues, Part Three: Reviving the GATT Subsidy Dispute Mechanism, Part Four: Summary and Conclusions,

8

Prioritizing an Agenda for Trade Dispute Settlement in North America

Overcoming Domestic Interests, A Royal Flush, Implementing a Coherent Canadian Trade Policy, Implications of Third-Party DSM Processes for NAFTA, Conclusions, Future Research,

Bibliography Indices

Acronyms

About the Author About the Book

206 207 210 212 213 221

225 225 227 237 246 247

251 251 256 257 266 267 269 273 296 309

311 312

Acknowledgements Critics of present institutional systems and structures can often appear as easily dismissing the diligent work that is carried out by the many bureaucrats and other professionals that staff these institutions. However, it would be a failure of the academic community if they were to avoid the hard issues of how those institutions function by sticking to their ivory towers. Without independent, and what I hope is constructive criticism, I am sure that all the people who work in or are involved in negotiating for better systems and structures which encourage a more efficient and open world trading system will take my comments in the spirit in which they were given. To the many people, too numerous to mention, in the Information and Media Relations Division at the GATT Office in Geneva, the International Trade Commission and International Trade Administration in Washington, the Canadian International Trade Tribunal, Departments of International Trade and External Affairs, and the Binational Secretariat in Ottawa, and the many other government departments and international bodies in North America and. Europe responsible for trade matters, who took the time out of their busy schedules to speak with me, or who provided me with materials to support my research, I am deeply indebted for their help. I would also like to thank the many colleagues and friends who supported me in the preparation of this book. Special mention must go to Professor Alan M. Rugman at the University of Toronto who has supported me in my endeavors since I was a graduate student at Dalhousie University, and Professor Alain Verbeke, who as my Doctoral Supervisor at Vrije Universiteit Brussel and a colleague, recognized the value and importance of this work by encouraging me to continue my research in this area. I would also like to thank the many anonymous reviewers for their invaluable comments and insights. At Westview Press helpful support has been provided to me by the Senior Editor and Editorial Director, Spencer Carr, as well as by Ellisa Braunstein, Alison Auch, Marykay Scott, and Anne-Barrie Norbeck in Acquisitions, and from Jennifer Blandford, Editorial Assistant and Deborah Rich the copy editor. Financial and equipment support for preparing this book has been provided by the Ontario Centre for International Business Research Programme and Law Programme at the University of Toronto, and the Business and Management Department at City University of Hong Kong. Special thanks must go to Rosemary Anderson for her many patient hours spent editing and helping me to prepare the manuscript, and to Brad Olson who tirelessly helped me prepare the camera ready copy. As always, the responsibility for any comments or criticisms in the book can only be attributed to me, including any errors or omissions. Andrew D.M. Anderson viii

Tables, Diagrams and Figures Tables 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 29 2.10

The Major U.S. Trade Laws U.S. Countervailing Duty Cases Against Canada: 1980-1993 U.S. Anti-dumping Cases Against Canada: 1980-1993 U.S. Escape Oause (Section 201) Cases Against Canada United states Trade Representative Actions (Section 301) Cases Against Canada: 1970-1993 The Major Canadian Trade Laws Canadian Anti-dumping Cases Against the United States: 1980-1993 Canadian Safeguard Cases Against the United States: 19801992 Total AD and CVD Actions by Calendar Year Undertaken by the United States and Canada: 1980-1992 North American Trade Law Action Results: 1980-1992

3.1

Frequency Distribution of Export Restraint Arrangements by Importing Country and Sector: 1984-1988

4.1

Caruida-U.S. Trade Disp~te Cases Handled at the GATT: 1980-1993 . Comparing the "Unfair" Trade DSMs in the Canada-U.S. FTAandtheGATr . .

4-.2 5.1 5.2 5..3 5.4

6.1

Canada-U.S. FTA Chapter Nineteen Disputes: Jan. 1, 1989-Aug. 15, 1994 Summary of the Final Results of Chapter Nineteen Canada-U.S. FTA Dispute Panel Review Jan. 1, 1989-Aug. 15, 1994 ·Outcome of Remands of the Canada-U.S. FTA Chapter Nineteen Dispute Panels in the United States: Jan. 1, 1989Aug. 15, 1994 Outcome of Remands of the Canada-U.S. FTA Chapter Nineteen Dispute Panels in Canada: Jan. 1, 1989-Aug. 15, 1994

eases:

Canada-U.S. FTA Chapter Eighteen Disputes: Jan. 1, 1989-Aug. 15, 1994 ix

37 43 44 48 49 53 57 61 63 65 78 1l5 1'0

143

~

].IE

~

X

Appendix Tables 2.1 2.2

United States Section 332 Investigations Involving Canada: 1980-1993 Countervailing Duty Cases by the United States Against

2.3

Anti-dumping Duty Cases by the United States Against

~exico:1980-1992 ~exico:1980-1992

68

72 74

Diagrams 2.1 2.2 4.1 4.2 4.3 4.4 5.1

Legal Timetable for U.S. Anti-dumping and Countervailing Duty Investigations Legal Timetable for Canadian Anti-dumping and Countervailing Duty Cases Dispute Settlement: FTA versus the GATT Time Frames for Consultation and Conciliation Under the GATT AD and CVD Procedures Time Frames for GATT Subsidies and AD Dispute Panels Time Frames for FTA Dispute and Arbitration Panels

40

56 :KE 1!B 113

m

A Framework of Analysis of the Economic Relationship Between the Legal Based DSMs of Canada-U.S. FTAs and Consumer Welfare

:J37

NAFTA Dispute Settlement Processes

216

1.1

Long-Term Changes in Expected World Welfare from Government(s) Trade and Industrial Policies

25

3.1

Policy Goals and hnplementation Structure for Government "Trade" Policy

95

6.1

Figures

1 Corporations and the Capture of Trade Policy Canada-U.S. Trade Policy in the Late 1980s The replacement of tariff barriers with non-tariff barriers (N1Bs) to trade, combined with the increasing globalization of international business during the 1980s, has complicated the development and implementation of Canadian trade and industrial policy in the 1990s. Canada by the mid-1980s was facing what it perceived as the increasing abuse of the U.S. administrative "unfair'' trade law mechanisms against Canadian-based firms, particularly those dependent on manufactured resource-based exports to the United States. International economists and other trade experts have also contended that many U.S.-based firms during the 1980s learned to use that country's "unfair'' trade law mechanisms as a legal means for denying entry at reasonable prices to a variety of foreign competitors. This problem was specifically addressed in Canada by a Royal Commission set up to examine the competitiveness of the Canadian economy (Canada 198Sd). The Macdonald Commission, as it was colloquially known, concluded that U.S. trade policy is created and applied through political and legal processes which decentralise decision-making power and enhance the political influence of relatively small and narrowly based interest groups such as unions and trade associations. The most notable examples of this fragmentation of power within the U.S. system are the legal mechanisms that afford producers contingent protection from import competition. These mechanisms usually involve countervailing duties, anti-dumping duties and emergency protection for U.S. producers suffering serious competitive injury from imports (302-3).

The report went on to note that 1

2 U.S.legislation gives domestic producers the right to launch costly lawsuits against foreign rivals, with little risk of loss if the claims of unfair and injurious import competition are proved groundless.

Since these U.S law suits are initiated by private firms, it is seldom possible to predict when they will be launched. Thus the threat of harassment they pose d,eters Canadian investment in new plants and equipment when the future profitability of such facilities depends on uninterrupted access to the North American market (302-3). [Emphasis added]

As evidence of these actions, the high incidence of use by the United States of its GAIT-based countervailing (CVD) and anti-dumping (AD) duty laws, or contingent trade laws, are often cited by economists. These types of awarded protection are "contingent" because they are supposed to require proof that the domestic producer is being harmed in some way by the foreign producer and that this harm can be proved by the agency or agencies responsible in each nation for handling its nation's administrative trade laws. These types of trade laws differ from such trade barriers as voluntary export restraints (VERs ), or even the use of the United States Section 301 trade laws, since these procedures are not GA1T-sanctioned, or often GA1T legal and are generally imposed in an arbitrary fashion based more on economic power than on economically rational criteria. Until the early 1980s, the use of VERs and the misuse of the safeguard procedure were more of a problem to world trade, but during the 1980s the use of the AD and CVD trade laws had increased substantially enough to have also become a major problem for certain nations, including Canada. This issue is discussed more fully in Chapters 2 and 3. This book is primarily concerned with the imposition of the contingent forms of protection. A number of authors in Canada in the mid-1980s had also begun to emphasize the extensive reliance that large Canadian industrial corporations had on the U.S. market for their manufacturing output.l For example, as of 1987 nearly 76 percent or C$91.8 billion of Canada's total exports of C$121.5 billion were going to the United States. Similarly, just over 68 percent of Canada's imports, or C$79.1 billion, came from the United States out of total imports of C$116.2 billion in 1979. The total share of U.S. trade with Canada as a percentage of total Canadian trade in 1987 was nearly 72 percent (Prospectus Investment and Trade Partners Inc. 1988). This growing dependence on the U.S. market by Canadian firms along with the growing recognition by the Canadian government of Canada's declining international competitiveness finally resulted in the recognition by the business community and the Canadian government, by the mid-to late 1980s, of the necessity for Canada to find a solution to its firms' market access problems with the United States in order to maintain unrestricted access to this key market.

3

The Use ofAD and CVD Trade Laws as Corporate Strategic Weapons

U.S. trade law calls for a U.S. agency, the U.S. International Trade COmmission (ITC), to test for "material" injury on the basis of the GATT Subsidies or Anti-dumping Codes (GATT 1980a and 1980b), as amended by Congress. More specifically, the lTC is required to consider a variety of economic variables affecting the competitiveness, performance and profitability of a U.S. plaintiff to assess if there is material injury, or the "threat of material injury," by reason of the subsidized or dumped imports. The assessment of the margin of dumping and/ or the level of subsidy is carried out by the International Trade Administration (ITA) at the U.S. Department of Commerce (DOC). The trade law process in the United States is often referred to as the technical track, versus the political track. The political track consists of politicians who are concerned with the probability of being re-elected, so that in cases where the impact of special measures on voting behavior is highly uncertain, it may be in their interest to delegate trade policy implementation to a technical track, which consists of bureaucrats who carry out the trade policy within certain defined limits. It has been argued that the delegation of trade policy implementation to a technical track is due to voting considerations (Downs 1967 and Hayes 1978). Economists have pointed to the trade-disrupting actions by certain firms in the United States that have deliberately used the technical track to harass their competitors in Canada and elsewhere. It has also been argued that the actions at both the lTC and the ITA have supported the actions of these U.S.-based firms in seeking protection from their foreign rivals. For example, economists point out that the lTC routinely assesses material injury in its preliminary determinations before the margin of dumping or subsidy has actually been calculated by the ITA, even though according toGATT law there is supposed to be a causal link. While it is recognized that the administrative agencies' final positive determinations are often less damaging to Canadian interests, economists contend that the entire process of a year-long investigation has often inflicted considerable expense and damage upon Canadian companies (Horlick 1986 and Rugman 1986b). It has also been asserted in Canada that U.S.-based firms have, and still are, using their nation's administrative trade-remedy law process (the so-called technical track) as a strategic weapon against their Canadian rivals, even when they have not been expecting to win a case (McHale 1990 and Rugman and Verbeke 1990b).

4 The harassment of Canadian firms by their rivals based in the United States under the technical track may help to provide those U.S.-based firms with a competitive strategic advantage over Canadian-based and other foreign rivals. If this harassment by the firms initiating the "unfair" trade laws in the United States, or for that matter in Canada, is deliberate, then it is argued that those firms are following a "non-competitive", or shelter-based, corporate strategy, where shelter refers to the avoidance of competition by firms and their subsequent failure to develop sustainable, long run competitive advantages (Rugman and Verbeke 1990b). Similarly, if the agencies themselves are providing U.S.-based firms with a deliberate advantage then they will also be providing shelter or protection to the initiating firms. This can either occur deliberately through the politicization of the AD and CVD trade law processes or simply through their poor administration.2 . The Canada-U.S. Free Trade Agreement (PTA) was designed to overcome any possible abuse or administrative mishandling of the U.S. administrative "unfair" trade law measures (and also arguably any Canadian abuse or mishandling of Canada's AD and CVD trade laws). It was supposed to do this by adding new institutional provisions which would permit Canadians (or Americans on Canadian trade law cases) to be directly involved in the process of U.S. or Canadian trade law, in order to assess whether the other nation's AD and CVD trade laws were being used for protectionist or shelterseeking purposes. Chapters Eighteen and Nineteen of the Canada-U.S. PTA contain the institutional provisions that deal with these so-called "unfair'' trade disputes. There are a number of other measures contained in the PTA for dealing with other types of disputes. These include Chapter Eleven, for dealing with SC slapped a 26 per cent AD duty on Sandvick's imports. However, the United States has refused to return the millions of dollars the duty raised, claiming that the judgment" ... was based on a technicality and that, anyway, GAIT had no business laying down specific remedies (The Economist 1991c: 69)." While the GAIT Panels' "recommendations" may have favored Canada in the past, they have not been judiciously followed by the United States, which has been extremely slow in responding to the GAIT Panels' decisions by eliininating its GAIT-inconsistent activities.13 As Jackson (1990: 49) indicates, in practice the United States has been quite willing to attempt to subvert that process by a variety of procedural devices or simply by refusing to comply with the results of the panel procedure that went against it. Similarly, with regard to following GAIT rules he notes that despite cynical statements by members of the U.S. Congress that GATI rules are 'irrelevant', there are a number of proven instances when congressional committees and their staff members have taken considerable trouble to tailor legislative proposals so

123 as to minimize the risk of a complaint to GAIT. Not all of these efforts have been successful, but in other cases Congress has been persuaded to drop a proposal because of its inconsistency with GA'IT provisions. The U.S. executive branch is also influenced by GA'IT legality arguments, although it too does not always defer to these Oackson 1990: SO).

It can be expected that given time, Canadian and U.S. Panel members' opinions on the key precedents in AD and CVD reviews will converge (though this is not as clear under NAFrA with the different traditions of law underlying the Mexican legal system). Any convergence, even under NAFrA, will still depend on the degree to which Canada can continue to keep political pressure on the United States to adjust its "unfair'' trade remedy laws to more adequately reflect the economic efficiency aspects of trade law cases, rather than the folitical aspects which it has swung toward after the Tokyo GAlT Round.1 Chapters Nineteen, Eighteen and Eleven The Canada-U.S. FTA contained three new institutional provisions to help assist in the settlement of trade disputes between Canada and the United States. They may also help to reduce the overall number of NTBs that are being used in the world today. The institutional provisions are contained in Chapters Eighteen and Nineteen of the Agreement, and deal with the socalled "unfair" trade dispute~. In contrast, Chapter Eleven dealt with the socalled "fair" trade problems or "safeguard" actions. Chapter Eighteen set up a new institutional framework that included a Commission and procedures to handle disputes arising from changes to the Canada-U.S. FTA as well as to changes in the rules of the GATf. While this may become an important agency in the future with its continuation in NAFrA as Chapter Twenty, the binational appeal body under Chapter Nineteen is of greater immediate political importance to Canada (maintained as Chapter Nineteen in NAFrA). Chapter Nineteen: AD and CVD Bilateral DSM Chapter Nineteen permitted the replacement of"... judicial review of final anti-dumping and countervailing [duty] determinations with binational panel review (Canada 1988f: paragraph 1904[1])." This was the first time that an international agreement had enabled the foreign nation named in an action actually to participate in the domestic appeal process of a bilateral trade dispute. Chapter Nineteen maintained the sovereignty of both Canada and the United States and oilly applied if one of three conditions was present (a) when a Party (Parties) in either nation feels (feel) that the spirit of the FTA has been breached such that the establishment of"... fair and predictable

124 conditions for the progressive liberalization of trade" has not taken place, (b) when disputes arising or negotiated under the GATI accord or amendments by either nation to the AD or CVD laws are inconsistent with the GATI or the FTA, or (c) when the final decision in an AD or CVD case is not in accordance with the AD or CVD laws of the importing Party (Canada 1988f: subparagraph 1901[1][a], point 1902[2][d][ii], and paragraph 1904[2]). The last reason was of particular importance to Canada. While the trade laws governing AD and CVD in both Canada and the United States are virtually identical (being based on procedures agreed to during negotiations under the GAIT), it is the interpretation and the importance of the weight given to the economic and legal"factors" which are reviewed during the trade action proceedings which can differ between the two nations. If different factors are emphasized by the Canadian and U.S. administrative agencies responsible for AD and CVD actions, then the bodies of case law created in the two nations will be different. In effect, this will lead to the "non-level playing field" which the United States has criticized its trading partners for creating. The binational Dispute Panels established under Chapter Nineteen provide the mechanism whereby more common and mutually agreed upon rules can be brought into play.

Appeals of Trade Law Decisions Since Canada and the United States had replaced judicial review of AD and CVD determinations with binational panel review, either nation (Party) could request a review according to the "law" of that decision (Canada 1988f: paragraphs 1904[1] !lfld [2]). The FTA defined "law" as consisting of five parts: relevant statutes, legislative history, regulations, administrative practices and judicial precedents. Thus the Dispute Panels could presumably review not only the "economic" analysis, but the pure legalities of a trade law action (Canada t988f: Article 1911, Definitions). Article 1911 defined the "administrative record" to include"... a copy of the final determinations of the competent investigating authority, including reasons for the determination..." These determinations are of an economic nature, since the administration of CVD and AD cases involves economics-based tests undertaken by ann's length quasi-judicial agencies (United States 1979d). As indicated earlier, the trade laws are very similar between Canada and the United States; however, disagreement often occurs in the review of the economic evidence.15 Knowledge of this procedural change, permitting a greater role for the review of the economic evidence, should help strengthen the presentation of the original economic evidence by the investigative agencies, plaintiffs and defendants. Fewer cases should be launched when the Party (Parties) knows (know) that the initial economic evidence for the case is weak.

125 The Binational Dispute Panel

The binational Dispute Panel for a review of an AD or CVD case consists of five persons drawn from a roster of fifty people (twenty-five Canadians and twenty-five Americans). The United States subsequently increased the size of its roster to fifty members. Each nation chooses two panelists and mutually chooses the fifth panelist. "Candidates shall be of good character, high standing and repute, and shall be chosen strictly on the basis of objectivity, reliability and judgment, and general familiarity with international trade law (Canada 1988f: Annex 1901.2)." The membership list of twenty-five lawyers and consultants was announced by the Canadian Federal Government on January 1, 1989. Similarly on January 9, the U.S. government released the names of potential panelists that it had submitted to Congress for approval. Of the Canadian roster, only four non-trade lawyers were appointed, with no recognized economists on the panel (Canada 1988d: 30). Although the majority of the panel members under the Canada-U.S. FfA were required to be lawyers; their weighting could be counterbalanced by having up to two experts in international business and economics also on the panels (Canada 1988f: Annex paragraph 1901.2[2]). The chairperson, however, had to be one of the lawyers on the panel (Canada 1988f: Annex paragraph 1901.2[4]). Since 1989, at various times new members have been appointed to these panel rosters in both the United States and Canada. One serious problem for Canada, given the relatively few experienced trade lawyers in that country, is the ability to find impartial Panelists who on the one hand are arguing a case before a panel, while on the other will be asked to adjudicate a binational dispute case in the future. This could lead to the problem of lawyers setting up their cases by introducing the issue and encouraging a precedent while sitting oh a Dispute Panel.

Procedures Under Chapter Nineteen The setting up of binational Dispute Panels can be requested under three circumstances. First, the panel will be set up within thirty days if one of the Parties (i.e., either government) belie\res that there has been a violation of the law based upon the administrative record of a final AD or CVD case. Second, a Dispute Panel can be set up if a preliminary trade law determination results in the imposition of provisional measures. These would include such things as bonds having to be posted or duties paid by Canadian exporters to the United States. From Canada's viewpoint this is when the U.S. International Trade Administration (ITA) at DOC finishes its preliminary investigation of whether subsidization or dumping has occurred, or when the ITA's counterpart department in Canada- Revenue Canada, is finished its preliminary subsidy or dumping margin determination. (See Chapter 2)

126 Third, when a final determination is not published (i.e., in the U.S. Federal

Register or the Canada Gazette), the importing Party is responsible for notifying

the other Party, who may then request a panel within thirty days of receipt of the notice (Canada 1988f: paragraph 1904[4]). A variety of benefits of the Chapter Nineteen DSM process have been pointed out, including: (1) the fixed timetable will shorten the appeal procedures for final resolution of AD and CVD cases from the two to four years it now takes to 315 days; (2) the objectivity of the domestic decision-making process should improve due to the possibility of binational scrutiny; (3) the FTA will be a continually evolving agreement whereby experience will develop, since it requires the continued negotiation as well as notification of the other Party for any proposed unilateral changes to the national laws that affect the rules; (4) the use of a five-member binational panel, which would include a minimum of two Canadians rather than the usual appeal system in the United States which relies on one U.S. judge, will provide a full airing of different interpretations of U.S. and Canadian trade laws; and (5) it provides a cost advantage for small- and medium-sized businesses since the panel reviews are initiated and conducted by the federal governments.16 It is also arguable that the DSMs contained in the FTA are a significant improvement over existing Canadian and U.S. trade law, the GAIT Tokyo Round Codes, and other free trade agreements in the world.17 To facilitate a comparison with the GAIT procedures, Table 4.2 compares and contrasts the main points of both systems' mechanisms.

Time Limits for Reviewing AD and CVD Actions Under Chapter Nineteen the binational Dispute Panels must operate under strict time limits. They have a maximum of 315 days to bring down an initial written declaratory opinion (Canada 1988f: paragraph 1904[14]). These consist of the time frames specified in Article 1904.13, which are: thirty days to file the complaint, thirty days to designate or certify the administrative record, sixty days for the complainant to file its brief, fifteen days for filing reply briefs, fifteen to thirty days over which time the panel convenes and hears arguments, and ninety days during which time the panel writes up its decisions. This is much shorter than the two to four years that have been spent on cases when they have been appealed to the U.S. federal courts. The time frames for a Chapter Nineteen case can be seen in Diagram 4.4.

Benefits of Reduced Time Frames Canadian-based firms should benefit from a reduction in the time frame for carrying out a CVD or AD appeal, since it reduces the costs of appealing these decisions. Under the old system, all appeals had to be paid for by the firm or firms involved. This was costly since it required the hiring

Chapter19 Review of AD and CVD Cases

Canada-U.S. FTA

Chapter18 General Disputes

Article XXII Consultation

Yes No No No Yes (All) Three to Five None Necessary Yes 3-9months

Country No No Yes Yes

Article XXIII Nullification & Impairment

Designed by Andrew Anderson.

Sources: Canada (1988f) and GATT (1986c and 1986d) .

GATT

Initiated by Country Country Official Parties to the Dispute No (Partly in Canada's Case) Explicit Consumer Welfare CriterionNo No Formation Binding Upon Request Yes Yes No Consultations Framework Permitted Yes No Yes Yes Able to Arbitrate Yes No Binding Arbitration Possible Yes Not Applicable Nullification & lmpairmentt Yes Not Applicable Yes Binding on Domestic Law No No Yes Undeveloped••• Precedents Binding No No No•.... Decision Binding Yes No Third Party Membership Yes (All) No No Number of Members on a Panel Five Five Three to Five None Majority Including Chairman None Necessary No. of Lawyers Required on Panel Trade Background Yes Yes Yes ~illll! !'rame of the Panel 3 to 6 Months 315 days 30 daystt - 90daysttt Notes: •Includes those parts agreed on in the GATT Understanding (GATT 1979). •• Consumers or others who are adversely affected by a trade reduction (world welfare loss). ...To the" ... extent that a court of the importing Party would rely on such material," which is quite vague . ....They are if the Parties agreed to Binding Arbitration prior to the Panel's formation. Panel precedents are not. tThis is explicitly contained in the FTA Under Chapter 2011, which permits the invocation of Chapter Eighteen 1805, 1807, or 1806. tt CVD Code. ttt AD Code.

ITEMS

Table 4.2: Comparing the "Unfair'' Trade DSMs in the Canada-U.S. FTA and the GATT

Source: Canada (1988f).

Consultation

Final Determination Not Published

Provisional Duty Measures Imposed

Administrative Record Incorrect

40

315 ~

Final Report

- - - -

30

.......

~

Binding Arbitration

Arbitration

1--

r--

FTA Chapter Eighteen Arbitration Panels

FTA Dispute Panel

Commission (Cabinet)

30

FTA Chapter Nineteen Dispute Panels

I