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The NAFTA is a significantly different model of regional economic
integration than the European Union. The EU
is loosely based on the concept of a federal polity with an allocation of power
between Union organs - the Council, Commission, Parliament and Court of Justice
- on one side, and member state governments on the other side. The NAFTA is in the nature of a confederation among
independent sovereigns, each maintaining autonomous political decision-making
authority within constraints defined by agreement. The political decision-making apparatus of the NAFTA is
closely circumscribed to roughly include within the boundaries of its central
authority (the Free Trade Commisssion) the powers traditionally conferred upon
trade ministers by their governments. The European Court of Justice has
referred to the EC Treaty as a constitutional charter, and the Court has viewed
its role as the guardian of that constitution. The NAFTA does not purport to serve as a constitution in
the sense of altering the distribution of powers among its Parties.
The EC Treaty provides for the adoption of directives, regulations and decisions by the Union political organs. These enactments are customarily referred to as "secondary legislation" reflecting their status underneath the "primary legislation" of the EC Treaty. The relationship between primary and secondary Union legislation is similar to the traditional relationship between the constitution and parliamentary enactments of a national federal government. The EC Treaty and secondary legislation may have direct effect in the EU member states, meaning that this legislation may be relied on by individuals in the courts of the member states in appropriate circumstances.
The NAFTA political institutions are not empowered to enact secondary legislation except in very limited circumstances prescribed by the agreement (such as in adopting rules of procedure for NAFTA dispute settlement panels). There is no general legislative power allocated to the NAFTA political institutions. The NAFTA is in theory capable of direct effect within the national courts of its Parties. The United States has by legislation deprived the NAFTA of potential direct effect in U.S. courts.
The economic undertakings of the Parties were negotiated in detail. The results of these negotiations were expressed in the NAFTA text. The Parties have so far carried out the economic undertakings of the NAFTA substantially in accordance with its terms. Though a few matters are disputed, in the context of the overall undertaking, these disputes are modest.
The NAFTA prescribes mechanisms for the resolution of disputes between its Parties, and in limited circumstances for the resolution of disputes between the nationals of its Parties and Party governments. The general dispute settlement mechanism of the NAFTA is an arbitral procedure that refers determinations to Party governments for political resolution. This is consistent with the NAFTA's limited design in respect to intrusion on Party autonomy. The NAFTA''s anti-dumping and countervailing duty dispute settlement apparatus directly binds Party governments. Party nationals are entitled to pursue third party arbitration of investment-related claims at ICSID or under UNCITRAL rules. Each of these dispute settlement mechanisms is operational.
The European Union is a customs union. The EC Treaty prescribes the elimination of tariffs and other restrictive regulations of commerce on trade between its member states, and prescribes the establishment of common tariffs applicable to goods originating outside EU territory. The EC Treaty prescribes that goods originating outside its territory are in free circulation within its territory following the payment of the applicable common tariff upon entry into any member state. The EC Treaty prescribes a common commercial policy which binds its member states to follow a coordinated trade policy program. The EC Treaty prescribes the free movement of services, capital and persons between its member states.
The NAFTA is a free trade area. The NAFTA prescribes the elimination of tariffs and other restrictive regulations of commerce between its Parties, but does not prescribe common tariffs applicable to goods originating outside NAFTA territory. Except in so far as goods originating outside the NAFTA are transformed within a Party(s) so as to assume a regional character, such third country goods are subject to the payment of tariffs upon entry into each NAFTA Party. The NAFTA prescribes the free movement of services and capital, and limited free movement of business persons, between its members. Except in so far as the Parties are limited in their relations with third countries by the terms of the NAFTA, the agreement does not mandate that the Parties pursue a common commercial policy.
See generally, by FREDERICK M.
ABBOTT, LAW AND POLICY OF REGIONAL INTEGRATION: THE NAFTA AND WESTERN
HEMISPHERIC INTEGRATION IN THE WORLD TRADE ORGANIZATION SYSTEM (1995)
[hereinafter "Law and Policy"], Integration Without Institutions: The NAFTA
Mutation of the EC Model and the Future of the GATT Regime, 40 AM. J. COMP.
L. 917 (1992) [hereinafter "Integration Without Institutions"]; and
Foundation-Building for Western Hemispheric Integration, 17 NORTHWESTERN
J.INT'L L. & BUS. 900 (1997) [hereinafter "Foundation-Building"].
Each member state government allocates internal political power according to its own constitutional structure.
On the constitutive differences between the EU and NAFTA from the standpoint of U.S. constitutional law, see Frederick M. Abbott, The Maastricht Judgment, the Democracy Principle, and US Participation in Western Hemispheric Integration, 37  GERM. YB INT'L L. 137 (1995).
See generally, J.H.H. Weiler, The Transformation of Europe , 100 YALE L.J. 2403 (1991), and for a review of EC governance preceding the Single European Act and subsequent reforms, Stefan A. Riesenfeld, Legal Systems of Regional Economic Integration, 22 AM. J. COMP. L. 415 (1974).
Regarding the non-self-executing character of the NAFTA in the United States, see Frederick M. Abbott, Regional Integration Mechanisms in the Law of the United States: Starting Over, 1 INDIANA J. GLOB. LEG. STUD. 155 (1993).
The implementation of the NAFTA's economic terms is discussed infra at .
This author has recently completed a review of the implementation history of the NAFTA, including analysis of disputes among the Parties. Frederick M. Abbott, The NAFTA as Architecture for Political Decision (May 1997) and The NAFTA and Legalization of International Relations: A Case Study (Aug. 1998), each prepared for a Project on Legalization and World Politics. The second of these papers will be published in an edited volume of collected works from this project.
The first two NAFTA Chapter 20 panel decisions are discussed infra at .
The NAFTA includes a separate dispute settlement mechanism in respect to antidumping and countervailing duty (AD/CVD)-related complaints (Chapter 19, NAFTA). The NAFTA contains no rules regarding the substance of the AD/CVD laws of the Parties, requiring only that each Party act in domestic AD/CVD actions in compliance with its own laws. In the AD/CVD dispute settlement system, arbitral panels constituted on a case-by-case basis make decisions as to whether a country Party has complied with its own AD/CVD laws in a particular action. The decisions of AD/CVD panels are directly binding on the country Parties. There are approximately 30 completed or active Chapter 19 panels reviewing AD/CVD decisions of Canadian, Mexican and U.S. administrative authorities. NAFTA Secretariat, www.nafta-sec-alena.org, August 13, 1998.
The NAFTA also permits investors of Parties to pursue third party arbitration against a host government in the International Centre for the Settlement of Investment Disputes (ICSID) or under UNCITRAL rules. NAFTA, arts. 1115, et seq. See Law and Policy, at 102. The NAFTA obligates the Parties to make adequate provision for the enforcement of resulting arbitral awards. Several proceedings based on NAFTA investment rules have been initiated in the ICSID by U.S. nationals against the government of Mexico, and claims both by U.S. nationals against the government of Canada and by Canadian nationals against the government of the United States have been initiated or threatened.
The Parties may each elect to limit applicable tariffs to the single highest tariff payable in any NAFTA Party (so as to avoid double tariffing).
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