Opinion | Worse Than Nafta – by Gustavo A. Flores-Macías and Mariano Sánchez-Talanquer – NYT

By Gustavo A. Flores-Macías and Mariano Sánchez-Talanquer

Professor Flores-Macías is an associate professor of government at Cornell. Professor Sánchez-Talanquer is an assistant professor of political science at the Center for Research and Teaching in Economics.

 

“North American business leaders are breathing a sigh of relief after Canada agreed, at the 11th hour, to join the revised North American Free Trade Agreement between the United States and Mexico. But before they break out the Champagne, they should look at the details.

Although the revised deal brings much-needed modernization in areas such as e-commerce and intellectual property, the media spotlight on Canada has obscured a bigger problem for the region: Under the new terms, North American trade is headed off the rails and, perhaps along with it, political stability south of the border.

A key goal of Nafta, like all free trade agreements, is bringing certainty to the rules of the game to facilitate commercial exchanges. The new deal, called the United States-Mexico-Canada Agreement, undermines that certainty in two ways.

First, the deal eliminates expert panels for resolving government-investor disputes in most industries, save for those covering energy and telecommunications. Although it preserves panels for bilateral disputes regarding dumping and countervailing duties, it defers to domestic courts as the main mechanism for solving controversies should governments change the rules down the road. This measure puts a lot of faith in the transparency and competence of the legal systems of the member countries and opens the door to potential cronyism, unequal access to those systems and even corruption.

Second, the agreement sets up a mechanism for automatically reviewing its terms on a periodic basis. This and the automatic expiration after 16 years as the default option introduce significant uncertainty by making it less costly for governments to upend existing rules and threaten to exit the agreement. Establishing periodic reviews as natural breaking points for the rules of the game would certainly shorten investors’ time horizons.”

via Opinion | Worse Than Nafta – The New York Times

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About David Lindsay Jr

David Lindsay is the author of "The Tay Son Rebellion, Historical Fiction of Eighteenth- Century Vietnam," that covers a bloody civil war from 1770 to 1802. It was published by Footmad and Cherry Blossom Press on September 11, 2017. Find more about it at TheTaySonRebellion.com, also known as, DavidLindsayJr.com.
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