General Dispute Resolution Provisions of the Japan-Singapore Economic Partnership Agreement and the North American Free Trade Agreement

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General Dispute Resolution Provisions of the Japan-Singapore Economic Partnership Agreement and the North American Free Trade Agreement

in The Journal of World Investment & Trade


I According to the WTO, there are currently 155 Free Trade Agreements, Regional Trade Agreements, Customs Unions or other groupings falling within the purview of the General Agreement on Tariffs and Trade (GATT) Article XXIV. See World Trade C7rganization, Regional Trade Agreements Notified to the G.4�i-i,IWTo and in Force, September 2001, available at: <Beef-Hormones case (European Communities-Measures Affecting Meat and Meat Products, Case Nos. DS26 and DS48); and the two cases involving the Canada-Brazil aircraft dispute (Case No. DS46, and Joined Cases DS70 and DS71). 3 See Sungjoon Cho, Breaking the Barrier between Regionalism and Multilateralism: A New Perspective on Trade Regionalism, 42 Harv. Int'l L.J., 2001, p. 419, at pp. 428-435 and 464-465: describing interaction of regionalism and multilateralism and suggesting a strengthening ofWTO disciplines over regional bodies. 4 During the last ten years, countries all over the globe have actively pursued FTAs. The European Union has entered into twenty-seven separate FTAS, and Mexico has entered into nine FTAs with twenty-nine countries. 5 See, for example, Naoko Munakata, Evolution of japan's Policy toward Economic Integration, Center for Northeast Asian Policy Studies, Brookings Institution, Washington, D.C., 2001, p. 3: noting Japan's critiques of other nations' FTAs during the 1980s and 1990s; Cornelius Keijzer,japan and Regional Asian Integration, Institute for International Monetary Affairs, Tokyo, 2001, p. 3: describing Japan's criticisms of the European Communities and other nations. 6 See Nobuya Matanou, KanFzoku Sirrgapo-rt to ,/0 jyuubouekikyoutei wo Meguru Shiten [Viewpoints on FTAs with Korea and Singapore], Mitsui Global Strategic Studies Institute, Tokyo, 2001, p. 2, available at: « 02.htm1», last accessed 22 January 2002: noting Japan's isolation as a non-participant in any R'ins.

See Munakata, supra, footnote 5, at pp. 3-4: attributing Japan's past disinterest in Ftas to its prosperity and rapid economic growth, extensive overseas investments and dependence on equitable access to world markets; Keijzer, supra, footnote 5, at p. 3: describing commentary arguing that FTAs were hitherto impractical for Japan because its trade with its neighbours was nominal given differences in level of economic development and because it possessed an ethnic, cultural and religious makeup distinct from its neighbours. I See, for example, Robcrt Scollay, New Regional Trading Arrangements in the Asia Pacific, Institute for International Economics, Washington, D.C., 2001, pp. 1-3: describing twenty-five new Asian sub-regional trading agreements proposed since 1998. ' See Junichiro Koizumi, Asia in a New Century, speech at Boao Forum for Asia, Boao, Hainan, China, 12 April 2002, available at: «www.kantei.go.jplforeign/koizumispeechI2002/04/12boao- c.html", accessed 13 April 2002; Japanese Ministry of Economics, Trade and Industry, The Economic Foundations of Japanese Trade 1'oliry, 2000, Chapter 2, at p. 15, available at: « accessed 4 April 2002: stating the official position that: "Japan stands to gain economically from regional integration", which "should therefore be pursued"; Takeo Hiranuma, Challenges of the New AAe and the Japan-Singapore Free Trade Agreement, speech by Minister of International Trade and Industry, 9 October 2000, available at: ,�www.iiieti.gojp/policy/tradc_policy/jscpa/datc/speech2OOOlOO9e.htni),, accessed 21 January 2002: opining that "regional efforts to complement such multilateral negotiations arc becoming a critical sub-system in terms of enhancing the stability of the global system." 10 See Agrcement Between the Republic of Singapore and Japan for a New-Age Economic Partnership, signed on 13 January 2002, available at: «», accessed 22 January 2002. 11 See WTO Trade Policy Review Body, Trade Policy Review, Mirtutes of Meeting, WT/Ti,ik/M /76/Add. 1, Response to Hong Kong Q.2, 13 February 2001 (hereinafter Trade Policy Review): representative of Japan discusses creation of binational committee to study a Japan-Mexico FTA. For detailed discussions of such an FTA, see, for example, Japan External Trade Organization OETIkC)), Report nn Closer Economic Relations Between Japan and Mexico, April 2000, available at: `Niciti-Chijyuuboueki Kyoutei Kenkyuukai Houkoku (Report of the Study Grony 011 japan-Chile PIA], Tokyo, June 2001. 1. �3 See Trade Poliry Review, supra, footnote 11, at Response to Hong Kong Q.2: discussing governmental studies ofJapan-Korca FTA. For further commentary on the FTA, see, for example, Chungoo Kim, Perceptions on Free 'Trade: The Korean Debate over the Japan-Korea Free Trade Agreement, Center for Northeast Asian Policy Studies, Brookings Institution, Washington, D.C., 2001. " In addition to official government action on FTAs with Singapore, Mexico, South Korea and Chile, several countries, including Thailand, Taiwan, Switzerland, New Zealand, Canada and Australia, have reportedly expressed interest in FTAS with Japan. See, for example. Kcijzcr, supra, footnote 5, at pp. 16-22: providing an overview of Frns undcr formal and informal consideration. 15 Economists are divided on the economic impact of Japan's proposed bilateral FTAS and its possible participation in more comprehensive regional and inter-regional FTAs. Compare D.K. Brown, A.V. Deardorff and R.M. Stern, Multilateral, Regional and Bilateral Trade Policy Options forjapan and the United States, Discussion Paper No. 469, University of Michigan School of Public Policy, Ann Arbor, Michigan, 23 April 2001, pp. 12-18, available at: «»: predicting relatively modest economic effects for Japan's bilateral FTA options; with T.W. Hertcl, T.L. Walmsley and K. Itakura, Dyrrarnic Effect rf the "New Aye" Free Trade Agreement between Japan and Singapore, Center for Global Trade Analysis, Purdue University, West Lafayette, Indiana, 2001: predicting significant Japanese economic welfare gains of US$ 9 billion annually, and without trade diversion from third countries, because, "[u]nlike preferential tariff cuts, the 'new age' components of this FTA promote imports from all sources, thereby eliminating the problem of trade diversion." "

1(1 Last year, Japan's representative at the WTO explicitly disavowed media reports of official investigation of a Japan-United States FTA. See, for examples, Trade Policy Review, supra, footnote 11, at Korea Q.3. Several publications discussing the feasibility of a Japan-United States FTA have appeared in recent years. See, for example, Noboru Hatakeyama, japan.� New Regional Trade Policy-Wlrich Country comes next after Singapore? Whitman International Lecture, 13 March 2002, Washington, D.C., available at: «www.iie.corn/papers/ hatakeyama0302.htm», accessed 13 April 2002: proposing a Japan-United States FTA covering services. 17 Many commentators, as well as Japanese government officials, have suggested the possibility of an Asian FTA. Sec, for example, Hiroshi Hiyama, Japanese Trade Minister Calls for Pacific Economic Bloc, Agence France-Presse, 11 January 2002: raising the possibility of a "broad economic partnership in a Pacific economic bloc"; Jeffrey J. Schott and Ben Goodrich, Economic integration in Northeast Asia, paper presented at the 2001 KIEP/KEI/CKS Conference on the Challenges of Reconciliation and Reform in Korea, Los Angeles, California, 24-26 October 2001, available at: <Prospects for Closer Economic Integration in East Asia, 1 Stanford J. East Asian Affairs, January 2001, p. 106, at pp. 107-109: discussing failed regional initiatives, such as the East Asian Economic Group, and more recent proposals, such as AFTA and ASEAN+3. 18 For an introduction to customs unions and F rns under the GATT and WTO, see John Jackson, Perspective on Regionalist in Trade Relations, 27 Law & Pol'y Int'l l3us., 1996, p. 873, at pp. 875-878: introducing thejurisprudence of GATT Article xxiv, including the Uruguay Round's Draft Understanding on Interpreting Article XXIV; Cho, supra, footnote 3, at pp. 435-454: discussing each GATT Article XXIV provision and cases treating them.

1'1 GATT Article xxiv(8) provides that: "(a) A customs union shall be understood to mean the substitution of a single customs territory for two or more customs territories, so that (i) duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, xn, xm, XIV, xv AND xx) are eliminated with respect to substantially all the trade between the constituent territories of the union or at least with respect to substantially all the trade in products originating in such territories, and, (ii) subject to the provisions of paragraph 9, substantially the same duties and other regulations of commerce are applied by each of the members of the union to the trade of territories not included in the union; (b) A free-trade area shall be understood to mean a group of two or more customs territories in which the duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles xi, xn, XIII, XIV, xv AND xx) are eliminated on substantially all the trade between the constituent territories in products originating in such territories." 211 See GATT Article xxiv(5). 21 See GATT Article xxiv(8). 22 The Appellate Body has so far refrained from deciding whether the GATT permits members of an FTA to exempt each other from subjection to its safeguard laws. For example, under the terms of the NAFTA, the United States exempts Canada and Mexico from duties under U.S. trade-remedy laws, provided that Canadian and Mexican imports do not exceed a certain proportion of total imports. 21 See, for example, Japanese Ministry of Economics, Trade and Industry, Industrial Structure Council, 2001 Report on the WTO Consistency of Trade Policies by Major Traditig Partners, Tokyo, 2001, pp. 96-108 (hereinafter Report on Major Trading Partners): criticizing primarily U.S. and EU administration of dumping law to Japanese imports. See also infra, footnote 110. 24 See discussion infra, footnote 110: describing scholarship predicting increased use of trade-remedy laws by Japan to adjust to low-cost imports from China and other nations.

� See S.L. Baier and J.H. Bergstrand, On the Economic Determinants and Free Trade Agreements, JEL Paper, 2001, p. 1, available at: ,,,, accessed 26 September 2002: providing an overview of scholarship on FTAS; Cho, supra, footnote 3, at p. 429: arguing that "socio-political concerns" are as important as trade-creation and trade-diversion concerns. 26 See, for example, M.J. Trebilcock and R. Howse, T7ie Rf�M/<3ffon of International Trade, 2nd edition, Routledge, London, 2000, pp. 129-130: contrasting a view of the GATT as poor at "disciplining tariffs on primary products and non-tariff border measures ... and most other forms of trade-distorting policies" with another view of the GATT as a "decentralized framework for the negotiation and maintenance of mutually advantageous bargains among States." =� See R.M. Dunn and J.H. Mutti, International Economics, 5th edition, Routledge, London, 2000, p. 206: describing the incorrect view that "because some barriers to trade are being eliminated and others are being left in place, [and therefore] the average tariff level for the world declines." Many economists respond that FTAS are only generally beneficial if trade creation outweighs trade diversion. z" Trade creation occurs when the preferential trading agreement allows imports from a relatively more efficient producer in one signatory's territories to displace the products of a less efficient producer in another signatory's territory. As discussed below, this is only generally beneficial if the agreement does not at the same time also displace imports from even more efficient production from a non-signatory's territory. See, generally, ibid., at p. 206: providing definitions of trade creation and trade diversion. ='' See Carlos A. Primo Braga, Comments on the Proliferation of Regional 'Trading Arrangements, 27 Law & Pol'y Int'l Bus., 1996, p. 963: describing the view that "deep integration" and the resulting reduction in non-tariff barriers could only be achieved among a few negotiating parties. 3� But sec, for example, Scollay, sura, footnote 8, at p. 17: responding that trade facilitation, such as harmonization or mutual recognition of standards "can stimulate increased trade and economic integration, but they can also be used to discriminate against non-members, much like preferential elimination of tariffs."

31 A country such as Mexico that enters into many FTAS with different partner nations becomes a target for foreign investment because the local products of foreign firms' production facilities benefit from preferential treatment when exported to the country's various FTA partners' markets. See Trebilcock and Howse, supra, footnote 26, at p. 134: explaining that "there will be strong incentives for export-oriented firms to invest in operations [a hub nations, relative to other Parties to these bilateral (hub-and-spoke) agreements, because this will assure them of unrestricted access to all affected markets ..." iz See Dunn and Mutti, sura, footnote 27, at p. 208: summarizing the argument that FTAS improve political relations among signatories. 13 See Scollay, suyra, footnote 8, at p. 12: summarizing various arguments supporting the conclusion that a proliferation ofRTAs "could provide a route to the ultimate achievement of global free trade, which would be the outcome if the process continued until all RTns have converged into a single global arrangement." The argument is that negotiation among a few regional blocs would be more manageable, and thus productive, than negotiation among 125 or more Members of the WTO. 34 See Shujiro Urata, Regionalism, the New WTO and Japan 's New Trade Policy, Japanese Trade & Indus., 3 December 2001, available at: 2001 WL 2127243: arguing that "the increase in RIAS, which gives rise to discrimination, may make policy makers realize the importance of global free trade." But compare Scollay, supra, footnote 8, at p. 13: noting that policy makers faced with discrimination under an FTA might react differently; a welfare-reducing proliferation of antagonistic FTAS "might also occur as a response to the establishment of an initially significant [FTA], as affected countries scramble to protect themselves by negotiating preferential agreements of their own." 15 See Urata, ibid.: "rules in new areas, which have been formulated and implemented in RTAS, would prove useful models for the formulation of rulcs under the WTO." 5(1 See Jeffrey J. Schott, Is the United States Losing Ground as its Tradirrg Partners Move Alread? Testimony before the Subcommittee on Trade, Committee on Ways and Means, U.S. House of Representatives, 29 March 2001, 1, pp. 4-5: acknowledging that "FTAs by their nature discriminate against outsiders; tariff preferences are accorded only to member countries and thus disadvantage foreign suppliers." 3� See ibid., at p. 5: arguing that "the highest price we pay for not participating in FTAs is the lost opportunity to expand economic ties with our trading partners." 18 See, for example, Dunn and Mutti, snyra, footnote 27, at p. 206: noting that "discriminatory tariff cuts mean that the non-member country loses sales to less efficient producers in a member country, thus reducing world efficiency. Trade is diverted from low-cost to higher-cost sources, and world efficiency suffers."

39 Seejagdish Bhagwati, Prefercntial Trade Agreements: The Wrong Road, 27 Law & Pol'y hit'] Bus., 1996, p. 865, at pp. 86(�868: pointing to the costs imposed by rules of origin required to maintain FTAS. 40 Sec Scollay, supra, footnote 8, at pp. 11-12: commenting on the "possibility that disadvantaged non- members ... may take retaliatory or defensive action, by raising their own barriers or by forming [preferential trading arrangements) of their own," and recalling concerns over a three-bloc world driven by "strong incentives to aggressively pursue the enhancement of their own welfare at the expense of the other two blocs, potentially leading to destructive trade wars." See Baier and Bergstrand, supra, footnote 25, at p. 40: concluding that "the potential welfare gains and likelihood of a free trade agreement (FTA) between a pair of countries are higher: (i) the closer are the two countries as trading partners because of greater trade creation; (li) the more remote a natural pair is from the rest-of-the-world because of less trade diversion; (iii) the larger ... the economics of scale in the presence ofdifferentiated products and more trade creation; (iv) the greater the difference in capital-labor endowment ratios between two countries due to the gains from traditional comparative advantages and more trade creation; and (v) the less is the difference in capital-labor endowment ratios of the member countries relative to that of the [rest-of-the-world] due to less inter-industry trade diversion." ^= See Keijzer, supra, footnote 5, at p. 17: noting that Singapore is Japan's ninth-largest trading partner, while Japan is Singapore's third-largest trading partner. 43 See the Singapore Ministry of Trade and Industry, Free Trade Agreements: Progress so Far, available at: « Default.asp'�, accessed 21 January 2002: containing official negotiating documents and speeches by Ambassador-at-large Tommy Koh and Prime Minister Goh Chok Tong. There is also extensive commentary oil JSEPA in Singapore; see, for example, R.S. Rajan, R. Sen and R.Y. Siregar, Si yqapore and the New Regionalism: Bilateral Relations with Japan and the U.S., Discussion Paper No. 0122, June 2001, Centre for International Economic Studies, Singapore, pp. 23-26: analysing the likely economic impact of FTAs on Singapore's economy, discussing Singapore's motivations for entering FTAS and warning of diversion of resources from WTO negotiations, complications involving rules of origin and negative effects on Singapore's ASEAN neighbours.

4^ Currently Singapore is negotiating FTAs with at least Australia, Canada, and the United States. Sec, generally, Tim Martyn, A Complete Guide to the Regional Trade Agreements of the Asia—Pacific, Australian Avec Study Centre, Melbourne, 2001, pp. 47-48: providing a statistical and historical overview of several of Singapore's F rns. 45 See, for example, Katsunori Tsuchimatsu, Nikkantoushikyoutei wo rne,quru saikin no yQoki [Recent Developments regarding the Japan-Korea Investment Agreement], available at: , saikinnougokihunbun.html», last accessed 22 January 2002: describing protests by Japanese labour unions. South Korea, which has been investigating the possibility of a free trade agreement with Japan, has a lower wage structure in industries that are competitive with Japanese industry and thus poses a potential threat to the maintenance of Japanese workers' wages in the auto and other manufacturing industries. 4e Agriculture was not a major stumbling block in the JsEPA negotiations, in which there was only one dispute over whether Singaporean orchid and goldfish exports would be accorded preferential treatment; see James Brooke, An Orange Grove Illustratesjapan's Economic Woes, New York Times, 27 January 2002. 47 See, for example, Michael Richardson, Farm Lobby Fences in Japan Free-Trade Frontiers, International Herald Tribune, 16 January 2002, p. 13: describing the political power of the fann lobby, concerns of agricultural self- sufficiency and Japan's alleged refusal to negotiate access to the Japanese agricultural market. 48 Japan's difficulty in making agricultural concessions has been a stumbling block in multilateral trade negotiations; see, for example, Yuji Iwasawa, Cunstitutional Problems Involved in Implementing the Uruguay Round in Japan, in J.H. Jackson and A.O. Sykes (eds.), Implementing the Un4guay Round, Oxford University Press, New York, 1997, pp. 164-168; Joseph Kahn, CT.S. Accuses the Japanese ,,{Inflexibility on Trade Talks, New York Times, 31 October 2001. 49 See Keijzer, supra, footnote 5, at p. 17: noting that agriculture, forestry and fisheries products account for only 1.7 percent of Japan-Singapore trade. "I See stipra, Section u.n: discussing the GATT Article XXIV requirements for free trade areas. See also Munakata, supra, footnote 5: noting that "because Singapore does not have a significant agricultural industry or fishery products, a FTA could safely cover 'substantially all the trade' if tariffs on almost all the industrial goods were eliminated." Some of Japan's trading partners with large agricultural sectors disagree with the idea that theJSEPA is permissible under GATT rules; see, for example, Japan-Singapore FI:4 Contradicts WTO Rules: Ex-L1.S. TR., Jiji Press English News Service, 15 January 2002: noting Clayton Yeutter's view that the Jsevn's non-application to the agricultural and petrochemical sectors violated GATT Article XXIV; Sutton Worries about Pnrts of Sin,qaporc�Japan Trade Deal, N.Z. Press Association, 15 January 2002: noting New Zealand Trade Minister's view that Jsei'n violates the GATT, sets a dangerous precedent and further entrenches protectionist constituencies. Sr During the JSEPA negotiations, Japan's industrial lobby, Keidanren, published several "opinion letters". These letters revealed an interest not only in increased access to Singapore's market but also in deregulation of the Japanese economy. See, for example, Keidanren, Nihon Singapo-ru Jyuubouekikyoutei e no Kitai [Expectations of the japan-Singapore FI:4], 2 October 2000, available at: «www.keidanrcn.orjp/japanese/policy/2000/049.htnù». last accessed 22 January 2002: requesting, illter alia, relaxation of rules on foreign ownership of property in Singapore, simplification of Japanese customs procedures, liberalization of Japanese immigration rules, etc. JSEPA meets many of these requests.

52 JSEPA, Article 82, provides for an investor-State dispute settlement mechanism (ISDSM). The presence of ISDSM provisions similar to those in the NAFTA might come as a surprise to observers of the NAFTA and of Japan. This is because NAfTA's Chapter 11 1 Isdsm has been criticized as investors have sued governments for regulatory actions that many would consider well within a sovereign State's purview; see infra, footnote 101. 53 JSEPA, Article 77, defines expropriations in relatively broad terms and contains the same "fair and equitable treatment" standard that has proved to be a source oflitigation in the context of NAFTA Chapter 11 claims; see infra, footnote 101. 5. Negotiated rulemaking, known colloquially as "reg negs", is a relatively recent development in U.S. administrative process under which private-sector parties participate in a committee that formulates recommendations to government agencies regarding new regulations. The private-sector parties promise to support the recommendation and the agency promises to base its final regulation on the recommendation. See Joint Study Group, Recommendations for Japan-Singapore Economic Agreement for a New-Age Partnership, 28 September 2000, pp. 4-6, available at: , Default.asp,,, accessed 22 January 2002: outlining recommendations for all major areas of the JSEPA. The Study Group comprised six economics and law professors and four private-sector representatives (two from the financial sector, one from a major auto manufacturer and one from a shipping concern), in addition to fifteen Japanese and Singaporean Government Ministry representatives. 11 Commentators have traditionally used the tools of public choice theory to examine trade negotiations. See, for example, Paul B. Stephan W , Barbarians Inside tlre Gate: Public Choice Theory and International Economic Law, 10 Am. U.J. Int'l L. & Pol'y, 1995, p. 745. However, because private-sector parties helped formulate the framework for the JSEPA negotiations, the debate over negotiated rulemakings ("reg negs") may offer additional insights. Supporters argue that the reg neg process permits the agency to tailor its regulation to the needs of affected parties and to pre-empt costly legal challenges because interested parties participate in formulation ofthc regulation. Critics claim that these interested parties hijack the rulemaking process, diverting the agency's attention from the public interest. Compare Philip Harter, Assessing the Assessors: The Actual Performance of Negotiated Rulemaking, 9 N.Y.U. Envt'l L.J., 2000, p. 32, at p. 58; with William Funk, Bargaining toward the New Millennium: Regulatory Negotiation and the Subversion of the Public Interest, 46 Duke L.J., 1997, p. 1351, at p. 1387. 57 See, for example, Japan Signs Free Trade Pact with Singapore, Koizurni Calls it a Model for Economic Relations untdr other Asian Nitions, St. Louis Post-Dispatch, 14 January 2002, available at: 2002 WL 254(1271; Urata, supra, footnote 34: noting that "the proposed Japan-Singapore FTA is likely to include the rules on new areas such as competition policy and trade facilitation [which] can be used as a model for the WTO." For a U.S. viewpoint, see Samuel Maury, Hearing on Free Trade Deals: Is the United .States Losing Ground as its Trading Partners Move Ahead? Testimony before the Subcommittee on Trade, Committee on Ways and Means, U.S. House of Representatives, 29 March 2001, at p. 7: noting that: "The imminent Japan-Singapore FTA and the proposed Japan-Mexico FTA are unlikely to cover most agricultural trade. As Japan and the EU create the precedent that trade in agriculture is too 'sensitive' for international rules, the United States will find it increasingly difficult to open foreign markets for U.S. farmers." " 5" See Trade Policy Review, sura, footnote 11, Response to Chile Q.l: During Japan's most recent WTO Trade Policy Review, the Japanese representative suggested that the JsEUn shows that it is pennissible under the WTO for an FTA to exclude certain sectors: "[T]hcrc may be a case where it is appropriate to consider a framework to strengthen the economic relationship through, for example, harmonization of economic regulations, without including elements of traditional FTAS." (emphasis added).

5� But compare NiLron Singal)(i-ni ga Fta Teiketsti, Chu,qoku kensei ka [Japan and Sin`qapore Sign F'rA-PossiGly to Contain China], Japanese JoongAngllbo, 15 January 2002, available at: « article. php?sv =j iiews&src +biz&coiit= bizo&aid= 2002011518 1340300,,, accessed 22 January 2002 (hereinafter JoongAngllbo): doubting the applicability of a model FTA limiting agricultural trade to any Asian country other than Singapore. 60 Although the period from 1999-2001 marks an increase in activities by the Japanese governments regarding free trade agreements, it can be argued that this shift to regionalism was more gradual and is the culmination of a process that began in 1997 with the Asian financial crisis; see Munakata, supra, footnote 5, at pp. 9-12: "resistance to an increased Japanese role in Asia was replaced by an expectation that Japan would lead the region out of thc crises and spearhead efforts to create a stable regional economic environment." hi See Japanese Ministry of Economics, Trade and Industry, Koiisitottkaislii made uo Keii [Sequence of Events leadillg to Start d/ N�ff'�f�], available at: ��vjww. meti. gojp/policy/trade_policy/j scpa/ data/ history. him,), accessed 21 January 2002 (hereinafter Sequertce of Events): noting that Prime Minister Obuchi agreed with Prime Minister Goh to commission a joint study on 8 December 1999. 62 See Jeffrey Schott, The Wro after Seattle, in Jeffrey Schott (ed.), The WTO after Seattle, Institute for International Economics, Washington, D.C., 2000, p. 4: describing the collapse of the Seattle Ministerial due to such factors as the rifts among the W ro's 137 Members over issues as diverse as agriculture, competition and dumping law, labour, the environment and intellectual property. 6} Sec Edward Lincoln, Taking Al'HC Seriously, 92 Brookings Institution Policy Brief, December 2001, p. 1, at p. 3: concluding that, partly due to the 1997 Asian financial crisis, "hopes that Apec would provide a valuable arena in which to pursue the goal of open markets ... have fizzled." 6. See, for example, Urata, supra, footnote 34: noting the difficulty of multilateral trade liberalization given the differences among the many negotiating parties. 65 TheJSEPA's aim to stimulate trade and growth through the Agreement's "dynamic effects" is reminiscent of Ar�EC's voluntary liberalization format and is much broader than a traditional trade agreement focused on piecemeal tariff reduction negotiated to occur in lock step. In Avec, Member States commit in their individual action plans to liberalize in whatever way is most feasible and promising, given the State's particular circumstances. AI'Ec's broad initiatives include, for example, the harmonization of regulatory standards, trade facilitation and capacity-building; see ApEC Secretariat, Joint Statement: 13th A�ec Ministerial Meeting, 17-18 October 2001, available at: <supra, footnote 5, at p. 14: discussing the Japanese government's perception of its "role as an absorber in revitalizing the post-crisis Asian economy."

<07 See Kcijzcr, supra, footnote 5, at pp. l(�-16: arguing that regional integration is increasingly attractive to Japan because of rising economic demand and productivity in Japan's increasingly prosperous ncighbours; Munakata, supra, footnote 5, at p. 14: noting Japan's interest in "capitalizing on Asia's abundant workforce and growing markets as a way to revitalize the Japanese economy." 11 See discussion supra, footnote 15. 'N See, for example, Brown, Dcardorff and Stern, supra, footnote 15, at p. 13: predicting that an ASEAN+3 FTA would increase global economic welfare by US$ 224 billion and Japan's economic welfare by US$ 160 billion. 711 See, for example, Matanou, suyra, footnote 6, at p. 2: arguing that it will be easier to enter into FTAs with other countries in the future once Japan has proven that an FTA with Singapore can succeed. 71 see Trade Policy Revit'm, supra, footnote 11: In responding to a question posed by Canada in Japan's Trade Policy Review, the Japanese representative hinted at structural reform as a motivation for the JSEPA. citing "the catalytic role that regional trade agreements could play in accelerating liberalization and rule making in the framework of the multilateral trading system... [RJegional trade agreements [may help] revitalize our economy and society." " see Hertel, Walmsley and Itakura, supra, footnote 15, at p. 19: predicting that structural reforms, such as customs automatization, will "boost rates of return in Japan, by increasing efficiency in the economy, and thus give rise to a capital inflows ... Japan's exports arc projected to be nearly 2 percent higher, relative to baseline, in 2020." 73 See Free Trade Agreement, Mainichi Shinbum, 24 October 2000, available at: ` eng)ish/ncws/archive/200010/24/opinion.htm)'). accessed 22 January 2002: arguing that FTAs have aided structural reform in signatory States. 74 See Munakata, supra, footnote 5, at p. 14: alleging that "Tokyo was concerned about the steady development ofregional trade integration in Europe and America."

'� See, for example, Robyn Lim, Japan Re-engages Southeast Asia, Far East Econ. Rev., 24 January 2002, p. 26: arguing that the Japanese Prime Minister "wants to keep pace with China in forging free trade agreements"; Japan is Hard Sell for Koizumi: Prime Minister Meets Resistance on Asettnr Tour, Asian Wall St. J., 14 January 2002, p. 4: arguing that Koizumi aims to "counter China's growing influence". See JoongAngIlbo, supra, footnote 59, at p. 1: attributing Japan's interest in FTAs to a calculated plan to "protect its leadership position in Asia while containing China". 76 See Matanou, supra, footnote 6, at p. 1: arguing that ifJapan allows itself to become isolated by not entering into regional pacts, its authority at the WTO will decrease. 77 See Munakata, supra, footnote 5, at pp. 4-S: blaming Japan's "wartime legacy" for failed attempts to coordinate regional trade within Asia. See also Yoichi Funabashi, Asia I'atific Fusion: Japan's Role in Aphc, Institute for International Economics, Washington, D.C., 1995: providing examples of Asian political resistance to Japanese trade initiatives. 78 See, for example, Munakata, supra, footnote 5, at p. 24: commenting that "Singapore could help address recurring criticism from other Asian economies that the Japanese market was still closed, despite low tariffs and deregulation, and that the Japanese would never be willing to accept a different state of affairs ... [T]he focus should be on what Japan stands to learn from Singapore, and to enhance Japan's capacity to learn from its neighbors." Matanou, supra, footnote 6, at p.2: commenting that Japan might learn from Singapore's expertise in information technology and competitive business models; Keidanren, supra, footnote �1, at p. 2: noting that Japan will gain access to Singapore's know-how in infonnation technology, freight forwarding and financial services. 7" See Hitoshi Tanaka and Motoshige Ito, Can Japan Find a Breakthrough? Japan Echo, 1 February 2001, p. 814, available at: 2001 WL 16227033: noting that the Jssen could be the beginning of a "new framework of co-operation" to deal with "many regional issues that Japan must tackle in concert with other Asian countries." 811 See Joseph McKinney, Created from NAFJ:1: The Strutture, Function and Significance of the Treaty's Related Institutions, M.E. Sharpe, Armonk, New York, 2000, p. 19: noting that the NAFTA would not have been possible without various dispute settlement and compliance monitoring mechanisms. "Assurances that administrative agencies in the United States could be challenged on whether they were accurately and fairly applying trade remedy laws was essential for Canada's approval of the agreement." rit See id. 82 The NAFTA Chapter 11 and Chapter 19 dispute settlement mechanisms both affect the domestic legal environment in a direct way but have been met with differing levels of acceptance by domestic constituencies. See infra, footnote 101. 1 .

11 In addition to characterizing dispute resolution models as power-based, interests-based or rules-based, commentators have suggested other classifications; see, for example, Andrea K. Schneider, Gutting Alon,e: The Evolution ofdispitte Resolution Regimes in International Trade Organizations, 20 Mich. J. Int'l L., 1999, p. 697. "' See William Davey, Dispute Settlement in Gait, in John H. Jackson, William Davey and Alan Sykes (eds.), Problem of International Economic Relations, 3rd edition, Institute of International Economic Law, Washington, D.C., 1995, pp. 328-333: weighing the merits of a GATT dispute settlement system based on adjudication as opposed to mediation; see also S.B. Goldberg, J.M. Brett and W.L. Ury, Deigning an Elective Dispute Resolution System, in S.B. Goldberg, F.E.A. Sander and N. Rogers, Disputes Resolution: Negotiation, Mediation and ather Proresses, 2nd edition. Aspen Law and Business, New York, 1992, p. 6; John H. Jackson, The World Trading System, Mir Press, Cambridge, Massachusetts, 1997, pp. 109-112: contrasting power-based and rules-based diplomacy. "5 See Jackson, ibid., at p. 109: characterizing "power-oriented" and "rule-oriented" dispute resolution, respectively, as "settlement by negotiation and agreement with reference ... to relative power status of the parties; or settling by negotiation or decision with reference to norms or rules to which both parties have previously agreed." " 86 Because international dispute resolution systems generally lack the threat of force to mandate compliance, their perceived "fairness" and "legitimacy" are crucial to their ability to elicit compliance; see, generally, Thomas M. Franck, The Power of Legitimacy among Nations, Oxford University Press, New York, 1990; Jackson, supra, footnote 84, at p. 110: arguing that the effectiveness of a rules-based system in eliciting compliance requires that "the parties believe that if their negotiations reach an impasse the settlement mechanisms which take over for the parties will be designed to Jairly apply or interpret the rules." (emphases added). 17 See Davey, supra, footnote 84, at p. 332: adding that adjudicative systems promote compliance because the formalized nature of panel recommendations clarifies legal rights and obligations, helping "losing" parties understand exactly what compliance requires: "So long as most decisions are respected, adherence to the rules under a legalistic system will be better than in a negotiation/consensus system." "" See ibid., at pp. 332-333: concluding that these costs result in a relatively high level of compliance in adjudicatory systems, unlike concluding negotiation/consensus systems, in which "the only cost may be unpleasant diplomatic exchanges, a negligible cost compared to the domestic political and economic benefits obtained by violating the rules."

11 See Goldberg, Brett and Ury, supra, footnote 84, at pp. 406-411: proposing the following design features for interest mediation: (1) an initial consultation stage to avoid disputes from arising through misunderstandings and to avoid aggravating disputes through angry reactions to unilateral behaviour and public accusations; (2) provisions that encourage parties openly to articulate interests instead of engaging in counterproductive gamemanship and bluffing; (3) "loop-back" and "cooling-off" provisions that give parties multiple opportunities for amicable settlement once they have evaluated each others' strengths and weaknesses and can reasonably calculate the likely outcome of more costly adjudicative proceedings; (4) provisions for binding mediation and other low-cost alternatives to strict rules-based or power-based dispute resolution; and (5) efforts to ensure that parties have the training, resources and motivation to compromise. This last goal can be supported by explaining the long-term costs of rules-based adjudication (even if one wins): "high legal fees, greater recurrence of disputes, and strained, often destroyed relationships." y° See Australian Department of Foreign Affairs and Trade, APSC Eronomies: Case Studies in Regulatory and Administrative Reforms, Barton, ACT, October 2001: describing wide-ranging economic reforms undertaken voluntarily within the APEC framework. �r Among the disputes that have been lingering for up to twenty years or which have arisen recently and continue to trouble the transatlantic relationship despite the parties' recourse to the WTO dispute settlement procedures are the Beef-Hormones, supra, footnote 2; Foreign Sales Corporation (United States-Tax TreatmentforForeign Sales Corporations, Case No. DS108, 28 November 1997); and several steel safeguards and dumping cases. 92 See John Mclnerney, Chief Counsel for Import Administration, U.S. Department of Commerce, Statements at Panel: Internatinnal Review-The Next Frantier far AD/CvD? Georgetown University Law Center, Washington, D.C., International Trade Update, 31 January 2002: warning that, in response to the WTO Appellate Body's alleged refusal to apply the Dsu Article 17.6 Standard of Review in anti-dumping cases, U.S. negotiators would refuse to make new concessions. 9' See, for example, C. Christopher Parlin, Oycratiorr of Consultations, Deterrence and Mediatioti, 31 L. & Pol'y Int'l Bus., 2000, p. 565, at p. 569: describing the WTO Dispute Settlement Understanding's (Dsu) mandatory provisions on consultations and discretionary provisions for good offices, conciliation and mediation, and concluding that "the WTO has been quite successful in resolving disputes without resorting to a Panel", in light of evidence that 53 percent of WTO disputes have been resolved prior to start of panel proceedings.

11 In contrast, commentary on procedural issues provided for in the text of the W'ro's Dsu or developed through WTO case-law has addressed procedural features, at least some of which appear on their face to be outside the scope ofJsenn Chapter 21 or NAFTA Chapter 20; see, for example, Peter Lichtenbaum, Procedural Issues in W7o Dispute Resolution, 19 Mich. J. Int'l L., 1998, p. 1195: discussing, inter alia, right to counsel, standing, mootness, exhaustion of domestic remedies, scope ofpanel review, judicial economy, role of precedent, burden of proof, panel fact-finding, appellate review, compliance and remedies. However, WTO case-law is likely to be relevant in aDJSEPA Chapter 21 disputes. It is likely that WTO jurisprudence will play a role in JsEen Chapter 21 disputes ifJsEVn panels import interpretations of substantive and procedural provisions of the WTO Dispute Settlement Body (Dsn) as NAFTA Chapter 20 panels have done; see, for example, Irt the Matter qf Cross-Border Trucking Services, Final Report of the Panel, NAFTA Chapter 20 Arbitral Panel, USA-MEx-98-2008-01, 6 February 2001: in which the Panel repeatedly looks to WTO panel and Appellate Body decisions for guidance and bases its reasoning on those decisions. 95 See McKinney, supra, footnote 80, at pp. 16-23: noting, inter alia, that the presence of institutions can improve the quality of dispute resolution by permitting specialization and efficiency in decision making, providing reliable information, enabling oversight and monitoring of compliance with the agreement and providing a forum in which party representatives regularly interact and improve levels of communication and trust. 9(, See, generally, Denis Lemieux and Ana Stuhec, Review of Administrative Action under N.4F7:Æ, Carswell, Toronto, 1999: examining all seven dispute settlement mechanisms and their interaction with domestic legal systems; Michael Gordon, Forms of Dispute Resolution in the NAFTA, 13 Fla. J. Int'l L., 2000, p. 16: introducing five different NAFTA dispute resolution systems; William Merritt, A Practical Guide to Dispute Resolution under the North American Free Trade Agreement, 5 NAFTA L. & Bus. Rev., 1999, p. 169: introducing provisions and case-law under four different NAFTA dispute resolution systems; David Lopez, Dispute Resolution under NAF7A: Lessnns from the Early Expedience, 32 Tcx. Int'l L. J., 1997, p. 163: analysing disputes under Chapters 19 and 20 and the labour and environmental side agreements,. '3� NAFTA'S general dispute settlement mechanism is set forth in Chapter 20; see, generally, Vilaysoun Loungnarath and Celine Stehly, T7ie General Dispute Settlernent Mechanism in the NAFTA and the Who System, 34 J.W.T. 1, February 2000, p. 39: introducing NAFTA Chapter 20 and CUsFTA Chapter 18 jurisprudence and alleging its over-reliance on politically negotiated solutions; Sidney Picker, NAFrA Chapter 20: Reflections on Party-Party Dispute Resolutinn, 14 Ariz. J. Int'1 & Comp. L., 1997, p. 465: outlining main features of the Chapter 20 dispute resolution process and comparing it with predecessor CUSFTA Chapter 18; Lemieux and Stuhec, ibid., at pp. 99-116: discussing jurisdiction, procedure, sources of law and case-law. 98 Sec, generally, David Gantz, Dispute Settlement under the NAFTA and the WTO: Choice of Forum Opportunities and Risks for the NAFTA Parties, 14 Am. U. Int'l L. Rev., 1999, p. 1025: comparing dispute resolution under the WTO and NAFTA Chapters 19 and 20. The World Trade Organization's dispute settlement mechanism, for example, is much less varied than the NAFTA'S. WTO disputes arc generally adjudicated by the same institutional mechanisms, with slight procedural variations depending on the substantive Agreement under which rights are being pursued. 99 See, for example, Emilio J. Cardenas and Guillermo Tempesta, Arbitral Awards under Mercosur'.c Dispute Settlement Mechanism, 4 J. Int'l Ec. L., 2001, p. 337, at p. 342: describing the procedural flexibility, speed, informality, mandatory jurisdiction, and temporary nature of arbitral tribunals established under Mercosur's mechanism for the settlement of disputes.

""' Anti-dumping and countervailing-duty matters fall within the jurisdiction of Chapter 19; see, generally, Lemieux and Stuhec, supra, footnote 96, at pp. 7-58; Richard Cunningham, Nafta Chapter 19: How Well Does it Work? 26 Can-U.S.L.J., 2000, p. 79. "" NAFTA Chapter 11, which provides an investor-State dispute settlement mechanism, has proven to be controversial; see, generally, McKinney, supra, footnote 80, at pp. 224-231: introducing key provisions and case- law; David Gantz, Potential Conflict bctween Investor Rights nnd Environmental Regulation under Chapters 11, 33 Gco. Wash. Int'l L. Rev., 2001, p. 651. '!'= NnFrn Chapter 14, covering financial services, provides that financial services disputes shall be adjudicated under either Chapter 11 or 20; see Constance Wagner, The New Wt'o o Aqreeineiit on Financial Services and Chapter 14 of rhe N.iF1A, 5 NAFTA L. & Bus. Rev., 1999, pp. 75-78. t03 NAFTA, Chapter 10 provides for dispute resolution in government procurement disputes; see Lemieux and Stuhec, supra, footnote 96, at pp. 59-79: discussing provisions and cases explicating jurisdictional and procedural requirements. 104 See Lemieux and Stuhec, ibid., at pp. 121-139: discussing procedural and institutional aspects of the North American Agreement on Environmental Co-operation (NnnFC:). 105 See McKinney, supra, footnote 80, at pp. 33-89: reproducing the text of the North American Agreement on Labor Co-operation and discussing its background, institutional features and practice. I'll The JsFnn's general dispute settlement mechanism is set forth in Chapter 21. 1117 The JsEUn's investor-State dispute settlement mechanism is set forth in Chapter 8. '08 JSEPA Annex IV(A)(IV) provides that disputes in the financial services area may be resolved under the provisions of Chapter 21, provided that the arbitral tribunal has the "necessary expertise relevant to the specific financial service under dispute". "''' JSEPA Annex IV(B)(V) provides that the signatory States must provide for an "independent domestic body ... to resolve disputes regarding appropriate terms, conditions and rates for interconnection" in the event of disputes between a service supplier requesting interconnection and the major supplier. 110 JSEPA. Article 14, which applies to elimination of customs duties, provides that, notwithstanding any tariff reduction commitments, the Parties retain the right to impose, inter alia, anti-dumping and countervailing duties that are consistent with W'ro obligations. The Jssnn's failure to restrict the use of these is surprising in light of frequent complaints of the Japanese government at being subjected to such trade remedies; see Katsuyuki Yano, Thirty Years of Being a Respondent in Antidumping Proceedings, 33 J.W.T. 5, October 1999, p. 31. However, the Jsepa's silence in this area may be explained by the possibility that Japan may need to rely on its trade-remedy laws as it opens its market through FTAs to nations that could produce surges in competitive agricultural imports. The JsZVn is not silent regarding all trade-remedy laws. There arc provisions regarding safeguards (termed "emergency measures" in the JsErn), which Japan has employed against agricultural imports from China; see JSEPA, Article 18: establishing mandatory time-frames for investigations and relief, standards of injury, procedural rights and rights to compensation. See also Norio Komuro, Japan's First Safeguard Measure against Agricultural Imports, 7 Int'l Trade L. & Regulation, 2001, p. 84.

See Lemieux and Stuhec, supra, footnote 96, at p. 100: noting Chapter 20's broad jurisdictional reach and explaining situations in which even "issues that arise under Chapter 10 or Chapter 11 may be subject to Chapter 20 arbitral panel consideration." 112 Nafta, Article 2004. 11.1 See id. The breadth of this language would appear-in the most extreme circumstance-to permit a Party to bring a case so long as it believes that another Party's proposed measure would violate (or nullify or impair) its rights. This language suggests that Canada or Mexico, for example, could obtain an advisory opinion on a U.S. regulation while the regulation was still in the notice-and-comment period preceding the regulation's promulgation. Further, Article 2004 also appears to give Parties a right to obtain advisory opinions on provisions of the NAFTA wherever there is a dispute over its "interpretation". 114 See NAFTA Annex 2004: excluding the application of Chapter 20 to nullification and impairment claims dealing with NAtTA Part n, Annex 300-A and Chapter 6. See ibid.: noting the application of Chaptcr 20 to nullification and impairment claims under NAFTA Part m. 116 See ibid.: noting application of Chapter 20 to nullification and impairment claims under NAFTA Chapter 12. � Sec ibid.: noting application of Chapter 20 to nullification and impairment claims under NAFTA Part m. 118 For example, with respect to trade in goods, investment in the automotive and energy sectors cannot be the subject of nullification and impairment claims; see NAFTA, Article 2004.

"' JSEPA, Article 139(1): introducing the scope of Chapter 21. 1211 See JSEPA, Article 140. 121 See JSEPA, Article 142(1): providing that "the requesting Party considers that any benefit accruing to it directly or indirectly ... is being nullified or impaired (a) as a result of failure of the requested Party to carry out its obligations, or (b) as a result of the application by the requested Party of measures which conflict with its obligations." 122 Sec Jsevn, Article 107: providing that, inter alia, Chapter 21 provisions do not apply to "the co-operation between the Parties in sharing information on securities markets and securities derivatives markets ..." 123 See JsEPA, Article 60. '2^ SeeJSEPA, Article 105: removing disputes over competition law from the purview of Chapter 21. This provision, entitled "Dispute Settlement", is the final provision of Chapter 12, which covers competition-law issues. 125 United States-Japan relations have been particularly impacted by real or perceived anti-competitive behaviour that has resulted in diminished market-access opportunities for U.S. firms. See, generally, Michael Young, Lessuns from the Battle Front: C1.S. Japan Trade Wars and their Impact on the Multilateral Trading System, 33 Geo. Wash. Int'l L. Rev., 2001, p. 753, at pp. 776-779. r26 See William Scanlan, A Test Case for the New World Trade Organization's Dispute Settlement Understanding: The Japan-United States Auto Parts Dispute, 44 U. Kansas L. Rev., 1997, p. 591: describing U.S. and Japanese actions taken at the WTO. 127 See, for example, John Linarelli, The Role Dispute Settlement in World Trade Lau�: Lessons from the Fuji-Kodak Dispute, 31 Law & Pol'y Int'l Bus., 2000, p. 263: analysing background of, and legal issues involved in, the dispute.

12H Sec ibid., at pp. 273-280: detailing the WTO Panel's scrutiny ofJapanese governmental actions in the area of competition policy dating back to the 1960s. 129 See Lemieux and Stuhec, supra, footnote 96, at p. 100: noting that, unlike NAFTA Chapter 20, "[b]inational panels under Chapter 19, the Procurement Review Board under Chapter 10, and arbitral tribunals under Chapter 11 all provide for the participation of private parties or individuals." 1311 See Loungnarath and Stehly, supra, footnote 97, at p. 43: arguing that "Chapter 20 of NAFTA seems in many respects more geared toward facilitating a negotiated settlement than to settling the dispute in a jurisdictional manner, [partly because] the exclusion of persons ... increases the weight of inter-governmental diplomacy in the dispute settlement process." 131 See Lemieux and Stuhec, supra, footnote 96, at pp. 100-101: arguing that disputes under NAFTA Chapter 20 are particularly important and "politically sensitive" and noting that Chapter 20 cases so far "have generally involved issues which concern industrial sectors rather than individuals".

�3= See NAFTA, Article 2006(1). 131 See James Nafziger, NAFTA's Regune (ur 7n(fMff(Ma< Property, 19 Hous. J. Int'l L., 1997, p. 807, at p. 825: summarizing the view that alternative dispute resolution, such as informal consultations, "encourages expediency, confidentiality, greater assurance of technical expertise, an emphasis on problem-solving rather than vindication of rights, greater flexibility in fashioning solutions, and encouragement of mutually satisfactory settlements." �3; See discussion supra, Section IV.A. 135 In the event that another Party has also requested consultations subsequent to the first request, the first complaining Party must wait forty-five days before it may request a meeting of the Commission; see NAFTA, Article 2007(1). 11', See id. The requesting Party must deliver the request to other Parties and to its section of the Secretariat; see NAFTA, Article 2007(3). 131 Parties may request special consultations after having undertaken general consultations; see JSEPA, Article 142(2)(b). However, the reverse does not apply: Parties cannot request general consultations after having undertaken special consultations; seeJSEPA, Article 140(5). Finally, Parties may engage in good offices, conciliation or mediation at any time; scc JssE'n, Article 141. 13H See JSEPA.Article 140. 139 See JsErn, Article 142. 140 Sce JSEPA, Article 141. 141 See JSEPA, Article 140. 142 See id.

143 See JSEI'A, Article 142: describing applicability of special consultations to nullification or impairment claims, attributable to the "failure of a party to carry out its obligations or as a result of the application ... of measures which conflict with its obligations." 144 Generally, a Party "shall enter into consultations within 30 days after the date of receipt of the request." See JSEPA, Article 142(2). However, if the requesting Party has previously resorted to general consultations regarding the matter, the other Party must respond within ten days after receipt of the request; id. 145 See JSEPA, Article 143: providing that Parties who have undertaken both general and special consultations may request panel procedures after thirty days, whereas Parties that have undertaken special consultations alone may request panel procedures after sixty days of the request for special consultations. 146 SeeJSEPA, Article 141: providing further that good offices, conciliation or mediation may continue at the same time as procedures of the arbitral tribunal. 1.7 See Jsepa, Article 140(3); permitting, but not requiring, Parties to request that the Consultative Committee convene. 148 See Loungnarath and Stehly, supra, footnote 97, at pp. 43 and 71: concluding that Chapter 20's sensitivity to "the political factor ... disadvantages Canada because of the obvious political asymmetry" among the Parties and reasoning that Chapter 20 is politicized largely because of "on the one hand, the role given to the Commission- an essentially political body-in the dispute settlement process, and on the other hand, the weakness of the Arbitral Panels in the exercise of their jurisdictional functions."

�'9 See NAFTA, Article 2007(3). iso See NAFTA, Article 2007(4): providing that the FTC is to convene within ten days "unless it decides otherwise". This proviso turns the ten-day time-frame into a rather open-ended standard. 151 Sec NAFTA, Article 2007(5). �5= See NAFTA, Article 2008(1). 153 JSEPA, Article 140(4).

154 Compare Loungnarath and Stchly, supra, footnote 97, at p. 44: criticizing the FTC; for being too politicized, despite its broad judicial authority. Because it is staffed by Ministerial-level bureaucrats from national governments, and because its responsibilities include administering the Agreement and supervising working groups and committees, "the Commission cannot be viewed as a true jurisdictional body. It lacks the objectivity and the independence necessary to thejurisdictional function. That is why the Commission is another means of pursuing negotiations already started by the disputing parties." 15�' But see ibid., at pp. 44-45: arguing that, once a dispute has failed during bilateral consultations, it is "superfluous" to require resort to mediation by the FTC.

156 Compare NAFTA, Article 2011 (a)-(d), and Jsenn, Article 143. 157 See NAFTA, Article 2016(2): providing that the usual 90-day period may be modified pursuant to the Model Rules of Procedure. l5» See NAFTA, Article 2016(2). ISO See NAFTA, Article 2016(4). 16" See NAFTA, Article 2016(5). 161 See NAFTA, Article 2017(1). w2 See NAFTA, Article 2017(2). Various explanations for this provision exist; see Lemieux and Stuhec, supra, footnote 96, at pp. 108-109: noting the dangers of disclosing the identity of dissenting panel members. "First the effectiveness of the arbitral panel recommendations may be undermined if there is evidence that panel members voted along national lines ..." However, these arguments seem less persuasive in view of the fact that there has been little or no evidence of nationalistic bias; see Robert Cassidy and Simon Potter, Panel Discussion: NAF1:1 Revisited, 23 C:an.-U.S.L.J., 1997, p. 157, at p. 158: both panellists agreeing that, "there is not a national lines tendency". 1W See JSEPA, Article 144(6): providing that the "tribunal shall issue its award within 120 days of its establishment" and permitting a further extension by thirty days if the tribunal and Parties agree to such delay. 164 See Jsenn, Articlc 144(7). 165 See JSEPA, Article 144(1). 1(,(, See JSEPA, Article 144(8).

161 NAFTA, Article 2018(l): further providing that the Parties "shall notify the Secretariat with respect to any agreed resolution". 168 See NAFTA, Article 2018(2): providing that: "Wherever possible, the resolution shall be non- implementation or removal of a measure not conforming with this Agreement or causing nullification or impairment ... or failing such a resolution, compensation." 169 See infra, footnote 175.

170 See NAFTA, Article 2019(1). "' Id. 172 NAFTA, Article 2019(2). 173 See NAFTA, Article 2019(3): providing that: "On the written request of any disputing Party ... the Commission shall establish a Panel ..." Although all Parties are authorized to request such a panel review, the text of Chapter 20 renders it unlikely that the winning Party would see a need to do so. Instead, the winning Party can simply unilaterally decide upon a level of retaliation and then wait to see if the losing Party will challenge that level by requesting a panel. IN NAFTA, Article 2019(3). Article 2019(4) further provides that: "The panel shall present its determination within 60 days after the last panelist is selected or such other period as the disputing Parties may agree." 17S See Understanding on Rules and Procedures Governing the Settlement of Disputes, Articles 21-22, Annex 2, Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, 15 April 1994, 33 I.L.M., 1994, p. 1226. See also Joost Pauwelyn, Enforcement and Cauntermeasures in the W7o, 94 Am. J. Int'l L., 2000, p. 335; John H. Jackson and Patricio Grane, The Saga Continues: An Update on the Ballalla Dispute and its Prncedural O_ j/.spring, 4 J. Int'l Ec. L., 2001, p. 581; Patricio Crane, Remedies under W7o Law, 4 J. Int'l Ec. L., 2001, p. 755. 176 See JSEPA, Article 147(1 providing that-within twenty days of issuance of the award-the losing Party notify the other Party as to the "period which it assesses to be reasonable and necessary to implement the original award". This period may "extend to 12 months only if administrative or legislative measures have to be undertaken"; JSEPA. Article 147(l)(a). 177 See JsEPA, Article 147(l)(c): providing that, if unable to agree on a reasonable period, the Parties enter consultations within ten days of the receipt of the request for such consultations. Should consultations fail to resolve the issue after twenty days, the Parties may submit their dispute over a reasonable period to an arbitral tribunal; see JSEPA, Article 147(4)(a).

178 See JSEPA, Article 147(2): providing that, "if the implementing Party considers that compliance with the original award is impracticable, it shall ... promptly enter into consultations with the other Party, with a view to developing a mutually acceptable resolution, through compensation or any alternative arrangement ..." 17. See JSEI'A, Article 147(3). 180 See Jsenn, Article 147(4)(b). 181 See JSEI'A, Article 147(5): providing specifically that the other Party may "notify the implementing Party that it intends to suspend the application to the implementing Party of the obligations of the other Party under this Agreement or the Implementing Agreement." 182 JSEPA, Article 147(7). 183 SeejSEPA, Article 147(7)(a): providing that suspensions "shall not be effected if, in respect of thc dispute to which the suspension relates, consultations, or proceedings before an arbitral tribunal arc in progress." raa Scc Jsevn, Article 147(7)(b): providing that suspensions "shall be temporary, and shall be discontinued when the Parties reach a mutually satisfactory resolution or where compliance with the original award is effected." ISS See JSEI'A, Article 147(7)(c): providing that suspensions "shall be restricted to the level of nullification or impairment that is attributable to the failure to comply with the original award." 'afi See JSEPA, Article 147(7)(d): providing that suspensions "shall be restricted to the same sector or sectors to which the nullification or impairment relates, unless it is not practicable or effective to suspend obligations in such sector or sectors." .�'

187 See JSEPA, Article 147(8). Subparagraph 8 gives the implementing Party recourse against alleged abuses by the winning Party: "If the implementing Party considers that the requirements in paragraph 5 [setting forth time- lines and requirements related to notification of intent to retaliate after an arbitral tribunal finds that the losing Party has failed to comply within the implementation period], 6 [setting forth time-lines for notification of intent to retaliate for non-compliance with the Parties' agreement on compensation, or 7 [setting forth time-lines for, and limitations on appropriate targets of, rctaliationJ... have not been met, it may request consultations with the other Party. The other Party shall enter into consultations within 10 days after the date of receipt of the request. If the Parties fail to resolve matters within 30 days after the date of receipt of the request for consultations pursuant to this paragraph, either Party may refer the matter to an arbitral tribunal." 188 See JsEVn, Article 147(9): providing that the membership of this arbitral tribunal shall be the same as the original arbitral tribunal, wherever possible, and that this tribunal "shall issue its award within 60 days after the date when the matter is referred to it". 18') Thus, for example, although Mexico had the theoretical right to retaliate immediately against the United States upon U.S. failure to comply with the recommendations of the Trucking panel in early 2001 (see sura, footnote 94), Mexico opted instead to apply diplomatic pressure to produce U.S. co-operation. This strategy has had mixed results. Although President Bush recently signed into law a bill that gives Mexican truckers access to the U.S. market, the bill mandates a number of costly and complicated procedures that amount to an unfair trade barrier in the eyes of Mexican truckers; sec Jonathan Treat, Mexico to Even ,Score after t/.�. Approval of Tough Trncking Access Law, NAmi Editorial, 8 February 2002. For a discussion of the background of the trucking dispute, see, for example, Michael Skahan, Tlre NAFIA Truckit1g Dispute with Mexico, 5 NAFTA L. & Bus. Rev., 1999, p. fi03; Pamela Schmidt, �V4F7�; The Effects of the Motor Carrier Provisions on the Future of the Agreement, 20 Hastings Int'l & Comp. L. Rev., 1997, p. 505. 190 It is unlikely (but nevertheless quite possible) that a winning Party in a NAFTA dispute would resort to retaliation in the event of non-compliance because immediate retaliation would further exacerbate trade relations. Damage caused by the sudden (if legal) exercise of retaliatory rights is especially threatening and costly in the case of an FTA among highly interdependent neighbours, such as the NAFTA, in which the Parties (and especially Canada and Mexico) are so economically dependent on the other Parties.


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