From NAFTA to the TPP

More than twenty years have passed since the U.S., Mexico and Canada signed the North American Free Trade Agreement (NAFTA). NAFTA provided for the quasi-total elimination of tariffs and a dramatic reduction in non-tariff barriers among its Parties, which contributed to a substantial increase in cross-border trade and investment among the three member States. NAFTA was a very ambitious initiative that helped to integrate the North American economies. However, it did not deal with many aspects of current hot-button issues like e-commerce, transparency and anti-corruption. Although certain topics such as labour and the environment were addressed alongside NAFTA, the treatment of those topics left room for improvement.

NAFTA members have independently joined the Trans-Pacific Partnership (TPP) together with nine other countries: Australia, Brunei, Chile, Japan, Malaysia, New Zealand, Peru, Singapore and Vietnam. The TPP recognizes prior rights and obligations under the WTO, NAFTA and other agreements.

Above and beyond such recognition, the TPP will broaden the NAFTA Parties’ existing commitments to one another in many areas and will serve as a tool to improve upon NAFTA’s perceived weaknesses in some of the following areas:

E-COMMERCE. The TPP promotes the free flow of data between companies and consumers, prohibits the imposition of customs duties on electronic transmissions, and provides for the protection of online consumers and their personal data. The TPP guarantees non-discriminatory treatment to digital products and provides that no Party may require companies to locate computer facilities in its territory.

STATE-OWNED ENTERPRISES & DESIGNATED MONOPOLIES. The TPP provides that State-Owned Enterprises (SOEs) must generally act in accordance with commercial considerations and in a non-discriminatory manner. Moreover, the TPP prevents Parties from causing adverse effects to other Parties through non-commercial assistance to SOEs.

LABOUR. The TPP reaffirms Parties´ obligations as members of the International Labour Organization, including the commitment to the effective abolition of child labour. Parties also agree not to derogate from their labour laws to promote trade or foreign investment, and they are to discourage the importation of goods produced by forced or compulsory labour, including child labour. At the same time, the TPP recognizes that labour standards shall not be used for protectionist purposes.

ENVIRONMENTAL. The TPP creates enforceable commitments across a range of environmental issues, including: (i) the Parties must implement the Convention on International Trade in Endangered Species of Wild Fauna and Flora; (ii) the Parties are to combat illegal fishing and (iii) the Parties agree to promote the conservation and sustainable use of biodiversity. The TPP also promotes trade and investment in environmental goods and services between the Parties, and provides that the Parties should encourage companies to voluntarily adopt corporate social responsibility policies.

SMALL AND MEDIUM-SIZED ENTERPRISES. The TPP promotes the dissemination of its provisions among small and medium-sized companies and fosters capacity building.

TRANSPARENCY AND ANTI-CORRUPTION. The Agreement strengthens transparency by obligating Parties to promptly publish laws, regulations, procedures and administrative rulings as well as by obligating them to maintain independent judicial or administrative tribunals for the review and correction of relevant administrative decisions. In the TPP, the Parties declare their commitment to eliminate corruption in international trade and investment, and to adopt measures necessary to establish certain corrupt acts that affect international trade and investment as criminal offences.

INVESTMENT. The TPP states that the most favored nation clause is not applicable to international dispute resolution procedures, and defines the minimum standard of treatment as the minimum standard in accordance with customary international law. The TPP seems to exclude from the minimum standard actions that are merely inconsistent with an investor’s expectations. Concerning investor-State dispute settlement, under the TPP, written submissions, transcripts of hearings, orders and awards will be available to the public, and hearings will be open the public as well (all subject to certain limited exceptions). The TPP clarifies that arbitral tribunals shall not award punitive damages.

The TPP does not replace nor derogate from NAFTA commitments; thus, with respect to Canada, Mexico and the U.S., companies will be able to choose among the disciplines set out in NAFTA and those set out in the TPP.