[Congressional Record Volume 142, Number 138 (Monday, September 30, 1996)]
[Senate]
[Page S12038]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               REFORM OF NAFTA CHAPTER 19 DISPUTE PROCESS

 Mr. CRAIG. Mr. President, in preparation for renewed 
consideration of adding countries to the NAFTA and of fast-track 
legislation for this purpose, it is imperative, in my view, that action 
be taken to resolve a serious problem with the NAFTA: The NAFTA Chapter 
19 dispute settlement system for antidumping duty and countervailing 
duty appeals.
  In August of last year, nine of my Senate colleagues, including the 
former majority leader and the chairman of the Trade Subcommittee of 
the Committee on Finance, expressed serious concerns about Chapter 19 
in a letter to then-U.S. Trade Representative Michael Kantor.
  Mr. President, I ask unanimous consent that this letter be printed in 
the Record at the end of my statement.
  The PRESIDING OFFICER. Without objection, it is so ordered. (See 
exhibit 1.)
  Mr. CRAIG. Mr. President, I wish to emphasize that I share the 
concerns of the authors of this letter and believe that addressing this 
failed system must be a priority for U.S. trade policy. Under Chapter 
19, appeals of determinations that imports are subsidized or dumped 
into the U.S. market were, for NAFTA countries, transferred from 
domestic courts to panels of private individuals, which include foreign 
nationals. The system was introduced in 1988 as a provisional 
compromise for the United States-Canada Free-Trade Agreement. Although 
serious reservations were expressed about Chapter 19 at that time, it 
was accepted on an interim basis with Canada only until disciplines 
against Canadian subsidies and dumping could be negotiated. Although no 
such unfair trade disciplines were agreed to, Chapter 19 was, 
unfortunately, extended to the NAFTA. Its inclusion was a key reason 
for my vote against that agreement.
  Chapter 19's infirmities are several. As the Justice Department 
indicated in 1988, there are major constitutional problems with giving 
private panelists--sometimes a majority of whom are foreign nationals--
the authority to issue decisions about U.S. domestic law that have the 
binding force of law. These panelists, coming from different legal and 
cultural disciplines and serving on an ad hoc basis, do not necessarily 
have the interest that unbiased U.S. courts do in maintaining the 
efficacy of the laws as Congress wrote them. Moreover, the ad hoc, 
fragmented nature of Chapter 19 decision-making can lead to 
contradictory outcomes, even with regard to a single instance of 
alleged unfair trade.
  In practice, Chapter 19 has revealed itself to be unacceptable. A 
foremost example is the Chapter 19 review of a 1992 United States 
countervailing duty finding that Canadian lumber imports benefit from 
enormous subsidies. Three Canadian panelists outvoted two leading 
United States legal experts to eliminate the countervailing duty based 
on patently erroneous interpretations of United States law--
interpretations that Congress had expressly rejected only months 
before. Two of the Canadian panelists served despite egregious, 
undisclosed conflicts of interest. The matter then was argued before a 
Chapter 19 appeals committee, and the two Canadian committee members 
outvoted the one United States member to once again insulate the 
Canadian subsidies from United States law.
  The U.S. committee member was Malcolm Wilkey, the former Chief Judge 
of the Federal Court of Appeals for the D.C. Circuit and one of the 
United States' most distinguished jurists. In his opinion, Judge Wilkey 
wrote that the lumber panel decision ``may violate more principles of 
appellate review of agency action than any opinion by a reviewing body 
which I have ever read.'' Judge Wilkey and former Judge Charles 
Renfrew--also a Chapter 19 appeals committee member--have since 
expressed serious constitutional reservations about the system. While 
some have claimed that Chapter 19 decides many cases well, its 
inability to resolve appropriately large disputes, and its 
constitutional infirmity, demand a remedy.
  Like my colleagues who wrote to Ambassador Kantor, I believe that 
something must be done about Chapter 19. I support returning appellate 
jurisdiction to the U.S. judiciary where it had long rested and still 
rests for non-NAFTA countries. Alternatively, Chapter 19 perhaps could 
be reformed to eliminate its constitutional and practical infirmities. 
It should, at minimum, be clear to executive branch officials that 
Chapter 19 cannot be extended to any additional country in its current 
form, be it Chile or any other NAFTA prospect. I look forward to 
working diligently in the upcoming Congress to correct this serious 
problem.

                               Exhibit 1

                                                  August 21, 1995.
     Ambassador Michael Kantor,
     Trade Representative, Executive Office of the President, 
         Washington, DC.
       Dear Ambassador Kantor: In light of the advent of the new 
     trade and dispute settlement rules in the agreements 
     establishing the World Trade Organization (WTO), we are 
     writing to express our concern with the current system for 
     reviewing antidumping and countervailing duty cases under the 
     NAFTA.
       As you know, the original intent regarding Chapter 19 was 
     that: 1) it would be limited to Canada and quickly phased 
     out; 2) panelist conflict-of-interest rules would be strictly 
     enforced; and 3) panels reviewing U.S. determinations would 
     be bound, like the U.S. Court of International Trade, by U.S. 
     law and its deferential standard of review.
       It is clear that these conditions have not been met. 
     Despite earlier assurances to the contrary, the system was 
     extended to Mexico and effectively made ``permanent'' with 
     respect to Canada and Mexico in the NAFTA. Moreover, the 
     U.S.-Canada softwood lumber case demonstrated serious 
     inadequacies and problems with conflicts of interest and 
     standards of review under the Chapter 19 system.
       We believe that because of the intended temporary nature of 
     Chapter 19 and the great controversy it has engendered, the 
     Chapter 19 dispute settlement mechanism should not be 
     extended in future trade agreements to any other country, 
     including the present NAFTA accession negotiations with 
     Chile. This belief is without regard to whether such 
     agreements should be concluded.
       Under Chapter 19, ad hoc panels of private individuals rule 
     in place of judges on whether antidumping and countervailing 
     duties have been imposed consistent with the domestic law of 
     the importing country. This requires Chapter 19 panels to 
     interpret and apply national law itself, rather than 
     resolving disputes over the interpretation of international 
     agreements as would normally occur in international dispute 
     settlement like the WTO. These panel decisions are 
     automatically implemented without judicial or political 
     review of accountable government officials.
       In light of the WTO's new binding international dispute 
     settlement process, and the Uruguay Round's new agreements on 
     subsidies and dumping, we question the need for a special 
     NAFTA trade remedy. It is our belief, especially in light of 
     past experience, that disputes about U.S. law are best left 
     to the U.S. Court system.
       Absent an outright elimination of Chapter 19, which we 
     would certainly consider in a favorable light, substantial 
     attention should be given to reforming Chapter 19 with 
     respect to the current NAFTA. The United States should not 
     agree to extend this fundamentally flawed system to any other 
     country. We trust that you will consider our suggestion in 
     your ongoing negotiations with Chile, and urge increased 
     consultation with the Congress during the process.
       We appreciate your consideration of this important matter.
           Sincerely,
         Max Baucus, David Pryor, John Rockefeller, John Breaux, 
           Kent Conrad, Chuck Grassley, Bob Dole, Orrin Hatch, 
           Alfonse D'Amato.

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