Dale E. McNiel

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This Article critically examines the decision of the first dispute settlement panel established under the NAFTA. The panel ruled against the United States, holding that Canada's rights under the GAIT allowed it to apply tariffs in excess of its NAFTA tariff commitments. It found, implicit in the NAFTA and GAIT negotiations, an agreement to allow tariffs resulting from GAIT "tariffication" of non-tariff barriers to exceed the limits established under the NAFTA. This Article argues that the decision is incorrect both as a matter of fact and as a matter of law. First, it is factually inaccurate because the negotiators never reached such an agreement. Second, the panel erred in relying on this hypothetical bargain instead of applying the relevant legal principles to the dispute. Conducting its own textual analysis of the relevant GAIT and NAFTA provisions, the Article concludes that the GAIT provision that governs non-tariff bindings cannot be justified by the NAFTA provision incorporating a ll GAIT rights and obligations. The panel, by holding otherwise, failed to apply established law and violated the spirit of trade liberalization under which the agreements were negotiated.

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