Wyden Tells Lighthizer Blocking State-to-State Dispute Panels Should End

The top Democrat on the Senate Finance Committee told U.S. Trade Representative Robert Lighthizer in a May 22 letter that panel blocking is a mistake, and that trying to use Section 301 tariffs to enforce trade commitments of Canada or Mexico won't work. Sen. Ron Wyden, D-Ore., wrote: "So far, the Administration’s justification for this mechanism has only increased my worry that the new Agreement will not be enforced." He acknowledged "certain improvements" in the labor and environment chapters, but said, "all of the obligations become meaningless if the United States cannot effectively and swiftly enforce them."

He noted that no state-to-state dispute has been resolved since the U.S. blocked a panel in a case brought by Mexico in 2001 (see 1807230029). He said USTR chose to continue that broken system, so that any country can opt out of the dispute process.

"This choice by the Administration will have two results. First, the lack of a NAFTA forum for resolving disputes will push many of those disputes to the World Trade Organization (WTO), where possible. The WTO Agreements, in many cases, have weaker and outdated obligations -- including no obligations on labor and environment -- or obligations that have been interpreted by the WTO Appellate Body in a manner with which the United States disagrees. For these reasons, I am dubious that it is better to resolve disputes between the NAFTA countries at the WTO," he wrote.

And second, he said, the administration is saying that Section 301 can be used to enforce obligations. Wyden has his doubts.

"The tariffs that were imposed initially against $50 billion in trade have been ratcheted up to potentially capture all U.S. trade with China, including retaliatory tariffs on U.S. exports. And yet, China has not budged on any of the issues identified in the 301 investigation.

"Canada and Mexico are not China. Our issues with Canada are serious, but discrete. For example, I had a dispute with Canada over discrimination against U.S. wine exports which your office advanced in the WTO dispute settlement system. New wine-specific commitments in the new Agreement intended to address Canadian practices cannot be enforced at the WTO. Moreover, I question whether 301 tariffs would be effective in resolving such a dispute where the amount of trade impacted by the bad behavior is much lower ... ."

He also said that to enforce labor commitments by Mexico, the best approach "is to add and strengthen tools, not take them away. That means shoring up the ability to bring labor cases under dispute settlement, building on past lessons learned."

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, told reporters on May 22 that he had not had time to read Wyden's letter that was issued earlier in the day. But he said he had not talked to any senator nor to Lighthizer about the issue of blocking panels in the state-to-state dispute settlement system.