I understand the importance of simplifying concepts for an audience that might be unfamiliar with the topic, but this explanation of NAFTA Chapter 19 is insufficient and its assertions are questionable. Under U.S. law, executive branch agencies can be taken to court over the decisions they render by aggrieved parties. The U.S. International Trade Commission and the Department of Commerce are the agencies with jurisdiction over the antidumping and countervailing duty laws. If the domestic petitioner or a foreign respondent or another party to an antidumping case believes that the Commerce Department overstepped its discretion and failed to administer the law properly, it can file claims at the U.S. Court of International Trade. This is the channel for adjudicating matters related to trade remedies.
However, under the terms of NAFTA, as an alternative to the domestic courts, the parties can choose a Chapter 19 panel to adjudicate. Essentially, the domestic courts can be cut out of the appeals process. That raises a lot of legitimate questions about constitutionality and sovereignty among lawyers and legal scholars, and the Trump administration’s position in the NAFTA talks is to get rid of these special panels and restore oversight to the domestic courts. For reasons not entirely clear to me, the Canadians want to retain Chapter 19. Presumably, they believe they get a better outcome from the NAFTA panels than they do from the courts. There is a perception that the U.S. courts are unfair to foreign entities in these proceedings, but that is not reflected in the data we’ve examined at Cato.
A review of the 18 months of data on CIT case decisions through June 2017 indicates that the court agrees with the plaintiff (the party challenging the agency’s actions) on 46 percent of the issues raised. When the plaintiff is the U.S. industry (objecting to DOC or ITC decisions in the underlying AD or CVD case), the CIT agrees on 43.2 percent of the issues. When the plaintiff is the foreign interest (foreign producer or exporter), the CIT agrees on 47.2 percent of the issues.
Those results suggest that foreign industry plaintiffs have a slightly higher success rate than U.S. industry plaintiffs, which may reflect the fact that agency discretion is more often exercised in a way that is adverse to the foreign interests. An examination (published in a 2006 Cato paper) of the 18‐month period between January 2004 and June 2005 found that the CIT remanded 19 cases to the Commerce Department with instructions to revisit its decisions or recalculate its antidumping results. In 14 of those 19 cases, the recalculated dumping margins were smaller, suggesting a higher incidence at Commerce of exercising its discretion to the detriment of the foreign or importing interests, as well as the court doing its job.
The U.S. courts are not the problem. The problem is with the laws’ administration at Commerce (and to a lesser extent at the U.S. International Trade Commission), which is given way too much discretion for an agency with an overtly protectionist agenda. Thus, Chapter 19 is a solution in search of a problem.
But Bown suggests that the Trump administration’s preference for terminating Chapter 19 is an affront to good judgment and an act of aggression that will be deeply consequential to Canada. His presumed preference for the status quo may also have something to do with his curious claim that Chapter 19 deters “especially frivolous claims” under unfair trade laws. Say what? Considering that the standard of review accepted by these panels is supposed to be identical to that of the domestic courts, there should be no difference between the outcomes reached by the panels and the courts. If there is, that would seem to bolster the argument that Chapter 19 is unconstitutional.
Bown mentions Canada’s recent Chapter 19 review request—perhaps to illustrate that Trump’s plan to snuff it out would be a real hardship for Canadians. But the fact is that the United States doesn’t have a great record complying with NAFTA panel decisions. Neither Commerce nor the ITC enjoys getting cases remanded to them. When the body doing the remaining is not a U.S. court, but an international panel, the agencies drag their feet and invoke sovereignty and constitutionality claims, knowing those arguments appeal to many Americans. That’s exactly what happened during the last round of lumber litigation in 2005, which enabled the Bush administration to buy enough time to extract $1 billion of illegally collected duties, which should have been refunded.
Bown has more: