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World Trade Organization and North American Free Trade Agreements

The world trade organization and North America free trade agreements are both international trade agreements with several similarities and differences. This assessment paper will be deeply focusing on their comparisons and their ways of settling disputes.

Both agreements have a common relationship towards the field of trade and economic of raising the standards of living, to ensure full employment, maintaining steady growth of real income and high demand , increasing the trade of goods and services, and allowing the maximum use of the available resources to sustain development (Shippey, 2002). They also seek to protect and preserve the environment to ensure economic development. Both agreements make positive efforts to ensuring that the developing countries and the least developed participate in international trade to be assisted in their economic growth. As of august 2001 world trade organization had 142 members. WTO has 15 agreements and its central agreement is General Agreement on Tariffs and Trade (Shippey, 2002). Its agreements are multilateral on the other hand; NAFTA is made up of three members: United States, Canada and Mexico. NAFTA is a preferential agreement whereby they ensure only their members benefit from their agreements. It has three bilateral separate agreements between Canada and Mexico, Mexico and United States, and finally United States and Canada.

The world trade organization has got two principles of non- discrimination which must be followed by every member when dealing with other members. Any kind of benefit offered by one party to the other, the other members are also entitled to it. However the main principle in NAFTA is national treatment whereby no member has the right to give its goods or services a special treatment more than those imported from other member nations. The world trade organization has got some exceptions to the main principles and obligations. GATT article xx offers some freedom to members to take measures in some cases as long as their act would not lead to some kind of discrimination (Shippey, 2002). This article allows for these exceptions when there is need to protect a life, public morals, and natural resources. On the other hand, NAFTA as well makes use of the same GATT article whereby members are allowed to discriminate for their security reasons taxation and tax treaties are limited and measures to tackle issues of balance of payments are also tolerated.

The world trade organization apply the rules of origin in a way that a member is not prescribed the exact rules which it must have, but it capitalizes in harmonizing rules by encouraging transparency and be based on a positive standards (Shippey, 2002). Through this the rules of origin is made objective and predictable. Rules of origin are not aimed at creating obstacles to international trade or bringing some disruptive effects but to make it more effective. In NAFTA the rule of origin applies in such a way that only goods and services from member countries would receive preferential treatment.

The rules in NAFTA are more detailed such that goods must be tested for them to qualify. Any products which must be made should be made in member countries or from their materials and not foreign ones. If by any chance the products are made from foreign materials, the final products must be made in member country to ensure that it meets the right requirements. There are special rules of origin set by NAFTA concerning the automobile goods, clothing and textiles, and agricultural goods. Textiles must be made from NAFTA materials and automotive goods and light vehicles must be 62.5% NAFTA products. The only exceptions to the rule of origin in NAFTA are final products with small amount of non-NAFTA fibers or goods in short supply.

The world trade organization dispute settlement administered by the Uruguay round whereby it’s made to understand the rules and procedures in dispute settlement. All the members are allowed to relate their arguments on the GATT or in any other multilateral trade agreements found in WTO agreement. There is a Dispute Settlement Body (DSB) which is made up by all the members and has the authority to exercise decision making. It’s the duty of DSB to implement decisions unless when the members have agreed not to adopt them (Shell, 2006). Settlement of disputes in WTO has got some stages. It begins with consultations, incase this fails a panel is made to give a report by recommending the matter in question. If the Appellate Body (AB) in the panel happens to covers some issues on law an appeal may be taken. The Appellate Body gives out a report with recommendations which the members are supposed to implement. If there is no implementation done rules for compensation or suspension are applied.

NAFTA has got four main characteristics of settling disputes (Shell, 2006). The first one is government to government through following three stages of initially making consultations, commission resolutions, and finally binding panel proceedings. Secondly, disputes are settled by antidumping and countervailing duties through a panel with judicial powers. The third step is whereby the investment responsibility is enforced and finally a procedural process for dispute avoidance is conducted. The central institution which governs settling of disputes in NAFTA is the free trade commission. It’s composed of representatives from all the members’ country. Incase consultation and commission are unable to solve the dispute, the board of panel gives out a recommendation to act as the base for an agreed final solution. The dispute settlement procedure in NAFTA involves participation of private parties unlike that of world trade organization which allows the participation of government only. The panel’s final resolution can not be entrusted by itself, as it has to rely on the authority from the administration. The administration therefore relates its moves with the opinions of the panel.

Chapter X1X of NAFTA is the known original mechanism for settling its disputes. It has both pros and cons. It’s considered advantageous because it provides an expeditious review whereby the final decision must be given out within 315 days since the time the panel review files request (Shell, 2006). Those new rules and regulations in settling NAFTA disputes have contributes much to the improvements of the economic relations management. Settling of disputes among the three member countries for the last eight years is a full commitment of the rule of law. The three member countries have proofed to have used the procedures of settling disputes equally.

In conclusion, both WTO and NAFTA state to state settlement of disputes has been operated effectively as it is the obligation of the member countries to fully come together and deeply discuss the issue placed to be settled. Although there have been challenges now and then cooperation among members have made these processes of settling disputes possible.


Shell, R.G. (2006). Bargaining for advantage: negotiation strategies for Reasonable people, (2nd ed). Penguin Publishers.

Shippey, C.K. (2002). A Short Course in International Contracts: Drafting the International Sales Contract for Attorneys and Non-Attorneys, (2nd ed). World Trade.


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