Amid rumours of a Brexit intervention from Barack Obama, Boris Johnson has taken issue with the US president’s “outrageous and exorbitant hypocrisy”. After all, he points out, the US would never submit to overseas control in the way the UK must as a member of the EU.
He cites NAFTA, the North American Free Trade Agreement, which the US formed with Canada and Mexico in 1994 – though Johnson names it incorrectly as the “North Atlantic Free Trade Agreement”. Would the US, he asks, “submit to a NAFTA court of justice – supreme over all US institutions – and largely staffed by Mexicans and Canadians whom the people of the US could neither appoint nor remove?”
In fact, NAFTA does provide for courts whose rulings are binding in domestic law. Under Chapter 11 of the NAFTA Agreement, investors may take a case to a UN or World Bank-based arbitration mechanism. These are an alternative to domestic courts, but their decisions are enforceable. Under Article 2011, arbitration panels must include members from other NAFTA countries. And their decisions have had an impact, for example when the court outlawed a Canadian ban on a supposedly harmful petrol additive.
Like other member countries, the US is also bound by the rulings of the World Trade Organization (WTO). Canada and Mexico recently complained to the WTO over US country-of-origin labelling rules for beef and pork. Faced with the prospect of a billion-dollar penalty, the US Congress backed down. A recent review found similar investor dispute settlement arrangements in 93% of bilateral investment treaties.
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With a small secretariat and intergovernmental decision-making, NAFTA’s structures are less intrusive than the EU’s. While the NAFTA court does erode sovereignty – for example undermining national ability to pass environmental measures – it hears far fewer cases than the EU’s own court of justice. But that is because NAFTA’s trading arrangements are less comprehensive than the EU’s. For example, unlike their EU equivalents, exporters within NAFTA have to obtain onerous certificates of origin to prove products qualify for lower tariffs.
The features of the EU that Brexiteers do not like are not a conspiracy with political union as the ultimate goal. They are common to all free-trade arrangements, as NAFTA shows. The deeper you want your trading relationship to be, the more you have to be prepared to pool sovereignty.
Edited by Alan Wheatley
Thanks to InFacts for another insightful article. It might be added that US companies are subject to EU courts and regulators when they sell their goods and services in EU. Microsoft, Intel, Apple and Google, for example, have all been the subject of extensive EU investigation into anti-competitive and alleged anti-competitive practices. The European Commission famously blocked the all US merger of GE and Honeywell in 2001. This would remain the case for British companies selling into the EU if we were to leave. As you rightly say it’s no sinister conspiracy, just a fact of doing business internationally, which the Brexiteers seem to think we would be so good at outside the EU!
Good article Jack, I particularly like the pithy final paragraph. A theme to expand in another article?
The differences between trade dispute settlement arrangements under NAFTA or WTO and the role of the CJEU are perhaps a tiny bit more than you’re letting on. NAFTA arbitrations are focused on specific, technical applications of Treaty rules, whereas CJEU sees itself as having a general remit to build a body of case law to build upon EU Treaties, Directives and Regulations. Time and again, the CJEU has demonstrated an expansive reading of its role, recently for example in its interpretation of the Charter of Fundamental Rights. NAFTA only has rules applying to trade and investment by businesses; the EU has rules which extend deep into a range of domestic policy competencies.
On the general point made by Boris Johnson, it is worth pointing out that the US government continues to not ratify the UN Convention on the Laws of the Sea, the UN Convention on the Rights of the Child, and to not participate in the International Criminal Court. In each case, concerns over ceding sovereignty have been central. Boris Johnson’s point surely stands.
“The features of the EU that Brexiteers do not like are not a conspiracy with political union as the ultimate goal. They are common to all free-trade arrangements, as NAFTA shows.” Obfuscation stretches to mendacity here. NAFTA does not have a large bureaucracy with a budget of over a hundred billion dollars. NAFTA does not make new law outside of treaties with qualified majority voting. NAFTA does not have an active legislative agenda reaching far into domestic policy competencies. NAFTA does not have a Court with a general remit to advance the progress of the association.