The International Organization That Settles Trade Disagreements And Enforces Free Trade Agreements

The WTOs procedure for the settlement of commercial disputes under the dispute settlement agreement is essential to the application of the rules and, therefore, to the fluidity of trade. Countries argue disputes in the WTO if they feel their rights are being violated by the agreements. Specially designated independent expert judgments are based on the interpretation of each country`s agreements and obligations. Go straight to jail. Don`t pass Go, don`t collect…. Well, not exactly. But the feelings are valid. If a country has done something wrong, it should quickly correct its guilt. And if it continues to break an agreement, it should offer compensation or face an appropriate response that has a bit of bite – when it`s not really a punishment: it`s a remedy, the ultimate goal is for the country to comply with the judgment.

Chapter 19 of NAFTA proved controversial. Canada insisted on its inclusion in the CUSFTA because of what it considered to be a long history of unfair U.S. trade policy. Ottawa has backed down on the chapter`s independent panels in dozens of cases, many of them related to U.S. tariffs on Canadian wood. Some trade experts have argued that Chapter 19 has reduced trade disputes between NAFTA members by increasing the likelihood that trade barriers will be removed by panels. This situation, coupled with the assassination of Luis Donaldo Colosio, presidential candidate of the Institutional Revolutionary Party (PRI) and former Minister of Urban Development and Ecology, has raised questions about Mexico`s political stability among foreign investors. The murder of Francisco Ruiz Massleu, a senior PRI official, contributed to this uncertainty. These events, combined with riots in southern Chiapas, have fuelled investor skepticism. The Mexican consequences quickly spread to Brazil and Argentina, whose stock markets fell, along with those of other developing countries in the world. Investors have received a reputation that some have called a “wake-up call” and have reminded them that political and economic instability can largely influence growth prospects in developing countries.

Since 1992, trade agreements such as the Tokyo Round and the Uruguay Round of GATT and NAFTA, as well as 200 other lesser-known trade agreements, have benefited the United States through the substantial reduction of trade barriers. Since its launch in 1994 and despite a Mexican recession, NAFTA has kept its promise. U.S. trade relations with Canada and Mexico are better, consumer goods prices are lower, the region is more competitive with fast-growing trading blocs in Europe and Asia, and trade and investment has increased across North America. U.S. exports to Mexico increased by 70% between 1993 and 1997, despite a sharp decline in Mexican domestic demand. In addition, U.S. exports to Mexico surpassed exports to Japan for the first time in 1997, a country with an economy 12 times larger than Mexico. In 1998, U.S. exports to Western Europe exceeded $150 billion, an increase of more than 30% over 1990, and exports to Eastern Europe, which reached just $7.5 billion.

U.S. direct investment across Europe has outpaced exports. According to a report by Arthur Andersen on international investment, Europe was the world`s largest recipient of foreign investment in 1995.