U.S.-Canada Free Trade Agreement

The U.S.-Canada Free Trade Agreement took effect in 1989, creating the world's largest free trade area at that time. The Agreement also established various means, including binational review panels, to settle disputes over unresolved trade issues between two countries. One of these issues was the proper use of national trade remedy laws that combat unfair trade practices. Some decisions by binational panels that reviews U.S. government agency antidumping and countervailing duty determination caused public controversy and created trade tensions between the two countries. This briefing report (1) summarizes U.S. and Canadian expectations for the binational panel process, (2) provides a statistical overview of panel activity and decisions, (3) identifies and analyzes the participants' views on points of satisfaction and dissatisfaction with the panel process, and (4) identifies some other factors that may have contributed to the controversy over the binational panel process in general.

GAO found that: (1) the U.S. and Canadian compromise on the binational panel process occurred when U.S. and Canadian negotiators could not agree on harmonizing their trade remedy laws in FTA; (2) the panels' goals included protecting each country's sovereignty, creating trade benefits, reducing political pressures, and providing a fair and expeditious review process; (3) expectations on how the panels would accomplish these goals differed because the countries' underlying concerns about the use of trade remedy laws remained unresolved; (4) it was difficult to identify any patterns in panel operations because of the small number of completed cases; (5) some participants were satisfied with the binational panel process because they thought the process was faster than traditional judicial review, operated smoothly, and gave thorough and in-depth review of the cases; (6) some participants were dissatisfied with the process due to the misinterpretation of U.S. law, improper substitution of panelists' judgment for U.S. agencies' judgment, excessive use of remands, emergence of a separate U.S. case law applicable only to Canada, and the adverse impact of panelist and agency discord or conflicts of interest on the process; and (7) the controversy over the binational panel process was heightened due to the conflict between panel behavior and some participants' expectations of how the panel process should have worked.