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The Department of Justice is working with U.S. officials renegotiating a trade agreement with Mexico and Canada in an effort to ensure that U.S. businesses are treated fairly when it comes to competition enforcement.
The renegotiation of the North American Free Trade Agreement, a trilateral agreement among the U.S., Mexico, and Canada, is viewed as a potential vehicle to advance model antitrust language that can be used in future international trade deals. The U.S. Chamber of Commerce claims that American businesses are being unfairly targeted by antitrust enforcers in jurisdictions like Europe and Asia.
DOJ’s antitrust division is “collaborating closely with the United States Trade Representative to ensure fulfillment of the announced NAFTA objective that the competition chapter establish basic rules for procedural fairness on competition law enforcement,” DOJ spokesman Mark Abueg told Bloomberg BNA.
The Office of the U.S. Trade Representative said in a Sept. 27 statement that NAFTA’s competition chapter has “advanced substantively” and is expected to be completed before the next round of negotiations, which start on Oct. 11. A spokeswoman for the agency didn’t respond to a request for comment on competition aspects of the NAFTA talks.
House Judiciary Committee Chairman Robert Goodlatte (R-Va.) and Senate Judiciary Committee Chairman Charles Grassley (R-Iowa) urged U.S. antitrust regulators in a July letter to take a lead role in ensuring a strong competition chapter. The letter grew out of a June House Judiciary Committee hearing that looked at an antitrust report commissioned by the Chamber of Commerce, a committee aide told Bloomberg BNA.
According to the report, some foreign jurisdictions are applying antitrust laws in ways that clash with long-standing U.S. principles, such as due process and “sound economics.” In addition, it said some non-U.S. competition enforcement actions have been initiated with the intent of taking advantage of U.S. companies.
Goodlatte and Grassley say NAFTA is an opportunity to set a “gold standard” for how an international competition agreement should look. The three countries involved are on the same page philosophically on competition issues, the House Judiciary Committee aide said.
U.S. thinking on competition language in trade agreements has evolved significantly since the adoption of the original NAFTA agreement in the 1990s, antitrust scholars told Bloomberg BNA.
Procedural fairness in antitrust enforcement involves legal protections for companies and individuals, such as due process and transparency, according to Daniel Sokol, a law professor who focuses on antitrust issues at the University of Florida. These are fundamental U.S. concepts, embedded in the Constitution, he told Bloomberg BNA. But they weren’t spelled out as clearly in NAFTA as in the 2016 Trans-Pacific Partnership, an agreement between 12 countries covering North America and the Asia-Pacific region.
The U.S. withdrew from the TPP in January, soon after President Donald Trump took office. The remaining 11 countries, including Canada and Mexico, are attempting to implement the pact without the U.S.
NAFTA “was a first generational agreement,” Sokol said. “The Trans-Pacific Partnership was the last major trade agreement with a competition chapter. If you compare the text of the original NAFTA competition chapter to what’s in the TPP final text, there are some changes. We have a much better sense of working through procedural fairness issues, for example.”
Mexico and Canada have antitrust agencies that are “very strong” and “highly competent, but there are growing concerns in the U.S. about antitrust enforcement in other foreign jurisdictions,” said Sokol, who serves as an academic adviser to the chamber.
“The perception from the business community is that many of these agencies are judge, jury, and executioner,” he said. “There are some very legitimate concerns about procedural fairness. If the attempt of NAFTA is to improve these issues, that’s positive. I think the hope is that, if you create high standards, everybody has to sign on, and it improves everybody’s game.”
U.S. officials are likely to negotiate a more robust due process provision in the updated NAFTA, using TPP as one of their models, said Eleanor Fox, an antitrust professor at New York University School of Law. The original NAFTA competition chapter barely mentions due process.
“If they do get that in, it not only would help them in the NAFTA agreement, but could also be used as a stepping stone to insert similar language into other international trade agreements going forward,” she told Bloomberg BNA.
The kind of competition language that’s in the TPP has the potential to set international norms and to allow consultations among countries, but it doesn’t necessarily provide a mechanism for the resolution of disputes, Sokol said.
“This is where soft law comes into play,” he said. “It’s used for persuasion. The mere threat of consultation may be enough to get the parties on board. You don’t want to be publicly shamed. It does force behavior to improve.”
—With assistance from Len Bracken
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