RESTRICTED
WORLD TRADE WT/REG4/M/1
21February 1997
ORGANIZATION(97-0706)
EXAMINATION OFTHE NORTH AMERICAN FREE TRADE AGREEMENT
NOTE ONTHE MEETING OF20-21 JULY 19951
Chairman: H.E. Mr.Donald Kenyon (Australia)
1. Themeeting tookupthefollowing items:
A. General Introductory Remarks
B. Examination oftheServices Aspects oftheNorth American FreeTrade Agreement
(NAFTA).
- Chapter Eleven: Services andInvestment
- Chapter Twelve: Cross-Border Trade inServices
- Chapter Thirteen: Telecommunications,
- Chapter Fourteen: Financial Services
- Chapter Sixteen: Temporary Entry forBusiness Persons
C. Examination oftheGoods Aspects oftheNorth American FreeTrade Agreement.
- General Statements
- Chapter One: Objectives
- Chapter Two: General Definitions
- Chapter Three: National Treatment andMarket Access
- Chapter Four: Rules ofOrigin
- Chapter Five: Customs Procedure
- Chapter Six: Energy andBasic Petrochemicals
- Chapter Seven: Agriculture
- Chapter Eight: Emergency Action
- Chapter Nine: Technical Barriers toTrade
- Chapter Ten: Government Procurement
- Chapter Seventeen: Part6-Intellectual Property
A. General Introductory Remarks
2. Therepresentative ofCanada, speaking onbehalf oftheGovernment ofCanada anditsNAFTA
partners, saidbywayofintroductory remarks thattheNAFTA hadbeenconceived withtheaimsof
contributing totheharmonious development andexpansion ofworld trade andofproviding acatalyst
tobroader international cooperation. TheNAFTA hadbeenbased upon thefundamental rules ofthe
multilateral trading system, anditincluded allsectors oftheeconomy. Even though amajority ofintra-
1Themeeting wasconvened inWTO/AIR/110.WT/REG4/M/1
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NAFTA trade tookplace without problems, theNAFTA nevertheless provided foreffective dispute
settlement procedures, andworking groups hadbeenestablished invarious areas inorder toreduce
thepossibility ofdisputes. TheNAFTA wasinfullconformity withtheGATT provisions.
B. Examination oftheServices Aspects oftheNorth American Free Trade Agreement
(NAFTA)
Chapter Eleven: Services andInvestment, (Questions fromdocument WT/REG4/1)
3. Therepresentative ofAustralia noted theimportance ofexamining Article 1208oftheNAFTA.
Thisarticle required theNAFTA Parties todescribe commitments toliberalize quantitative restrictions,
licensing requirements, performance requirements orother non-discriminatory measures relating to
cross-border provision. Thenotification process setoutinthatarticle wasinteresting asNAFTA seemed
totakeastaged approach toliberalizing theservice sector, andasparagraph 2ofArticle VoftheGeneral
Agreement onTrade inServices, (GATS), emphasized suchastaged approach toliberalization.
Chapter Twelve: Cross-Border Trade inServices
4. Therepresentative ofJapan asked, inrelation toquestion 161,paragraph 2,forwhich sectors
under Chapters 11,12and14theNAFTA Parties wereallowed tomake useofthereservations enabling
themtocontinue theapplication oflawsandregulations which didnotconform toapplicable NAFTA
principles.
5. Therepresentative ofNAFTA saidthatArticle 1201, paragraph 2oftheNAFTA listed the
sectors exempt fromdisciplines andnoted thatonlyairservices ofageneral nature werelisted there.
With theexception ofcivilairtransport, nomajor services sectors wereexcluded from thecoverage
oftherules relating toservices. Other sectors oflimited coverage which were unbound under the
Chapters relating toservices weresetoutinAnnex IIandrelated toareasofsocial concern, forexample
those inrespect ofnative oraboriginal peoples orthose concerning public health.
6. Therepresentative ofJapan wondered whether therewasanyrationale behind theclassification
oftelecommunications andfinancial services asseparate chapters intheagreement.
7. Therepresentative oftheNAFTA replied thatinthecaseoftelecommunications, thesituation
wasanalogous totheoneintheGATS, which described specific rules addressing access tothe
telecommunications networks andenhanced telecommunications services. TheChapter onFinancial
Services, which haditsowninvestment component, wasaproduct ofseveral factors. Even though
theChapter wasstructurally different, allprovisions oftheChapter related tothefundamental principles
ofmarket access andnational treatment embodied intherestoftheNAFTA.
8. Inrelation toquestion 173,concerning Article 1211:2, Denial ofBenefits, therepresentative
oftheEuropean Communities asked whether thesentence onsubstantial business activities could be
further clarified. Didthecase-by-case basis, depending onthespecific circumstances ofaparticular
business, imply thatspecific rules applied toparticular businesses?
9. Therepresentative ofJapan referred tothereply toquestion 167,andsaidthatArticle 1207:2,
onQuantitative Restrictions, stated that:"Within oneyearofthedateofentry intoforce ofthis
Agreement, eachParty shallsetoutinitsschedule toAnnex Vanyquantitative restriction maintained
byastateorprovince...". Could theNAFTA Parties provide information onanyquantitative restrictions
thathadbeenincluded intheirschedules, since oneyearhadalready elapsed?WT/REG4/M/1
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10. Therepresentative oftheNAFTA referred tothequestion which related toquestion 173,in
particular theterm"nosubstantial business activities". Theresponse provided toquestions 151and
152onthesameterm, usedinChapter 11,would clarify thepointraised bytheEuropean Communities.
Asdescribed inthese responses, there were nospecific orexplicit rules ontheinterpretation ofthe
term"nosubstantialbusinessactivities".Abuilt-inflexibilityallowedforitsapplicationonacase-by-case
basis. Intheresponses toquestions 151and152,theParties hadtriedtoprovide anexample ofhow
theprovision would beapplied. Regarding thequestion onquantitative restrictions, theNAFTA Parties
would make thelistofnon-discriminatory quantitative restrictions available todelegations directly.
11. Therepresentative ofJapan hadaquestion regarding NAFTA 'sprocedure forwaivers under
theGATS Article V,which related toquestion 175. Thereply mentioned thatsince NAFTA metthe
required criteria, there wasnoneedforawaiver. However, consistency withtheGATS would be
determined bythisWorking Party. Suppose theWorking Party concluded thatsome provisions ofthe
NAFTA werenotconsistent withthelegalobligation oftheGATS; would theParties totheNAFTA
thenseekawaiver?
12. Therepresentative oftheNAFTA replied thatitwasuptotheNAFTA Parties todecide whether
toseekawaiver, buttheNAFTA Parties 'understanding oftheprocess wasthattheNAFTA wasfully
consistent withArticle V.Without prejudice toanyaction theNAFTA Parties might takeafterthe
examination Report would befinalized, theycurrently didnotseeanyneedforawaiver andhadno
intention ofseeking awaiver.
Chapter 13,Telecommunications
Chapter 14,Financial Services
Chapter 16,Temporary Entry forBusiness Persons
13. TherepresentativeofArgentina,inrelationtoquestion190,SectionD,Professionals,wondered
whether there was,inthiscategory, amaximum number ofprofessionals thatcould enter acountry,
andifso,whatwerethespecific provisions? Were theprovisions different inthisspecific regard, as
compared tothose which weretobeapplied tothirdparties forthesame category? While itwasclear
thattheperiod would necessarily beatemporary one,anindication withrespect toitslength could
beuseful.
14. Therepresentative oftheUnited States replied thatthere wasonlyamaximum number with
respect totheUnited States, assetoutinAppendix 1603.D.4. Paragraph 1oftheAppendix stated
thattheUnited States would approve annually asmany 5,500 initial petitions under thecategory of
professionals.
15. Therepresentative ofArgentina wondered whether thiswaspartoftheUnited States yearly
quota inthiscategory, orwasitindependent ofthat?
16. Therepresentative oftheUnited States referred toAppendix 1603.D.4, paragraph 2C,which
stated thatintheoperation oftheImmigration andNationality Act,the5,500 initial petitions for
professionals would notbecounted inthenumerical limits thatwereapplied forother types ofentry.
Thequotas towhich thedelegation ofArgentina referred were separate from these, andCmade it
clearthatthese numbers would notbecounted against other numerical limits thatwould beapplied.WT/REG4/M/1
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C. Examination oftheGoods Aspects oftheNorth American FreeTrade Agreement
General Statements
17. Therepresentative ofMalaysia, speaking onbehalf ofASEAN, saidthatinthewake ofthe
proliferation ofregional groupings andfree-trade areas, thechallenge forthose embarking onsuch
ventures wasnotonlytoensure thattheywere infullconformity withtheprovisions oftheWTO,
butalso,toensure thatsucharrangements wereoutward-looking. While preferential tradeliberalization
would certainly benefit theNAFTA members, therewasapotential fortradeandinvestment diversion,
especiallyinthesectorswherestringentruleshadbeenprovided.Acommonconcernamongnon-NAFTA
members, including ASEAN, wasintheareaofrulesoforigin, where ruleswerestringent, especially
intheautoandtextiles sectors. These strictrulesoforigin might havevarying implications fordifferent
individual non-member countries supplying intermediary goods. Itmight bedifficult toassess theimpact
atthisearlystage, buttherelevant information could perhaps bemade available intheperiodic reports
bytheNAFTA Parties, envisaged intheWTO Understanding ontheinterpretation ofArticle XXIV
oftheGATT. TheNAFTA wasoneofthemajor free-trade agreements which wereexamined inthe
WTO. TheASEAN delegation hoped thattheWTO would beabletoproduce abetter record than
theGATT haddone, andthedelegation expected thatthisWorking Party would beabletocome up
withadefinitive conclusion onthequestion ofNAFTA conformity withtheconditions laiddown in
Article XXIV. Individual ASEAN members might haveissues toraisewhen examining thespecific
provisions oftheAgreement.
18. Therepresentative oftheEuropean Communities saidthathisdelegation wasgenerally infavour
ofinitiatives toliberalize andexpand world trade, inthecontext ofopenregionalism, butanysuch
initiative hadtocomply withtherules oftheWTO. Anexercise inthisforashould assess theway
inwhich theNAFTA influenced theeconomies which werenotparty toit.While itmight bedifficult
toisolate thepossible trade-creating effects oftheNAFTA persefrom those stemming from other
concurrent positive andnegative factors, some aspects oftheNAFTA contained restrictive elements
which were likely toexacerbate theinevitable trade deviation effects generated bytheformation of
afree-trade area. TheWorking Party must takeabalanced approach inaddressing these questions
since theobjective wastoassess theglobal incidence ofNAFTA, andnottodetermine whether each
individual dutyorregulation wasconsistent withallprovisions oftheWTO Agreement. Itwasobvious,
however, thattheglobal incidence ofanagreement wasonlytheresult ofthespecific effects ofits
different components, andtheCommittee should, attheproper moment, draw theattention ofthe
Working Party tosome ofthose specific aspects.
19. Therepresentative ofAustralia saidthattheNAFTA wasparticularly important asitbroke
newground, going beyond traditional border protection issues fortradeagreements andintosuchareas
astheenvironment andlabour issues. TheAustralian delegation noted thatregional trade initiatives
were providing much ofthedynamism andthepolitical willforintegration, deregulation and
liberalization. Themultilateral system should endeavour tokeeppacewithdevelopments attheregional
level, suchasthose embodied bytheNAFTA. Atthesame time, theWorking Party should avoid
encouraging arrangements which could harm themultilateral trading system. While theAustralian
delegation wasingeneral supportive oftheNAFTA, itsimplications forAustralia appeared tobemixed.
Insofarasitpromoted economic growth inNorth America, itwould clearly helpcreate trade and
investmentopportunitiesforpartiesoutsidetheNAFTA.However,differenttreatmenthadbeenaccorded
totheNAFTA Parties under sensitive sectors suchasautos, textiles andagriculture. Some sectors
hadbeenexcluded while some were subject tostrict rules oforigin, andothers hadbeensubject to
bilateral negotiations. Theinitial assessment wasthatthedifferent treatment given tothesensitive sectors
could,possibly,havetheoveralleffectofmaintainingthestatusquointheNAFTAonsensitiveproducts.
Ifthatwasthecase, itwould raisethequestion about itsimplications forthemultilateral system. If
agroup oflike-minded countries, suchasthose intheNAFTA, were stillunable togobeyond theWT/REG4/M/1
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status quoforsuchsensitive products, whatdiditmean forthemultilateral system? Allaspects of
trade would, overtime, hopefully beincluded onanequal footing under theNAFTA.
20. Therepresentative ofJapan saidthatastheNAFTA would haveaconsiderable influence on
thefuture ofthemultilateral trading system, andasregional integration waspermitted onlyasan
exception totherule,iswasnecessary toapply strictly theWTO Agreements toregional integration.
Thejustification forregional integration should bethatitseffect wastomaintain andstrengthen the
multilateral free-trading system. Against thisbackground, hisdelegation 'sexamination oftheNAFTA
hadrevealed thatthere weresome issues, suchastherulesoforigin, which hisdelegation would like
toraiseduring thediscussion. TheGovernment ofJapan regretted thatthefirstsession hadbeendelayed
duetothelatenotification oftheNAFTA andthelatesubmission ofreplies tothequestionnaire.
21. Therepresentative ofSwitzerland saidthatthetopic ofregionalism andmultilateralism was
ofprime importance tothecontinued existence oftheworld trade multilateral system, asaresult of
theincreased importance ofthetrading networks atthecontinental andeventheintercontinental level.
Thenewprovisions oftheWTO ensured thatregional integration agreements would contribute tothe
liberalization oftrade andtothecreation ofnewtrade opportunities, while avoiding theerection of
newbarriers totradewiththirdcountries. Efforts towards economic integration ontheNorth American
continent, asexemplified bytheNAFTA, werewelcome, butNAFTA provisions which might bring
about adeterioration intheterms ofaccess totheNorth American market deserved attention.
22. Therepresentative ofNAFTA saidthattheNAFTA offered theopportunity forincreased trade
among thethreepartners,which inturnwould offertheopportunity forincreased tradeandinvestment
between theNAFTA Partners andthirdcountries. TheNAFTA Parties would liketoseeadefinite
determination onNAFTA conformity withArticle XXIV, since intheParties 'view itwasinfull
conformity. Onthelinkages between multilateral andregional agreements, theNAFTA Parties were
oftheviewthattheNAFTAofferedtheopportunityforincreasedliberalizationinthemultilateralsystem.
TheNAFTA showed thewayforward bydealing withsuchareas asservices, intellectual property,
investment andcompetition policy -areas thattheWTO hadnottaken upprior totheconclusion of
theUruguay Round. Therules oforigin hadbeendesigned inawaysoasnottohaveanimpact on
theaccess ofthirdcountries. Goods ofthirdcountries continued toenjoy thesame levelofaccess to
theNAFTA Partners, thisaccess being based onexisting multilateral rules. TheNAFTA wasforward
looking andprovided, through itsaccession mechanism, foradditional countries tobecome parties
totheAgreement. Thedelegate ofJapan hadspoken oflatenotification oftheAgreement, butthe
NAFTA hadbeen notified totheGATT, asitthenwas, subsequent toitsentry intoforce, on
1January 1994.
23. Therepresentative ofMexico said, inrelation totheissues ofmarket access andnational
treatment, thathiscountry 'sexperience hadbeenapositive onefromseveral perspectives. Participating
inanagreement ofthistypehadmade itpossible forMexico toprogress onthepathofliberalizing
anumber ofsectors, which otherwise would havebeenverydifficult toopenbecause ofthelackof
reciprocity withcommercial partners. Within thecontext ofafree-trade agreement whose coverage
wentbeyond trade ingoods andwhich wasextensive, progress hadbeenpossible. Once thedoorhad
beenopened, thebenefits became clear, andthat,inturn,provided forfurther opening. Foreign trade
statistics ofMexico showed thatimports fromvarious regions oftheglobe hadriseninthepastyear,
which meant there wasnotasituation ofclosed regionalism.
Chapter One: Objectives, andChapter Two: General Definitions
24. Therepresentative ofAustralia wondered whatpercentage oftotalNAFTA tradewasconducted
in"sensitive sectors": sectors forwhich there werebilateral agreements andsectors forwhich special
conditionshadbeennegotiated,includingtighterrulesoforigin.TheAustraliandelegationwasprimarilyWT/REG4/M/1
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thinking ofagriculture, autos andtextiles. Would therulesforthese sectors bebrought intolinewith
therules forother NAFTA sectors?
25. Therepresentative ofArgentina hadaquestion ofageneral nature directly related to
questions 7,8and13ofthedocument. Thereplies toquestions 7and8began bystating "increating
afree-trade area", andinreply toquestion 13itwasstated that"itisafree-trade area, rather than
acustoms union". Were theNAFTA representatives oftheviewthatcustoms unions wereinherently
more restrictive thanfree-trade areas, andifthatwerethecase, asthereplies seemed toimply, could
theyprovide theeconomic andlegalrationale forthisassumption?
26. Therepresentative ofNAFTA saidthattheresponse toquestion 27gaveacomprehensive
answertothepercentageoftotalNAFTAtradeintheso-called"sensitivesectors".Question27Areferred
togoods covered inAnnex 300A, which wastheautomotive sector; 27Breferred toAnnex 300B, which
covered thetextiles sector; and27CdealtwiththeHarmonized System 's(HS)Chapters 1-24, covering
theagricultural sector. There hadbeensome typographical errors inthepercentage numbers thathad
beenprovided, butthecorrect oneswould beprovided inawritten corrigenda. Oneblatant error that
needed tobehighlighted related to27B,Imports toCanada. While thefigure ofCanadian dollars in
textiles andapparel imports intoCanada fromtheUnited States wascorrect, three billion, thepercentage
wasnot.Sixty-nine percentofthetrade wasnotinthetextiles sector. Itrather was6.91, more or
less,buttheconfirmation ofthatwould beprovided inwriting. TheNAFTA tariffs forallofthese
items would havebeenreduced attheendofthetransition period. Regarding rulesapplicable tothese
sectors andtheextent towhich theyhadbeenharmonized withothersectors, theCanadian representative
wasnotsurewhether asector distinction waswarranted. Annex 401oftheAgreement, which elaborated
therulesoforigin forallsectors oftheeconomy, proceeded onachapter-by-chapter basis, sosector-
specific, HS-specific rules wereapplicable tothese sectors aswellastoallother sectors. Regarding
thequestion fromthedelegate ofArgentina onthedifference between customs unions andfree-trade
areas, theresponse oftheparties toquestions 7,8and13wassimply meant tohighlight thatincreating
afree-tradearea,consistentwithArticleXXIV,nocommonexternaltariffpolicyhadbeencontemplated.
Itwasthusimpossible fortheNAFTA tocreate anincrease oranewformal barrier vis-à-vis non-parties.
Distinctfromthatsituationwasthecreationofacustomsunion,where,inaccordancewithArticleXXIV,
members hadtoconfirm andagree uponacommon external tariffpolicy. Experience hadshown that,
insome cases, countries whohadbecome members ofcustoms unions, hadhadtoraisetheirtariffs
inamanner which allowed themtoconform tothose oftheother members ofthecustoms union. The
answer wasnotmeant toimply thateachcustoms union would necessarily result insuchincreased
tariffs, butsimply topoint outthatthepossibility existed, contrary tothecreation ofthefree-trade
area.
27. Therepresentative oftheEuropean Communities saidthatexperience hadalsoshown that,
inthecreation ofcustoms unions, some tariffs wentdown. Could theNAFTA Parties giveanidea
oftheeffect theNAFTA hadhadonthetradewiththirdparties? Even ifstatistics wereonlyavailable
for1994, thefigures would stillbeinteresting.
28. Therepresentative ofNAFTA replied thatthere should notbeanydifficulty insharing the
trade statistics for1994, when thefigures hadbeencompiled.
29. Therepresentative ofJapan hadseveral questions under thegeneral part.Thefirstonerelated
toquestion one.Thereply saidthatnoeconomic sectors wereexcluded fromtheNAFTA. However,
itwastheunderstanding oftheJapanese delegation that,asfarasmarket access inagriculture was
concerned, ithadnotbeenpossible toarrive atacommon rulewithin theNAFTA. What wasinforce
wasessentially asystem ofbilateral regimes, forexample theformer US-Canada FTA. Ifthat
understanding wascorrect, itwould mean thatthatsector wasdefactooutside oftheNAFTA. Itcould
thusbequestioned whether theanswer thatnoeconomic sectors wereexcluded fromtheNAFTA wasWT/REG4/M/1
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ahundred percentcorrect. Thesecond question related toquestion five.Asrequested bytheEuropean
Communities, concrete datatocorroborate theassertions thathadbeenmade bytheNAFTA Parties
inparagraph 3andparagraph 4ofthereplywould beuseful. Thesecond paragraph ofthereplyreferred
toanumber offactors which suggested thattheNAFTA hadatrade-creating effect. Which werethese
factors? Thethirdparagraph ofthereply onlymentioned anassessment fromtheCanadian side.What
were theviews oftheUnited States about theAgreement?
30. Therepresentative ofJapan saidthathisthirdquestion related toquestion 14,regarding whether
theNAFTA prevailed overtheWTO Agreement. Could theParties giveanexample, which might
facilitate theunderstanding ofthismatter. Inparticular, soastoensure thatwhatever wasagreed upon
between theNAFTA Parties would not,inturn,violate theWTO Agreement? Thelastquestion was
related toquestion 18,which stated thattheCanada-US Free-Trade Agreement hadbeensuspended
withtheentry intoforce oftheNAFTA. ItwastheviewoftheJapanese delegation thatthatconstituted
asubstantial modification oftheCanada-US Free-Trade Agreement andthatitshould havebeennotified
totheGATT. Hadtheparties doneso?
31. Therepresentative ofCanada saidthatthefirstquestion onthetreatment ofagriculture probably
waspremisedonamisunderstanding.AlthoughtheChapteronAgricultureencompasseddifferentbilateral
agreements forcertain aspects ofagricultural trade, Article 300oftheNAFTA clearly stated thatthe
general rulesformarket access applied toallsectors, except totheextent specifically provided inanother
chapter. So,overandabove thespecific aspects ofagricultural trade thatwere treated inthespecial
fashion setoutinChapter 7,allother rulesoftheAgreement continued toapply. Thatmeant thatthe
agricultural sector, farfrom being excluded fromNAFTA coverage, wassubject tothefundamental
principles ofnational treatment, transparency, andtheother market access rulessetoutinChapter 3.
Regarding question 14andtherelationship between theNAFTA andtheGATT orWTO, theArticle
inquestion, Article 103oftheNAFTA, wasmeant toprovide thegoverning rulefordisputes that
arose under theNAFTA Agreement, asbetween theParties totheNAFTA. Inthatcase, theNAFTA
rules, rather thantheWTO rules, weretogovern. Thisdidnotimply anyinconsistency intherules.
Forexample, theNAFTA didnotcontain anyinternal equivalent toArticle XIIIoftheGATT. There
wasnointernalMFNrequirementformarketaccesswithinthefree-tradearea.Thus,therewerecurrently
some differences inthetariff phase-outs andintheallocation ofquotas ortariff ratequotas (TRQs)
inregard tocertain sectors. However, NAFTA Article 103wasdesigned toemphasize thatifaParty
went before aNAFTA dispute settlement panel, rather thanaWTO Panel, theywould notbeable
torelyonWTO Article XIIItotrump theotherwise applicable rulesoftheNAFTA. Nafta Article 103
wastoprovide guidance toNAFTA panels inthatregard anddidnotpurport toaffect anyParty's
rights andobligations under theWTO, itself. Regarding question 18,itmight havebeenatechnical
error, intheformofournotification. Neither Canada northeUnited States hadanyintention tomislead
orprovide incomplete information toWTO Members regarding thenature ofthetrade relationship.
They would behappy toprovide theexchanges ofletters thataccompanied theentry intoforce ofthe
NAFTA. Thedocumentation would beprovided inconnection withtheanswers toanysupplementary
questions raised inthecourse ofthemeeting.
32. Therepresentative oftheUnited States saidthatdataonthetrade flows withother countries
would beprovided. Another factor which suggested thattrade creation effects would begreater than
trade diversion effects wasthattheNAFTA Parties were already sureoftheirrespective trade, and
thattherealincome gains would create greater demand forgoods, notonlyfromwithin theNAFTA,
butalsofrom thirdparties. Twoother factors should beadded. Thefirstwasthattrade effects were
determined bytheexternal policies ofthethreeNAFTA Parties, andthattheyhadagreed, intheWTO,
toliberalize trade inanumber ofareas. Liberalization intheareaoftariffs would allow realincome
gains within theNAFTA totranslate intorealopportunities forproducers outside theNAFTA. The
second wasthattheinclusion ofMexico intothefree-trade areabetween Canada andtheUnited StatesWT/REG4/M/1
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would contribute tothetrade creation, particularly overthemedium tolonger term, which would
outweigh anyshort termtrade-diversion effects thatmight occur.
33. TherepresentativeofCanadasaidthattheCanadiandelegationhadtakennoteofJapan'squestion
withregard totheresponse toquestion 5andwould endeavour toprovide relevant assessments from
theUnited States sideontheimpact oftheAgreement. Withregard tothequestion about notification,
thethreePartieshadnotifiedtheNorthAmericanFree-TradeAgreement,andtheNAFTAitselfindicated
those articles oftheUS-Canada Free-Trade Agreement which hadbeenincorporated andcontinued
tobeinforce.
34. Therepresentative oftheEuropean Communities followed uponthequestion posed byJapan
onagriculture. Theagricultural sector wascovered inamyriad ofbilateral agreements. According
totheanswer, Article 103applied onlytocertain aspects. Some precision would therefore beuseful.
There wereapparently onlycertain aspects oftheagricultural sector which werefullycovered bythe
Agreement.
35. Therepresentative oftheNAFTA clarified thatArticle 300wasnotjustanarticle thatapplied
toagriculture, butagoverning rulethatstated thatallprovisions ofChapter 3regarding market access
applied toallsectors, except totheextent thatthere weremore specific provisions insector-specific
chapters, suchastheonesconcerning energy oragriculture, orannexes ontextiles andautomobiles.
Theentire Market Access Chapter, which contained thecoretrade liberalization rules, applied tothe
agricultural sector. HalfofChapter 7Bapplied tosanitary andphytosanitary measures which related
totheagricultural sector. Anyagricultural services, orinvestment inthatsector, were governed by
those relevant chapters. Regarding tariffs, theresponse toquestion 22setoutthemanner inwhich
agriculture wascovered assubstantially asanyothersector oftheAgreement, interms ofmarket access.
36. Therepresentative ofJapan came backtothequery regarding thefactors, suggesting thatthe
trade-creation effects would begreater thanthetradediversion effects. Hisdelegation didnotunderstand
thelinkbetween theinclusion ofMexico intothefreetrade area, andtheassertion thatdirect trade-
creation effects oftheNAFTA would offset anytrade-diversion effects.
37. Arepresentative oftheNAFTA replied thatbycreating alarger free-trade areaamong three
Parties, theincome gains would bemore significant inallthree Parties. These higher income gains
inalarger area,would result inapositive impact onworld trade, which inturnwould result inalarger
possibility oftrade creation, offsetting anyshort-term trade diversion.
38. Therepresentative ofArgentina wondered whether itwascorrect thattherewerenoeconomic
sectors which were excluded from theNAFTA, eventhough there seemed tobecertain exceptions,
suchasclothing, textiles, shipping, energy, power, price policy, agriculture, withlimitations for
investments?
39. TherepresentativeoftheNAFTAsaidthatthebasicquestionforthisWorkingPartywaswhether
theNAFTA hadremoved tariffs andother restrictive regulations ofcommerce onsubstantially allthe
tradebetween theParties totheAgreement. Therepresentative ofCanada hadnotmeant toimply that
those sectors which hadaspecific annex orchapter necessarily resulted insymmetries. Interms of
overall coverage andphase-out periods, theNAFTA wasanAgreement withmore coverage anda
more reasonable phase-out period, thanmost other agreements thathadbeennotified.
Chapter Three: National Treatment andMarket Access
40. Therepresentative ofJapan hadadoubt concerning question 24.Thereply tothatquestion
stated thattheamount oftrade incertain products wassmall, which provided thereason whythatwasWT/REG4/M/1
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anexceptional casewhich qualified forthe15-year transitional period. Hisdelegation wasoftheview
thatthefactthattheamount oftrade wassmall might havebeentheresult ofprotective measures.
Were there anysupplementary reasons whythese sectors were qualified asexceptional, resulting in
atransitional period of15years? Hissecond question related toquestions 25and26,concerning a
likely change inthefuture. Theanswers onlyreferred tothepastsituation. Could theNAFTA Parties
provide anyperspectives forthefuture? Hisdelegation would alsoliketohavethestatistics forthe
year1993onthesame basisastheanswers thatweregiven. Thethirdquestion related toquestion 30
regarding thedetermination ofthestatus ofprinciple andsubstantial supplier. Wastheamount ofintra-
trade within theNAFTA excluded when determining thestatus ofprinciple andsubstantial supplier?
Hislastobservation related tothereply toquestion 32,which stated thatMexico would notraiseany
duties applied tonon-NAFTA members above thebound levels negotiated intheUruguay Round. The
factthatMexico hadchanged thebasisforcustoms valuations fromf.o.b. toc.i.f.onlyfornon-NAFTA
countries would imply adefacto increase intariff rates.
41. Therepresentative ofMexico replied withrespect toquestion 24,thatproduct sensitivity
determined whether acasewasconsidered aspecial one.Products which werenotconsidered sensitive
would notenjoy afifteen-year period envisaged fortariff elimination. With regard toquestions 25
and26regarding thepotential forafuture change, hesaidthatitwasextremely difficult togazeinto
theeconomic future. Thestatistics which wereprovided for1994demonstrated thatasubstantial part
oftrade ofthethree Parties tookplace among themselves before theestablishment ofthefree-trade
area. Theprobability oftrade diversion wastherefore mathematically smaller thaniftheincidence
ofintra-trade relations previously hadbeenverylow.There wasnouseintrying toguess anyfuture
development, asthere wasalarge number ofvariables which would render theexercise arbitrary. In
reply toquestion 30,thebestguarantee hadbeengiven, which wasthattheNAFTA Parties would
fullycomply withtheprovisions ofArticle XXVIII oftheGATT asfarasdetermining thestatus of
principle andsubstantial supplier. Regarding question 32,therewasnocasewhere theNAFTA Parties
would raiseMFN duties applied above thebound levels negotiated intheUruguay Round. Thatwas
anobligation incumbent onallunder theGATT 1994. There wasnolinktothefactthatthec.i.f.system
applied toallimports thatdidnotoriginate inNorth America. Hisdelegation didnotshare theview
thattheapplication ofthec.i.f. system toMexican products implied infactanincrease inthetariff
levels.
42. Therepresentative ofJapan saidthathisdelegation 'sconcern waswhether theintra-NAFTA
trade, which wasconducted onapreferential basis, would putthecountries outside theNAFTA in
anunfavourable position. Therequest wastherefore thatindetermining theposition ofprinciple and
substantial supplier, theintra-NAFTA trade should benetted-out.
43. TherepresentativeofAustraliasoughtclarificationontheNAFTAParties'answertothequestion
which therepresentative ofJapan hadasked inrelation toquestion 24,concerning thelength ofthe
phase-outperiodforsomemeasures.Touseaconcreteexample,wouldCanada'sprohibitionsonimports
ofusedvehicles from Mexico expire in2019? Ifthatwere thecase, didthisrelate totheprovisions
ofGATT Article XXIV:5(c)?
44. TherepresentativeofCanadaansweredthattheprovisiononlydealtwiththeusedcarprohibition
between Canada andMexico. Canada 'srelationship withother WTO Members, which wasgoverned
bytheWTO, hadbeenaddressed asaresult oftheconclusion oftheUruguay Round negotiations,
under which Canada hadanobligation torevoke itsusedcarprohibition against WTO Members.
45. Therepresentative ofMexico saidthatthedatafor1993 would besupplied inrespect ofall
three Parties concerned. Healsoreiterated thatanyprovision inGATT Article XXVIII ordecisions
referringtoit,includingunderstandingswithintheUruguayRound,werebindingandwouldberespected
bytheNAFTA Parties.WT/REG4/M/1
Page10
46. Therepresentative ofJapan hadtwofurther questions regarding Mexico 'sAutomotive Decree.
Therelevant reply indicated thatanotification ofaTRIM hadbeenmade pursuant totheTRIMS
Agreement, Article V:1;however, itwasunderstood from thereply thatMexico hadnotyetmade
anyrequest totheCouncil forTrade inGoods regarding theextension ofthetransition period, according
totheTRIMS Agreement, Article V:3.Ontheother hand, theNAFTA, inAnnex 300A, stated the
validity ofMexico 'sAutomotive Decree uptotheyear2004. IfMexico wasregarded asadeveloping
country, theTRIMS Agreement stipulated thatthetransition period would beuptofiveyears; there
seemed thustoexistadifference inthetransition period between theNAFTA Annex andtheTRIMS
Agreement. Wasthereapossibility thatMexico would notrequest anextension ofthetransition period
intheCouncil forTrade inGoods andabolish, oreliminate, theAutomotive Decree before theyear
2004? Thesecond question related tothereplytoquestion 54,which saidthatanytradesurplus achieved
byavehicle manufacturer established inMexico could beusedbythatmanufacturer toimport vehicles
fromanycountry andfromanymanufacturer. Howwould non-manufacturers ornewentrants betreated,
andwhatwould thescope oftheapplication ofthisDecree be?What would theduration andthemethod
tocalculate thevalue oftheimports be?
47. Therepresentative ofMexico replied thatMexico 'sAutomotive Decree wassomething which
didnotderivedirectlyfromtheNorthAmericanFree-TradeAgreementnegotiations.ItdatedtoMexico's
entry intotheGATT in1986, which hadbeensubject tonegotiations. ATRIMS notification hadbeen
made which hadeven included anoteexplaining what hadbeen agreed upon under theNAFTA
Agreement. TheMexican delegation didnotatthismoment wishtoprejudge itsposition infiveyears
timeastothepossibility ofMexico asking foranextension ofthefive-year period ofgrace under the
TRIMS Agreement. Itwould depend onthefinancial, tradeanddevelopment requirements atthatpoint
intime. Regarding theanswer toquestion 54,inaccordance withtheMexican Automotive Decree,
anytrade surplus achieved byvehicle manufacturers established inMexico could beusedbythat
manufacturer toimport vehicles fromanycountry. Itdidnotrefertovehicles fromanyspecific country
orfromanyspecific manufacturer ofvehicles. Theauthorities weretoissuetheimport permits atleast
intheamount ofthetrade surplus inaccordance withthisDecree. With regard tonewentrants, or
newmanufacturers, hewasnotfamiliar withanyspecific case, butMexico would abide bytheits
internationalcommitmentsandobligations,includingtheobligationsundertheTRIMSAgreementsetting
outthetreatment ofsuchnewentrants ornewmanufacturers, should suchacasearise.
48. Therepresentative oftheEuropean Communities referred tothereply given toquestion 53.
Henoted thatinthenotifications made totheCommittee onTRIMS under Article V:1,Mexico had
notifiedtheseautomobilemeasures,statingthatitwasuncertainwhetherthosemeasureswerecompatible
withtheTRIMS Agreement. Bynotifying fortransparency reasons, Mexico hadpassed theballto
theCommittee onTRIMS, butwhatwasMexico 'sownviewonthismatter?
49. Therepresentative ofMexico, recalling theJulymeeting oftheCommittee onTRIMS, said
thatatthatmeeting ithadbeensaidthatallthegeneral exceptions oftheGeneral Agreement were
alsoapplicable totheTRIMS Agreement. Inthatcontext ithadalsobeennoted thattheexceptions
ofGATT Article XVIII were applicable. Herecalled thatunder theTRIMS Agreement nogeneric
definition ofaTRIM hadbeen determined, butrather anillustrative listofTRIMS which were
inconsistentwiththeobligationsunderGATTArticleIIIorXIhadbeenincluded.TheTRIMSAgreement
didnotprovide aclear-cut definition todetermine which measures would beconsistent andcould hence
beenvisaged. Mexico had,inspiteofallthis,adopted atransparent attitude.WT/REG4/M/1
Page11
Chapter Four: Rules ofOrigin2
50. Therepresentative ofJapan saidthattheNAFTA reply regarding therulesoforigin wasbased
ontheviewthatpreferential rules were usedtodetermine eligibility forpreferential tariff treatment
anddidnotaffect MFN tariffs orother policy instruments thatapplied toimports ofgoods fromnon-
NAFTA countries. Intheviewofhisdelegation, thewayinwhich these rulesweredetermined could
haveasuppressive effect onimports fromoutside countries. Thatwaswhythisquestion hadbeentaken
uprepeatedly during other Working Parties andduring theUruguay Round. Hereferred toadocument
entitled "The NAFTA -Expanding USExports, JobsandGrowth", which hadbeenissued during the
NAFTA debate intheUnited States. Thedocument repeatedly referred totough orstrictrulesoforigin
inrelation totheneedtoprotect andassist United States workers, which suggested thattherules of
origin hadbeendesigned towork asaprovocative device ontheimports from countries outside the
NAFTA. Another specific question related tothereply toquestion 60,which stated thattheParties
hadalready begun work tosimplify therules oforigin. How didtheParties intend togoabout the
simplification andwould countries outside theNAFTA begiven achance toexpress theiropinions
about thework thatwasbeing conducted?
51. Therepresentative oftheNAFTA answered thatthesimplification work hadbegun shortly
aftertheconclusion oftheNAFTA negotiations. Since therules pertained solely totrade within the
NAFTA region, theprocess hadbegun withtalkswiththeregions 'industries. Inreply tothemore
general comment, itdidremain theviewoftheNAFTA Parties thattherulesoforigin, assetoutin
Chapter 4oftheNAFTA, were preferential rules andwere intended solely todetermine whether a
good produced within theNAFTA region waseligible forNAFTA trade preferences. They didnot
apply toimports fromoutside theNAFTA region, andtheydidnotincrease tariffs totradefromoutside
theregion. Possible short-term trade diversion would, overthemedium tolongterm, beoffset bythe
trade creation impacts oftheNAFTA.
52. Therepresentative ofKorea hadaquestion related toquestion 72,aswellastotheoverall
responses oftheNAFTA Parties totheissueofcountry oforigin. InspiteoftheNAFTA reply, trade
opportunities forthird countries, aswellastrade opportunities within theNAFTA area, could be
adversely affected, especially through theregional content requirements applicable toautomobiles.
Hetookthehypothetical example ofaforeign auto-manufacturer located inCanada which exported
automobiles toMexico ortheUnited States. Thecarswould havearegional content exceeding the
50percentlimitthatexisted, which might havebeenthereason fortheforeign investor toestablish
afactory inCanada. Themanufacturer hadtheexpectation thatthe50percentrulewould continue
toexist. Thatmanufacturer might finditdifficult, orevenimpossible, tochange thetechnical method
ofmanufacturing, orthesourcing ofhiscomponents, intheevent thattheregional content requirements
wereincreased; inthatcase, theonlyoption forthecompany would betostopproduction andleave.
Thatmight lead,inturn,totrade restriction inthatsmall sub-sector. Delegations hadrepeatedly been
toldthattheNAFTA covered allsectors oftheeconomy andthattherestrictions inallsectors should
beeliminated. Theregional content requirement hadbeenincreased, leading tosome contradictory
results. How could thisinconsistency beexplained, anddidtheNAFTA Partners intend toaddress
thiskindofproblem inanyway?
53. Therepresentative oftheNAFTA firstreplied tothecar-company scenario. TheNAFTA Parties
hadtriedtobeastransparent aspossible indeciding upontheautomotive rulesoforigin. Automotive
goods, ascompared toother goods, wererather complex andsophisticated goods. Inorder tomake
surethatasatisfactory ruleoforigin triggering NAFTA tariff preferences wasdeveloped, anumber
2Delegations alsoreferred totheissue ofrules oforigin inthecontext oftheirdiscussions onChapters Five
andSix.WT/REG4/M/1
Page12
ofchanges hadtobemade. Onewastoincrease therequired content level, butasitwould notbe
fairtodothatovernight, aneight-year phase-out period, involving twosteps, hadbeenprovided for.
Indetermining thistransition period, theensuing needforchanges inthetechnical process andchanges
insourcing hadbeentaken intoaccount. Anumber ofother changes should beviewed asgoing in
theopposite direction, intheactual content required. Inanycontent equation, boththeformula and
thenumber should beconsidered. Inreply tothemore general question, theNAFTA Parties didnot
seeanyinconsistency withregard totherulesoforigin andtheWTO obligations. Again, theNAFTA
rulesonlyapplied totradewithin theregion, andtherewasnothing intheNAFTA thatprevented trade
tocontinue atMFN rateswithin theregion. Therulesoforigin stated thedegree ofregional content
required inorder tobenefit from thepreferential rates.
54. Therepresentative ofAustralia followed uponthequestion posed bytheKorean delegate.
Although MFN ratesinsome sensitive sectors hadnotbeenincreased, tighter rulesoforigin inothers
would notnecessarily leadtoincreased trade within theNAFTA inthese sectors. Thisraised some
questions about whathadbeensaidabout theoverall trade-creating effect oftheNAFTA. Could any
figures beprovided toanswer thisquestion? Areference wasalsomade totheanswer given bythe
Parties toquestion 88where itwasspelled outthattheNAFTA wasexpected tohaveapositive impact
onimports ofallgoods, from allregions oftheworld, because ofthetrade-creation effects arising
from higher incomes intheNAFTA territories.
55. Therepresentative oftheNAFTA saidthatthephrase "tighter rules" hadbeenmentioned in
reference totheCanada-US Free-Trade Agreement. While certain ruleswithin theNAFTA weretighter,
inthattheyrequired ahigher levelofdomestic content thanrulesinother agreements, certain others
might lessrestrictive. However, itcould bequestioned whether itwasappropriate tocompare two
entirely different agreements. There should betrade creation within theNAFTA region asthe
opportunities fortrade would grow withreduced MFN ratesbetween thethree countries, asallowed
under Article XXIV. Thatwould inturn,through anumber ofspill-over effects, leadtoenlarged trade
opportunities toworld trade ingeneral.
56. TheChairman asked, inthelightofthefactthattheNAFTA hadbeenineffect forabout eighteen
months, whether itwould bepossible fortheParties toprovide some statistical information about the
trade-creating effects, particularly inthesectors referred toinquestion 88.
57. Therepresentative oftheNAFTA replied thatitwastheunderstanding oftheNAFTA Parties
thattheyhadalready undertaken toprovide tradedatafor1992, 1993and1994. Itwould bepremature
toprovide tradedatafor1995. However, theyhadnoted theparticular interest intradedatafortextiles,
textiles apparel andautomotive goods.
Chapter Seven: Agriculture
58. Therepresentative oftheNAFTA saidthat,ifhehadunderstood thequestions which hadbeen
raised inrelation toquestions 118,119and120,therewasbotharequest forgreater detail andarequest
tothedelegation oftheUnited States toprovide anassurance withrespect totreatment ofAustralia 's
agricultural trade. TheNAFTA Parties hadintended toprovide suchanassurance, andwere ofthe
viewthattheyhaddoneso.Inorder toamplify theresponse given toquestion 121,theNAFTA Parties
could confirm thattheirobligations under Article XIIIoftheGATT, withrespect topublic notice and
withrespect toconsultations, would befulfilled.
59. Therepresentative ofNewZealand referred toquestion 109,concerning theprovisions ofthe
NAFTA which allowed eachNAFTA Party tocount thein-quota quantity under thetariff-rate quota
intheagricultural sector towards thesatisfaction ofcommitments made under theUruguay Round.
Thiswasanimportant question forNewZealand, asithaddowithwhether thirdcountries wereableWT/REG4/M/1
Page13
tomaintain theirrights oftariffquota access tothemarkets ofafree-trade area.What werethecriteria
usedtodetermine thetariffratequotas (TRQs) under theNAFTA, andtheamount thatcould becounted
against theUruguay Round commitments?
60. Therepresentative oftheNAFTA saidthat,inviewofthecomplexities involved, hewould
takethequestions from Australia andNew Zealand andprovide adetailed written response as
expeditiously aspossible.
61. Therepresentative ofJapan wished toregister hisdelegation 'sconcern withrespect totheuse
ofexport subsidies. Theanswer toquestion 123indicated thattheUnited States usedexport subsidies
onskimmilkpowder salestoMexico in1994. Ontheother hand, theanswer to112referred tothe
elimination ofallexport subsidies affecting agricultural tradebetween theNAFTA Parties. Hehoped
thatwhen thisobjective hadbeenreached, theexport subsidies would correspond tothose usedfor
trade between theNAFTA Partners, andwould notbeallocated toexports tonewmarkets towhich
export subsidies hadnotyetbeenallocated.
62. Representative oftheNAFTA emphasized, astheresponse toquestion 112pointed out,that
under NAFTA Article 705, theNAFTA Parties remained committed tomake further progress,
multilaterally, onthereduction andelimination ofexports subsidies ininternational agricultural trade.
Article 705provided auseful mechanism toensure further progress among theNAFTA Parties. A
provision onexport subsidies inthebilateral free-trade agreement between Canada andtheUnited States,
which hadbeenincorporated intoChapter 7oftheNAFTA, remained operative under theNAFTA
aswell.
63. TherepresentativeofUruguayaskedwhattherelationshipwasbetweentheintra-NAFTAquotas
andthose which thethree member countries were determined todevelop within theGATT market.
Furthermore, Canada hadasystem which wassomewhat different fromthatoftheother twocountries.
Could theinformation indicate thecharacteristics ofthetworegimes oftariff quotas forthemembers
oftheLatin American Integration Association?
64. Therepresentative oftheNAFTA replied thattheNAFTA Parties hadalready undertaken to
provide written responses regarding therelationship between intra-NAFTA trade andmultilateral
commitments onTRQs, andthattheanswer toquestion 108,which alsoresponded toquestion 117,
made clear exactly which provisions applied asbetween Canada andeachofitsNAFTA Parties.
65. Therepresentative ofArgentina haddoubts concerning sugar trade andreferred tothereply
toquestion 121which stated thattheUnited States hadnotproposed toallocate ashare oftheTRQs
toCanada orMexico inamanner inconsistent withArticles XIIIorXXIV. Howshould theallocation
withrespect toArticle XIIIbeinterpreted? Didthereasoning related toArticle XXVIII havesomething
todowiththis?
Chapter Four: Rules ofOrigin, Chapter Five: Customs Procedures, Chapter Six:Energy and
Basic Petrochemicals
66. TherepresentativeofJapanhadcommentsinrelationtoquestions103-105.Thereplytoquestion
103explained theeffects onNAFTA 'strade, inawaywhich suggested thatonlytheNAFTA countries
existed intheworld. Secondly, thechange fromanf.o.b. toac.i.f. basis hadadiscriminatory effect
against countries outside theNAFTA. Thechange would alsomean achange inthelevelofconcessions
contained inMexico 'sSchedule, which hadbeenarrived atduring theUruguay Round negotiations.
How didMexico explain thesituation?WT/REG4/M/1
Page14
67. Therepresentative oftheEuropean Communities wasalsoconcerned about thereply to
question 103.Thechange wasdiscriminatory andhadnegative effects onnon-NAFTA Parties. Nothing
inthereply explained whythechange hadbeenintroduced orwhyithadbeenmade atthatparticular
point intime.
68. Therepresentative ofMexico saidthatparagraph 3ofthereply onlyreferred totheimpact
ontheUnited States andCanada because theyweretwooftheParties totheNAFTA, andthereply
hadbeengiven inthecontext ofaNAFTA examination. Onthesubstance ofthequestions hesaid
thatusing either thec.i.f. orthef.o.b. asabasis forcalculation wasallowed under theAgreement
onCustoms Valuation since Article VIIIprovided foreither basistobeused. Themultilateral system
thusdidnotexpress apreference foreither c.i.f. orf.o.b. Allmembers oftheWTO weretreated on
anequal footing. When aproduct originated inCanada ortheUnited States, c.i.f. wasapplied as
abasisforvaluation,justaswhenitoriginatedintheEuropeanCommunities,Japan,orfromtheterritory
ofanyMember oftheWTO, or,forthatmatter, anynon-member oftheWTO. However, when the
goods conformed totherulesoforigin provisions oftheNAFTA, suchgoods wereconsidered tocome
fromtheNorth American FreeTrade Area, andtherefore treated under thef.o.b. system. Theactual
economicimpactwasnegligible,since90percentofMexico'simportsoriginatingfromtheUnitedStates
came from quite nearby,making thedifference between thef.o.b. orc.i.f. values minimal. Since
53percentoftotalimports fromtheUnited States and59percentoftotalimports fromCanada were
already duty-free under theNAFTA, thedutyrevenue, whether thebasiswasc.i.f.orf.o.b., waszero,
sotherewasnoeconomic implication regardless ofthebasisused. AttheendoftheNAFTA transition
period, nodifference between c.i.f. orf.o.b. would existsince trade among thePartners would be
based onazerotariff level, causing dutyrevenue alsotobezero. Ifthere hadbeenprotectionist
intentions, ordesigns tofavour theNAFTA trading Partners, andiftheNAFTA Parties stillhadwanted
tocomply withWTO rules, theMFN ratecould havebeenincreased, astherewasstillamargin between
Mexico 'sbound tariffs under theUruguay Round andtheapplied tariffs. Hedidnotthink thatthe
factthattheEuropean Communities usedac.i.f.basismeant thattherewerenegative effects onNAFTA
exports. There wasalsoaquestion oftiming. Even ifitwereassumed thatthec.i.f. basis were less
favourable totradethananf.o.b. basis, andifthechange could beinterpreted astheraising ofabarrier
under Article XXIV, itwould stillbetruethatthec.i.f. system hadnotbeenimplemented directly
aftertheentry intoforce oftheNAFTA. Even ifdefacto thec.i.f. produced asituation ofgreater
restriction, itwould notbeadirect result oftheentry intoforce oftheNAFTA.
69. Therepresentative ofJapan clarified thathisdelegation didnotcontest thelegality ofeither
thec.i.f. orthef.o.b. system under Article VIIIoftheCustoms Valuation Agreement. What hehad
beentrying point outwasthat,ashadbeenmentioned inthereply, therewaslittledifference between
c.i.f.andf.o.b. values for90percentofMexico 'simports fromtheUnited States, andthatthechange
would leadtoanincreased difference oftreatment forproducts originating incountries outside the
NAFTA, especially from far-away countries. Thatwasthediscriminatory effect.
70. Therepresentative oftheEuropean Communities saidthatthefactthatitwastheNAFTA that
wasunder review didnotmean thatdelegations werenotinterested intheeffects oftheNAFTA on
other countries. Thatwas,above all,whattheexamination wasallabout. Healsowondered whythe
Mexican regulation which changed thesystem hadbeenpublished on29December 1993.
71. Therepresentative ofMexico saidthatthemultilateral trading system would nothaveaccepted
calculations onthec.i.f.basisiftheyactually constituted anincrease inbarriers. However, bothways
ofcalculating wereequally validfromthelegalpointofview, anditwastherefore notlogical todeduce
thatonesystem wasmore restrictive thantheother. Astothepossibility ofadiscriminatory effect,
iftheNAFTA contained apreference forNorth American goods, itwasbecause itwasafree-trade
agreement. Apreference didexist, butthatwasentirely consistent withArticle XXIV. Regarding
theimpact onthirdcountries, theWorking Party hadthemandate toexamine theconsistency oftheWT/REG4/M/1
Page15
NAFTA withArticle XXIV, nottheeconomic impact onWTO Members. TheNAFTA Parties were
oftheviewthat,interms ofArticle XXIV, thesituation was100percentcompatible. TheDecree,
pursuant towhich thec.i.f. basisshould beapplied toallMembers ofWTO, oranycountry enjoying
MFN status, wasalegally distinct enactment fromtheonesetting outamendments toMexican legislation
thatarose outoftheimplementation oftheNAFTA. Astothepublication dateoftheregulation on
29December 1993, thedecision applied tocustoms andthusthefiscal timetable inMexico hadbeen
taken intoconsideration: decisions thatapplied tocustoms valuation werealways published inthesecond
halfofDecember inMexico.
72. Therepresentative ofArgentina referred tothestatement bytheMexican delegate thatifMexico
hadhadtheintention toincrease themargin ofpreference totheadvantage oftheNAFTA Parties,
itwould havebeenenough forMexico toraiseitstariffs, since theceiling ofitsbinding washigher
thanthetariff ithadapplied. Itwassaidearly oninthismeeting, thatinafreetrade area, from a
technical point ofview, andunlike acustoms union, there wasnopossibility ofproducing distortions
oftrade, bydefinition. Ifthatwere so,itwould seem that,atagiven point intime, tariffs could be
changed right uptotheceiling, permanently modifying preferences andaffecting theflowoftrade
tothirdparties, without consulting other members about matters inafree-trade area. Wasthatcorrect?
73. Therepresentative ofMexico didnotconsider theargument given bytheArgentinean delegate
tobecorrect, firstly because thebound tariff andtheautonomous tariff persehadnothing todowith
customs unions orfree-trade areas. What hadbeensaidwasonlythatthedifference between acustoms
union andafree-trade areawasthatinafree-trade areatherewasnoneedforacommon external tariff,
whereas acustoms union didrequire one.Thecomment hadonlybeendirected tothefactthatMexico
could haveraised itstariffs, which itdidnotdo.Mexico wasnotinanywaytrying toprotect itsindustry.
Iftheexercise theWorking Party wasengaged inwastoexamine thecompatibility oftheNAFTA
withArticle XXIV, hewondered whether anyprovision oftheNAFTA wasinrealcontravention of
Article XXIV, ashedidnotthink thatthatwasthecase.
74. Therepresentative oftheEuropean Communities pointed outthatitwaswithin themandate
oftheWorking Party toexamine whether thecreation oftheNAFTA hadincreased thelevelofduties
orother regulations, without contesting thatitwasinthenature offree-trade areastocreate preferences
among itspartners. However, while preferential treatment wasgiven totheNAFTA Parties, thirdparties
weresuffering fromthechange inthesystem which hadresulted incalculations being carried outon
anf.o.b. basisforgoods within theNAFTA, while thirdparties 'goods werebeing subject tocalculations
onac.i.f. basis.
75. Therepresentative ofMexico saidhedidnotdenythatthere wasadifference intreatment.
However, hedidwanttoexplain thatthec.i.f. system didnotderive fromtheentry intoforce ofthe
NAFTA. Inother words, thesystem could nothavechanged thesituation which wasapplicable before
theNAFTA came intoforce. Therefore, therewasnoissueinterms ofconsistency withArticle XXIV
or,more particularly, theprovisions ofitsparagraphs.
76. TheChairman saidthathefound Mexico 'sresponse intriguing, ifitmeant thatthematter at
handwasanArticle Iissue, rather thananArticle XXIV issue.
77. Therepresentative ofNewZealand wasoftheview thattheactions taken bygovernments
between thenegotiation ofafree-trade areaandtheimplementation ofitwerehighly relevant tothe
question ofconsistency withArticle XXIV:5(b). Countries could otherwise dowhatever theywanted
intheperiod between negotiation andimplementation, toaddgreater advantage towhatwasnegotiated
inthefree-trade area.WT/REG4/M/1
Page16
78. Therepresentative ofJapan hadsome questions relating toChapter 4onrulesoforigin. The
firstoneconcerned question 63,withregard toparagraph 1ofthereply. TheJapanese delegation would
liketohaveacopyoftheUniform Regulations forChapter 4.Withregard toparagraph 2,whatwere
theactivities andthepresent situation oftheWorking Group onRules ofOrigin? Inrelation to
questions 64and65,theJapanese delegation wished tohavemore information about theparticularly
complicated rulessetoutfortheautomotive andother areas. Partofthereason wasgiven intheanswer
toquestion 72;butwhatdistinguished theautomotive sector fromother equally complex products like
aircraft? Withregard toparagraph 3ofquestion 64,whatwastheaimandapplication oftheinventory
control method thatwasreferred to?Question 65,paragraph 2,saidthatinsome casestheuseofnational
eight-digit tariffitems oraregional value content testwasnecessary. What wasthescope ofsuchcases
andthecriteria fordetermining them? Thereply alsomentioned thatthedegree ofspecificity inthe
NAFTA Rules ofOrigin forindustry sectors wasbased onthedegree ofspecificity intheHarmonized
System forgoods inasector. Itwasdifficult tounderstand thatthedegree ofspecificity intheNAFTA
Rules ofOrigin forindustry sectors hadbeendecided forsolely technical reasons. Hisdelegation had
thefeeling thattheyhadrather beendecided withtheintention ofprotecting certain sensitive areas.
Thenextquestion related toquestion 66and67.Hisdelegation didnotintend tochallenge theexistence
ofrulesoforigin themselves. However, theiressence wastodistinguish between products originating
intheNAFTA region andproducts originating outside theNAFTA, anddepending onthecriteria and
application ofthese rules, there could beproblems ofapplication inaprotective manner. Inthecase
ofthelocalcontent requirement onautomobiles, theNAFTA content levelwould eventually become
62.5percent,from50percentintheCanada-US FreeTrade Area. Thatcould beconsidered inconsistent
withArticle XXIV:5(b). What wastheviewoftheNAFTA Parties onthispoint?
79. Therepresentative ofJapan continued byraising amatter concerning question 72.Ifadetailed
calculation method oflocalcontent wassetupforindustries withawiderange ofcomponents, itwould
putagreat burden onindustry. Would thatnotconflict withtheintention oftheNAFTA Parties to
simplify therules oforigin, asexplained inthereply? Afollowing question related tothereply to
question 76which didnotgiveananswer interms ofthecreation ofadministrative burdens on
companies, ashadbeenasked inthequestion. What wastheeffect oncompanies? Hisdelegation was
oftheviewthattheinternational harmonization ofrulesoforigin wasnecessary. IntheUnited States,
however, there were three different methods ofcalculating local content namely theNAFTA, the
Labelling ActandtheCorporate Average FuelEconomy law("CAFE" law)-which complicated the
system andalsoconstituted aburden onprivate companies. Were there anyplans forharmonization
within theUnited States? Iftherewere, could aspecific schedule beprovided? Thethirdquestion related
toquestion 79.Afive-year period fortheretention ofNAFTA records inMexico andtheUnited States,
andasix-year period inCanada, wasspecified ineachmember 'snational rules. Inwhich lawsornotices
were these actually specified? TheNAFTA required exporters orproducers tomaintain allrecords
related totheorigin ofagoodforfiveyears, orlonger thanfiveyears, astheNAFTA Party mayspecify.
What kindofsituation wassupposed torequire anextension ofthefive-year period? Thelastquestion
related toquestion 82,which seemed tohavebeenmisprinted. Theintention hadbeentoaskabout
thecaseofacompany exporting goods, notfromMexico totheUnited States, buttheother wayaround,
fromtheUnitedStatestoMexico.Hisdelegationwouldappreciateafreshreplybasedonthisclarification
ofthequestion.
80. Therepresentative ofCanada replied thattheNAFTA Parties would behappy toimmediately
provide acopyoftheUniform Regulations totheJapanese delegation. Acomplete copyoftheUniform
Regulations forChapter 4hadbeenprovided inthenotification totheSecretariat. Those Uniform
Regulations wereimplemented verbatim, andthere wereminor differences inallthree countries. The
NAFTA Working Group onRules ofOrigin hadmetsixtimes. Aminimum offourmeetings was
required under theNAFTA. These hadbeencarried outin1994. Twomeetings hadbeenheldsince
then. Oneareathathadbeenofmain concern wasthereview oftheUniform Regulations toensure
thattheyworked. Theruleshadbeenpublished intheUnited States andinMexico. Public commentsWT/REG4/M/1
Page17
hadbeensolicited andreceived. TheParties were intheprocess ofimproving theoperation ofthe
rules, including some changes withregard totheautomotive rulesinorder toprovide more flexibility
inactually conducting thecalculations under therules forautomotive goods. Another areathathad
attracted theattention oftheWorking Group wastheconversion oftheHarmonized System for1996
since theNAFTA Rules ofOrigin were permanently based onchanges intariff classifications. The
thirditemhadbeentheRules ofOrigin forthechemical sector, forwhich proposals hadbeendeveloped
toeliminate orreduce theincidence ofaregional value content test.There wasalsoacustoms sub-group
which hadmetsixtimes. Ithaddealt with issues suchastariff classification ofproducts andthe
operations ofChapter 5.
81. Therepresentative ofCanada continued, replying tothequery onquestion 72,regarding the
complexity oftherules oforigin fortheautomobile sector. Theaimoftherules hadbeentoensure
thatthere wasanaccurate number reflecting thecontent within theregion. Theanswer toquestion 72
waslongbecause thenumber ofelements intheoverall calculation hadbeenchanged. There hadbeen
certain difficulties withtheformula oftheCanada-US Free-Trade Agreement, andtheformula had
beenchanged inorder tosimplify it.Thenewformula should better reflect value added incomplicated
goods suchasautos. Therulesapplied onlytothose items which werelisted intherelevant annexes;
anything elseimported oruseddidnothavetobecounted atall,andonlytheoverall netcostofthe
good hadtobedetermined. TheNAFTA Parties recognized thatthecalculation could impose some
burdens onproducers, andwerecurrently looking atways tosimplify thetracing function byallowing
producers, instead ofreporting thespecific amount ofcontent, todetermine itasanoriginating part
onitsown. They could claim halfthevalue ofthatpartinthefirstfouryears, andthen, asthenumber
wentup,whatever proportion, asoriginating basis. Thiswasprobably going tobeincluded inthecurrent
setofuniform regulations andinoneoftheamendments.
82. Therepresentative ofCanada went ontoreply tothequery onquestion 64regarding the
inventory control anditsaimsandpurposes. TheNAFTA Parties hadagreed toallow theuseofthe
inventory control method forthedetermination oftheorigin offungible materials andgoods. This
reduced operational costsforproducers, astheydidnotneedtokeepseparate inventories. TheNAFTA
allowed fortwotypes ofinventory control methods -i.e.firstin,firstoutandlastin,firstout-which
aresetoutintheNAFTA Uniform Regulations. Thisprovision increases theflexibility oftherules
oforigin, andwasintroduced upon therequest ofproducers. Regarding question 65,paragraph 2,
while theHarmonized System wasinsome cases verywellelaborated withregard topartsandgoods,
inother cases itgrouped lotsofdifferent products together. Thereason whytheNAFTA Parties had
chosen tocreate eight-digit tariff items wastogetridoftheregional value content test-anobjective
shared byallthree Parties. Instead ofdragging theproducers through thecontent calculation, they
onlyhadtospecify theoriginating inputs. Aneffort hadalsobeenmade tofindplaces where theregional
value content testcould betaken away. Thatwaswhyinparticular Chapters 84and85oftheNAFTA
appeared tobeaconfusing maze ofvalue content testsandrules based ontariff shifts. Theaimwas
tohavenothing butrules based ontariff lineshifts inacouple ofyears. Allthetariffs thathadbeen
created forthepurpose oftheNAFTA Rules ofOrigin could befound attheendofAnnex 401.In
reply tothequestion regarding theincrease inthelocal content requirements forautomobiles from
50to62.5percent,herepeated thatthepurpose oftheWorking Party wastojudge themerits ofthe
NAFTA anditsrules, asopposed tocomparing ittosome previous Agreement. Astothequestion
whyCanada required sixyears'retention ofNAFTA records while theother twoParties onlyrequired
five,hereplied thatsixyears wasthestandard requirement inCanada forallpurposes ofcustoms
procedures andcustoms documentation under theCustoms Act.Itwould therefore onlybeappropriate
tokeep thesame requirements withregard torules oforigin. Hereferred tothelastquestion,
question 76,inrelation towhich theobservation wasmade thattheanswer didnotaddress thequestion
ofthecostsimposed oncompanies byrequiring different calculations. Within every country, different
non-preferential rules could befound. TheNAFTA Parties wanted totaketheopportunity tomakeWT/REG4/M/1
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thepointthattheyagreed thattheproliferation ofdifferent rulesacross countries, andwithin countries,
wasamajor concern.
83. Therepresentative oftheUnited States explained thattheremaining portion ofthequestion
on76andthequestion on79needed tobeverified. AsfarastheUnited States delegation knew, there
were noplans toharmonize theUnited States 'measures thathadbeenmentioned, i.e.those ofthe
NAFTA,theUnitedStatesLabellingAct,andtheCorporateAverageFuelEconomyLaw.Anyadditional
information obtained would beprovided totheWorking Party. Question 79,onwhere thefive-year
requirement toretain records relating totheorigin ofthegoods could befound inUnited States law,
could bereplied tobytwocitations. Section 205A oftheNAFTA Agreement Act,which wasthe
United States implementing legislation, amended asection oftheTariff Actof1930, inparticular
Section 508C. Thus, itcould befound intheUnited States 'system either bylooking attheimplementing
legislation itself, orbyturning tothecompilation ofUnited States law.Athirdcitation wasTitle19
oftheUnited States Code, Section 1508C, where United States 'lawswere compiled.
84. Therepresentative ofMexico saidthatthequery inrelation toquestion 82hadnotbeenproperly
put.Itreferred todetermining whether Mexico hadtwokinds ofcertificates oforigin. Theonlychange
wasthatwhere itsaid"from Mexico totheUS"itshould havesaid"from theUnited States orCanada
toMexico". However, thereply thatthere were nottwokinds ofcertificates oforigin wascorrect.
Chapter Eight: Emergency Action
85. Therepresentative ofJapan hadaquestion relating tothereply toquestion 128,paragraph 2,
which stated thatNAFTA Article 802,under which imports fromaNAFTA Party might beexcluded
fromanother NAFTA Party'sapplication oftheglobal safeguard action under certain circumstances,
didnotconflict withGATS Article XIXandtheWTO Agreement onSafeguards, inthecontext of
afree-trade agreement under GATT Article XXIV. Itwashisdelegation 'sviewthattheexclusion could
beinconsistent withtheMFN ruleoftheGATT 1994. What wastheviewoftheNAFTA Parties,
onthispoint?
86. Therepresentative ofMexico saidthataccording totheparties, suchexclusion ofaparty in
terms ofsafeguards wasfullycompatible withthespirit ofArticle XXIV ineliminating barriers between
trading partners, andwithArticle XIX.
87. Therepresentative ofKorea alsohadconcerns regarding theresponse given toquestion 128
which seemed toimply thatfree-trade areasweregiven somekindofblank cheque foranydiscriminatory
practices under Article XXIV. Thatconcern hadbeenvoiced before inrelation tocustoms valuation
aswell. Ifthatwere thecase, what wastheWorking Party exercise allabout? Could theexclusion
oftheNAFTA Parties from safeguard actions create asituation whereby anextra burden wasplaced
uponnon-member countries, and,inthatcase,whatwould themagnitude be?Theextraburden imposed
uponthirdcountries could amount toanincrease inrestrictions applicable tonon-members. Howcould
thatbejustified under Article XXIV:5(b)?
88. Therepresentative ofMexico wished tostress thatnonewburden wasbeing imposed onthird
countries. Theapplication ofArticle 802,which limited theexclusion from theapplication ofglobal
safeguards toother NAFTA Parties, wassimply apreference thatwasperfectly compatible withthe
provisions ofparagraph 5(b)ofArticle XXIV.
89. Therepresentative ofArgentina saidthatquestion 128hadbeenformulated byMERCOSUR
andthereply hadbeentaken noteof.Atechnical clarification wasneeded withregard tothelastphrase
which stated thatthesafeguard action didnotconflict withGATT Article XIX, norwiththeWTO
Agreement onSafeguards inthecontext ofafreetrade agreement under GATT Article XXIV 1994.WT/REG4/M/1
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90. TherepresentativeoftheNAFTAsaidthatArticleXXIVprovidedthelegalbasisforthecreation
ofpreferences inderogation toother Articles oftheGATT, notjustinregard totariffs, butalsoin
regard toallother restrictive regulations ofcommerce. Members ofafree-trade areamight decide
nottoapply anti-dumping duties between them, which would otherwise beaviolation oftheMFN
principle. Article XXIV ineffect saidthatitwaspossible toapply Article XIXinthesame wayas
tariffs wereapplied onlessthananMFN basis. TheParties totheNAFTA haddecided toremove,
atleastpartially, oneoftherestrictive regulations ofcommerce between them. Asimilar measure had
beenadopted inthebilateral Canada-US FreeTrade Agreement, butthere hadnotbeenanyindication
bytheWorking Party examining thatFTAthatthesystem didnotentirely come within thescope of
anArticle XXIV FreeTrade Agreement.
Chapter Nine: Technical Barriers toTrade
91. Therepresentative ofJapan hadaquestion onPart3,related toquestion 130.Could theword
"measures" in"standards-related measures" beclarified? What diditspecifically referto?Thereply
stated thatallconsultations about standards-related measures were channelled through theNAFTA
Committee onStandards Related Measures andasub-committee which wasoperating under Chapter 9.
What wastheprocedure foraNAFTA member toholdsuchconsultations? Were suchconsultations
restricted toNAFTA members, or,iftheywerenot,wasthereadifference intheprocedures between
NAFTA members andnon-members?
92. Therepresentative oftheNAFTA pointed outthatthedefinition ofstandards-related measures
appearedinArticle915.Astandards-relatedmeasuremeantastandard,technicalregulationorconformity
assessment procedure. With reference tothequestion onprocedures forconsultations, Article 913
established theCommittee onStandards-Related Measures which wascomposed ofrepresentatives of
eachParty. Insofarastheconsultations referred towere carried outwithin theCommittee, the
participation wasconfined torepresentatives ofeachParty. There wasnoformat fortheconsultations.
TheCommittee, under therulessetoutintheTreaty, metattherequest ofanyParty andatleastonce
ayear.Since itwasconfined torepresentatives oftheParties, therewasnoprocedure forrepresentatives
ofthirdparties.
Chapter Ten:Government Procurement
93. Therepresentative ofJapan hadaquestion ongovernment procurement andspecifically on
question 140.DidtheGovernment ofMexico commit itselftorulesongovernment procurement only
within theframework oftheNAFTA, ordidithavetheintention todosowithin theGATT framework
aswell?
94. Therepresentative ofMexico replied thatMexico wasready toexamine thepossibility of
subscribing tonewagreements ongovernment procurement, including theGATT Agreement.
95. TherepresentativeoftheEuropeanCommunitieshadtwoquestionsongovernmentprocurement.
Thefirstrelated tothequestion 139.Would theParties beabletogivethethreshold figures forthe
procurement ofservices andconstruction services? Exchange rateswould come intoplay, butcould
theNAFTA threshold figures beprovided inSDRs atthepresent exchange rates, atleast? Thesecond
question related toquestion 140.Wasthere anytimetable forMexico todecide whether toaccede to
theWTO Agreement ofGovernment Procurement?
96. Therepresentative oftheNAFTA replied thattheNAFTA thresholds expressed inSDRs would
beprovided.WT/REG4/M/1
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97. Therepresentative ofMexico clarified thatMexico wascurrently notconsidering itsaccession
totheAgreement onGovernment Procurement, butthatitwasready toconsider accession inthefuture.
Inthecontext oftheWTO theagreement wasaplurilateral agreement which notallWTO members
hadsigned; hedidnotseeanyrelationship between theGPA andGATT Article XXIV.
98. TherepresentativeoftheEuropeanCommunitieswishedtoreceivefurtherclarificationregarding
question 135ongovernment procurement, where itwasasked whether therewasanyconflict between
theprovisions oftheNAFTA andoftheGATT Government Procurement Agreement inrelation to
thresholds. Itseemed thattheNAFTA goods threshold waslower thantheoneagreed tointheGPA.
Forcontracts falling between thetwothreshold values, therewasthusthepossibility ofdenying benefits
tothose suppliers which were notowned bythenational. DidtheParties seethese twoagreements
ascompatible?
99. TherepresentativeoftheNAFTAthoughtthattheanswerinthewrittenreplywascomprehensive.
Totheextent thatentities, within thresholds, werecovered bytheGATT Government Procurement
Code, Canada andtheUnited States remained bound toextend those benefits toallother members
oftheCode, without discrimination. AstheGATT Government Procurement Code wasaplurilateral
agreement, Canada andtheUnited States recognized thatthere wasnoArticle XXIV exemption from
therequirements toextend tosuppliers under theCode, thesame benefits astoeachother inrespect
oftheproducts andentities covered, forcontracts above thethresholds. Withrespect toareasnotcovered
bytheCode, orprocurements below Code thresholds, theNAFTA Parties retained therighttoinvoke
adenial-of-benefits exception vis-à-vis eachother. Assuming thatCanada andtheUnited States would
become members oftheWTO Agreement onGovernment Procurement when itentered intoforce,
theywould beobliged torespect theirobligations vis-à-vis allParties ofthatAgreement.
100. Therepresentative oftheNAFTA explained thatArticle 1005wasonethatwould beinvoked
byaNAFTA Party withrespect toaparticular procurement. Itwasnotintended tocreate ablacklist
ofentities relating toallprocurements. TheNAFTA Parties would know, inanygiven case, whether
theyweredealing withaprocurement situation which fellbelow thethresholds ofeither oftheTokyo
Round Agreement onGovernment Procurement Code ortheGPA 1994 when itcame intoforce, or
withaprocurement above thethreshold, asstipulated intheplurilateral Agreement, which theywere
thenobliged torespect.
101. Therepresentative oftheEuropean Communities asked ifitwasrighttoassume that,ifthere
wasaprocurement withacontract value above theGPAthreshold, theGPAProcurement Code would
apply?
102. Therepresentative oftheNAFTA didnotwishtoanticipate thefinalresults ofthenegotiations
oftheAgreement onGovernment Procurement, buthypothetically, iftheentity were partofthe
plurilateral list,theprocurement were above thethreshold, andthenature ofthegoods orservices
procured werenotsuchastobesubject toareservation orexception, thentheanswer would beyes.
Chapter Seventeen: Intellectual Property
103. Therepresentative oftheNAFTA saidthatsome oftheanswers werestillbeing finalized and
would beprovided inthenextfewdays.
104. Therepresentative ofJapan pointed outthatwhathisdelegation particularly wanted toknow
inquestions 194,203and204wastheNAFTA view ofthecases where provisions intheNAFTA
provided forahigher levelofstandard orenforcement compared withthose intheTRIPS Agreement.
Hisdelegation wasoftheviewthat,pursuant toArticle IVoftheTRIPS Agreement, suchtreatment
should beextended toallWTO Members onanMFN basis.WT/REG4/M/1
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105. Therepresentative oftheNAFTA saidthatintellectual property received different treatment
because theTRIPS Agreement contained noarticle likeArticle XXIV oftheGATT 1994orArticle V
oftheGATS. What wasavailable were provisions foragreements ontheprotection ofintellectual
property prior totheentry intoforce oftheWTO, specifically Article IV,sub-paragraph b,ofthe
TRIPS Agreement. Consultations wereunder wayunder theaegisofthePresident oftheTRIPS Council,
withaviewtodetermining thebestmeans ofdealing withtheprovisions ofArticle IV.Hisdelegation
hoped thatthose consultations would come toasuccessful conclusion andpreferred todealwiththe
matter intheCouncil onTRIPS. TheMexican delegation wasready topursue consultations intheTRIPS
Council.
106. TheChairman noted thattheUnited States andCanada wereprepared toprovide answers to
questions onintellectual property inthecontext ofthework ofthisWorking Party. Hewondered if
Mexico would consider joining theUnited States andCanada inresponding toquestions onthattopic
aswell.
107. Therepresentative ofCanada made clearthatresponses would beprovided without anyintent
toprejudge, inanyway,theprocedures tobeapplied bythisWorking Party orbytheTRIPS Council.
108. Therepresentative ofArgentina saidhisdelegation tooknoteofthatprocedural issueandwould
consider itduring thesummer. Hisdelegation alsotooknoteofthefactthattheresponses fromCanada
andtheUnited States didnotprejudge thesubstance ofthematter.