By Doug Farquhar
NAFTA may be dead, but USMCA isn’t much different.
Trade between the U.S. and our North American neighbors Mexico and Canada is huge—an estimated $1,139.2 billion in 2017. Much of this comes thanks to the North American Free Trade Agreement (NAFTA), which President Donald Trump is seeking to replace with a new agreement—the United States-Mexico-Canada Agreement (USMCA).
Much of the new agreement mirrors the old agreement. But for states, one provision in the new agreement is significant: the elimination of Chapter 11, the Investor State Dispute Resolution provision, preventing investors from challenging government actions (including state laws) that may harm their investment.
This provision was used to challenge California’s restrictions on methyl tertiary butyl ether (MBTE) in gasoline, on Ontario’s effort to limit methylcyclopentadienyl manganese tricarbonyl (MMT) and on San Luis Potosi’s prohibition on a hazardous waste incinerator. A Canadian tobacco company sued the United States over the tobacco settlement between several state attorney generals’ and the major tobacco companies. A U.S. pesticide company sued Quebec over its Pesticide Management Code. Using NAFTA’s Chapter 11, investors brought 26 cases challenging environmental laws in Canada alone. The USMCA removes this provision.
The agreement doesn’t totally end investor challenges against Mexico, but does limit the scope of the challenges.
The deal isn’t done, Congress has to sign off. The same goes for the parliaments in Canada and Mexico.
But the elimination of Chapter 11 should bring relief to states. No longer can state laws be challenged by Canadian or Mexican investors through a NAFTA trade challenge.
For more information on USMCA, contact Jon Jukuri in NCSL's Washington, D.C., office, or Doug Farquhar in Denver.
Doug Farquhar directs the Environmental Health Program at NCSL.