Abstract
With such models as the Trans Pacific Partnership being negotiated between the United States and Pacific countries the concept of free trade agreements are of relevant to the subject of air transport. Although open skies agreements allow market access between signatory countries, air transport has not featured prominently in free trade agreements. An example is the North American Free Trade Agreement (NAFTA) which has not allowed air transport to be included in the context of the three partners United States, Canada and Mexico, it is relevant to consider the model from an academic point of view.
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Notes
- 1.
GATT is a multilateral body established in Geneva on 1 January 1948 on coming into force of the General Agreement on Tariff and Trade (GATT) negotiated and signed by 23 countries. GATT functions as the principal international body concerned with negotiating reduction of trade barriers and with international trade relations. While being an organization to which member States belong, where they could use it as a forum in which they can discuss and overcome their problems and negotiate to enlarge world trading opportunities, GATT is also a code of rules which is calculated to liberalize world trade. The Uruguay Round is the 8th round of multilateral trade negotiations held by GATT so far, and by far, one of the most complex. This round of negotiations is assisted by the Group of Negotiators on Services (GNS) which the GATT established in 1986 to follow the services negotiations. The GNS has drafted a detailed agreement comprising 35 articles and five annexes. See Abeyratne (1994), p. 2, for a discussion of the history of multilateral trade negotiations held by GATT.
- 2.
Although the agreement is titled “Agreement Establishing the Multilateral Trade Organization” and establishes the Multilateral Trade Organization (MTO) in Article 1, with references thereafter in the agreement to the MTO, It is considered that the new name for GATT is “World Trade Organization”. See International Legal Materials, Vol. XXXIII, No. 1 January 1994 at 2.
- 3.
The North American Free Trade Agreement Between The Government of the United States, Government of Canada and the Government of the United Mexican States (1992), International Legal Materials, Volume XXXII, No. 3 May 1993 at 612.
- 4.
See the Text of the General Agreement on Tariffs and Trade, Geneva, July 1986 at 41. The only major difference between these two instrumentalities of trade is that whereas in a Customs Union member States have to erect a common tariff wall towards the outside world, in a Free Trade Area member States are free to maintain or modify independently their external structure of tariffs and other barriers to imports from third countries.
- 5.
See International Legal Materials Vol. XXXIII No. 1 January 1994 supra note 3 at 34–38 (this chapter) for an interpretation of the most-favoured-nation treatment clause in the GATT Agreement of 1994 in relation to Free Trade Areas.
- 6.
For a detailed analysis of performance requirements see, Graham and Krugman (1989), p. 127.
- 7.
- 8.
See the Gordon Commission Report which analyzed the extent of foreign ownership in Canada. This Report proposed that foreign investment in Canada be controlled in four ways, including control by a central review board. Report of the Royal Commission on Canada’s Economic Prospects, Queen’s Printer:Ottawa, 1958. A subsequent study, the Gray Report, concluded that it was necessary to regulate foreign investment in Canada in view of the very high level of foreign ownership in Canada. According to this report 76 % of the energy sector and 90 % in various other sectors were under foreign ownership. See Foreign Direct Investment in Canada, Information Canada:Ottawa, 1972.
- 9.
- 10.
- 11.
Foreign Investment Review Act, supra note 10 (this chapter), Article 2(1). Small investments of $5 million which employed no more than 200 employees however, required only the formality of registration.
- 12.
See Albrecht (1984), p. 149.
- 13.
Article III.4 of GATT provides:
The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, purchase, transportation, distribution or use. The provisions of this paragraph shall not prevent the application of differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the nationality of the product.
See also, Administration of the Foreign Investment Review Act, Report of the Panel, July 25, 1983, BISD 30th Supp., at 140 (1982–1983).
- 14.
Investment Canada Act, R.S.C. 1985, c 28 (1st Supp.).
- 15.
- 16.
ICA, supra note 14 (this chapter), Article 2.
- 17.
Ibid. Article 14(1)(a). This regulation obviated the review of 90 % of the transactions that were required to be reviewed by FIRA. See however, Glover et al. (1985), p. 98 where the authors claim that the 10 % of the investment categories that were retained from the FIRA days comprised 90 % of the total transactional value of investments in Canada and therefore this apparent achievement of the ICA is merely illusory.
- 18.
Id., Article 21(1). This period is extendable to a maximum of 75 days, unless the investor agrees to the contrary. Both the FIRA and the ICA considered the review of a proposal to be based on policy rather than law. See Arnett (1985), p. 26.
- 19.
Id. Article 21. The criteria determining “net benefit to Canada” are similar to those followed by FIRA and vests the Minister responsible for the implementation of the ICA with a large discretion. Article 20 provides that these criteria should be based upon the effect of investment on labour and employment, productivity, human and other resources, technological development and benefit, national and international market competition, the extent of participation by Canada and the consistency of the investment with national, economic and cultural policies of Canada.
- 20.
Three quarters of the 5266 investment proposals received up to the end of 1990 were not subject to review, and the 25 % of those that were reviewed had all been approved. See Investment Canada, The Opportunities and Challenges of North American Free Trade: A Canadian Perspective, Ottawa: Investment Canada, May 1991 at 44. See also Investment Canada, Annual Report 1990–1991, Investment Canada: Ottawa, 1991.
- 21.
Aeronautics Act 1985 R.S.C. Ch. F-2.
- 22.
Bank Act 1985, R.S.C., Ch B-1.
- 23.
Fisheries Act 1985 R.S.C., Ch F-14.
- 24.
Western Stabilization Act 1985, R.S.C. Ch W-7.
- 25.
Canada Shipping Act 1985 R.S.C. Ch S-9.
- 26.
Territorial Lands Act, 1985 R.S.C., Ch F-7; Canadian Petroleum Resources Act, 1986 Can. Stat., Ch 45; Canada Oil and Gas Act, S. C. 1981 C 81. The Canadian energy policy has often been subject to criticism on the basis that the Canadian Government adopted a policy of inordinate appropriation and that such policy was calculated to canadianize the industry. See Olmstead et al. (1984), p. 439. Also, for a descriptive analysis of Canada’s Energy Programme see Mendes (1981), p. 475.
- 27.
Broadcasting Act 1985 R.S.C. Ch B-1.
- 28.
Foreign Direct Investment Study Act of 1974, 15 U.S.C. 786 (1982); Foreign Direct Investment in the United States: Report of the Secretary of Commerce to the Congress in Compliance with the Foreign Investment Study Act of 1974 (1976).
- 29.
International Investment Policy Statement 19 Weekly Comp. Pres. Doc. 1214 (September 1983) cited in Raby (1990), p. 400.
- 30.
See generally, Graham and Krugman (1989).
- 31.
The United States is limited by its Constitution and by the treaty provisions governing the country in its capacity to regulate foreign investment. There are built in guarantees that are offered to foreign investors in the Friendship, Commerce and Navigation Treaties (FCN), the OECD Code of Liberalization of Capital Movements, which have a direct effect on the United States legal system, and the guarantee of due process and non discrimination entrenched in the United States Constitution.
- 32.
Bale Jr. (1985), p. 207.
- 33.
- 34.
On 1 February 1990, President Bush issued an order based on the Exon-Florio Amendment, to the China National Technology Import and Export Corporation to divest its holdings in MAMCO, a United States manufacturer of aircraft components. MAMCO was a firm which fabricated custom made metal components for the use of manufacturing civilian aircraft and helicopters. See Mendenhall (1991), p. 294. See also Nance and Wasserman (1990), p. 926 for a discussion of Presidential powers on the regulation of foreign investments on national security grounds.
- 35.
The Federal Communications Commission may refuse to grant a broadcasting licence if the corporation applying for the licence is owned by foreigners and if it is in the national interest to refuse the grant of such licence. See Federal Communications Act, 47 U.S.C. 734 (1976).
- 36.
Jones Act of 1920, 46 U.S.C. 802 (1976 & Supp. V 1981).
- 37.
Federal Aviation Act, 49 U.S.C. 1301 (1976 & Supp. V 1981).
- 38.
Atomic Energy Act, 42 U.S.C. 2133, 2134 (1982), Mineral Leasing Act, 30 U.S.C. 22 (1982), Agricultural Foreign Investment Disclosure Act, 7 U.S.C. 3501 (1978). See also Scarborough (1985), p. 94.
- 39.
National Bank Act, 12 U.S.C. 1974. The restrictions aimed at under the banking laws of the United States are based on the nationality of the directors of a foreign investment company and not on foreign ownership.
- 40.
One of the most compelling elements of State control of foreign investment in the United States is based on national defence under the Defence Production Act of 1950, 50 U.S.C.A. App. 2170 (West Supp. 1989).
- 41.
Clayton Act, 15 U.S.C. 1981.
- 42.
- 43.
Law to Achieve Ecological Balance and to Protect the Environment by Preventing and Controlling Pollution of the Atmosphere, D.O., November 1988; Law to Protect the Ecology and Environment from Dangerous Substances, D.O. November 1988. These laws are implemented and enforced by the Secretariat of Urban Development and Ecology (SEDUE).
- 44.
See Free Trade Negotiations with Mexico: Environmental matters (1991) 3 Int’l Environment Affairs, 219. See also Mumme et al. (1988), p. 7; du Mars and Beltran el Rio (1988), p. 787 for an overview of environmental legislation in Mexico. See also Labour Canada, Comparison of Labour Legislation of General Application in Canada, the United States and Mexico, Labour Canada: Ottawa, March 1991 for an analysis of the labour laws of Mexico. For NAFTA issues on the labour and environmental position of Mexico see McCambly (1991), p. 47; Reyes (1991), p. 241.
- 45.
See generally, Kate (1978).
- 46.
Programa de Intercambio de Deuda Publica por Capital, D.O. March 30, 1990. This programme is an integral part of the understanding between Banks in Mexico and the Mexican Government which resulted from the Brady Plan. Banks have undertaken to write off Mexico’s medium and long term debt, while providing new loans to the government and reducing interest rates.
- 47.
See Baker (1988), p. 333.
- 48.
Torres Landa (1990), p. 734.
- 49.
Ley para Promover la Inversion Mexicano y Regular la Inversion Estranjera D.O. March 9, 1973. The text of this law was reproduced in (1973) 12 International Legal Materials, 643.
- 50.
According to Article 20 of the Foreign Investment Law, supra note 49 (this chapter), there was no option to renew this permit.
- 51.
Ibid. Article 20.
- 52.
Ibid.
- 53.
Maquiladoras are in-bond assembly plants where only a fraction of their production is allowed to be sold on the domestic market. The parts are imported into Mexico, to be assembled and then exported to other countries. See Article 17 of the Foreign Investment Law, supra note 49 (this chapter).
- 54.
It is noteworthy that in the first 5 years of the decade between 1980 and 1990, imports into Mexico amounted to an average value of U.S. $12 billion per year whereas in 1990, imports amounted to a value of U.S. $32.8 billion.
- 55.
Mexico adhered to GATT’s Antidumping Code of 1979, Code on Import Licences of 1979, Code on Customs Valuation of 1979 and the Regulations Against Unfair Trade Practices.
- 56.
Ley del Impuesto General de Importation, D.O. February 12, 1988.
- 57.
U.N. Doc. A/CONF.97/18, Annex 1, reprinted in (1980) 19 International Legal Materials 668.
- 58.
Decreto que establece el control generalizado de cambios, D.O. September 1, 1982. The imposition of foreign exchange control was exceptional in the context that the peso had not been subject to control.
- 59.
Decreto de Cambio, D.O. December 10, 1982.
- 60.
This does not however, apply to exports of small value nor to the maquiladora industries. It is also noteworthy that the Mexican exporter is legally obliged to require that exports be paid for in a foreign currency.
- 61.
On four previous occasions, i.e. in 1854, 1911, 1925 and 1948, Canada and the United States had discussed introducing free trade between the two countries. In the case of Mexico however, NAFTA was the first instance that Mexico considered introducing free trade with its North American Neighbours. See generally, Granatstein (1986), p. 11. See also, Crookwell (1990), p. 3.
- 62.
As will be discussed later, an accession clause for third parties is part of the NAFTA.
- 63.
As released in a joint statement by the two parties, The White House, Office of the Press Secretary, Joint Statement by the Presidents of Mexico and the Unite States of a Free Trade Agreement (undated).
- 64.
The Economist, July 3rd 1993 at 26.
- 65.
The Economist, September 18th 1993 at 27.
- 66.
The Economist, August 1st 1992.
- 67.
Statement by the Minister for International Trade, Crosbie (1991).
- 68.
See Wilson (1991), p. 4 where it is implied that Canada’s participation at the trade talks which led to NAFTA was due to the fact that Canada did not have much choice. See also, Statement of John Weeks, Notes for an Address by John Weeks, Canada’s Chief Negotiator for a North American Free Trade Agreement to the Council of the Americas and the Canadian Manufacturers’ Association, Statement no. 91/29, June 3, 1991 at 3.
- 69.
Although the Salinas administration expected improved trade with Europe in the early nineties, the unpredicted collapse of the East Bloc of Europe diverted Western Europe’s interests in that direction. NAFTA revived the interest of Europe and Japan in Mexico. See Fallows (1991), p. 46.
- 70.
- 71.
Framework Trade and Investment Agreement, reproduced in 1988 27 International Legal Materials 438. See also, Smith (1989), p. 655.
- 72.
U.S. Department of Commerce, International Trade Administration, North American Free Trade Agreement – Generating Jobs for Americans, U.S. Dept. Comm: Washington, May 1991, at 3.
- 73.
Weintraub (1990), p. 206.
- 74.
Vienna Convention on the Law of Treaties, United Nations General Assembly Document A/CONF.39/27, 23 May 1969.
- 75.
There are instances where States may record their reservation on particular provisions of a convention while signing the document as a whole. The International Court of Justice in its examination of the Genocide Convention has ruled:
The object and purpose of the Convention…limit both the freedom of making reservations and that of objecting to them. It follows that it is the compatibility of a reservation with the object and purpose of the Convention that must furnish the criterion for the attitude of a State in objecting to the reservation. 1 I.C.J Rep. 1951, at 15.
- 76.
Schwarzenberger and Brown (1976), p. 118.
- 77.
The Preamble to NAFTA provides:
The Government of the United States of America, the Government of Canada and the Government of the United Mexican States, resolved to:
STRENGTHEN the special bonds of friendship and cooperation among their nations;
CONTRIBUTE to the harmonious development and expansion of world trade and provide a catalyst to broader international cooperation;
CREATE an expanded and secure market for the goods and services produced in their territories;
REDUCE distortions to trade;
ESTABLISH clear and mutually advantageous rules governing their trade;
ENSURE a predictable commercial framework for business planning and investment;
BUILD on their respective rights and obligations under the General Agreement on Tariffs and Trade and other multilateral and bilateral instruments of cooperation;
ENHANCE the competitiveness of their firms in global markets;
FOSTER creativity and innovation, and promote trade in goods and services that are the subject of intellectual property rights;
CREATE new employment opportunities and improve working conditions and living standards in their respective territories;
UNDERTAKE each of the preceding in a manner consistent with environmental protection and conservation;
PRESERVE their flexibility to safeguard the public welfare;
PROMOTE sustainable development;
STRENGTHEN the development and enforcement of environmental laws and regulations; and,
PROTECT, enhance and enforce basic workers’ rights…
- 78.
Greig (1976), p. 8.
- 79.
Statute of the International Court of Justice, Charter of the United Nations and Statute of the International Court of Justice, United Nations: New York, Article 38.1 (a).
- 80.
Id. Article 36.2 (a).
- 81.
Supra note 74 (this chapter).
- 82.
Vienna Convention, Preamble.
- 83.
Id. Article 42.1.
- 84.
Id. Article 57.
- 85.
Id. Article 59.
- 86.
Id. Article 60.
- 87.
Id. Article 61.
- 88.
Id. Article 62.1.
- 89.
Id. Article 46.
- 90.
Reuter (1989), p. 16.
- 91.
See von der Dunk (1992), pp. 223–224.
- 92.
For a discussion of these concepts see generally Abeyratne (1994).
- 93.
NAFTA, Article 102, International Legal Materials, Vol XXXII, Number 2, March 1993 at 297.
- 94.
Id. Article 102.2.
- 95.
Id. Article 103.2.
- 96.
Article III of GATT stipulates that the contracting Parties to GATT recognize that internal taxes and other internal charges and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as not to afford protection to domestic production. Furthermore, the provision also states that the products of a territory of any contracting Party imported into the territory of any other contracting Party shall not subject, directly or indirectly, to any taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products. Moreover, no contracting Party shall otherwise apply internal taxes or other internal charges to imported or domestic products in a manner contrary to the principles set forth in the Agreement. GATT, supra, Chap. 5, note 21.
- 97.
Id. Article 301.
- 98.
See Article 1139 of NAFTA for a definition of “investment”.
- 99.
The Economist, July 3rd 1993 at 26.
- 100.
Articles 1202, 1203 and 1204.
- 101.
Brownlie (1990), p. 433.
- 102.
RIAA ii 615 at 641.
- 103.
Ibid.
- 104.
(1927) PCIJ Ser. A. No. 17 at 29.
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Abeyratne, R. (2016). The NAFTA Free Trade Model. In: Competition and Investment in Air Transport. Springer, Cham. https://doi.org/10.1007/978-3-319-24372-6_9
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