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Legal Guide

The North American Free Trade Agreement (the “NAFTA”) defines Canada’s most comprehensive trading relationship. It complements and expands upon the overriding international trade rules established under the WTO and governs trade relations as between Canada, the U.S. and Mexico. The NAFTA was built upon the framework of the Canada-U.S. Free Trade Agreement by adding Mexico to the trading area, creating new specialized rules of origin and content requirements, ensuring protection for intellectual property rights, and linking environmental and labour market regulation to trade issues. The NAFTA also facilitates the trading relationship by providing privileged access to each member’s country by business and professional persons.

Although the NAFTA covers many areas of trade and investment, the bulk of the Agreement is focused on trade in goods. Rules of origin particular to the NAFTA are established for each specific good. These rules ensure that preferential tariff treatment is only accorded to goods wholly produced, substantially transformed or whose major component is produced in the free trade area, inducing economic activity within the area.

In addition to dealing specifically with trade in goods, the NAFTA also addresses trade in services, customs procedures and specific obligations related to such matters as energy, the automotive sector, agriculture, textiles, technical barriers to trade, government procurement, intellectual property and investment. Further, the Agreement provides preferential status for NAFTA parties in anti-dumping and safeguard proceedings. In addition, Chapter 19 of the NAFTA contains a mechanism for private parties involved in anti-dumping and countervailing duty investigations, to bring a party’s decision in front of a bi-national review mechanism. NAFTA’s Chapter 11 contains investment rights and protection for investors from both discrimination and government measures that are tantamount to expropriation. This Chapter provides rights that are enforceable by investors directly through international arbitration.

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