The North American Free Trade Agreement (NAFTA) has been in effect since January, 1994. It is aimed at reducing and eliminating barriers to trade, investment, and services between the United States, Canada, and Mexico. As you know, Chili is also negotiating to be part of this agreement. These negotiations are to be completed in 1995.

NAFTA creates the largest free trade area in the world with 360 million people and a gross national product (GNP) totalling $6 trillion.

We can’t talk about NAFTA without saying few words about the Uruguay Round of the General Agreement for Tariffs and Trade (GATT) which came to completion in December, 1993, and was officially signed by 100-plus signatory countries on April, 1994. GATT sets down for the first time, clear rules for the international trade of agricultural products. GATT has the same purpose as NAFTA which is to reduce and eliminate traditional barriers to trade, such as quotas and tariffs. These agreements also provide rules and disciplines on the use of non-tariff barriers, such as technical health standards. It is aimed at reducing sanitary and phytosanitary (SPS) measures that may be used for protectionist purposes.

Soon, GATT will no longer be known as GATT. Instead, the Uruguay Round Agreement establishes the World Trade Organization (WTO)- the new name for the multilateral body which will be responsible for facilitating the implementation of the Uruguay Round obligations and administering the dispute settlement system.

Historically, SPS protocols were bilateral and strength dominated. There was no place to proceed for dispute resolution. The SPS texts of the agreements are the first attempt to provide a framework for the use of SPS measures within the context of trade.

Both NAFTA and WTO make explicit a country’s right to adopt and maintain any measures it believes are necessary to protect the health of its plants and animals, including measures that may be more stringent than existing international standards.

However, both NAFTA and WTO seek to minimize the variations in the levels of protection by requiring countries to participate in international standard setting organizations.

If a country does not use the relevant international standard because of their chosen level of protection, then if challenged, the country must demonstrate that the chosen measure is based on science and that it is transparent in the way it was developed and implemented. NAFTA and WTO encourage countries to take into account the objective of minimizing negative trade effects. We are expected to avoid arbitrary or unjustifiable distinctions in the level of protection in different circumstances if such distinctions result in unjustifiable discrimination against goods from another trade partner.

Contracting parties have obligations for the SPS measures. First, it is important that any measures be science-based. This means that import decisions must be based on a risk assessment which uses scientific data and methodologies. WTO and NAFTA describe a number of factors which should be considered in a RA, including

·Risk assessment methodologies and techniques developed by the OIE.

·Relevant scientific evidence.

·Relevant processes and production methods.

·Relevant inspection, sampling, and testing methods.

·Prevalence of disease or pests of concern, including the existence of pest or disease-free or low-prevalence areas.

·Relevant ecological and environmental conditions.

·Relevant treatments, including quarantines.

·Relevant economic factors such as production or sales losses and control costs if a particular disease or pest were to be introduced.

 

This provision commits WTO and NAFTA signatory countries to treat an exporting country’s SPS measures as equivalent to its own when the exporting country demonstrates, using scientific evidence, that its measures achieve the importing country’s desired level of protection. Equivalence encourages countries to recognize that different procedures could and can be used to achieve the level of protection demanded by the importing country. The measures can be applied only to the extent necessary to achieve the appropriate level of protection.

National treatment: We can’t be more onerous for imports than for our domestic programs.

NAFTA and WTO include various provisions which encourage greater transparency of the domestic rule making process which affects trade. For example, NAFTA and WTO require member countries to provide advance notification on any new or modified regulation which may impact on the exports of another country and which differ from international standards. Also, both NAFTA and GATT require signatory countries to identify a contact point where other countries can access information and documents regarding regulations, procedures, decisions, and other information related to the establishment of SPS measures. The Standards Council of Canada is the Canada’s inquiry point.

Basic to WTO and NAFTA are the provisions encouraging countries to base their SPS measures as much as possible on international standards, whenever such standard exists.

Animal health measures should be based on the Office International des Épizooties (OIE) standards. The reason for encouraging the development and use of international standards is to harmonize, to the greatest extent possible, countries’ SPS measures. This is intended to reduce unnecessary variances between countries’ technical health standards-differences which are often the cause of technical trade disputes. The OIE standards in the animal health area are not fully developed. However, the trend, driven by the WTO and NAFTA members, is to be active participants in the development and elaboration of these international standards.

WTO and NAFTA commit countries to recognizing disease-free areas as well as areas of low disease prevalence. This concept, known as regionalization, is perhaps the most significant policy issue facing my organization. It encourages members to recognize regional freedom of disease where this has been objectively demonstrated by the exporting country.

Both NAFTA and WTO establish dispute settlement systems. However, both systems share the common feature that disputes begin with technical consultations at the SPS Committee level which meets approximately three times a year. In particular, SPS committees are expected to play a vital role in facilitating consultations on specific SPS trade problems, encouraging technical cooperation, and addressing standard setting issues as they arise.

If no resolution is achieved through technical consultations at the SPS Committee level, the complaining party may elevate a complaint by invoking the formal NAFTA or WTO dispute settlement process.

Generally, in both the WTO and NAFTA dispute settlement systems, panels may be formed to review complaints and make recommendations. Such panels may seek recommendations and advice from the relevant international standard setting organizations as well as from a board of experts to evaluate an issue.

Some points about the process should be underscored:

1. Emphasis will be placed on resolving technical disputes and complaints through negotiation at the technical level in order to prevent setting-off the more formal, complex and costly dispute settlement process since mutually satisfactory resolutions tend to be more effective.

2. The challenging party has the burden of proving that a particular SPS measure or standard is in violation of WTO or NAFTA.

3. Panels will determine whether the measure, subject to dispute, is in compliance with all NAFTA obligations including the requirement that it be based on a scientific risk assessment and whether data and the process used in that assessment was:

·collected in a scientific fashion

·based on international standards

·not unnecessarily and unfairly discriminatory in nature

·transparent

4. If a panel rules that a standard is in violation, then the violating country must change the offending measure. If they leave the inconsistent measure in place, the complaining party may seek authority to suspend trade concessions of equivalent value to the lost trade.

The role of the regulatory agencies is to participate in the SPS committees and assist in resolution of irritants.

·The gradual elimination of quotas and tariffs.

·The impact on trade is not expected to lead to an immediate surge of imports as quotas and tariffs are eliminated gradually over time, but Canada is expecting the Canada-US trade to increase at a rate of 15 percent per year.

·Establishment of international standards is crucial in the application of trade agreements.

·The easier the trade becomes, the higher the degree of industry rationalization can be on an international scale: fewer plants on a larger scale.

·Regionalization will be requested more often for bilateral negotiations. Mexico, for example, has made some requests for recognition of regional freedom from Hog cholera and selected avian diseases.

·NAFTA is considered an initial step in a process for building a hemispheric free trade area. At this point Chile is considered the most likely next member, and Canada is supporting Chile’s candidature. The agreements provide an effective mechanism to support regional blocks with internal free trade. The incentive to extend current trade blocks and develop others is strong and likely will change the world trade order even more toward free trade in the future. With the NAFTA, North America is on a path to freer trade with markets more open to each other than to other trading partners.

1. The principles of the NAFTA and GATT SPS agreements are significant, and we believe in them.

As an example, consider:

-our progress in easing our Bluetongue requirements for the importation of US cattle, based on favorable risk assessments by both USDA and our own staff - a fundamental shift involved here in recognizing that a transient viremia, in an imported animal, during the nonvector season, IS NOT A BLUETONGUE OUTBREAK.

-recognition by both Canada and the USA of the low prevalence of Hog Cholera in the Mexican State of Sonora - this recognition does not throw open the border - but does set a base from which specific import proposals may be considered (with attendant risk assessment and management steps)

2. In making these changes we are not entirely altruistic. We note that the pendulum swings both ways.

For example we are looking for progress on brucellosis requirements for Canadian cattle moving south. We, like yourselves, are expecting Mexico to back-off on its PRRS testing requirements if surveys now underway demonstrate that the virus is widespread in Mexico.

i. Stakeholders can get very nervous there is often more at risk than disease; namely markets. This enhances the importance of full and open consultation. Our bluetongue case involved a complex multi-stakeholder negotiation in Canada to establish our approach to the bilateral Canada/US discussions. We had to consider the diverse interests of the commercial and purebred beef and dairy industries, and the different requirements of our many markets for live animals, semen and embryos.

Knowing the challenge of bluetongue, I expect that discussions in both Canada and the USA about proposals to liberalize our requirements for beef from Uruguay and Argentina, or pork from Mexico, will be most stimulating. Lets do our best to use sound principles of risk assessment, management and communication as we work through these most significant changes.

ii. We must recognize that something could (and eventually will) go wrong. Managed risk is not zero risk. We are not perfect. Someday, something will go wrong. In fact, it did - our recent BSE experience illustrates the point.

A rationale approach to dealing with this issue is not to turn back the clock. Those countries that want to trade cannot return to zero risk.

Rather, the answer lies with insurance through:

- carefully planned protocols to minimize damage

- early detection (our disease surveillance found BSE)

- effective emergency preparedness and response capability

- regionalization strategies

- etc.

It is appropriate that your Emergency Diseases Committee is attending to this issue - your work assumes increasing importance in this area of calculated risks.

The challenge was how to create an acceptable approach to resolve disputes involving differences in regulatory systems or measures which were the cause of disruptions in trade. The NAFTA and WTO are to encourage harmonization through the widest possible use of international standards and the creation of a dispute settlement system while permitting countries to maintain the sovereign right to protect animal, plant, human life and health.

The WTO and NAFTA panels established to review disputes will rely on international sources of expertise for advice on technical trade matters. An important contribution of veterinary science will be to help accelerate the development of technically and operationally feasible international standards, including standard methodologies for conducting risk assessments.

Veterinary science can play a key role in discussions which attempt to clarify and define levels of risk. Given the shift away from the "zero-risk" paradigm, increasing emphasis will be placed on developing new technologies and strategies to allow for trade while ensuring that health risks are reduced to acceptable levels. The veterinary field will be an important contributor to developing these new risk assessment and management tools. In parallel to that, I think we all agree on the increasing importance of effective emergency preparedness measures which give a supplementary protection to the trading partners.