Monday, December 8, 2014

Celebration of NAFTA’s 20 Year Anniversary Puts Focus On Importance of Alternative Dispute Resolution

Former Mexican President Vicente Fox and former Costa Rican President Laura Chinchilla convened a roundtable of business leaders at the Arizona Chamber of Commerce on September 23, 2014 to mark the 20th anniversary of the North American Free Trade Agreement (NAFTA). The roundtable provided an excellent opportunity for Arizona business and political leaders to hear from two prominent former Latin American leaders who have been at the forefront of expanding free trade among Latin American countries, the United States, and Canada.

The importance of NAFTA to the economic and political relations between the United States, Mexico and Canada cannot be underscored enough. According to statistics released by the U.S. Trade Representative (USTR), NAFTA is the largest free trade agreement in the world and includes 450 million people and produces $17 trillion of trade between the three countries. The USTR indicates trade between the U.S. and Mexico was $80 billion in 1994 - the year NAFTA was signed. Nearly 20 years later, trade between the two countries has sky rocketed with the USTR reporting $507 billion of trade in 2013. Mexico now stands at the United States’third largest trading partner.

Celebrating the historic achievements of NAFTA, President Fox encouraged the political and business leaders attending the roundtable to build on the momentum of NAFTA, and try to build new political, economic, and social bridges between the U.S. and Mexico. President Fox stated that the goal of all interested parties should the strengthening of the relationship between the two countries and increasing the prosperity for citizens on both sides of the border. President Fox identified the recent opening of the Mexican telecom and energy sectors to foreign direct investment as a monumental catalyst for economic growth and a unique opportunity for U.S. investors. President Chinchilla also trumpeted the success of NAFTA, but also highlighted economic benefit of regional based trade agreements such as the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR)executed between the U.S. and five Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua and the Dominican Republic), and the Pacific Alliance, a Latin American trade bloc, that includes four member states—Chile, Colombia, Mexico, and Peru.

NAFTA has certainly created a strong economic relationship between the United States and Mexico by eliminating barrier to trade and investment. Private bilateral commercial transactions do not occur in a vacuum; and while the United States and Mexico share much in common, the two counties have different cultures, languages and legal systems that significantly impact commercial transactions. Interestingly, NAFTA does not include a provision for alternative dispute resolution in the context of private commercial transactions. Including a provision in a private commercial contract involving parties from the United States and Mexico that requires the parties to mediate and/or arbitrate any dispute under the contract is crucial. Presenting the dispute to a qualified bilingual third party neutral who has the requisite experience in the area of law concerning the dispute and who understands the different cultural and business customs between the two countries can go a long toward resolving the dispute before the parties are compelled to invest in costly litigation in the U.S. or Mexico.

If you have any questions about the importance of alternative dispute resolution in the context of private commercial transactions between U.S. and Mexican based companies or individuals, please call Patrick F. Welch.
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