News reports indicate that Mexico is going ahead with retaliation in the NAFTA Trucking Services case:
Mexico slapped tariffs on 90 American agricultural and manufactured exports on Monday in retaliation for Washington's move to block Mexican trucks from using U.S. highways.
Here's the part that interests me. The original violation was related to services and investment, but the retaliation will be on goods, a different sector. What are the rules governing NAFTA Parties' ability to suspend in a different sector? Article 2019 states:
2. In considering what benefits to suspend pursuant to paragraph 1:
(a) a complaining Party should first seek to suspend benefits in the same sector or sectors as that affected by the measure or other matter that the panel has found to be inconsistent with the obligations of this Agreement or to have caused nullification or impairment in the sense of Annex 2004; and
(b) a complaining Party that considers it is not practicable or effective to suspend benefits in the same sector or sectors may suspend benefits in other sectors.
So, first try to suspend in the same sector, but if "it is not practicable or effective" to do so, you may suspend in other sectors. What are the standards for when suspension "is not practicable or effective"? There is no NAFTA case law on thie issue. One obvious place to look for guidance would be the WTO's DSU Article 22 jurisprudence. I would not be surprised at all if a NAFTA panel addressing this issue did just that. What I'm curious about is the reasons the panel would give for doing so. Would they just do it with no explanation? Or would they have some interesting things to say about the relationship of different international trade agreements?
We may never get to that point, of course, but if we do this is one of the things I'll be watching for.
