The way ahead for NAFTA

01-12-2017

The way ahead for NAFTA

akindo / iStockphoto.com

Mexico’s IP system has benefited from the North American Free Trade Agreement, signed nearly 25 years ago, but there are concerns over the US’s future participation, as WIPR finds out.

“Even a totally controlled society cannot resist the winds of change that economics and technology have imposed in this world of ours,” exclaimed then US President Bill Clinton, as he officially signed the North American Free Trade Agreement (NAFTA) in 1993.

He went on to promise a million jobs within five years of its implementation, and alongside his counterparts from Mexico and Canada, promised a boost in trade relations between the three countries.

It was the first international trade agreement to include obligations to protect IP rights.

Chapter 17 of NAFTA states that “each party shall provide in its territory to the nationals of another party adequate and effective protection and enforcement of intellectual property rights, while ensuring that measures to enforce intellectual property rights 
do not themselves become barriers to legitimate trade”.

It set out what has since been described as the “three-step approach”.

First, NAFTA establishes minimum standards of IP protection, as set out in the Geneva, Paris and Berne Conventions.

Second, NAFTA requires enforcement of IP rights at the borders of the three states to ensure that rights holders are protected from infringement by imported products.

Finally, it establishes a dispute settlement procedure with trade-related sanctions.

“NAFTA has been one of the most important international treaties for Mexico, not only on the IP side but also the commercial side, as it has built the framework for the three economies to start working together and to be competitive on a regional level,” explains Carlos Davila-Peniche, senior associate at Baker McKenzie in Mexico City. 

“The agreement has provided this framework and level of understanding to help Mexico develop and strengthen an IP system that matches not only the US framework but also the world standard for IP protection.”

He adds that NAFTA has provided Mexico with a framework to open up and increase innovation, increase the degree of protection for IP holders, and an opportunity to try to be “on the same level and have the same range of protection as other jurisdictions and those in our regions”.

Chapter 17 sets out obligations relating to each area of IP protection and the minimum standard that needs to be met in order for a country to meet its NAFTA obligations.

The idea was that a minimum level of IP protection would give companies from the three countries the confidence to move into a fellow NAFTA state, to benefit from the free trade agreement but know their rights are protected. 

Healthy trade

Between 1993 and 2017, trade between the three members more than quadrupled, from $297 billion to more than $1.2 trillion, according to statistics from the US Census Bureau. 

“NAFTA gives Mexico something to open up to the world and say: ‘Mexico is an emerging economy, we want to keep up with the leading economies, we understand the marketplace will be changing so we want to provide the titleholders with a certainty that this country will protect its creations and will be a business partner’,” adds Peniche. 

“I would say it has been successful in that now the legal structure and tools are there for practitioners, but they do not always bring the right cases to the authorities.”

Peniche further states that while the Mexican Institute of Industrial Property (IMPI) has a different structure from a civil court, it has the skillset and the expertise to understand how IP rights are created and protected “and how they can implement measures such as injunctions, takedowns and other preliminary measures to ensure they can protect IP rights”.

“NAFTA has helped in that sense,” he adds.

IP law in Mexico was reformed in 1994 for integration with NAFTA, which allowed the parties involved in a dispute to resolve their conflicts through a World Intellectual Property Organization (WIPO) arbitration court.

Previously, all IP disputes would have to be considered by a Mexican judge.

Oscar Valdez, head of the Spanish and Latin America law department at Kobalt Law, says this introduction was one of the “greatest consequences” of the agreement.

“Many legislative reforms were introduced to the Mexican legal framework on topics that were considered untouchable in the previous 75 years.”

“Having such protection in place, there was a growth in the national industry and commerce. Equally we were recipients of a large number of companies from the US and Canada establishing in Mexico and the arrival of new products and services.”

He adds: “Many legislative reforms were introduced to the Mexican legal framework on topics that were considered untouchable in the previous 75 years.”

The effect of TRIPS

A year after NAFTA was signed, the World Trade Organization (WTO) adopted the TRIPS Agreement.

It could be suggested that from an IP perspective, this deal superseded the IP provisions set out in NAFTA. The TRIPS Agreement set out similar minimum standards of IP protection across all 161 members of 
the WTO. 

The agreement included provisions such as extending the lifespan of copyright protection to 50 years after the author’s death, ensuring legitimate interests of third parties are taken into account by patent holders, and ensuring that in each state, IP laws do not offer any benefits to local citizens which are not available to citizens of other TRIPS signatories.

“The IP benefits of NAFTA to Mexico are hard to explain without considering the TRIPS Agreement,” explains Nathaniel Lipkus, partner at Osler, Hoskin & Harcourt. 

“NAFTA was a catalyst for Mexico to implement some modernisation of IP but they have a long history of adhering to the field of patent and copyright conventions. They did have IP laws before NAFTA, but they were modernised to conform to NAFTA and TRIPS. 

“The big criticism of Mexico on the IP front is their enforcement and to some extent their adoption of more modern copyright treaties. They are not considered a major IP rights offender in the world, or one which doesn’t protect IP, but of course they have work to do to make their rules are a bit more enforced.” 

While NAFTA has its benefits, it has not always been a clear roadmap for the trade relationships for the three countries. 

The introduction of the agreement proved divisive in all countries, with various politicians in Canada, Mexico and more recently the US being very vocal in their scepticism about the agreement.

A potential major worry for those who currently benefit from NAFTA is comment from US President Donald Trump. 

“Personally, I don’t think we can make a deal ... I think we’ll end up probably terminating NAFTA at some point,” he said at a rally in Arizona in August.

During the US Presidential campaign trail, Trump railed against NAFTA and other free trade deals, saying they sapped manufacturing jobs from American workers as companies sought to pay lower wages abroad.

“Trump’s comments are worrying, but not necessarily for IP rights in Mexico,” adds Lipkus.

“I have been doing consultation from the Canada side, and from what I know, Mexico hasn’t submitted a proposed IP chapter text but Canada and the US have. Mexico is likely to work with Canada’s text rather than 
the US’s.

“In any event, IP doesn’t seem to be one of 
the most contentious issues in the negotiation
—yet.”

With NAFTA making headlines for concerns about a possible cancellation, question marks may be hanging over the protections offered by NAFTA to rights holders.

The future

Just what does the future hold?

“If you ask the US Chamber of Commerce and Trade Representative, they would say a system in which a new standard where all IP law is harmonised and that looks a lot like US IP law, is what they are pushing for,” adds Lipkus.

“From a Canadian perspective there is a desire to modernise where the old law may have been outpaced, but not in a way that is so US-centric.

“Because of TRIPS there is not the same need to have a new minimum standard of IP protection as there was 25 years ago, and I think there is a different vision going forward.”

While the “winds of change that economics and technology have imposed in this world” have had a widespread effect on trade, jobs and IP in Mexico, observers may be hoping that any concerns following Trump’s comments can soon blow over.

NAFTA, trade, TRIPS, IP and trade

WIPR