The way ahead for NAFTA

“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.