As the Trade North America Conference continues, it is important to understand the nuances of the North American Free Trade Agreement (NAFTA) which make the implementation of NAFTA’s goals possible. One of the largest barriers to getting the agreement passed, and which still creates issues today are the legal issues surrounding the agreement, as well as how it deals with the differing legal systems of each of the countries involved.
One legal issue which NAFTA regulates between countries is copyright law. Since the separate countries involved in NAFTA have differing laws relating to copyrights, NAFTA needed to include a provision which would protect intellectual property. First and foremost, NAFTA mandates a stringent minimum standard, which requires each country under it to treat the intellectual property of someone who isn’t a national at the same level a national would be treated. Included are standards for copyrighting, trademarks, trade secrets, patents, and logos. Furthermore, NAFTA allows member countries to establish even higher standards than NAFTA requires, which in turn serves to motivate the other countries to respond in kind.
Another provision of NAFTA is the protection of actual property. If an investor who buys property in another country has it affected in a negative manner, it is the responsibility of the government of that country, under the NAFTA provisions, to protect their investment. This means that the investing company has the ability to sue the government in which their country is in if the property is seized through condemnation, or if the property is devalued as a result of laws or regulations passed by that government. This helps to build investor confidence, and generates more business for the country in which they trust the safekeeping of their property.
All in all, differing legal systems create a complex relationship, especially with respect to business in trade in various countries. NAFTA carefully approached these legal issues with a mind towards fostering successful business relations between Canada, Mexico, and the U.S. When investors feel they can rest easy about the legal issues of doing business in another country, they’ll be more apt to take risks and embrace the concept of going global.
For more on the various legal nuances of global business, check out globalEDGE's large selection of Trade Law resources!