Service Sector Dispute Settlement in Free Trade Agreement: The Case of NAFTA Cross-Border Trucking Services

In international trade negotiations two parallel trends have emerged in recent years. One is the development of free trade agreements and the other is an increase in the importance of service sectors in international trade. Many expect that signing more FTAs and including trade in services within these FTAs would enhance liberalization in this specific sector, which historically has been a very difficult point in reducing trade barriers. With the rapid development of FTAs and the services trade, it is predictable that there would be more and more service sector dispute settlement cases in the WTO as well as in the FTA regimes. It is therefore significant to study constructive comparisons between the regional and multilateral liberalization of the services trade focusing not only on their negotiation process, but also on dispute settlement systems and their compliance with each other. The objective of this paper then, is to examine the compatibility of the WTO and FTA performance on services sector dispute settlement functions, as well as the similarities and differences on the provisional framework of the services sector in GATS and FTA through analysis of the legal texts of the agreements. Studying the NAFTA Cross-Border Trucking Services case gives an especially practical insight into FTA Panel decisions and its compliance with WTO rules that show how the FTA Panel decision can be implemented after determination. This case is especially valuable to study because it is the only service related FTA Panel case which contains various arguments on broad issues of the services sector, such as investment and cross-border services. In addition, there recently has been a retaliatory action by Mexico in accordance with the NAFTA Panel decision on this case. With the case analysis, this paper will give some meaningful lessons and implications on future services sector dispute settlement in KORUS FTA in that they can have a more legitimate and effective mechanism for solving services sector disputes.