Hastings International and Comparative Law Review, Vol. 16, 1993, at 489-526

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This article will set out the legal context of the emerging trading relationship between the European Community and NAFTA. The present situation of the Community with respect to non-member country goods, services, and investment will be described and analyzed. NAFTA's proposed treatment of non-party goods, services, and investment will likewise be described and analyzed. This article will explore the consequences of present and potential asymmetries between the external effects of these regional arrangements and offer some suggestions as to how the United States and European Community may attempt to ameliorate potential conflict.

The resolution of uncertainties concerning the interpretation of the EEC Treaty —uncertainties that involve the power of Community organs to restrict the right of establishment and the freedom to provide the services of third-country-owned enterprises within the Community—is critical to determining the prospective access of U.S. enterprises to that market and thus to determining the balance of concessions between the United States and the Community. The proposed Maastricht Treaty on European Union, which includes amendments to the EEC Treaty, is particularly troublesome as these amendments seem to create (or confirm) in the Community organs a power to condition access to the internal market that may be presently lacking in the European Community (EC) charter. In addition, the bilateral treaties of Friendship, Commerce, and Navigation (FCN) between members of the Community and the United States, and the multilateral Organization for Economic Co-operation and Development (OECD) Code of Liberalization of Capital Movements, will affect the right of establishment of enterprises of each region. Questions about the status and effect of these FCN Treaties and the OECD Code must be resolved for an effective evaluation of U.S.-Community trade relations.

The November 1992 report on NAFTA of the External Economic Relations Committee of the European Parliament, which includes the Opinion of the Foreign Affairs and Security Committee and the subsequent resolution of the Parliament regarding NAFTA, are important as initial formal reactions of the Community to NAFTA. These documents reflect a remarkably divided view of NAFTA: the External Economic Relations Committee, on the one hand, takes a moderate approach to NAFTA and welcomes the agreement to the extent that it creates trade and is compatible with the General Agreement on Tariffs and Trade (GATT); the Foreign Affairs and Security Committee, on the other hand, raises an alarm about serious political and economic threats to the Community, perhaps justifying sharp responsive measures. This article urges political leaders and trade negotiators to avoid the rhetoric of war and to concentrate instead on negotiating an acceptable balance of trade concessions.