Comparing NAFTA & the MAI

Barry Appleton LL,B., LL.M.

Appleton & Associates International Lawyers

Contents

Type of Agreement

Coverage

Definitions

Subsidies

Performance Requirements

National Treatment

Government Procurement

Investment Incentives

Reservations

Provincial Jurisdiction

Summary Chart

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While the MAI was based on the investment provisions in the NAFTA, the MAI differs substantially from the NAFTA.  This summary sets out the differences between the proposed MAI and the North American Free Trade Agreement (NAFTA).

Type of Agreement

The MAI is a proposed treaty between twenty-nine countries only dealing with investment issues.

The NAFTA is a trilateral agreement dealing with a wide variety of issues such as: trade in goods, cross-border services, standards, intellectual property, agricultural and automotive trade, and telecommunications and investment.

Coverage

The MAI applies to all investors of other Parties (and their investments) within the geographic territory of a Party. This coverage includes provincial, territorial, local and aboriginal governments.

The NAFTA applies to provincial and local governments but it has made special provisions which limit its application to them. (See Reservations below.)

Definition of Investment

The term "investment" is broadly defined in the MAI. It encompasses every kind of asset owned or controlled, directly or indirectly, by an investor.

The definition of "investment" is broader in the MAI than in the NAFTA or the Canada-U.S. Free Trade Agreement. The MAI does not exclude any type of economic activity while the NAFTA exempts a large number of economic transactions.

Subsidies

The MAI national treatment obligation applies to all government measures (including subsidies programs and other "advantages" provided by the government). This is a significant expansion of the national treatment requirement in the NAFTA.

The NAFTA specifically does not apply to provincial subsidy programs.

Performance Requirements

MAI Governments are forbidden to impose "performance requirements" upon foreign investors. The MAI performance requirement obligations are broader and more extensive than the similar ones contained in the NAFTA.

The NAFTA contains prohibitions on imposing performance requirements.

National Treatment

The MAI Parties must give the best treatment anywhere in Canada to a foreign investor. Thus, the policies of one province can set the standard for all the others.

The NAFTA only requires that investors receive the best treatment provided in that province.

Government Procurement

The MAI, as currently drafted, contains no exemption for provincial or municipal government procurement policies. At a minimum, the MAI performance requirement obligations would severely restrict procurement policies at all levels of government.

The NAFTA exempts provincial government procurement policies from the national treatment, senior management and certain performance requirement obligations.

Investment Incentives

The MAI requires that any investment incentives offered to local persons must be made equally available to foreign persons. These incentives cannot be conditioned on performing specified requirements. Programs that assist small, aboriginally-owned, not-for-profit or community-based businesses must be provided to foreigners.

There is no corresponding obligation in the NAFTA.

Reservations and Withdrawal

There is no process contained in the MAI for making reservations. Any reservations that are made will be subject to future negotiation for removal (rollback). While a country can withdraw from the MAI on six months’ notice, the MAI continues to apply for fifteen years.

The NAFTA had a detailed process for the making of reservations by provincial governments from obligations. These reservations were without phase-out and were not subject to the prior agreement by the other NAFTA Parties before they were listed. Any Party can withdraw from the NAFTA on six months’ notice.

Provincial Jurisdiction

The MAI has no procedure to dealing with obtaining consent from other levels of government. The MAI does not acknowledge constitutional systems that have a division of powers.

The NAFTA contained a process for provinces to make reservations to permit them to continue their existing policies. Also, where the NAFTA dealt with areas of exclusive provincial jurisdiction, the provinces were permitted to opt-in to the agreement. (This opt-in process was used for the labour and environmental side agreements).

Go to MAI HomePage

Summary Chart:

Differences Between the MAI & NAFTA

MAI NAFTA
Type of Agreement investment only many topics
Scope Covers every government in Canada special exceptions for provinces, states and local government
Definition of Investment very broad--no exceptions broad--but some limitations in definition
Subsidies fully covered exempted for national treatment
National Treatment no differences permitted between states/provinces differences permitted between states/provinces
Performance Requirements broader than NAFTA a specified list
Government Procurement fully covered for all levels of government not covered for provinces/states and local government
Investment Incentives covered not covered
Reservations and Withdrawal no process is specified; the MAI  applies for 15 years after withdrawal unilateral reservations are permitted; complete withdrawal in six months
Provincial Jurisdiction no acknowledgment of provincial jurisdiction acknowledgment and process incorporated in NAFTA

 

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