NAFTA Article 605

Bill Walker, author and political junkie, was the winner of the contest to decipher the meaning of NAFTA Article 605.

Article 605: Other Export Measures

Subject to Annex 605, a Party may adopt or maintain a restriction otherwise justified under Article XI:2(a) or XX(g), (i) or (j) of the GATT with respect to the export of an energy or basic petrochemical good to the territory of another Party, only if:

(a) the restriction does not reduce the proportion of the total export shipments of the specific energy or basic petrochemical good made available to that other Party relative to the total supply of that good of the Party maintaining the restriction as compared to the proportion prevailing in the most recent 36-month period for which data are available prior to the imposition of the measure, or in such other representative period on which the Parties may agree;

(b) the Party does not impose a higher price for exports of an energy or basic petrochemical good to that other Party than the price charged for such good when consumed domestically, by means of any measure such as licenses, fees, taxation and minimum price requirements. The foregoing provision does not apply to a higher price that may result from a measure taken pursuant to subparagraph (a) that only restricts the volume of exports; and

(c) the restriction does not require the disruption of normal channels of supply to that other Party or normal proportions among specific energy or basic petrochemical goods supplied to that other Party, such as, for example, between crude oil and refined products and among different categories of crude oil and of refined products.

Bill's explanation:

Section a) is simple, really. It means that whatever percentage of Canada's oil production that we supply to the U.S. during good times cannot be curtailed during bad times. For example, if we currently supply 20% of our production to the U.S., then we cannot reduce that percentage over the next 36 months. That applies to all situations including if we are in the midst of a domestic shortage.

Section b) goes one step beyond and requires us to sell our resources to the U.S. at the same price as we sell it to Canadians. We cannot apply excise taxes, for example or set minimum price guarantees.