INTEGRATING ,ENVIR.oNN!ENTAL I'ROTECTION AND
NORTH MIERJCANF"REETRAD:E
by
Peter M. Emerson and Alan C. Nessman*
for the
Australian AgricultucalEconomics Society
38th Annual Conference
Victoria University
Wellington, New Zealand
February 7-11, 1994
Introduction
Revolutions in technologyanclcommnnicationilavegreatly#.}nbanced.Ollf capncity
transfer ideas, people, gouds andser\:1ces, capital, and pollution .across nation31
boundades.These'transfers crentea growing interdependence .... aconvergence of
interests ,. .. among very different and sovereign nntions. li1is interdependence is
:routmelye>,:pressed though the commercIal exchange: of goods! services, and capital. It is
tttsoe~-pressed tbrougbconc.erns for important social values like the environment~ worker
safetyJ'and buman rights ..
to
On. Jamlary 1, 1994, Canada, the United States.• and ~1exico began to further
their economic ~ifairs.through a new regional trade pactc~eated by the North
Amerlcnn. Free Trnde Agree.ment (NAFTA). This historic setting offers an opportunity
to e~~ll1ht:l.," how the gro\\ring interdependence .among these sovereign nations might
('ontribtite to solving the difficult problem ofenviron.m.ental degradation.
lnt\~grate
In partit1l1of, is there a conve.rgence of interestsinvohingfuternational trade and
social values that can he used to design a strategy that \\111 allow the trading partners to
achieve hig!:er lev~ls of envlrollll1ental protection? Oft will the specific objectives of free
tradeniand environmental adv()cates :result only in unproductive confrontations?
AU$\\,ets to these que~tions are Important in North Alnerica and in avadety of
international settings.
During the NAFrA debate, trade and environment issuesemetged in a
controversial manner, with much attention paid to thecontlicts between trade and
envlloru:ne,utal polides. The t\'lO policyregitnes are dpe for conflict because the
disclpl;ues are themselves 'bighlycomplAx and be<.:ause they are 'managed by specialists
with widely differing expecta.tions of what is attainable~ V'lihUe such .conflicts can easily
beexaggeril.ted, there are sevel'nl PI)ints nt which trade and environmental regimes .might
be reconciled.
Succ<!ssor failure in this enderivQr will be determined by n host of economic,
polidcaland cultural factors. BUl, if a succcrsful strntegycan be found it could build on
the fact that both trade liberalization and environmental regulation have as their
pri.ncipal goal the more efficient use of available resources (Repetto) .• Indeed, if they
can be adopted, policies that promote ecoromic grmvth and environmental quality
among trading partners would provide a stable base for international cooperation and
rnoresustrunable development.
The purpose of this paper .is to describe tbe role environmental issues and interest
groups played in shaping the NAFfA and its related agreements. It outline.') specific
environmental problems that "\vere raised during the negotiation of the trade agreement
and documents steps ~hat were taken to address these problems. This may help in
unde.rstanding implementation of the NAFfA and in deaUng with issues that were not
1
fully r.ef,olved in the negotiation. process. It maynlso haveimplicutions for future trade
and~n"ir(mmental agreements beyond NQrt.h A:mericn. The-need to reconcile trade and
tt
environrtlel~tal policy ·w.aserophasized attbe 1992"Earth SUlnmit in Rio de l'uneiroand
is Ukely to confront governments for many years.
The p~lper proceeds by first describing somegenerai chnrncterlstics.of the
NAFTA., TIle secondsectilm. documents fOllr categories ·oftoncerns that were raised by
environmenlulist.) in the dehate. The .tblrd sectione~'Plains how trade .negotiators and
politicalle.nde.rs responded to problems raised by environmentalist.s., The 'paper ends
with brief commentS on bow tbe l'tJ.\.Fr.;.\ 'mIght influence what 'happens nextns trnde
and env.ironment agendainterac1*
\-Vhatls TIle NAFTA?
Cross,.border trade in North A.meriea.is substantinland gro'ving, and it is
dominated by trade lllvolvingtbeUnlted Sl'{l.tcs. Tn. 1992, U.S... Canndian iwo.,way trnde
(imports ande:\-ports) accounted fornbout 13 percent of the regi"uisH)ml trade ill
me rchu:n dise; U.S. ·~lerltzn.n for about Z6 percent, ,and Canad.i:~n .. ~r.exico.n for about
one percent (Congress!omdBudget Office). \Vhiletrade with Canada and :Nle:dco is a
significant share of aU U.S. trade) theUnhed States does not depend on their trade to
the same extent that Canada. and .Nfe:tico depend on trade with the United States.,
The United Stat,esand Canada enjoy strong trade and illvestm.ent link~, but' they
also sbarea long history of commercial di:-putes. In 1989. they entered into the U.S....
Canndn. Free Trade Agreement. 1bisttnde agr.e.eroent was n.egotiated, in. large mensur~;
t.o re~olve frictions that have marred conunercial relations between the t\\'ocountries in
areas such as energy, mvestments,so(twood lumber andautornoti\'e products. It \vas also
seen as a vehicle to move regional trade Ubero.lizution.ahead Qf slowermultilat:!l'·:ll lrude
talkst lvlanyaspects of the C.S... Canada Free Trade Agreement are included in the
NAFTA~
Despite broad public. support for the enVirOnJllent nnd a host of U.S. ~ Canadian
m,ltural resource controversies, enviromnental concerns did not ph1,Y a significant role in
shaping the U.S~ '" Canad.ian trade negotiations. However~ environmentaJconcerns were
not entirely absent, especially in Canada. Although, unsuccessful .in mod.ifyiog the trade
agreement.,. Canndian environmental groups did make a vigorous c.ase nguinst free trade
using many arguments that again surfaced in the NAFTA debate (Pearsm. ).
Since 1965, tbet:nhed States und ~1exico have shared a partIal IIfree trade"
experiment called the Border Industrialization Program n:.S. C()ngress~ OTA).This
program liberalized toreignmvnership restrictions on land and other assets in ~fexko
and granted special trade status to businesses that export their products. Typically, the
::vrex.ican..:bnsed pIanISt r.uUedttmuquiladoras," import manufacturing :tllatenals and
2
1I1UC :lines
free of duty lntoNlexico nndexport finisbedor semi:"finished products t.o
U.S. subject to asmn:U value-added duty•. hddulh~ (be :mnquilndorns W~rI~ allowed the
operate {lnly in the border area. But since lheeutly 1970s, speclnllrade sttttus tt)
hus been
grnnted,witha fewexceptious" to companies j'Jco,ted elsewhe.re In fi;fe~\i.co.
In themid.. 1980s, tbe~rexican .governmentadopted au outward..lookingttllo
mnrket.. onenterl .agenda.representing a n1ttjor breakw ilh pas·teconami
cand fore.ign
policy. ;\long\'vithdomestlcprograms of fiscal discipline, deregulation :and privatiz
ation,
IVfexico also joined tbeQ.e.'1~ll Agreenlenton Tariffs and 'Trade (GATT) in
1986
..
This
wnsaccomparried by the removal of some restrictions on. foreign investment,
relative
ly
large reductions in tadffsJand the eH.mlnatiOllof certain" "irements for import
UceUSeS.
Asa re~ultof thesen~don~i by ~.rexiC'nn:nda relativelyopeu U.S" marke
between thet:\vo countries hus ;e:<panded rapidly in. recent years. Today, ~rexictt trade
an economy amounting to flve percent o.f U.S. gross domestic product ..... is t.t1.e o-· \vith
States' third-largest trading pOItner afte.r Canada ;and Japan. And Nte:dco"s Gnited
economy is
t
very beavilydependent on the United States. Two .. thlrds"Of all ~'rexie
an exports are sold
in the -U~S. and 70perce.nt <.\r Nlexicnn imports are purchased in the C.S. Similar
ly, two ..
thirds of aU new direct foreign investment in !vlexh:;,} originates in the l:.S.
(Congressional Budget Office).
In early 19QO President Saliuas de Oarto.ri approncbed Presidcnt13ush to
negotiate a bilateral free trade ngteement.E.'\:pandedto indudeCannda in Januar
1991, the proposetl i.lade agreement ,- while rerycontroversia{ in munyquarters y
enJo}ed the suppOrt of politi.cnl le'~dersnt the highest lev-cIs from the begi.nn
ing.
j
The NAFTA, wbichentered into force
011 January
1, 199i, will create
the hu~gest
free tradearen in the world, \v;tb 360 million peo-p.le .und an annual gross nationa
l
produ.ct totalling ovet S6 trillion. Net economic bihefits are ex-pected to flow
fr.o.m
the
new tradeaYleem.eot, but they are UmJted by the c!t.rrent low level of traden.nd
in¥estment barriers between the l':nited States and tanad,l~ and the relativelv
sm~lIl size
of tbe !\le:dcun e.conomy(flutbauernnd Schott~ 1991; Krugman)*
"
The trade and Investm.cnt liberalizing objectiv~s of the :NAFI:~ win affect nearl~~
every flSpect of businessacdvity in North America (s\·e Table I). Itcnnm'ins.
scbedules
for the phased eUminationof t~lriff and most nontarH f barriers on regionultrade
'within
ten years, although a fe\"l import-sensitive productswil hZlve n t5 . .year transit
ion
l,eriod.
It :lisocontains .rules fClr converting nontariff barriers ~{) tariff harrier5~ rules
for
determining the origin of trade goods; special provisin '.lS f(lf inteUectuai proper
t;,ervices, investment, and governnlent procurement.; u"ttriety of dispute settlemty.
provisions; and numerous exceptions to the generalterk1s and conditions of ent
the
llgreement. A country ;Olny whhdru\v rf{un the NAFTA six nlonths Ufif.!'f it provide
sa
\vntten notice ofwithdrnwul to the other countries.
3
TABLE 1: ObJe.ctlves of tbe North American ,Free; Trade Agreement
Article, 102: Objectives
The objectives of this Agreement, as t'libonlted more specu:\!aUythrougb its
principles and rules. including national treatment, m.oSt "fnvored,.natlon trea.tment and
transparency. are to!
(a)
elhninnte barriers to trade ill, and facilitate the cross-border movement of,
goods and services betweetl the terntonesot the; Parties,
(b)
promote conditions of fair competition In the free trade area;
(c)
increase substantially investUlent opportunities :in the terrItories
Parties;
(d)
provide adequnteand effective protection and enforcement of intellectual
property rights in each Purty's terntory;
f')f
the
"
.(e)crenteeffective procedures for the implementation and appli~ation of this
Agreement; .fOf its joint adtninistrationand for the resoLution of disputes~
and
(f)
establish a framework for funber trilater3.1~ regional and multilateral
cooperation to expand and e'lhan~e the benefits of this Agreement.
Source; North American Free Trade Agreement. 1993
4
Investment pro*risionsof the NAFrA
performance requireluents and will substan. aren.oleworthy because they eliminate :ronny
activities in ~lexico.For some products, tially liberalize restrktiaosou financial
cho.1cesaOout wllere to locate factories this will result in, more ratlonnleconomjc
the U.S. and Canada rather tban moVinga.s fim lsa rea ble to supply Mexican markets from.
to MexicQ,tomeet local man
requltenlents~However, as in
the case of the tariff reduction schedule ufacturing
s~ lVlexico is
granted exceptions that pt"vvide longer
liberalizing provisions th::~n is tbeUnitedtime periods to comply ~vith investment
States ot Canada. This
cession reflects
~1exico"s less developed status
and relatively .more closed economycon
.
The NAFTA isa massivedocum
negotiations. It consists of five volumes.ent;tlle product of lengthy multilateral trade
of thetigreement is n.ot the final word. and nearly 2,000 pages" Nevertheless, the text
committees or working groups for furtherAlmost eve ryc hap tet calls for the fotmatiollof
clarification and administration of the
agreement.
trade
One sector in which the NAFfA
For national sovereignty reasons, Mexicodoes not HberaHzeinvestments is petroleum.
energy resources. Foreign investment willwIll maintain most of its existing re!->trictiollS on
exploration ,and development, andO.S. continue to be prohihited in petroleum
and Canadian finns will not be able to
~fexican retail gasoline mar
enter the
ket.
Unlike the U.S. - Canada Free Tra
the first major trad e agreement that dea de Agreement and the GA n the NAFr;-\ is
(\Veintraub). Key environmental prov ls ina significant way with tbe environment
isiol
accord on North .Amerlcan environmen lS found in the NAFT,f~text, a trilateral side
environmental dean-up initiatives, are tal issues~ and U.S. - .tYlexico border
discussed in the third section of this pape
r~
In addition toa side accord on the env
ironment, there are also side
labot issues and import surges to be
implemented by the trading partners. accords on
The side
accords supplement, but do not amend,
NAFTA.. They promote compliance withthe rights and obligations contained in the
problems before they develop into trad national laws and regulutioo5 and seek to solve
e disputes.
fna n effort to avoid a drift awa
seeksconsistt.!ucy with provisions of they from freor multilateral trading, the NAFTA
memberShip open to all countries with GATT throughout and leaves prospective new
geographic limitution. However, there
reasOns to be concerned about the treaout
tme
nt of non-member countries. First, becare
certain preferential provisions, such as
ause
effects on third ..country trade. Second,industry-specific rules of origin, may have adverse
unanlmous approval to jOin -.. does not because the trude agreement -.- which requires
spell out the application procedur(!$ or
criteria that new members would have
to meet (H'ufbauer and Schott, 1993). the
5
The NAFTA hns been. favonibly described as. the most comprehensive 'ireetrade
pact (short ofa conlman market) ever negotiated between regional trading partners, and
the first reciprocal free trade pact bet\veen a developing country and industrial coulltries
(Hufbauer and Schott, 1993)~ For tv{exi.co, it could "lock in~i rece.utecouomic reforms,
guarantee it access toe~1>ott ,markets. In the,U~S.and Canada,andb.elp It to attract
foreign cap.ital needed for modernization. For Canada, participationiu the NAFfA.
helps secure its presence and influence in U~S.aIld Ivlexicunmarkets iund in any larger
free trade area thntmight arise in the future. Finally, for the U.S., It will bemucheHsier
to conduct b!lSiness InNlexico und tbere is unexpectntion that continued gro\vthof the
~fe:dcaneconomy will provide long tenD economic n.od political benefits.
The EnvlrontnentUl Side of North American. Trade
In contrast to IheU.S .... Cannda Free Trnde Agreement" the environment was
very prominent In the NAFI::\ negotiations. The proposed entry of ~lexicol a
developing nation~ into.a trade agreement with the United States and Canada, two highly
developed. nations, raised new que.stionsabout the environmental consequences of
furtber industrlnli.zation and resource utilization. In all three countries,environmentalists
can point to serious trade·related problems that need to be solved. But, gr.eater
differences in .~fexi(;os level ·of economic development and ability to enforce laws
protecting theenvir01lt.lent directed much of the attention south.
Furthermore, the tuna.. dolpbin dispute bet\veen ~1exico and the U.S" under the
GAIT luade international trade a concern for many environmentalists wbo bad never
before thought of trade as an environmental 'issue... n.1exicochnUenged a U.S ban on
imports of ~'lexicnn tuna. The ban ,vas based on the number of dolphin incidentally
killed by ~lexican tuna fishermen. The GATT panel ruled for wfexico, in part because
the import restriction was based on the process by which the product was harvested, not
the quality ·of the product itseJf. The panel also held that the U.S. could not use
unilateral trade measures to protect animal life outside of itS territOry and stated tbat the
U.S. should have relied on less trade restrictive methods of protection such us
international agreementS and product labeling. Althvugi this ruling bas not been
implemented (because the (;.S. and i\;fe,ico were able to ff!solve the issue)., it greatly
worriesenvironmentallsts who see import restrictions based on the method of production
asa powerful tool for advancing international environmental protection (Berlin and
Lang).
·\Vbile the 'motives of a few environmentalists may huve been to block the trade
agreement, most who participated in the NAFTA debate seem. to favor a. pragmatic
approach. As a group, they are concerned that trade liberalization and economic growth
in the absence of careful planning and poUcies that correct forexternnlities and property
tights failures willincrense environmental degradation. They also recognize that a
growing economy is far more likely to raise environmental standards than a stagnant or
6
decUllingoue t and thnt successful lrade negotiations can be used to raise the .level
of
environmental protee:t.iOll nmong the tradingcQ\lntr.ies~
~!ajor problelns tl1ttt envirorunentulists put forth in the NAFri
.\ debate are
sUIIlmnrized below under faur headings or themes. Th~yare transboundary
pollution havens; health~ safety and environmental standards; and sustainablepollution;
development. TIlere is also a brief discussion of how illterest groups tookenvirol'Jm
entul
issues to the NArl
i\ bargaini.ng table.
TransbounduQ:Pollution
U.s . .,. Canadian environmental prdblem.s are numerous and persist
but they
are dwarfed by tbe poor Hving conditions along tbeU.S.- lV!exico 'border* ent,
III 1990. an
l\merican :rvfeciical Assoeintiongroup described parts of the U.S. - Nlexico
border
virtual cesspool ,t;tltd breeding ground for infectious diseasesi' (CouncHon Sdentif as lin
i·c
Affairs)~ P.ressingenviromnentai problems include wuterc
ontaminatiou from raw sewage
:and to:<ic wastes, air pollution caused by daily gridloekat border crassingsf degrad
of nquiferS t unregulated disposal of hazardous materials, and loss of habitat (U.s. ation
El)A).
The environmental problems of th~ U~S+ .. Nfexico border are mostly the result
of
industrlu1ization~ rapid population growth and the maquil
adoras, coupled\v"ith poor
eruQtceulent of existing regulations and grossly inadequate infrastructure
s. The
'border regio.n demonstrates what hnppens \vhen public poHcies su.cceed infacilitie
stimulating
economic growtb but fail to pro'vide the necessary environmental and public health
infrastruc.tUre
to sUpport grO\vth.
Wbile the NAFTA,. eliminates the special trade status granted to the
m.aquUadoras, industrialization alld population gro\vth are expected to continu
e on the
border as trade and investment b(lrrlers are removed. This raises serious concern
U.S. and~fe;dcnn borderco01munities do not have the governancemechnn.islns s· since
and
:financing to accommodate added strain on their environ:mental and heulth
system
s, and
have often been ignored by their federal governments (Border Environmental
Plan
Advisory Committee).
PoUutionHavcns
In the NAFfA debate, it was argued that weak environmental laws and/or la.,<
enforcement of potentially effective environmental laws would provide an incenti
ve for
businesses to relocate to ~Iexico .... a pollution huven
to avoid tougher laws and
higher pollution control costs in the United States and Canada. Because
the
possibility of business relocation and attendant loss of jobs to w1exico, theofpolluti
haven fear created an opportunity fora-coalition bet\veen some envlrollmenta on
U.S. and Canadian labor groups threatened by lower wages in Mexico. It waslists and
also
ll
II
...
7
argued tIltH business relocation would both destroy tlle:environmetlt in Mexico and
ulldercut political support for tough environmental standards .in the U.S. and Canada.
T.hequestion;of whetber businessre1Qcutio,U is likely tooccut under the NAI~A
solely because countries have differingenviromnentnl standards and levels of
enforcement 1s problematic. A. 1991 study by the JJnlted StatesOovernment Accounting
Office found that during a three yenrperiod between 11 and 28 furniture manufactu.rers
in the .Los .Angeles 'area relocated all or part of tbeirmanufuctu.ring operations to
Nfexico (Hutbauerand Schott, !99a). These nmnufucturers cited "the lligh cost for
workers' compensation insurance and wages and the F.mngentair pollution. emission
control standarcls\! 11$ major factors in tllcir decision to relocate. It husalso been
reported that c.e.ttuin copper smelters, petroleum refineries.~ asbestos plants alld ferroalloy
plants have heenconstructed abroad rather than in the United States for environmental
reasons (Olobennnn).
f
Nevertheless other studies show that for many production processes,
environmental costs are only a small fraction of the ftrmts tOtal expenses and that
historically, environmental factors have not been a major determInant in. how companies
allocate tbefrinvcstments among countries (Pearson). FinnJly, evidence was presented
showing tbat the business relocation criticism of the NAFTA was likely to be overstated
in light of the SOldll share of costs inmost industries due to pollution abatement and the
already low level of Li.S. tariffs in industries facing higb pollution abatement costs
(Office of the U.S. Trade Representative).
t
f
Health,. Sarety and En'ironmental Standards
Environmentalists were cQncerned that theenvironm.entnl and health product
standards of the trading partner with the highest standards would be challenged as
protectionist measures by a partner\'Vith lower standards, or voluntarily reduced to
hannonize them with the stnndnrdsof the other countries. For instance, n stringent C.S.
food quality standard applied to Dtlexican vegetables or Canadian fruit at the borden~
could becbaUenged either as a disguised burrier to trade" or bargained away by
government offidals in an effort to harmoni.ze standard. This is a significant concern for
at least three reasons. First, scientists and governments do not agree on acceptable
levels of e~:posure to many chemlcn.ls~making it possible to argue that u. ~tnndnrd does
not have a sound scientific basis. Second, producers in a count.ry with higher standards
willargu.e that they are at a competitive disadvantage relutiveto other producers. And.
third, individual states and localities in all three NAFTA countries may sel standards
stricter than their federal. governments, whkhmight be challenged as impediments to
trade .
.Nfovi.ug beyond product standards that are applied to goods as they cross the
border, some environmentalists cnHed for the application of process standurds to monitor
the ways in which good are produced and investmentsnre made .in the three countries8
Such process standards are notco.mtnonly
specified intrndeagreements.Proponents
nrgue that high process standards are nee
ded
weaker process standards., or their ItL~enro to ptotecttheenvironment and that
rceme.nt, are objectionable .sub
sidies.
Opponents ..",which include environmentalis
ts ..... t\Jgue the case fOf.:nutional sov~reignty
in setting and enforcing processstandn
rds.:especially when t~e pollution imp
Strictly 10co.1. In their view, local polluti
act is
according to lhnetables that reflect diff on problems should be handled dom.estic:ally!
erences in incctne, social preferences, and
cnpncities to absorb pollution.
Challenges to standards affectin
dispute resolution processes in the tradg trade are curried out through consultation :~l1d
e agree.ment. In the NAFrA~enviromnenta
sought to open these processes to pubUcp
l1sts
in dispute resolution hearings on. bebalf nrticipationand sought the right to intervene
They reason increased public purticipatioof health, sufety and environmental standards.
environmental and other sodal interest u will make the proce.edings more responsive to
s. In the U.S. and C{lnada~ state and pro
governments also joined environmentalis
ts in seeking to participate In internationvindnl
ptoce~dings that would settle
al
disputes involving their own laws.
Although not technically u NAFTA issu
et the tunn..do}phin dispute under the
Gf'\TT appears particularly ominous toen
viron.mentulists~ Concern aris
es beCtlUse in
decid.ingagainsta provision of the U~S.
Nlurine Nlammal Protecdon Act "the
equated industrial methods of produc
panel
considered restrictions on taking on tion to the 'taking' of species and because it
equivalent of objecting tn '(1 protectedtbe high seas outside a natiOll~s ter.ritory as the
method of production\vithin a. nation~
(Berlin and Lang). ~fany environmen
territory"
talis
should distinguish bet\veen Hving things ts argue that the application of standards
... fish. \vndUfe~ and plants .... ~\nd industr
goods. They also believe that a nati
ial
ons
met by all domestic and foreign produc stnndardsaimed at pre~er'wing spedes should be
ers as purt of the price of admission to
market.
the
Sustainable De\lelopment
The bn)adest concern raised bv
economic growth resulting from the ~i\environmentalists was the feur that ttdditionul
pennanent harm to the worlds environ FTA may not be sustainable~insteudcau.sing
and investment ure removed~ it is argu ment and natural resonrces. As barriers to trade
ed that increased resource utilization. pro
and ~onsumption will stru.in the environ
ductit,n
damage, but also through adverse glob ment not only tllnlugh local and transborder
al impacts such as climate change. ozo
depletion. and loss of biological diversity
ne
.
Some sustainable development advocates
apposed the NAFTA based on their
conviction that tbe world has already renc
hed
the
l/linlits of growth and that further
econoolic growth will increase environulen
tnl
<!ost
:;,
fuster than benefits (Duly).
other sustainable development advocates
support trade liheralization to achieve Yet,
,~re
'f
uter
9
effic.iency in the use of resources Ul1.d believe that econom.ic growth is computiblewith
sustainable development.·nlcyargue fot polidestointe.rnalizeenvironmentalcostsulld
recognize that protectionism oftencontdbutes t.o poverty :mdabuse of the environment
(NHkeseU, Hudson).
RoleQf Environmental Interest Groups
From. eady 1990 to the fnll of 199.3, cllvirontuentaIistsio all three countries took
these problems and others to their elected officials, to the NAFTA trade negotiating
teams, and to the public. Sometimes environmental concerns and recommendations
were delivered througb coalition efforts. On other occasions,environmentaUsts acted
independently,
In the United States, the Bush Adminlstrution's need to secure anextenslorl of
fast track negotiating authority from. Congress in the Spring of 1991, provided a major
oppo.(tunity for environmentalists to press for inClusion of envixonmentallneasures in the
NAFTA and related agreements. \Vorking with supporters in the U.S, Congress!> they
succeeded in convincing the Administration to add envuonmental representatives to
several NAFTA review committees~ The Administration aJsocommitted to work jointly
with Nfexico to carry out a "paral.lel planll to improve public health and the environment
along the border.
During the negotiati<..1 of the NAFfA, environmentaUsts participated in
legislative and administrative hearings and numerous conferences. They also met.
regularly wi.th trade negotiators and elected officials in all threecountdes. TIle final text
of the trade agreement responded, with varying degrees of success, to some of the
environmentalist!,' concerns.
In septembe r 1992, Presidents Bush and Salinas de Gortari and Prime Minister
Nfulroney signed the NAfTj-\' However, the U.S. Congress did Jj~)t pass the legiSlation
needed to impiement the NAFTA until November 1993; more tbt~n one yenrafter
President Clintons election. During his cumpaign~ :Nlr. Clinton assured Nlexico and
Ca.nada that he would not seek to renegotiate the N;\FTAS text. He did however. cull
for trilateral side accords on theenvirorunent and labor.
t
Prior to net otiatiug the environmental side accord~ the new Clinton
Administration sought rewmmendations from a brond range of experts .in environmental
groups, business, academia and govrrrunent. Se~.'eralenvirorunental interest groups thut
ultimately supported the NAFT.\ worked together in 11 loose coalition. to develop
detailed proposals on enforcement1 regiontl1 cooperatioD" and U.S.• 1vlexko border
fu.nding. As provisions responding to envirolUnentnl concerns becrune dear in the side
accord negotiations and in developing plans to help cleanup the U.S... ivlexico border
region, theenvironmel1t became less of an issue in the remaining nlonths of the debate.
10
By the fall of 1993, nearly aU environmental groups in Nlexico strongly supported
the NAFfA, while urging their governnlent to continue strcllgthening its environmental
pr0grnnls. In Canada; most environmental groups opposed ttie NAFfA raising many of
the fears that had first surfaced in the U.S."Canada Free Trade Agreenlellt. And, in the
U.S., the major cuvirollDlental groups. split due to differences of opinion concerning the
NAFl~) text, the adequacy of governm.ent fuudillg1 and the likelihood of renegotiadon.
To increase their political strength. the allti. .NAFTA environmentalists joined with a
group of antl",:grO\vth advocates, traditional protectionistsnnd conservatives already
working against the trade agreement.
Now that some time bas passed and the NAFfA is beingimplernented, there is
evidence of a significant split in the North Amedcanenvironmentai community.
Environmentalist from both the pro-NAFli\. and anti-NAFTA ca~.t)s and from all three
countries are~ once again, w()tkil"g together on issues of luutual Interest and disagreeing
on others.
00
Solving 'fhe Problems
Co.nfronted \vith a series of environmental problems that could not be ignored,
policy officials and trade negotiators sought a strategy to successfully integrate trade and
environmental objectives. The results of their work are found in several provisions in
the NAFTAS text; in a trilateral side accord, called the North American Agreement on
Environmental Cooperation; and in environmental c1ean~up plans for the U.S. "" ~·fe.'{ico
border region.
These new commitments are explained and briefly evaluated in this section. In
some cases, they create rules for policy coordination and problem solving. In other
cases, they merely declare the intentions of the countries to pursue a particular course of
action.
NAFTA's EuvironmentnlProvisious
The NAFTA explicitly deals with environmental issues in its Preamble and In flve
chapters: international environmental agreements (Chapter One), sanitary and
pbytosanitary measures (Chapter Seven, Section B), standards-related measures (Chapter
Nine), investment (Chapter Eleven), and dispute resolution (Chapter Twenty). Key
environmental provisions of the NAFTA are summarized in Table 2.
These provisions attempt to resolve trade and environment conflicts that relate
directly to the trade agree.ment. They include! potential conflicts bet\veen the trade
agreement and trade measures in internath.. ual environmental treaties; the need to
discourage product standards that Ure disguised barriers to trade while protecting
stanuards\\!ith legitimate environmental purposes; and the risk that liberalized trade and
11
TnbIe2:
Key Environmental Provisions
or the North American Free Tradl.! Agreement
Chapter One (Objectives) gives precedence to confiictlng trade provisions
in three international environmental treaties.
*'
Chapter Seven, Sectio'o' B (Samtaryand Phytosanitary measures) and
Chapter Nine (Standaros ..Related :measures) concern product standards.
Eacbcouutry may set its 0\\11 appropriate levels of protection" Under
Chapter Nine, noo:ordiscriminatory general standards are essentia.lly immune
from challenge if they have a I'legitimate purposell such as protection of the
environment or health. Surutaryand Pbyto5unitary 'measures must meet
further tests. such as having some scientific bnsis. Effons to harmonize
either type of standard must not lower the level of protection.
Chapter Eleven (Invesunent) seeks to discourage a country from rela.!ing
hs environmental standards, or their enforcement, in order to attract
investment.
Chapter 20 (Dispute Resolution) allows dispute panels to consult outside
scientific or environmental experts and to create scien.tific review boards,
subject to the approval of the disputing countries.
Source: North American Free Trade Agreement, 1993.•
12
investulent provisions wllilead to pollution havens. The :mo.in sourceofcon.flict in these
provisIons is betweett, tr::lde UberalizationandenvirOD.mental protection, but nat:onal
sQver'!igntyis also a significant is?ue,especiaUy for product standards.
International Environmental Agreenlents
~~A:FTi'\S Article 104 gives precedence to ,ordllcting trade proV'i!.lOl1S in three
.internntional envirol"411ental treaties. T:uevare: the Basel Conventl.urt on Control of
Trnusboundnry ~/fovement5 of Hazardnus '\Yastes, the r..fontrenl Protocol on Substances
th~t Deplete theOZOt1C t.uyerJand the ConvenUonoll the International Trade:in
Endangered Species.. Other treaties may be added by agreement of the panies.
'Coder the GATr~ there is un eX'Plicit ba.~b forre~olvingcoufljcts between tile
trade agreement and environmental treuties. For example, the Basel Convention
probibit~ signatories frottt exporting hnzutdous wasta to non ..signutories. If a signatory
\\+erechnllenged under the GATT for refusing stIch exports, it could not rely on the
Basel Convention because there is no CATT provision consitieringtbe effect of
inconsistent environmental treaty provisions. It could only rely on theGKITs Article
XXexceptions,which'wQuld leuye tbe nutcome highly uncertain. flowever,under
Ardcle 104~ the Basei Convention would take precedence to the extent of any
inconsistency \vim NAFTA'S trade rules. Trade sensitivity in Article 104 is found in the
requirement tP "t where a party has a choice among lie qu aUy effective and reasonably
avanable~'means of .meeting itsenvironmettml treatyobligations,it mustclloose the
rneHUS that is least inconsistent with the NAFtAS trade rules.
The NAFTA is the first trnde ugreement to give such precedence to
envlronmentaltreati.es. Environmentalists are concerned, however, that the countries
will not act quickly to include :additional treaties that .may conflict \\tith the NAFrA
The requirement calling for the selection of the least NA,F1:>\.. iTlcon."iist~,,;nt means of
honorlngenvironmental treatyoblignnons i~a reasonable concession, as long as it is not
interpreted to aUow second-guessing of a countrys selection.
Product Standards
One of the m.ost complex issues is the us~ of product stundttrds to limit the import
of goods that may be harmful to health, safety and the environment The NAFTA~s
provisions provide more protection to ncotlntry's envirorunental standurdsthen either
the existing or proposed GATt text The NAFTA does this by (1) making the criteria
for defending challenges more deferen.tial to environmental measures: (2) giving dispu'ie
p.anels access to environmento.lexpertise; and (3) prohibiting dovy'llwurd barnlOnization
when the parties cooperate to make their standards compatible.
Criteria for Defe.nding Challenges to Standards. Tbe primary function of
standards pro'visions inn trade agreement Is to root out disguised harriers to trade. TIle
13
t-V\I~)\ balances thu~ fuuJ:tion ngninst the .need to shield Iegitimateenvironmenud
m.e.as~Jres. Tbe texteulpl.oys differentcdterla dependi.ng Oll whether the product
standard .is n, sanlturY'undpbytosanitary (S&l')standu.rd(which deals. with the tisksof
contilDlinants in f()Qdand the spreader disease and pests) 'otagcnerttl product standard
(\vhkh includes all other l~nvironmental product standards, such :a5 lh(,se regulatillg
.Uli.nimum flleleconoIl1), .and 'pollution emissionsot: autouiobiles). S&P smndardsnre
subject to' stricter scrutiny bemuse tbey have traditionally been mo,re nbused. for
protectionist purposes.. Howeve~,botbtypesof standards enjoy It gene.r::d presumption of
NAFl'k\cOlllpatibUity if they are ba«,ed :upon international standards. suell as tho~e ·or
the Codex Alinle.nnuius. Thus. tbe following discussion considers the defense ofa
standard that exceeds, interna.1J(loal nol1llS.
Fo,r botbt;ypesof standardst the N}\FrA shifts the burden ·of proof from the party
defending the standard (at) is the case under the GA1'T) 10 the challengin;g party"This
meanstha.tlf the dispute pan,!lun.ds tbeevidence inconclusive. itmu!\t uphold the
standard... Second. acbnllenged partyc:m elect to hnve the dispute decided sc:1ely under
tbe NAFTA. ThIs 'Prevents ·a country: tbat is ~balletlging ~, standard from .avoid.i,ng the
provisions of the NAFfA, by bonging tbechaUenge under the GAD:
The NAFTAexptfcitlyaU()ws euebparty loseti.ts own appropriate levels of
protection. or levels ,of risk (i.e~oneca.~e ,of C'nm~er in a million caused by pesticides in
fruit) And. to achieve thut level ·of protection byemplO,ying standards tbutexceed
international norms (Articles 702, 904.2t '905.l)~ TheNAFfA does. bowever:. impmi.e
trade disciplin,e On. how the level of protection is chosen. For example.. the parties are to
avoidnrbitrnryand unjustifiable distinctions between s'iulilar goods or levels of protection
where such distinctions discrimiIlnteagainst the goods of another part}' or aet as a
disguised barrier to trade .(..o\rtlcles 715(3) and901(:Z».>
The rnajar d.ifference between tbe Nt\Ff}\:s treatment of the two type~ of
standards is tbat acountrys general standards huving a *tlegitimate objectl\+e'· dono.t h~l\'e
to meet further tests that nreapphed to S&P standards. A ntln..di.scriminatory genet'at
standard isessentiaIly immune if .its demonstrable purpose is to achieve a tflegitin131e
ubjective1!'t such as protection of the environment, health~ sufety or sustainable
development (Articles 904(1},,91S). Thus1 for exalllple, if Canada sought to reduce
greenhouse gust.missions by requiring that new cars obtained a. certain le\rel of fuel
economy~ it would be ·"irtuaUyimpos'Sible fJrthel:S or ~lexico to successfully challenge
the stundard if it were applied equruly to both domesticund lhreign cars.
An S&P standard, (lO the l,1ther hand, is subject to several tests. For ex~rmple''\ the
standar'dmayollly beuppUed to the extent neces$,ary to tlchieve the chosen !evclof
protection fArticle 712.5) . TIle NArlA negotiator~ specIfically rejected the current
OA17 ,requirement that the party must chonse the S&Pmeasure that is ttlenst restdctilfe
to trade." The challenged party need only show that .its chosen level of protection
necessitates wemeasurc, it need not counter claims that the fiame h~\el of protection
14
could beacllieved by ,ll Jess trade disruptive meaus, such, as lnbeling or .0. pollution ttLtw
The pivotnltenll I'necessnry~'i howevett lsnot: derined in the text.
Au S&l?meusuremust also hnve a scientifi.c ba!sls. The NAFI'A test requires
only the existence of some scientificevidenee supporting tbe measure (Artic1~s 712.3,
and 724). Thus, the challenged party need not engage in a battle of scientific e.xpertsar
evidence.
FrO'ffi the environmental perspective, the NAFTA standards provisions. are a
significant im.provem,ent over those In the GATI: particularly with respect to general
standards. &10$t environment.alists would have preferred stronger and clearer protection
for S&P standards,. such 'as ,a cludtication of the 1fnecessart test.
Dispute .Resolution, The NAFTA gives panels deciding ch.dlenges to stund1lrds
the opportunity to seekenvirorunentalexpertis.ein resolving disputes. Theycnncollsult
with outside environmental and scientific experts orcreute scientific review boards,
subject to veto by the disputing parties., These provisions partiaUy respond to the
concern that dispute panels would pass judgment one.nvironmental st~lndards t~vithout
unde.rstanding scientific issues crucial to the dispute.
En\iironme.nralists would have preferred greater access to scientific expertise, but
their main criticism is that the NA.FI:AS text does not Increase the tra.nsparency of,and
puhlicaccess to~ trade, disputes involving standards.
Harmonization. High product standards are also threatened by the parties'effoTtS
to harmonize their divergent standards. The N~A, however~ prevents "dO\vuward
harmonization by requiring that any harmonization beaccompllsbed v.1tbout lowering
the level of protection (Art. 755(1), 756, 906(2). For general standards, the parties also
agree to work jointly to enhance the level ofenvirontnental protection (Article 90G(
These provisions are a significant improvement over the GATT: which contains no such
safeguards (Cbarnovitzj.
11
1».
Investment
The NAFrA text discourages the countries from lowering environmental
stlndards for the purpose of gaining business investments. It states that it is
"inappropriate" to use relaxed environmental regulations or enforce.ment to uttruct
investment and 'admonishes that a country "should not" undertake such an action (Article
1114) A country may request a consultation \vitl:a trading partner, if it believes that
the partner has ignored the guideline.
EnvironmentaUstsare dissatisfied that this provision does not prohibit the
relaxation of standards andthut it merely culls forconsultntion. Inndditioo, the .text
15
only addresses a portioner: fhe pollution ;haven problem. It does not confront existing
1#1.'( controls or (he rela.,,<ationo.f standards :(or thebeoefitof domestic industry ratber
tban foreign invt:'stors. Fortunately, the environmental :sldeaccord responds nlore
broadly to these concerns and provides tools fordeallng with lax enforcement.
Th~
North ,American Agreement on E'nvironmental Co.opernUon
\Vhile the envirO.runentnl prov:isionsof tl1e NAITA:<l text focus on issues closely
related to the trade agree,ment, the sidenccord. estnblishesa framework for cooperation
on,environmentnl matters and commits the parties to effective enforcem.ento£ their
environmentnllaws{Notth American Agreement on Environmental Co op etation). Key
provisions of tbe. side accord are summarized in Ta.ble 3 and discussed below. ~{any of
tbe conflicts dealt wit.bin theenvironm.entul side accord .ate not between environmental
protection and trade liberalization, but bet\veen environmental protection and national
sovereignty~
Commission on Environmental Cooperation
The heart of the environmental side ;uccord isa Co mmlssio n on Environmental
Cooperation« Its functions include fostering cooperation and solving environmental
problems before they become trade disputes; conducting research and making
recommendations on complex issues sucha.c; the use ·of process standards; and providing
environm.entalexpertise to various committees created under the NAFrA. The
Commission will also resolve specific complaints by citizens and countries that a country
15 not effectively enforcing its environmental laws.
The Conunlssion is directed bya Council of the environmental ministers of the
threecountnes The work of the Commission\vi.U be carried out by a Secretariat 'Witb
advice from a tdnational public advisory committee ·includingenvironmentalists.
fc
Enforce.ment of Environmental La\VIi
The side accord includes specific provisions for promoting theenrorcement ·of
each country's envirOllmentallaws. The ComlrJ.ssion accompUshes this by examining
complaints about la.xenforcement from individual citizens, interest groups and countries
and. by requiring the accused party to respond in. an appropriate lUanner~
The ,enforcement mechanism, has varying degrees of Commission Involvement.
ranging from simply asking a party to respond toa citizen's complaint to formal dispute
panel proceedings between countries that can lead to fines and trade sanctions. A~ the
level of Commission involvement and potential intrusion upon national sovereignty
increases, so do the requirements for what may be considered and the opportunities for
negotiated solutions.
16
Table 3:
*
KeyPto\'isions ·of the North American
Agreement on. Environmental Cooperation
Creates a Commission on Enviro.nmental Cooperation to facilitate
cooperation and research on problems concerdng trade and the
environrnentnnd tbe North American env'rOl1m.ent. TheColnmission may
develop recommendations on issues such ,{5 process standards and common
emission limits for certain pullutants.
Establishes a framework to promote .effecti\ie enforcement of each
countrys domestic environmental laws through citizen complaints to the
Commission, consultations and disputes bet\veen the parties.
CommitS the countries to provide for public participation in domestic
environmental decision- making and enforcem.ent.
Source: North Ame.rican Agreement on Environmental Cooperation 1993.
t
17
At the initial stage, any .citize Itenvironmentul group or other entity ofacountry
may complain to the Conunission that any NAFfAcountry has failed to effectively
enforce its environmental laws. Recognizing that ~no country is able to enforce .all of its
enviromnental1aws cOlllpletel>~ the .text defines ~Ie£rectivee;uorcetnenel and takes
account of the allocation of scarce resources an1ongenforce.::.ent priorities. If a
complaint ,meets basicrequire.ments, the Commission may require the country to respond
to the allegation. At this point there 'is no requ.irement that the allegation of lax
enforce.tllent be specifically related lotrade. Depending on the country>s response to. the
complaint, the Secretariat may prepare a factual record with the approval of two..;thirds
of theenviromnentallninisters (Articles 14..15).
Formal con.sult··~tions between the countries and dispute panel proceedings may be
requested only bya -countrj. The country seeking consultation must allege a "persistent
pattem"of lax enforcement. If consultations faiJ, a dispute panel may be convened.
However, tbis requires two .. thirds approval by the Council and evidence that the la."{
enforcement affects trade betwe.en thecountnes(Articles 22-24). If the panel finds a
pattern, of la"<: enforcem.ent, an action plan is prepared to remedy the problem. Ira
country fails to follow the action plan; the panel wiUlmpose fines which are backed up
elther by trade sanctions in the U.S~and Mexico, Or domestic court proceedings in
Canada. to collect the fine. The amount oftbe fine, up to S.20 million, is based on
factOrs such as the extent of the enforcement failure and the country's effort to remedy
it. Reve.uues from the fines ·are to be useu,at the directio.n of the Coun.cil. to improve
theenvironrnent or environmental enforcement of the country paying the fine {Articles
34-36, Annex 34)t
Some envirorunentaHsts .are satisfied with this enforcement mechanism~
parJ.cularlythe direct access of citizens to the Commission and the threat of sanctions
against recalcitrant parties. However, critics complain that the schem.e is too
cumbersome; that the many checks and balances will greatly delay the imposition of
penalties.
Strengthening Public Participation
The side accord includes severnI important commitments by the countries to
increase public partic.pation in domestic enforcement and in decision-making relating to
the environme.nt and pubhc health. For example, they agree to ensure that their citizens
have tlapprcpriate access to judicial or administrative proceedings for the enforce'ment of
environmental1aws. The countries also agree, to the extent possible, to give advance
notice of proposed laws and regulations, and to provide an opportunIty for comments by
interested persons.
..
ll
These commitments reflect a belief that lone t~Jnl integration of envirorunental
policy requires giving the citize11s of each country ready :~cces; to ehvironmental
18
.infOtrnation~decislon
lllakillga.lld remedies. Such participation lUqy lessen the need for
the Commission to act nsawatchdog.
The environtnenttd side ,accord containstnuch of ,vhnt cllvironnlcntalists had
proposed. Some hnvectilicized the Hll1its on the independence ·of theCownnssl.onnnd
ltsfuncdolls·. 'However, tbis was deem.ednec.essury bec:nuse of potential intrusion on
national sovereeignty and the need for tbis experimentnllnstitution to have flexibIlity to
evolve.
U.S.-iVlcXlcOBQrder 'Environmental Initiatives
The introduction of U.S... ~texjco borderenvironID.entnl problellls into the
NAFTA debate focused pOliticnlnttentiollon. long. ..oeglcctedneeds in, hothcountries. It
was seen as an opportunity t.o raise public conscinusness about the border region. aod to
redress lts degradation. Me.w initiatives. to deal with these needs are being carried out
under existing bilateral agreem.eot5 and nre llOt formally tied to the NAFTA. However,
in. both countries, the initiatives were proposed to win support for the trade ngt~eement.
Threeexnmples of ~lparanerl efforts. to solve public health 'and enmronm.ental
problems ,along the U.S. - 1vlexico border are described below. Tbeseefforts help border
resIdents sbape prioriti.es for their co mmuni.ti es. commit the federal governments to more
environmentnlinfrastructure investments, and increase private sector responsibility
through user fees and proper~y right:. strategies.
First! the U.S. and ~fexico worked together to prepare a multi-year ~nvironmental
manag.em.ent plan for the border region {U.S. EPA). The .firstcotnponent of the plan
(for 1992. .94) was released in FebnlD.ry 1992. The new plan is important because it
caused the two countries to identify joint problems, to set priorities, and to allocate
federal and state monies for public lnfrastru.cture facilities in. the region. For example,
the U.S. and !vfexi.co promised an addi.tional $700 millionroostly [or municipal
waste\\"uter treatment during the first phase of the plan (Congressional Budget Office).
However, the border plan. bas been widely criticized for being vngueand unresponsive to
local r;eeds, ,and because it provides neither the gove.rnauce mechanisn1s nor the funding
needed to ~ f)lve :nany of the region's problems (Kelly). Bothcountrles have recently
committed to prepareantlimproved" border plan and to locate environmental protection
offices in tb~' burder reglo,n (Browner).
Second~ in respon~e to continuing criticisms, theU~S. nnd ~lexico agreed last
November to create two new binational institutions to facilitate border en'Viroumentul
clean..up (Agre(~m.ent ()f November 15, 199.3). A Border Environmental Cooperation
Commission wiUassist local com,tnunities in coordinating and designingenviroumental
infrastructure projects and in conducting environmental assessments of proposed projects.
NIechanisms \\till be se: up to ensure that the priorities of affected communities and
19
members of tbe,pubIicaretaken into account. The b()rder cOtllllu5sion will be directed
by a binational board and u.citizenndvisory 'council.
Projects approved by the bord~r comrnissionwill be sent toa North American
Development Brulk for possible financing. TIle bank will be in.itinted with cnslland ,loan
guarantees contdbuted oqually by theIJ.S. and Mexican governments. Federal funding
will; 1n ttlrn" be used :to leverage larger amounts of '!lloney by requiring that projects be
co.,financ:ed by state and local governments and through user fees paid by prlvatefirrns.
It 1s e~:pected that the bank will provide an increase ·of $2 to $3 bHli~n itt financing to
th;;; border region over the next ten years (Agree.mellto£' November 1.5, 1993). The bank
will also be directed bya hinational board.
Fina.lly; the MArry.A debate has spurreJefforts to develop new bi.national
governance institutions to solve loeaUzedtrans~oundary pollution problems. For
e.xample~ the possibility of increusedecooQmic growth and. further environmentul
degradation under :tbe NAFfA 'btt.<; caused the U.S... ~fexico border cities of EI Paso,
Texas, anded. Juarez, Chibuabua~ to recognize the need forregfonal instituti.ons to deol
with eUviroumental quality. Because of tbe COIbbined effects of their im.mediute
proximity ina high elevation, arid mountain valley, and because of rapid populationund
industrial growth related tointemational trade., the t'sister citles share a very serious air
pollution problem. Healthy air quality standards are regularly violated in thecomm.on
airsbed that serveS both El Paso and Cd. Juarez.
tl
To reduce air pollution! community le.uders have agreed to workcoopera,tively to
create an international rur quality management district encompassing tbe two cities and
their surrounding area (Pnsztor). The management district will monitor air quality,
inventory emissions fromruajor sourcest Set air quality goals, and administetincentive..
based 'mechanisms for achieving these goals. Businesses operating in theairshed \viJl he
allowed to decide where and how to make their required reductions in poHutionand wlll
have an opportunity to earn emission reduction credits that may be traded or banked for
future use.
The international air quality management district provides a g(werno.nce tool
needed to address transboundaryair P()Uution. Withol-it joint management. national
clean air legislation in either country is unlikely to solve the poUution problern and
would not do soiP the most efficient manner possible. Alloyving new ande.:'~.'panding
businesses to make investments in. pollution offsets and to earn emission reduction
credits throughout the airshed helps to insure that additional economic growth due to the
NAFl}\ wiU contribute to the process of cleaning up the nlr.
One practical consequence of cross·border pollution transactions is that U.S.
businesses in bigher..income HI Paso t where many pollution abatement investments have
already been mnde, ~ill huvean 'incentive to invest in lower..income en. Junrez where
fewer pollutiona'batement investments have been made and large reductions in pollution
t
:0
nre possihle~ Inndditiou; 5uppliersof clean technology andulternative fuels may enter
the market to help finance these cross.. borderinvestments inexchallge fora share of the
emission reduction credits that .are.generated.
Ule :internatiomllait qualitymallugement district .... anenvi:ronmental. poUcy tool··
.. will benefit international trade by 'ptoviding an. efficient means of achIeving healthy air
quality needed t<) sustaine>.:panded trade and ecouo.rnlC growth. Trade liberalization
thrO\lgh the NAFrA on the other hand, will benefit the environment by eliminating
tariffs and other restrictions on tbeexportof polludonconttol equipment and technical
services.. These complementary outcomes,. which depend on theac.ceptanceof com.mon
air quaUty goals and business strategies tbat transfer poJiution-reduciog tecbnolo!''Yt will
benefit 'El Paso and Cd. Juarez by .improving their environmental performance and tbeir
opportunities for future economic growth.
\Vbere Do Thlngs Go From Here?
The NAFfA negotiations demonstrate that it. is possible to v..rrite a comprehensive
trade agreement v;dth environmental provisions and to l1Hlke relatedenvirontll.ental
commitments without subverting important goals of trade and investment libernlization.
This outcome refie<:ts n high degree of interdependence among the three countries. It is
the latest step in a series of bilateral agreements and unilateral decisions .,.- 5tarting in
the 1910s ... that move toward a more open trading systelu in North America.
The particular reconciliation of trade and environment issues found in. the
NAFrA was heavily influenced by environruentalists. Howevert it does not dictate
tmifoIlIlity of standards or otherwise impinge greatly on a nation'S sovereign control over
environmental matters within its own borders. .Policy officials and trade negotiators were
able to succeed because they rejected the view that conflicts behveen trade Uberalization
and environmental protection are insurmountable,and accepted the challenge of tr'/ing
to figure out how to achieve both goals.
TIle introduction of this practical strategy into the intern.adan.ttl trade arena may
be themos! significant feature of the NAFI:-"\ in shaping whnt might happen next.
There is now a. model that recognizes each country's right to choose appropriate levels of
environmental protection. tilts toward up\vard barmoniz~ltiont gives precedence to major
international environmental treaties, and retains sufficient discipline to allow disguised
trade barriers to becbo.llenged~ In.creating a COlnmission on Environ.mental
Cooperation, the N.AFD.\ countries seek to achieve better enforcement of .existing
environmentalluws. And, over u period of tlme~ they will r.ddress process standard.s thtlt
regulate methods of production and develop more consistent environmental policies for
the region. These commitments should help the countries achieve greu.terefficiency with
respect to the environment and trade~
21
Responding to long-standing needs that were brought iuto the spotlight of public
awareness by the trade negotiations, the U.S. and ,Mexico have earmarked additional
government funding for the border region aod have taken steps to give citizens from
border communities more influence in settiog priorities and solving problems.
Trunsboundary environmental damages, such as air pollution that may be intensified by
e.x-panded trade, are dealt with through bilateral governancemecbanisms that delegate
responsibility to the priV'ate sector.
Thf. NAFrA expe.ricnccs have been taken to thcGATr negotiations where
environmentalists .raised coucernsabQut challenges to legitimate environmental laws and
are working for the creation of a Committee on Tr.ade and the Environment to insure
post. .Uroguay Round follow..up on envIronmental matters.
Trade liberalization will CO.lltlnue through regional pacts, like the NAFTA, and
within the GATT. But, it will occur in the context of a much greater focus 00
environmental issues than bas been tlle case In the past. Finding strategies to achieve
,more open trading systems and to provideeco!ogical services needed to sustain economic
growth will be a key factor in fostering greater economic and social progress in all parts
of the world.
*The authors are senior economist, Environmental Defense Fund in Austin,
Texas, and pro-bono counsel, Environmental Defense Fund in Washington, D.C.,
respectively.
22
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