Trade, the Environment, and State Environmental Health Law

• Citation: Vol. 14 No. 2
• Publication year: 2011

Gonzaga Journal of International Law Volume 14 - Issue 2 (2010 - 2011)

Trade, the Environment, and State Environmental Health Law

Doug Farquhar, J.D.(fn*)

I. Introduction

Many advocates of environmental health, in fact, many public policymakers, pay little attention to trade laws. These laws, which govern international trade and allow for globalization, have little enforcement powers and speak even less on health, safety, and the regulation of the environment. Trade laws by design and implementation have altered, amended, and outright banned laws and policies designed to protect the public's safety.

This paper discusses two areas of international trade: the North American Agreement on Environmental Cooperation ("NAAEC") and Chapter Eleven of the North American Free Trade Agreement ("NAFTA"), and how these agreements prohibit states and other subnational governments from enacting laws to protect the public from environmental hazards.

II. NAFTA and the Environment

True to its promise as the most environmentally sensitive agreement, governments and environmentalists have used NAFTA to bolster environmental protection and challenge policies considered adverse to the environment.(fn1) The NAAEC established the Commission for Environmental Cooperation ("CEC"), which brings together the heads of each country's environmental departments to discuss concerns that face all three countries, and allows the public input into their decisions.(fn2) The agreement offers procedures to challenge governments for not effectively enforcing their environmental laws.(fn3) A side agreement to NAFTA, the Charter, created the Border Environment Cooperation Commission ("BECC"), which provides millions of dollars for water and sewage treatment along the U.S. - Mexico border.(fn4) Chapters Seven and Nine of NAFTA cover trade in goods and services, and can be applied equitably without interfering with state environmental policies.(fn5)

NAFTA also offers opportunities for investors to challenge NAFTA states when their laws are considered in violation of the agreement.(fn6) This direct challenge is novel to NAFTA; no other trade agreement allows private citizens to challenge a signatory state. Concerns by Canadian and American investors about investing in Mexico spurred this language to give them a tangible guarantee that disputes over investments could be heard not only by a country's legal/political system, but also by an independent international tribunal unaligned with the disputant country.(fn7)

A. NAFTA's Chapter 7, Section B Sanitary and Phytosanitary Measures

Chapter 7 applies to a national government's health and safety requirements, meaning any law that covers risks to health or life caused by animal or plant pests or diseases, food additives or contaminants; the laws related to sanitary and phytosanitary measures.(fn8) It is designed to protect the federal and state governments' decisions regarding health, safety and environmental laws, while offering the other signatories and foreign nationals some assurances regarding their development and application.(fn9)

NAFTA confirms the basic rights of each country, including their states and local governments, to determine the levels considered appropriate to protect the health and safety of humans, animals, and plants.(fn10) But it also requires that these levels are: § Based on scientific principals and risk assessment; § Applied only to the extent necessary to provide that level of protection; and § Do not result in unfair discrimination or disguised restrictions on trade.(fn11)

The United States Trade Representative (USTR) reviewed the provisions of Chapter 7 that relate to states, concluding that Articles 712 to 718 have greatest applicability to the states.(fn12) The chapter recognizes international codification of health, safety, and environmental standards, and mandates that signatory governments use international standards when appropriate.(fn13) States, local governments, and federal agencies may establish levels of protection different than international norms, as long as those standards are set higher.(fn14) Further, the chapter encourages governments to participate in these international standard-setting organizations.(fn15)

Another important aspect identified in Chapter 7(b) is equivalency and transparency. Since NAFTA's essential purpose is to reduce barriers to trade, the negotiators wanted assurances that sanitary and phytosanitary laws are not applied as an indirect trade barrier.(fn16) Governments are to seek "equivalency" in their sanitary and phytosanitary laws, making their health, safety, and environmental laws similar to each other while maintaining their chosen level of protection.(fn17)

Transparency refers to a government being open about their sanitary and phytosanitary regulations, and the procedures for implementing those regulations.(fn18) Governments cannot act in secrecy about the development or administration of these rules, otherwise the rules could be applied as a barrier. Non-governmental entities who test, inspect, or otherwise act in the role of administering these requirements also must act in an open and transparent manner.(fn19)

Finally, 7(b) requires both state and federal governments to adopt a formal notification process whenever they modify or develop sanitary and phytosanitary measures.(fn20) The notification process will be determined by the NAFTA negotiators.(fn21)

Article 718 most obligates a state by requiring a state whenever it seeks to develop or amend sanitary and phytosanitary laws, to: § Publish a notice of the proposed policy and grant time for interested parties to review the proposal; § Identify in the notice the rationale behind the measure, describing the objective and the reason for the measure; § Provide a copy of the proposed measure to any interested party; and § Without discrimination, allow interested parties to comment, and upon request, discuss those comments.(fn22)

B. NAFTA Chapter 9, Standards-Related Measures

Chapter 9 discusses any standards imposed by a government that affect goods and services in trade.(fn23) This includes technical regulations, standards, and procedures to assure conformity.(fn24)

Article 902 expressly mandates that national governments must ensure that state and non-governmental standardizing bodies follow the provisions of this chapter, including modifying standards to follow international norms and maintaining compatibility with other standards.(fn25)

Again, this chapter seeks to ensure that standards developed by either a government or non-governmental entity do not unnecessarily restrict trade.(fn26) This means that standards should be based on or use international standards, and used in the least-restrictive manner.(fn27)

States may adopt higher standards than international standards, but never lower standards nor should the standards be seen as discriminatory or trade restrictive.(fn28) The governments are to work towards conformity, treat foreign goods no different than domestic goods, and seek agreements establishing conformity standards.(fn29) Similar to Chapter 7, states (along with the federal government) must: § Publish a notice of the proposed policy and grant time for interested parties to review the proposal; § Identify in the notice the rationale behind the measure, describing the objective and the reason for the measure; § Provide a copy of the proposed measure to any interested party; § Allow interested parties to comment on the proposed standard; and § Allow foreign non-governmental persons to participate in developing the standards if domestic persons are involved.(fn30)

C. NAFTA's Chapter Eleven

Chapter Eleven of NAFTA provides private companies investing in foreign NAFTA countries protection from arbitrary and unreasonable government action against these companies.(fn31) It establishes a dispute settlement mechanism for investors to assure treatment equal to domestic investors, in accordance with the principles of international reciprocity and due process before an impartial NAFTA tribunal.(fn32)

The first part of the chapter lays out the protections each of the NAFTA countries agreed to for foreign investors. Protections such as National Treatment and Most-Favored-Nation Treatment ensure that foreign investors are accorded treatment no less favorable than domestic investors in like circumstances.(fn33) NAFTA countries also agreed to provide foreign investors with fair and equitable treatment and full protection and security in accordance with international law.(fn34)

Investors receive assurances that the countries will not, directly or indirectly, expropriate or nationalize the businesses or industries they invest in, unless certain conditions are met: § That the expropriation is for a public purpose; § That it is done on a non-discriminatory basis; § That it is in accordance with due process of law and general principles of international law and fairness; and § It is accompanied with payment of compensation.(fn35)

Investors receive compensation for direct expropriations, indirect expropriations, and for measure tantamount to expropriations.(fn36)

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