Trade and environment in the Western Hemisphere: expanding the North American Agreement on Environmental Cooperation into the Americas.

• Author: Block, Greg

1. INTRODUCTION II. BACKGROUND AND THE NAFTA EXPERIENCE A. The Structure: NAFTA, the NAAEC, and the CEC B. Nature of Environmental Concerns 1. NAFTA's Impacts on Environment Revisited 2. NAAEC Regional Impact a. Mexico b. Canada c. United States C. A Regional Voice for Environmental Cooperation 1. Impact on Trade and Trade Policy 2. How CEC's Trade/Environment Linkage Impacts the NAAEC Model a. Failing to Anticipate, Monitor, and Assess Compositional and Scale Effects b. Economic Integration Without Environmental Policy Convergence III. THE NEXT FRONTIER: THE FREE TRADE AREA OF THE AMERICAS A. Overview of Parties and Process B. Environmental Considerations in the Free Trade Area of the Americas 1. Latin America and the Caribbean: An Ecological Treasure Trove 2. Scale and Compositional Effects IV. TOWARDS THE FTAA: INVESTING IN ENVIRONMENTAL PROTECTION AND STRENGTHENING AND EXPANDING THE CEC A. Ignoring Developmental Needs Will Undermine U.S. Efforts to Promote the Effective Enforcement of Environmental Law in Latin America B. The Need to Adapt the Mandate, Structure, and Procedures of the NAAEC for FTAA Expansion 1. Fine-Tuning the NAAEC Mandate: Strengthening Citizen Submissions 2. Reinforcing Secretariat's Autonomy to Recommend and Prepare Factual Records 3. Considering Allegations that Specific Trade Policies or Practices Are Harming or Threatening to Harm National or International Efforts to Protect Human Health and the Environment V. CONCLUSION I. INTRODUCTION

   When the North American Free Trade Agreement (NAFTA) (1) and its environmental side accord, the North American Agreement on Environmental Cooperation (NAAEC), (2) came into force in 1994, free trade promoters labeled NAFTA the "greenest" trade agreement on record. Nearly ten years later, the Bush Administration hopes to expand the so-called "free trade zone" throughout most of the Western Hemisphere by negotiating an accord known as the Free Trade Area of the Americas (FTAA). The U.S. government has again committed to including consideration of environmental issues in the negotiation of the accord, this time by including several provisions in the so-called "fast track" authority allowing the President to present a comprehensive take-it-or-leave-it FTAA package to Congress.

   The Bush Administration has moved quickly to negotiate regional free trade agreements since having gained trade promotion authority from Congress in August 2002. A draft agreement with Chile awaits formal presentation to Congress, and the United States Trade Representative is quickly closing in on a similar package of NAFTA-type trade liberalization and investment measures with countries in Central America. Overall, the approach U.S. trade negotiators are taking on environmental issues is similar to the approach taken in NAFTA: They are eliciting commitments for maintaining high levels of environmental protection and including monetary enforcement penalties for engaging in a pattern of failure to effectively enforce environmental laws.

   Free trade may one day deliver many of the economic benefits promised by its supporters. Indeed, ten years into NAFTA, the region has posted impressive trade and investment figures, and the direst predictions about pollution havens and environmental dumping have yet to materialize. All the same, increased trade and investment has so far failed to generate the additional resources necessary to strengthen the institutional capacity to protect the environment and health in developing countries. During this transitional period, vital nonrenewable natural resources, ecosystems, and human health in vulnerable populations are at great risk. Technological advances in extracting, processing, and transporting natural resources, combined with global demand, may have a devastating effect on poorly managed resources. This is particularly worrisome in the FTAA region, where developing economies have sought to expand export markets by exploiting their comparative advantage in natural resource industries such as timber, mining, and fisheries.

   Much is at stake. Latin America is a veritable treasure trove of ecological bounty, though its marine and terrestrial ecosystems face a host of threats, including unsustainable harvesting practices and destructive land-use patterns, respectively. The potential impacts of free trade on these ecological assets have been inadequately studied as countries train their scarce research resources on predicting economic outcomes in specific sectors or product areas.

   As countries search for a means of accessing global markets while safeguarding the environment and health, NAFTA has taught us that domestic policy matters. Greater efforts must be made to assess and anticipate the impacts of free trade on health and the environment, and domestic policies buffering adverse impacts must be in place prior to accepting the constraints on domestic policy that free trade measures may impose.

   Above all, FTAA countries should link selected liberalization measures to the attainment of specific environmental and health benchmarks. These objectives should include milestones that ensure the infrastructure of environmental and health protection in vulnerable areas is ready to accommodate the demands of free trade. At the same time, meaningful incentives should be included in the FTAA to ensure that countries adopt compatible and, in some cases, harmonized environmental laws and regulations to ensure that environmental and health measures are mutually supportive across the region.

   Once trade and investment measures are effectively linked to environmental and health indicators and benchmarks in the FTAA, a strengthened NAFTA-type environmental framework could help ensure that free trade and environmental goals are mutually supportive. An adequately funded regional body could conduct sustainability assessments, monitor and assess trade and environment relationships, and evaluate countries' abilities to effectively enforce environmental laws. The NAFTA experience has taught us that a regional environmental body must have considerably more financial resources and independence to exert influence in order to confront unsustainable practices related to trade.

   Environmental provisions in the FTAA should include a "citizen submission" mechanism similar to that of the North American Agreement on Environmental Cooperation. Based on the success of the efforts of the North American Commission for Environmental Cooperation (CEC) to assess the impacts of NAFTA on the environment, a similar citizens' mechanism should be established to allow groups or individuals to allege that a specific trade or investment measure or practice has an adverse impact upon human health or the environment. However, the process must be strengthened by reinforcing the Secretariat's independence and insulating the Secretariat from government intrusions, eliminating the Council voting procedure, and allowing the Secretariat to "connect-the-dots" in its factual records. Well-substantiated complaints would be assessed by panels of experts in a process that will further our understanding of environment-economy-trade linkages, while at the same time assisting developing countries to assess the impacts of free trade on health and the environment.

   Part II of this Article summarizes the environmental provisions of NAFTA, its environmental side accord, or NAAEC, and the Commission for Environmental Cooperation (CEC). It then reviews the accomplishments and shortcomings of this commission, both at the regional and national level. The author extracts the environmental "lessons learned" from the commission's work on understanding the linkages between trade and environment in the region.

   Part III introduces the FTAA initiative to create a free trade zone throughout the Western Hemisphere. It then examines the environmental goals and objectives of the Bipartisan Trade Promotion Authority Act of 2002 (TPA). (3) The author identifies the primary environmental considerations in the region in light of the NAFTA experience and the region's economic and ecological features.

   Part IV advocates for stronger environmental safeguards in the Free Trade Area of the Americas, including investments in environmental infrastructure and linking tariff reductions in sensitive areas to ecological and developmental benchmarks. The author calls for a stronger regional environmental organization based on the CEC model, including a mechanism for examining allegations that specific trade measures are adversely affecting health or the environment.

   Finally, Part V concludes by recognizing that this may be our last and best chance to secure adequate resources in Latin America for environmental protection and to promote sustainable economies across the hemisphere.

2. BACKGROUND AND THE NAFTA EXPERIENCE

   1. The Structure: NAFTA, the NAAEC, and the CEC

      Since NAFTA took force in 1994, trade in goods between the three countries has almost doubled, from approximately $350 billion to over $700 billion in 2000. (4) Mexico alone has seen a four-fold increase in both exports and imports, growing from $40 billion to more than $170 billion. (5) Canada buys more products from the United States than the fifteen members of the European Union combined. (6) During the six-year period from 1994 to 2000, total foreign direct investments in NAFTA countries reached nearly thirty percent of total world foreign investments. (7) During this period, foreign direct investment more than tripled in each NAFTA country. (8) The NAFTA region currently produces over $11 trillion worth of goods and services, making it the largest trading block in the world. (9)

      For all its impressive numbers, NAFTA promised more than simply increased trade and investment. Concerns about the impact of trade liberalization on the environment led to the negotiation of several provisions addressing environmental issues in the text of NAFTA, as well as the execution of a...