Trade-environment linkages: U.S. perspective

Speech at CEI-UFM Conference, Guatemala City, Guatemala

I would like to thank Fred and Edward for providing a global context for my more specific remarks.

In my discussion, I’ll be mainly addressing trade and environment linkages from the U.S. perspective: First, how environmental groups have gotten those issues incorporated into bilateral and regional trade agreements; second, how NGOs are using those agreements to impose U.S. environmental standards in developing countries; and, third, how these free trade agreements are viewed as building blocks to include such issues more explicitly in World Trade Organization agreements.

I’ll be showing how environmental groups, through a series of steps, have used economic agreements to open a back door to impose U.S.-style environmental standards on other countries.

The first building block – NAFTA

The first U.S. trade agreement that included environment provisions was the North America Free Trade Agreement (NAFTA) between Canada, Mexico and the United States, which entered into force January 1, 1994. To placate U.S. activists groups opposed to NAFTA, environmental and labor provisions were included in separate side agreements after the trade agreement had been negotiated. The environmental side agreement includes the following:

  • Created a Commission for Environmental Cooperation, a Council made up of the three countries top environmental officials, a Joint Advisory Committee, and a Secretariat.
  • Obligates each signatory to “ensure that its laws provide for high levels of environmental protection and shall strive to continue to improve those laws.”
  • Through the Commission, promotes environmental cooperation among the three parties
  • Invokes dispute settlement provisions if a country persistently fails to enforce its environmental laws.
  • Monitors the environmental effects of the trade agreement

Many potential critics of including such provisions in trade agreements, including most free market groups, were unconcerned about the NAFTA precedent. After all, they said, it wasn’t really part of the trade agreement itself. The exception was CEI, which sounded the alarm about the side agreement setting a precedent for transnational environmental harmonization.  As CEI analyst James Sheehan said:  “NAFTA threatens to undermine national sovereignty by internationalizing domestic environmental policies.”

That largely overlooked environmental side agreement was an important building block in environmentalist’s push to more closely link economic agreements with environmental provisions.

The second building block – Trade Promotion Authority

The next big step occurred with the U.S.’s renewal of the Trade Promotion Authority Act (TPA) of 2002, which would give the President the power to have trade agreements voted up or down without amendments,   Labor unions and environmental lobbyists insisted that, in return, TPA had to include mandates that every bilateral and multilateral trade agreement must specifically include labor and environment provisions. TPA thus became the NAFTA side agreements writ large and on a global scale.

What TPA really did is require that any U.S. negotiations on trade include negotiations on labor and the environment, despite the fact that there is an international labor agreement and numerous multilateral environment agreements already in effect that deal with those issues.

The linkage of trade and environment was now a done deal, according to environmental groups and their proponents. As John Audley, one of the architects of the environmentalists’ trade strategy, said: “The Trade Act of 2002 reflects an important shift in U.S. trade policy. The argument over whether or not environment belongs in trade negotiations is now over; environmental policy is here to stay as an element of trade negotiations.”[1]

 TPA’s underlying purpose was to use trade as a big stick to enforce the U.S. view of labor and environment standards, even on poorer countries that may have other more urgent needs and priorities.

Instead of using those forums that specifically address environmental issues, environmental groups, recognizing the importance of trade to all countries, have increased their efforts to include substantive environmental provisions in bilateral agreements to advance their agendas.

The third building block – bilateral and regional free trade agreements

With TPA’s authority, the U.S. finalized free trade agreements with Singapore, Chile, Morocco, Bahrain, Oman, and Australia. Although those trade agreements included the TPA’s mandates for environmental and labor provisions, environmentalists now consider the CAFTA-DR Free Trade Agreement the model for subsequent FTAs.

Even though environmental groups and labor activists attacked the agreement when it was being considered by Congress, CAFTA-DR includes extensive labor and environmental provisions that go far beyond the requirements specified in the Trade Promotion Authority (TPA) Act of 2002.

For example, it includes an Environmental Cooperation Commission that is responsible for developing, and periodically revising and updating, a program of work that reflects “national” priorities for cooperative programs, projects, and activities. Of course, since those programs will principally be funded though the U.S.’s efforts, many of those priorities will be skewed toward the rich neighbor’s wants.

CAFTA also creates an environmental “secretariat” that listens to all charges from anyone in any of the countries that a CAFTA trading partner isn’t effectively enforcing its environmental laws. The trade agreement and its side agreements detail a cumbersome bureaucratic process whereby every single charge submitted receives a public response and a possible bump up to an arbitration panel. This heavy-handed process is done in the name of transparency and public participation.  However, it could readily be captured by special interests acting against the public interest.

There is some recognition that the CAFTA countries may not have the resources to address all of the U.S.’s environmental and other concerns; thus, the Environmental Cooperation Agreement sets out what the U.S. really expects these countries to do in the name of the environment.  Of course, Central Americans will initiate those programs with the advice and help of, among others, U.S. environmental groups that are already lining up for expected large government grants to build “capacity” – or to produce clones of the U.S. activist groups in those countries.  Even before CAFTA was signed, USAID provided a $500,000 grant to the Humane Society of America for such projects as helping a Salvadoran homemaker build her business of producing organic pet care products, such as natural shampoos and soaps.[2]

The U.S. Trade Representative’s website lists trade capacity building projects in an extensive database.  Included are significant environmental projects that are modeled after programs, laws, and regulations in the U.S., and that facilitate compliance with multilateral environmental agreements, for instance:

  • “. . . provide training and technical assistance for strengthening Central America’s capacity to implement the Persistent Organic Pollutants (POPs) and Pesticides in International Trade (PIC) Conventions . . .”
  • “Development of a module for Pesticide Risk Assessment for Central America.
  • “Technical assistance for the improvement of regional and national Greenhouse Gas Inventories.
  • “technical assistance . . .in the development and finalization of a Regional Model Wastewater Law . . .       “

Projects include awards to specific environmental groups in the U.S.  For example:

  • “The Rainforest Alliance . . . will promote and scale-up the sales of certified green products in the timber, banana and coffee sectors. . . . During the Project period, over 800,000 acres of forest and farmland will be certified as sustainably managed.”

And one that I would like to especially highlight:

  • With Counterpart International and the Humane Society of the U.S, — “to promote the implementation and compliance of regulations related to humane treatment of animals and environmental sustainability, encouraging organic production that promotes rural development  . . .” ($447,000)

Thus, with the opening provided by NAFTA’s side agreements, the Trade Promotion Authority Act’s mandates to include environmental provisions specifically in trade agreements, numerous trade agreements including environmental provisions, and with CAFTA-DR’s extensive environmental capacity-building programs to strengthen MEAs, trade has become a tool to advance global environmental goals.

In summary, the building blocks of NAFTA’s side agreement, the Trade Promotion Act’s mandate for the inclusion of environmental provisions in trade agreements, and subsequent trade agreements’ extensive environmental provisions have internationalized domestic environmental policies.

In commenting on the legal and environmental requirements being negotiated  in CAFTA, Manuel Ayau stated in a 2003 editorial in the Wall Street Journal:: “When these restrictions are incorporated into an international treaty, they will be more difficult to correct than sovereign decisions would be.”

Through the “back door” of economic agreements, environmental groups have created a transnational environmental regime, without resort to the democratic processes of those countries.

Thank you.