Free Trade and the Environment By: Marcel Dulay

Outline Proponents to Free Trade Opponents to Free Trade North American Commission on Environmental Cooperation NAFTA:

Free Trade US, Mexico, Canada – 1990 trade doubled – $700 billion in 2000 US-Canada largest bi-lateral trade in world Mexico 2 nd largest trading partner 80% of Mexico trade w/ US

Proponents of Free Trade Trade and Welfare – Trade = economic growth – Economic growth = higher wages – Higher wages = brings more taxes – Higher taxes = more enforcement resources Higher income = people want better environment Kuznets Curve Countries grow out of pollution with wealth

Proponents of Free Trade

Exchange of freedom makes environment clean – Technology – Management – Capital Stay globally competitive

Opponents to Free Trade Free trade vs economic growth – Week empirical direct link – Literature infers link – Open policies tend to grow faster Trade vs Environment – Week Deal with predictive assessments Difficult to see how the environment as a whole is doing Studies

Un-democratic Un-participatory Improvement depends on pollutant – Data shows green house continue to increase – Some losses are permanent – US/Mexico = CO higher Transportation causes air pollution Chapter 11 investment (expropriation) Hazardous waste increase (positive cor) Fear of trade will do to the environment Opponents to Free Trade

Problem: – Volume increases (input & output) – Growth stresses on infrastructure Offset by: – Different kinds of pollution – Less inputs/output (energy) – Technology Opponents to Free Trade Scale Effects

Problem: – Jobs vs. environment – Government race to the bottom Offset by: – Kuznet’s curve Opponents to Free Trade Competition Effects

Problem: – Pollution havens – Get up and move – Best example: hazardous waste Offset by: – Little evidence – Other factors are more important – Existing capital does move easy Opponents to Free Trade Location Effects

Problem: – Trade rules vs environmental regulation Offset by: – Regulation has no correlation – Smart laws – Laws with growth Opponents to Free Trade Regulatory Effects

Free Trade VOCs caused by petroleum, metals, and transportation CO increased from Metals sector Petroleum increases CO, NOx, SO 2 Transportation increases VOCs Chemical sectors relates to toxic releases Natural resources mixed, depends NAFTA Effects

NAFTA Basic Agreements – Doc. 1: 22 Chapters (11 is controversial) – Doc. 2: Understandings Side Agreements: Environment and Labor – Doc 3: NAAEC – 51 Articles Art 8: CEC Art 14-15: Submission on Enforcement Matters – Doc 4: Guidelines for submission: Art. 14 & 15 – Doc 5: NAALC Dispute Resolution – Doc 6-10: Codes and procedures Mexican Invest Law, and US Implementation Act

Chapter 11: Regulators fear conflicts with domestic laws – Ethyl Corp. settled out (MMT) – Three others have gone to court NAFTA

Council: governing body – Forum for discussion – Implement agreement – Handle dispute resolution – Consider/develop technical recommendations Secretariat: Executive Director and staff – Produces annual, information, and factual record reports – Receives submissions on enforcement matters Joint Public Advisory Committee CEC Commission for Environmental Cooperation

Public involvement – Past behind closed doors – Non-democratic CEC approach: Involvement at all levels Dispute settlement: Not very transparent to society Public Submittals to date – 8 Factual records – 11 Active – 31 no public record or action CEC

8 Factual Records CEC

31 Closed files CEC

Submissions: Factual Record (8) Canada – Fisheries (4) United States – Migratory birds Mexico – Coastal: environmental impact announcement – Habitat protection – Hazardous waste repatriate CEC

Does not conform to 14(1)11 Submission warrants no response2 No action warranted based on response5 Response identifies judicial order2 Council vetoes Secretariats request for factual record2 Submitter removes submission1 Factual record published8 Total31 Submissions on Enforcement CEC

Submissions: No factual records More than 3 cases – Aquatic Habitat – Fisheries 3 Cases – Endangered species – Air pollution – Groundwater contamination – Hazardous waste landfills CEC

As countries transition out of development need accompany environmental policy Slow liberalization to allow environmental policy time to adjust Global markets and capital move fast today, can’t be caught of guard Environmental policy should go in parallel to economic decisions, not after the thought Public needs to be involved Assessments “environment first” Need more data Conclusions/Path Forward

Studies show no significant winner over the debate on whether free trade is good or bad for the environment. – 1. Which side of the argument do you sit on, why? – 2. How can we better the assessment? NAFTA has very weak legal mechanism for environmental enforcement, and can be said to actually clash with regulation. – 3. Did NAFTA fall short in addressing environmental concerns? – 4. Is public participation realistic? The agreements clearly are the start of bi-national cooperation to improve the environment. – 5. How can the Parties work together to continue this effort? – 6. What policies should be implemented? Discussion