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February 2001 The trade and environment debate is bound to heat up this year as President Bush seeks to obtain fast-track negotiating authority to wrap up the Free Trade Area of the Americas, an expansion of NAFTA throughout the Western Hemisphere. But the protests at the 1999 Seattle summit of the World Trade Organization demonstrate the growing public concern about the environmental impacts of trade. To allay these concerns, policymakers in Washington may look to NAFTA's environmental side agreement as a model. But is that model adequate? Certainly not, if recent events in California and elsewhere are any indication. The side agreement established the North American Commission for Environmental Cooperation (NACEC) to handle, on a cooperative basis, issues that might arise among the three countries with respect to environmental enforcement and other environmental matters. In addition, NACEC was charged with administering a process by which citizens could seek official reports on whether or not a nation is effectively enforcing its environmental laws. Clearly, establishment of NACEC was a step in the right direction. International cooperation and oversight of environmental enforcement may create pressures to deal with some impacts in some cases. Over time, an institution like NACEC might grow in legitimacy, exerting wider influence over nations' willingness to protect their environment. Such an approach might not produce results quickly, but few would deny that the effort has some value. Unfortunately, however useful NACEC might be, it does not have the legal or political power to deal with the core environmental issue of trade agreements: In the effort to promote commerce, the trade agreements themselves enforce legal "disciplines" on domestic laws, regulations, and administrative procedures in ways that may sharply restrict legitimate health and environmental safeguards. Trade rules could be crafted more carefully to impose lighter disciplines that are more consistent with principles of environmental law. But the historic fact is that trade rules are not carefully crafted and may therefore pose a direct threat to domestic statutes and international agreements. For instance, NAFTA's investor chapter contains provisions that allow foreign investors to sue national governments for actions "tantamount to expropriation" of their investments. This language is so broad that it, in effect, establishes a right for private investors to seek compensation if any government action reduces in any way the investor's property values or expected profits. In so doing, NAFTA radically shifts U.S. law regarding what constitutes a Fifth Amendment "taking" in the favor of property holders and against the public interest. These provisions could exert a chilling effect on the adoption and enforcement of important environmental protections and cost taxpayers billions of dollars. Already, these provisions have been used to attack a host of legitimate environmental measures:
Several years ago, NACEC began an effort to clarify NAFTA's expropriation language so that it would pose less of a threat to environmental protection. But it made little progress, given the powerful political forces lined up behind the status quo. The FTAA package may soon confront the environmental community with a difficult choice. The FTAA itself or a side agreement might include a mechanism modeled on NACEC, including its citizen submission process, to encourage enforcement of national environmental laws, perhaps enhanced with some sort of fines or sanctions. But, as with NAFTA, the FTAA itself could also contain a number of legal principles embedded in its trade disciplines that run directly counter to hard-won principles of environmental law. Among other provisions, the FTAA is likely to restrict use of the precautionary principle, limit regulation of the way products are made, and allow private investors to sue national governments for supposed "regulatory takings." U.S. mining companies with gold concessions in the Amazon basin could sue if Brazil tried to enforce laws to protect its rain forest. Or U.S.-owned assembly plants in Central America could sue if governments tried to raise corporate income taxes to pay for water and sewers for the squatter communities where workers live. To avoid the inevitable debate over such unacceptable tradeoffs, the Bush administration should intensify the environmental review process of the FTAA that was initiated by the Clinton administration. And it should include in the agreement only those trade rules that open markets and provide opportunities for business without undermining legitimate environmental laws. Among other things, this would require replacement of NAFTA's investor-to-state dispute settlement mechanism with the state-to-state mechanism used for most other trade disputes. It would also require significant changes to NAFTA's vague rules on expropriation to safeguard normal government regulatory action. Once the FTAA is rendered safe for the public interest, then a NACEC-like mechanism might additionally provide a way to coax nations toward the effective enforcement of their environmental laws. Daniel A. Seligman is the Senior Trade Fellow with the Sierra Club in Washington, D.C. Copyright 2001 by Environmental Law Institute Up to Top HOME | Email Signup | About Us | Contact Us | Terms of Use | © 2008 Sierra Club |
