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Responsible Trade Program:
The North American Free Trade Agreement (NAFTA)

The North American Free Trade Agreement (NAFTA), which came into effect on January 1, 1994, required the elimination of most tariffs and other trade barriers on products and services traded between Mexico, Canada and the United States.

While trade agreements have the potential to promote more sustainable and just development, NAFTA did very little to safeguard our environment or communities that depend on it. It transferred enormous power from democratic governments to multinational corporations and faceless global market forces - and today communities across North America are at greater risk.

NAFTA has allowed environmentally irresponsible companies to continue their offenses outside U.S. borders where regulations are less stringent or poorly enforced. Health officials are now investigating a link between the swine flu outbreak and an industrial pig farm in Mexico, run by a subsidiary of the U.S.-based Smithfield Farms. Smithfield Farms is notorious for its environmental record in the U.S., having committed 6,900 violations of the U.S. Clean Water Act for dumping hog waste into a tributary of the Chesapeake Bay. Following passage of NAFTA, the company was able to easily set-up operations in Mexico,circumventing U.S. regulations that force them to properly treat hog waste.

NAFTA also gave multinational corporations the power to by-pass the domestic judicial system and directly challenge environmental and public interest laws in secret tribunals. For example, Dow AgroSciences LLC, a U.S. company, recently filed a $2 million dollar lawsuit against Canada, in light of Québec's ban on cosmetic lawn pesticides containing the dangerous chemical, 2, 4-D. The pesticide was banned in Québec due to 2, 4-D's link to leukemia, respiratory problems, and neurological disorders, among other health-related problems. However, this move by the Canadian province to protect its citizens from potentially devastating health problems is now being contested under NAFTA's Chapter 11 investment provisions.

In another example, California's new low-carbon fuel rules (LCFR) may violate NAFTA's "national treatment" provisions. The LCFR rules require refineries, producers and importers of motor fuel sold in the state to reduce the "carbon intensity" of their products by 10 percent by 2020. Since synthetic crude from Alberta's oil sands emits more carbon than conventional oil, the new rules would force those Canadian refiners to produce cleaner oil for export to California. Since Canadian refiners may need to spend more money than competitors in order to make their oil clean enough for export to California, Canadian trade officials contend that the LCFR rules are unfair. This dispute highlights the disconnect between citizens' ability to fight global warming and current international trade rules outlined in NAFTA. See "NAFTA's Corporate Investor Rights and Their Threat to the Environment," below.

We can do better! In an increasingly globalized world, global warming and environmental degradation have no borders, and it is vital that our trade agreements reflect that reality. Trade agreements should promote a higher quality of life for all, not simply serve as vehicles to increase corporate profits. We must learn from the failed trade agreements of the past and stake out a different course for a future where people's lives and livelihoods are protected and respected.

NAFTA's Corporate Investor Rights and Their Threat to the Environment

Under NAFTA, corporations have the right to sue a government directly if they feel that their ability to profit has been undermined by for example an environmental law or regulation. Examples of such lawsuits include a case where Mexico was forced to pay $16 million after denying a U.S. company a permit to build a toxic waste facility on an environmentally sensitive site, and a case where a Canadian mining company sued the U.S. for $50 million over a California law that requires that the holes created by open-pit mining be "backfilled" and that the landscape be brought back to its original form once mining operations have been completed. NAFTA's investor rights go beyond the rights granted to U.S. companies in protection against regulatory takings. Under NAFTA's rules, indirect expropriation and loss of future profits constitute grounds for a NAFTA case, threatening a wide array of legitimate policy regulations aimed at protecting the public health and the environment.

Under NAFTA's "investor" provisions, several attacks have been made on the environment and public health:

  • A Canadian gold mining company recently sued the United States to escape the clean up and reclamation of a mine site in California, claiming that this would have interfered with the Canadian company's profits.
  • The Mexican government was forced to pay the California Metalclad company $16 million in compensation when the local municipal government of Guadalcazar denied the construction of a toxic waste disposal facility on an environmentally sensitive site that had previously been contaminated with 20,000 tons of toxic waste.
  • A Canadian company challenged California's right to ban the gasoline additive MTBE. California banned MTBE because it leaked from underground gasoline storage tanks and polluted drinking and surface water throughout the state. The Canadian company Methanex sued California for almost $1 billion because its profits were allegedly harmed by California's MTBE ban.



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