Free Trade and the Environment

1. Free Trade and the Environment By: Marcel Dulay

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

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

4. 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

5. Proponents of Free Trade

6. Proponents of Free Trade • Exchange of freedom makes environment clean • Technology • Management • Capital • Stay globally competitive

7. Opponents to Free Trade Studies • 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

8. Opponents to Free Trade • 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

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

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

11. Opponents to Free Trade Location 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

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

13. Free Trade NAFTA Effects • VOCs caused by petroleum, metals, and transportation • CO increased from Metals sector • Petroleum increases CO, NOx, SO2 • Transportation increases VOCs • Chemical sectors relates to toxic releases • Natural resources mixed, depends

14. 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

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

16. CEC Commission for Environmental Cooperation • 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

17. CEC • 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

18. CEC • 8 Factual Records

19. CEC • 31 Closed files

20. CEC

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

22. CEC Submissions on Enforcement

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

24. Conclusions/Path Forward • 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

25. Discussion • 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?