NAFTA

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NAFTA

• And The Environment
• We know that good institutions are important,
  even though we have very little idea about how
  countries can acquire them. (Rodrik, 2001)
• Yadira Ramos
• Don Driscoll

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NAFTA an overview

• What is NAFTA?
• NAFTA is a trade agreement signed in November
  1993 between the United States, Canada, and
  Mexico. It helps to establish free-trade
  guidelines between the three countries. NAFTA
  will soon grow to include 8 more American
  countries Argentina, Brazil, Chile, Colombia,
  Paraguay, Peru, Uruguay, and Venezuela.

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• Goals of NAFTA
• To strengthen bonds of friendship and cooperation
  
• Act as a catalyst to international cooperation
• To create, expand, and secure future markets
• To establish fair rules of trade
• To ensure a predictable framework for business
  planning
• To enhance firms competitiveness in foreign
  markets
• To foster creativity and innovation
• To create new employment opportunities
• To promote development
• To strengthen environmental regulations

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NAFTA Preamble

• The Government of Canada, the Government of the
  United Mexican States and the Government of the
  United States of America, resolved to
• STRENGTHEN the special bonds of friendship and
  cooperation among their nations
• CONTRIBUTE to the harmonious development and
  expansion of world trade and provide a catalyst
  to broader international cooperation

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NAFTA Preamble (contd)

• CREATE an expanded and secure market for the
  goods and services produced in their territories
  
• REDUCE distortions to trade
• ESTABLISH clear and mutually advantageous rules
  governing their trade
• ENSURE a predictable commercial framework for
  business planning and investment

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NAFTA Preamble (contd)

• BUILD on their respective rights and obligations
  under the General Agreement on Tariffs and Trade
  and other multilateral and bilateral instruments
  of cooperation
• ENHANCE the competitiveness of their firms in
  global markets
• FOSTER creativity and innovation, and promote
  trade in goods and services that are the subject
  of intellectual property rights
• CREATE new employment opportunities and improve
  working conditions and living standards in their
  respective territories

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NAFTA Preamble (contd)

• UNDERTAKE each of the preceding in a manner
  consistent with environmental protection and
  conservation
• PRESERVE their flexibility to safeguard the
  public welfare
• PROMOTE sustainable development
• STRENGTHEN the development and enforcement of
  environmental laws and regulations and
• PROTECT, enhance and enforce basic workers'
  rights

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NAFTA Contents

• PART ONE GENERAL PART
• PART TWO TRADE IN GOODS
• PART THREE TECHNICAL BARRIERS TO TRADE
• PART FOUR GOVERNMENT PROCUREMENT
• PART FIVE INVESTMENT, SERVICES AND RELATED
  MATTERS
• PART SIX INTELLECTUAL PROPERTY
• PART SEVEN ADMINISTRATIVE AND INSTITUTIONAL
  PROVISIONS
• PART EIGHT OTHER PROVISIONS

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Has NAFTA helped or hurt the Environment?
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NAFTA Dispute Resolution

• NAFTA Corporate Dispute Resolution Private
  Enforcement of a Public Treaty
• NAFTAs Chapter 11 lists two international
  arbitration bodies in which NAFTA
  investor-to-state disputes can be heard. These
  two bodies operate with similar rules and
  procedures which exclude the public

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NAFTA Dispute Resolution

• The International Center for the Settlement of
  Investment Disputes (ICSID), operates under the
  auspices of the World Bank.
• An arbitral body (3 person) intended to handle
  cases involving specific contractual disputes
  between governments and corporate contractors
• ICSID only posts basic information such as
  parties, date of complaint and arbitrators
• Does not post documents in the course of the
  proceeding.
• In addition, there is no provision for amicus
  participation by outside interested parties
• There is no standard appeals process such as that
  found in domestic courts.

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NAFTA Dispute Resolution

• UNCITRAL (United Nations Commission on
  International Trade Law)
• Second Arbitral Body
• Handles any NAFTA investor-to-state cases
  involving both Canada and Mexico
• UNCITRAL provides a set of rules and does not
  have a webpage for NAFTA cases
• It does not have a professional staff to provide
  administrative oversight for arbitration
  proceedings.
• It does not compile information about pending or
  final decisions and therefore cannot make them
  available to the public.
• The history of cases brought under its rules is
  not known.
• Furthermore, since UNCITRAL has no staff to
  oversee cases, there is no provision for the
  review of tribunal decisions.

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Chapter 11 Cases

• Ethyl - Against Canada Apr. 14, 1997
• U.S. chemical company challenges Canadian
  environmental regulation of gasoline additive MMT
  
• Settled Ethyl Win, 13 million
• Metalclad - Against Mexico Jan. 13, 1997
• U.S. firm challenges Mexican municipality's
  refusal to grant construction permit for toxic
  waste dump and State declaration of ecological
  zone
• Metalclad Win, 15.6 million

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Chapter 11 Cases Contd

• S.D. Myers - Against Canada Oct. 30, 1998
• U.S. waste treatment company challenges Canadian
  ban of PCB exports compliant with multilateral
  environmental agreement
• S.D. Myers Win, Award Pending
• Loewen - Against the U.S. Oct. 30, 1998
• Canadian funeral conglomerate challenges
  Mississippi jury damage award
• 725 million Pending

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Chapter 11 Cases Contd

• Sun Belt - Against Canada
• U.S. water company challenges British Columbia's
  bulk water export moratorium
• 10.5 billion Pending
• Pope Talbot - Against Canada Mar. 25, 1999
• U.S. timber company challenges Canada's
  implementation of 1996 U.S.-Canada Softwood
  Lumber Agreement
• Pope and Talbot Win, Award Pending

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Chapter 11 Cases Contd

• Methanex - Against U.S. Dec. 3, 1999
• Canadian corporation challenges California
  phase-out of gasoline additive MTBE, which is
  contaminating drinking water around the state.
• 970 million Pending
• UPS - Against Canada Apr. 19, 1999
• UPS claims Canadian post office delivery service
  enjoys unfair subsidy because it is a  public
  service
• 160 million Pending

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Chapter 11 Cases Contd

• Mondev - Against U.S. Sept. 1, 1999
• Canadian real-estate developer challenges
  Massachusetts Supreme Court ruling on local
  government sovereign immunity
• 50 million Pending
• Karpa - Against Mexico Apr. 7, 1999
• U.S. cigarette exporter challenges denial of
  export tax rebate by Mexican government
• 50 million Pending

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Chapter 11 Cases Contd

• Azinian, et. al - Against Mexico Mar. 17, 1997
• U.S. investors challenge Mexican federal court
  decision revoking waste management contract for
  suburb of Mexico City
• 19 million Dismissed
• ADF Group - Against U.S. July 19, 2000
• Canadian steel contractor challenges U.S. "Buy
  America" law
• 90 million Pending

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Chapter 11 Cases Contd

• Waste Management - Against Mexico Sept. 29, 1998
  
• U.S. waste disposal giant challenges city of
  Acapulco revocation of waste disposal concession
• 60 million Pending
• Calmark - Against Mexico Jan. 11, 2002
• U.S. development company challenges Mexican court
  ruling in development dispute
• 400, 000 Pending

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Chapter 11 Cases Contd

• Adams, et. al - Against Mexico Feb. 16, 2001
• U.S. landowners challenge Mexican court ruling
  that developer who sold them property did not own
  land
• 75 million Pending

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Side Agreements

• 1. The North American Agreement on Environmental
  Cooperation (NAAEC)
• 2. The Agreement between the U.S. and the
  Government of the United Mexican States
  establishing the Border Environment Cooperation
  Commission and the North American Development
  Bank (BECC/NADB).
• Created to ensure transparency in
  decision-making, assure environmental
  sustainability, environmental cooperation, and
  public participation.

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NAAEC

• To achieve the objectives each party agreed to
• Not lower their levels of environmental
  protection (to attract investment)
• Effectively enforce their environmental laws
• Report on the state of the countrys environment
• Develop environmental emergency response measures
• Promote environmental education, research
  development
• Promote the use of environmental instruments

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NAAEC

• The Key objectives of the NAAEC were to
• Promote sustainable development
• Encourage pollution prevention policies and
  practices
• Enhance compliance with environmental laws and
  regulations
• Promote transparency and public participation in
  promulgating laws and policies
• North American Commission on Environmental
  Cooperation was established by NAAEC to achieve
  these objectives.

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NAAEC
NACEC
Council of Ministers
Secretariat
Joint Public Advisory Committee JPAC
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CECCouncil of Ministers

• Environmental Ministers from Mexico, US and
  Canada
• Oversees and develops recommendations on
  implementation and Further elaboration of NAAEC
  Art. 10
• Directs the Secretariat
• Conducts a cooperative work program
• Develops recommendations to address key
  environmental issues
• Addresses questions arising between parties
  regarding application of NAAEC
• Focal Point for trade and environmental issues
  between the Parties
• Meets at least once a year

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CECSecretariat

• Executive Director
• Provides Technical operational support to the
  Council of Ministers or their committees
• Professional staff of 30 from all 3 countries
• Headquartered in Montreal
• Prepares annual work program budget of CEC
• Prepares reports on matters within scope of NAAEC
• Responsible for management of the submission on
  enforcement matters process
• Any person or NGO may submit a partys failure to
  effectively enforce its environmental laws (See
  Art 6)
• Council decides if a factual record will be
  developed
• Administers the fund North American Fund for
  Environmental Cooperation

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CECJPAC

• Five Citizens from each country
• Bridge for public participation in CEC activities
• Provides advice to the council on matters within
  the scope of NAAEC
• Advice may be technical and / or scientific
• Meets at least once a year

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BECC / NADB

• Institution of Mexico and the US
• Headquartered in Mexico
• BECC
• Certifies projects based on their economic
  viability and sustainable developmental
  components
• Goal is to make environmental infrastructure
  process more accessible for small communities and
  non-governmental organization that are devoted to
  the environment and community development

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How has the environment has been affected?

• The environmental impact of Mexican trade
  liberalization does not appear to have been very
  positive.
• Various studies show that post-NAFTA, water, air
  and soil pollution has increased in Northern
  Mexico due to the growth of manufacturing
  industry and the controversial maquiladora sector
  along the border with the United States.

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How the Environment has been affected continued

• Approximately 80 of the total value of the
  Mexican export industry is controlled by two
  percent of the total number of companies in the
  country, most of which are transnational
  corporations. Many of these are classified by the
  U.S. EPA as industries utilizing highly toxic and
  dangerous processes. Even official statistics,
  however, show that only 10 of the seven million
  tons of toxic waste these industries generate is
  properly treated.

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Negative Aspects of the CEC

• CEC is financed equally by the three countries
  and has an annual budget of approximately 9
  million dollars which is below the originally
  promised budget of 15 millions dollars
  (p.44/Mumme, 1999)
• The inadequate funding of this institution has
  resulted in staff shortages, and has contributed
  to the limited scope and less-than-efficient
  performance of mandate functions. (id)
• CEC does not have the autonomy, the authority nor
  the organizational structure needed to initiate
  reports, gather information or enforce
  environmental actions (Torres,1999), limiting its
  ability to comply with its mandate of promotion
  of environmental law enforcement (Mumme, 1999).
  In other words, like all other NAFTA
  institutions, it lacks teeth (Lopez-Hoher, 2003)

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What about NADBank and BECC?

• Lack of political will and its policy of lending
  credits at market rates or above, has discouraged
  lenders from applying to the banks credit.
• The unwillingness of the bank to include and
  actively promote funding of water quality and
  conservation programs in the agricultural sector,
  contribute to the current reliance on Northern
  producers on inefficient irrigation technologies.

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Summary of Weaknesses that affect the side
agreements related to the Environment..

• Most of these institutions continue to lack the
  key characteristics that theory suggests are
  required of effective organizations. (p.39)
• In particular, they do not have adequate mandates
  and organizational structure to deal with
  environmental impacts from agricultural
  liberalization which could be assessed as one of
  the main sources of environmental pressures in
  Mexico.
• This oversight is partly due to a lack of
  adequate funding, a lack of political will, and
  the fact that most institutions were created in
  response to external pressures rather than
  national needs.

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Summary of Weaknesses Continued..

• Further, the absence of incentives to fund
  greener technologies in the Northern part of
  the country, as well as the lack of credit and
  funding of rural development programs in the
  South, have been a key factor fostering
  unsustainable use and over exploitation of
  natural resources. (p.39)

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Recommendations to improve negotiations as they
relate to NAFTA and Environment

• NAFTA has positively influenced the creation and
  development of environmental institutions in
  Mexico.
• Trade and investments must be made compatible
  with social and environmental concerns so that
  sustainable development can be attained.
• Trinational institutions must be created that,
  while respecting each countrys sovereignty and
  promoting international cooperation, guarantee
  the implementation of integrated policies and
  commitments.

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More Recommendations

• Solving the environmental and sustainability
  issues of the Mexican agricultural sector will
  require strong political will and governmental
  interventions in many fields not related to the
  institutional framework.
• Nevertheless, an improved environmental
  institutional framework should prove useful as a
  base to support future sustainable development of
  the Mexican agricultural sector.
• The reassessment of objectives , structures and
  funding of all the related environmental
  institutions accommodate the areas of agriculture
  and trade.

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SOURCES

• Ghiso, Silvina J. Vilsa (2003). NAFTA,
  ENVIRONMENT INSTITUTIONS A Critical Analysis
  of the National Multilateral Environmental
  Institutions in Mexico, in Light of Trade
  Liberalization in the Agricultural Sector
  (Dissertation for the University of Oxford).
• National Wildlife Federation (www.nwf.org/trade/na
  fta/html)
• The Mexican Action Network on Free Trade
  (www.developmentgap.org/rmalveni.html)
• Canadian Office of the North American Agreement
  on Environmental Cooperation-NAAEC
  (http//naaec.gc.ca/eng/agreement/summary_prov_e.h
  tm)

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Sources

• Public Citizen, NAFTA Chapter 11
  Investor-to-State Cases Bankrupting Democracy
  (September, 2001).
• United States Department of Agriculture, Foreign
  Agricultural Service (http//www.fas.usda.gov)
• Secretariat of the Commission for Environmental
  Cooperation, North American Agreement on
  Environmental Cooperation (1993)
  (http//www.nafta-sec-alena.org/DefaultSite/home/
  index_e.aspx)
• Office of NAFTA and Inter-American Affairs
  (http//www.mac.doc.gov/nafta/index.html)