The North American Free Trade Agreement (“NAFTA”) entered into force in 1994 between the US, Canada and Mexico is generally acknowledged to be the first major preferential trade agreement (PTA) comprehensively addressing environmental issues. During the G20 summit, NAFTA has been superseded by the recently negotiated United States-Mexico-Canada Agreement (“USMCA“).
In regard to environmental matters, this 2.0 version of the original NAFTA agreement entails some considerable changes:
To start with formal aspects, the agreement includes an explicit chapter on the environment (Chapter 24), whereas the vast majority of environmental provisions under the original NAFTA is included in a side agreement, the North American Agreement on Environmental Cooperation (“NAAEC”). This matter because the new environmental chapter in the USMCA is now covered by the main state-state dispute settlement mechanism of the trade agreement and this subject to a strong enforcement mechanism.
#USMCA includes a strong chapter on environment
Within the newly added Chapter on the environment, the USMCA inter alia recognizes that it is “inappropriate to encourage trade or investment by weakening or reducing the protection afforded in their respective environmental laws”. The chapter further contains commitments and obligations in order to address environmental issues such as illegal wildlife trade and logging, fishing management and subsidies and species conservation (similar to TPP). Moreover, completely new developed regulations on marine litter have been introduced. It lacks provisions to enforce multilateral environmental agreements, except for the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). NAFTA 2.0 does not mention climate change in the text and – not surprisingly, given the position of the current US President and in light of the Trade Promotion Authority (TPA), which allows the US President to negotiate international agreements that Congress can approve or deny but cannot amend or filibuster and which currently prohibits the US President from addressing critical aspects of climate change through its trade agreements. The US hence does not follow the EU’s example to include a provision on the implementation of the Paris Climate Agreement.
Micro-level policy-making: negotiators of NAFTA 2.0 ambitious on environmental protection
In addition to that, USMCA does no longer include an arbitration-based investor-state dispute settlement mechanism for investment disputes arising between Canada and the United States, except for Mexican government contracts in the oil and gas sector subject to a carve-in provision. Considering the significant number of cases in which private companies challenged environmental policies in the contracting parties (e.g. Windstream Energy LLC. V. Canada) this modification is presumably the most remarkable one.
Since Trump is against environmental protection, would it not have been reasonable to expect a weakening of environmental provisions in NAFTA 2.0? One key reason for the relatively strong environmental chapter is that the TPA demands certain environmental content to be included in trade agreements. Another reason is that NAFTA 2.0 turned out to be micro-level policy-making: The result of the renegotiation of NAFTA suggests that negotiators seem to have been able to be more ambitious than expected, using their position of being under the radar to insert substantial environmental content into NAFTA 2.0.
This might also be of interest:
The G20 summit and the future of the WTO
(The Current Column, 3 December 2018)