Is the newly-negotiated United States-Mexico-Canada Agreement (USMCA) [1]  “greener” than the North American Free Trade Agreement (NAFTA)? According to the United States Trade Representative (USTR), Parties “have agreed to the most advanced, most comprehensive, highest-standard chapter on the Environment of any trade agreement”[2]. Nevertheless, behind few notable innovations existing in the agreement, additional measures about the implementation and enforceability of environmental measures could have also been included.

The USMCA will replace the NAFTA[3] which was signed between Canada, Mexico, and the United States, and which entered into force in 1994 under the U.S. government of Bill Clinton. It removed trade restrictions between the contracting parties and enabled the development of a free trade area between them[4]. At the time of its entry into force, the NAFTA was considered to be the “greenest” trade agreement since it was the first time the links between environmental protection and liberalised trade were considered in such agreement[5].

Environmental provisions in the NAFTA can be found in the main text of the Agreement[6] as well as in a side agreement, called the North American Agreement on Environmental Cooperation (NAAEC). The NAAEC created the North American Commission for Environmental Cooperation (CEC), whose aims are mainly to promote, increase environmental cooperation between the Parties and improve enforcement of environmental laws in North America[7]. The effects of the NAEEC on the environment are quite important, including a better assessment of the effects of trade on the environment as well as an improvement of our understanding of these effects[8] and a certain space for public participation in environmental matters[9]. In spite of some ground-breaking aspects of the NAFTA, the system it established has been criticized[10]. Among these shortcomings, the blame has been put on the use of Chapter 11 of the NAFTA to challenge the implementation of environmental laws[11], the problematic implementation of the “citizen submission” process[12] and on the fact that the CEC has been understaffed and underfunded.[13]

Addressing NAFTA’s shortcomings

Environmental provisions in the USMCA are much more elaborated than in NAFTA. Indeed, an entire Chapter in the USMCA is dedicated to environmental protections (Chapter 24). Like NAFTA, the USMCA also has its separate parallel agreement: the Environmental Cooperation Agreement (ECA). It is meant to modernize the various institutions created by the NAAEC. The ECA mentions the continuation of the work of the CEC which came into existence under the NAFTA. [14] It means that the Commission will continue to be responsible for submissions on enforcement matters. Notwithstanding the above, such procedure was mainly criticized due to its slowness under the NAFTA. However, it seems to be fixed under the new agreement, which provides for shorter time requirements concerning the procedure on enforcement.[15]

Contrary to the NAFTA, the USMCA encourages more transparency in its procedures. Under the NAAEC, only article 1 mentioned the aim of promoting “transparency and public participation in the development of environmental laws, regulations and policies”[16]. This aspect is more elaborated in the USMCA’s environmental Chapter which provides that “proceedings for the enforcement of the Party’s environmental laws [have to be made] available [by each Party] under its law” and each Party must also make sure “that those proceedings are fair, equitable, transparent, and comply with due process of law”[17].

One of the criticisms addressed to the NAFTA was the absence of specific policies to tackle new environmental concerns, such as overfishing and wildlife trafficking[18]. The USMCA prohibits fisheries subsidies that are “provided to a fishing vessel or operator” and “subsidies for fishing that negatively affect fish stocks that are in an overfished condition”[19]. It should be reminded that Sustainable Development Goal 14.6 aims at prohibiting by 2020 “certain forms of fisheries subsidies which contribute to overcapacity and overfishing and eliminate subsidies that contribute to Illegal Unreported and Unregulated (IUU) fishing, and refrain from introducing new such subsidies”. USMCA’s provision is even more remarkable that the World Trade Organisation (WTO) members are currently negotiating to reach an agreement in order to end fisheries subsidies[20].

The welcomed but poor innovations brought by the new NAFTA

Covering more environmental aspects. If the USMCA maintains 72% of the environmental provisions originally included in the NAFTA[21], it also contains three environmental provisions that have never been included in any previous Preferential Trade Agreement (PTA), namely an increased enforcement of wildlife trafficking[22], a trade regime related to food waste[23] and an obligation to take measures to prevent and reduce marine litter”[24]. According to Article 24.12 of the USMCA, “The Parties recognize the importance of taking action to prevent and reduce marine litter, including plastic litter and microplastic” (paragraph 1) and they “shall take measures to prevent and reduce marine litter” (paragraph 2). For the Trade and Environment Policy Advisory Committee (TEPAC)[25], this provision is a “significant step” in order to tackle this issue. However, the TEPAC added in its report that this article “could have been strengthened by requiring specific commitments[26] from the parties to take concrete measures to address the problem”[27].

Furthermore, according to Article 24.22(5) of the USMCA, “each Party shall take measures to combat, and cooperate to prevent, the trade of wild fauna and flora” in the situation where it was unlawfully done. For the TEPAC, the Parties to the Agreement should have rather committed to “prohibit” such trade, and even mentioned the prohibition of the illegal possession and transport of wild fauna and flora. The Committee explained in addition that the Parties could have even added provisions about the transhipment of illegally traded or taken products and the reduction of wildlife products “grown of manufactured unsustainably or at a great cost to local wildlife population”[28].

Withdrawing the “proportionality clause”. Interestingly, the USMCA does not contain the “energy proportionality clause” anymore, which existed under the NAFTA and was binding on the U.S. and Canada[29]. The proportionality clause requires Canada to maintain a consistent share of energy exports to the U.S. as a proportion of domestic supply based on a three-year average. The clause meant that Canada could not reduce U.S. access to Canadian oil, natural gas, coal and electricity without a corresponding reduction in Canadian access to these products. Without this clause, we can expect a potential reduction of these exports, since Canada would not be bound to export these productions to the U.S. It has been said that this situation could make it easier for Canada to meet its mitigation commitments under the Paris Agreement, if Canada reduces its oil and gas exports[30]. It is worth noting however, that Canada is the fourth largest producer of crude oil and the fourth largest exporter of oil and gas in the world and that in 2018, Canadian supply and demand of crude oil “slightly increased from 2017”[31]. In 2018, there has been an 8.2% increase of total volume of Canadian oil export compared to 2017[32] while exports of natural gas decreased[33].

Reducing the scope of ISDS. The Investor-State Dispute Settlement (ISDS) is an arbitration mechanism existing in investment and trade agreements that allows an investor of a state party to the agreement to pursue claims against another state party that is hosting the investment, if the latter has allegedly breached a standard in the agreement. Under NAFTA’s Chapter 11 on Investment and when resorting to ISDS, some cases have shown that business interests would prevail over environmental issues[34]. Other cases also confirmed the scepticisms of environmentalists towards the use of ISDS[35]. Under the USMCA, ISDS between the U.S. and Canada will be eliminated three years after the Agreement comes into force. Between Mexico and the U.S. however, ISDS is limited in scope to five economic sectors, including activities with respect to oil and natural gas, supply of transportation services and supply of power generation services to the public [36].

The lack of strong measures to tackle climate change

The environmental Chapter of the USMCA does not mention “climate change”[37], global warming or greenhouse gases. This is not very surprising, considering the environmental policy of the current United States Government, presided by President Donald Trump, who decided on June 1, 2017 to withdraw from the Paris Agreement on climate change of 2015. The TEPAC explained in its 2018 report that the new NAFTA “does virtually nothing to directly address the challenges to trade, growth, and the environment posed by global warming”, even though the Contracting Parties are also Parties to the United Nations Framework Convention on Climate Change (UNFCCC)[38].

Another missed opportunity concerns the non-acknowledgment of fundamental principles in International environmental law, and especially the precautionary principle. In the European Union (EU), this principle allows the EU or the Member States of the EU to act against a risk, even before this risk has been scientifically proven[39]. The precautionary principle appears in the non-binding Rio Declaration of 1992[40], of which the U.S., Mexico and Canada are Parties. However, the U.S. are only Signatory, since it supports a science-based approach, which requires scientific evidence before taking action[41].

In addition, even though the USMCA mentions more Multilateral Environmental Agreements (MEAs) than the NAFTA[42], it is not very stringent about the implementation of these agreements. It only encourages its Parties to fulfil their obligations under three MEAs, namely the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)[43], the Montreal Protocol on Substances that Deplete the Ozone Layer (Montreal Protocol)[44], and the Convention for the Prevention of Pollution from Ships (MARPOL)[45]. Strong enforcement language is however only used for the CITES whereas weaker language is used for both the Montreal Protocol and the MARPOL Convention above-mentioned[46]. The USMCA misses to mention other MEAs, that had to be included according to a bipartisan trade deal of 2007. This deal made clear that the U.S. Administration and Congress agreed to incorporate certain MEAs in the free trade agreements negotiated by the U.S., including the Inter-American Tropical Tuna Convention (IATTC)[47], the Ramsar Convention on Wetlands (Ramsar Convention)[48], the International Whaling Convention (IWC)[49], and the Convention on Conservation of Antarctic Marine Living Resources (CCAMLR).[50] Strikingly, the USMCA mentions fewer MEAs than do several other U.S. PTAs that were negotiated after 2007.[51] The USMCA however covers some of the fields regulated by the conventions that it fails to mention in the environmental Chapter, such as the protection of whales[52]. It is worth noting that contrary to the NAFTA[53], the USMCA does not contain any provision about the legal prevalence of MEAs in case of inconsistency with the provisions of the Agreement. This is certainly a drawback for environmental protection.

In order for the USMCA to enter into force, each Party must notify to the Parties when it has completed the internal required and respective procedures to do so[54]. The Mexican government is at the time of writing the first to have completed the ratification procedure[55]. The situation is more delicate in both Canada and the U.S. Concerning Canada, Prime minister Justin Trudeau has delayed the ratification of the Agreement since the U.S. Democrats who have the majority in the U.S. House of Representatives are not completely ready to ratify it as well. Indeed, in the U.S., Democrats have concerns about some provisions of the USMCA, including about environmental protections.

Clara Colonna
Master 2 Vie publique et relations institutionnelles – Université Paris Panthéon-Assas

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References

[1]https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/agreement-between

[2] Website of the United States Trade Representative, “UNITED STATES–MEXICO–CANADA TRADE FACT SHEET Modernizing NAFTA into a 21st Century Trade Agreement”, available at https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2018/october/united-states–mexico–canada-trade-fa-1 (last visited on October 7, 2019)

[3]https://www.nafta-sec-alena.org/Home/Texts-of-the-Agreement/North-American-Free-Trade-Agreement

[4] G. A. Flores-Macías and M. Sánchez-Talanquer, “The Political Economy of NAFTA/USMCA” (2019): The total value of trade in the North American region reached $1.1 trillion in 2016.

[5] Fox, Annette Baker. “Environment and Trade: The NAFTA Case.” Political Science Quarterly, vol. 110, no. 1 (1995), pp. 49. JSTOR, www.jstor.org/stable/2152050.

[6] In the NAFTA, the main environmental provisions are provided in its preamble and in chapters 1, 7, 9, 11 and 21.

[7] NAEEC, Article 1(c) and (g).

[8] C. Wold, « Evaluating NAFTA and the Commissioner for Environmental Cooperation: Lessons for Integrating Trade and Environment in Free Trade Agreements, » Saint Louis University Public Law Review 28, no. 1 (2008) p. 222-223.

[9] S. Vaughan, “NAFTA’s Environmental Record: History, outcomes, impacts and options”, commentary from the International Institute for Sustainable Development (June 2017), p.5.

[10] L. J. Allen, “The Environment and NAFTA Policy Debate Redux: Separating Rhetoric from Reality”, 42, William & Mary Environmental Law and Policy Review Rev. 965 (2018) p. 984-985.

[11] D. C. Esty and J. Salzman, “Rethinking NAFTA: Deepening the Commitment to Sustainable Development”, A Path Forward for NAFTA, Peterson Institute for International Economics (July 2017) Ch.10 p.128-129.

[12] Ibid. p.129.

[13] Supra n°8 p. 204-205.

[14] USMCA, Article 24.25(3).

[15] USMCA, Article 24.28.

[16] NAAEC, Article 1(h).

[17] USMCA, Article 24.6(3).

[18] D. C. Esty and J. Salzman, “Rethinking NAFTA: Deepening the Commitment to Sustainable Development”, A Path Forward for NAFTA, Peterson Institute for International Economics (July, 2017) Ch.10 p.136.

[19] USMCA, Article 24.20(1).

[20] See the latest developments on this issue available at https://www.wto.org/english/news_e/news18_e/fish_20dec18_e.htm (last visited on October 4, 2019).

[21] N. Laurens, Z. Dove, J.-F. Morin, S. Jinnah, “NAFTA 2.0: The Greenest Trade Agreement Ever?” accepted for publication in World Trade Review, p.6.

[22] USMCA, Article 24.22(7).

[23] ECA, Article 10(2).

[24] USMCA, Article 24.12.

[25] The TEPAC is established by the United States Trade Representative in order to “provide policy advice” on “trade policy matters that have a significant impact on the environment”, according to the Charter of the Trade and environment policy advisory Committee approved on September 27, 2017.

[26] Italics added.

[27] TEPAC Report on ‘Trade Agreement’ September 27, 2018, p. 8-9 available at https://ustr.gov/sites/default/files/files/agreements/FTA/AdvisoryCommitteeReports/Trade%20and%20Environment%20Policy%20Advisory%20Committee%20%28TEPAC%29.pdf

[28] Ibid. p. 10.

[29] NAFTA, Article 605 (Energy Chapter).

[30] N. Laurens, Z. Dove, J.-F. Morin, S, Jinnah, “NAFTA 2.0: The Greenest Trade Agreement Ever?” accepted for publication in World Trade Review, p. 14.

[31] Website of the Canadian Government, “Crude oil facts – Natural Resources Canada” available at https://www.nrcan.gc.ca/crude-oil-facts/20064. (last visited on October 4, 2019).

[32] Website of the government of Canada, Crude Oil Annual Export Summary – 2018, available at https://www.cer-rec.gc.ca/nrg/sttstc/crdlndptrlmprdct/stt/crdlsmmr/crdlsmmr-eng.html (last visited on October 4, 2019).

[33] The precise data is available on the website of the government of Canada, available at https://www.cer-rec.gc.ca/nrg/sttstc/ntrlgs/rprt/ntrlgssmmr/ntrlgssmmr-eng.html (last visited on October 4, 2019).

[34] e.g., Metalclad Corporation v. The United Mexican States, ICSID Case No. ARB(AF)/97/1.

[35]  G. C. Hufbauer, D. C. Esty, D. Orejas, J. J. Schott, L. Rubio, NAFTA and the Environment: Seven Years Later (October 2000), p. 9-16.

[36] USMCA, Annex 14-E.

[37] K. Tienhaara, “NAFTA 2.0: What are the implications for environmental governance?” Earth System Governance 1 (2019), p. 2.

[38] TEPAC Report on ‘Trade Agreement’ September 27, 2018, p. 10-11.

[39] Prof. Dr. iur. P.-T. Stoll, Dr. Wybe Th. Douma, Prof. Dr. N. de Sadeleer and P. Abel “CETA, TTIP and the EU precautionary Principle. Legal analysis of selected parts of the draft CETA agreement and the EU TTIP proposals.” (June 2016), p.9.

[40] It is stipulated in Principle 15 of the Rio Declaration, available at http://www.unesco.org/education/pdf/RIO_E.PDF.

[41] https://www.uschamber.com/precautionary-principle (last visited on October 4, 2019).

[42] NAFTA, Article 104 only mentions 3 MEAs. See D. C. Esty and J. Salzman, “Rethinking NAFTA: Deepening the Commitment to Sustainable Development”, A Path Forward for NAFTA, Peterson Institute for International Economics (July 2017), Ch.10 p.134.

[43] USMCA, Article 24.22(2). The text of the Agreement is available at: https://cites.org/eng/disc/text.php

[44] USMCA, Article 24.9(1). The text of the Agreement is available at: https://treaties.un.org/doc/publication/unts/volume%201522/volume-1522-i-26369-english.pdf

[45] USMCA, Article 24.10(1). The text of the agreement is available at: http://www.imo.org/en/About/Conventions/ListOfConventions/Pages/International-Convention-for-the-Prevention-of-Pollution-from-Ships-(MARPOL).aspx

[46] The Montreal Protocol and the MARPOL Convention are only mentioned in the footnotes of Articles 24.9(1) and 24.10(1) and no explicit wording is used about the enforcement of these agreements, in contrast to the CITES.

[47] The text of the Agreement is available at: https://www.iattc.org/HomeENG.htm

[48] Text of the Agreement available at: https://www.ramsar.org/about/the-ramsar-convention-and-its-mission

[49] https://archive.iwc.int/pages/view.php?ref=3607&k=

[50] Bipartisan Trade deal, May 2007, available at: https://ustr.gov/sites/default/files/uploads/factsheets/2007/asset_upload_file127_11319.pdf

[51] N. Laurens, Z. Dove, J.-F. Morin, S, Jinnah, “NAFTA 2.0: The Greenest Trade Agreement Ever?” accepted for publication in World Trade Review, p. 15.

[52] USMCA, Article 24.19 (2).

[53] NAFTA, Article 104.

[54] Protocol replacing the North American Free Trade agreement with the agreement between the United States of America, the United Mexican States, and Canada, Paragraph 2.

[55] On June 19, 2019, the Mexican Senate approved the implementing legislation for the USMCA.