By Cameron Parsons

One of the most important policy debates of the last two decades surrounds the impact of trade liberalization on the environment. Brought to the fore during the NAFTA negotiations of 1993 between the governments of Mexico, Canada and the United States, the debate over how to best mitigate environmental damage associated with the scale effects of increased economic activity fiercely divided the U.S. environmental lobby—half arguing in favor of market-based solutions to alleviating trade-exacerbated environmental harms, and the other half in favor of a more protectionist policy approach. Ultimately, this dynamic forced the Clinton and later Bush administrations to embark on a series of environmental negotiations with Mexico that ran “parallel” to the trade negotiations. (Esty 2010) These series of negotiations and the new environmental provisions and so-called “side-agreement” institutions they established made NAFTA the first free trade agreement of its type to specifically address the concerns of the environmental community (Ibid). However, nearly 20 years after the signing of NAFTA, there is significant concern about the extent to which these specific provisions have lived up to their potential and safeguarded against the increased pollution, resource depletion, and lowering of environmental, labor, and health standards that many feared increased economic integration would bring. (Mumme 2007).

Ultimately, this analysis will demonstrate that the environmental regulations and institutions associated with NAFTA—as strong as they appeared on paper—were not properly equipped to keep pace with the increased rates of economic growth on both sides of the United States-Mexican border. (Audley et al 2004) For want of funding, genuine autonomy and power, the environmental side-agreement institutions were never truly given a chance to fulfill their missions, as corporate and economic interests ultimately trumped environmental concerns. As a direct result, environmental damage has grown and continues to grow along the U.S./Mexican border at the expense of both the economic benefits of liberalized trade and the health of populations on both sides of the frontera. Mexican and United States policymakers should seek to strengthen the NAFTA environmental provisions and institutions so as to allow them to fulfill their original monitoring, enforcement, and development mandates, while also reforming some of the language of NAFTA which has been liable to abuse by corporate interests. Then, and only then, will Mexico and the U.S. achieve genuine success in making trade and environmental policy more mutually supportive. (Esty 2010)

At the time of the signing of NAFTA, opponents of the agreement argued that the elimination of trade barriers and the subsequent increase in economic activity would result in “environmental disaster” for Mexico, whose governmental institutions historically favored the unrestricted growth of industry, and thus invested little time or energy into creating or enforcing already weak environmental regulations (Gallagher 2004). Environmentalists pointed to the “Maquiladora Zone” along the U.S./Mexican border where early attempts at free trade with the United States had already caused a high concentration of loosely regulated, and highly polluting industries. (Korves, 2011) They feared a rapid expansion of this 100 kilometer wide, 2,000 mile long zone, and the creation of “pollution havens” within Mexico, as prudent corporations with carbon-intensive goods or production processes migrated from countries with high income and relatively strict regulations to take advantage of Mexico’s cheap labor and lax regulations. (Korves, 2011) Furthermore, environmentalists feared that this would initiate a so-called “race-to-the-bottom” where the United States government—under pressure from domestic corporate lobby and labor unions to protect U.S. industry and labor from being undercut by Mexican competition —“harmonized” its stringent environmental and labor policy down to match that of Mexico’s. These theories came in addition to fears about the possibly detrimental scale effects[1] of increased trade on the environment.

Trade lobbyists immediately responded to these concerns by speaking of the potential benefits of free trade for the environment, using the “Environmental Kuznets Curve” as their chief defense. (Lipford 2011) Not only did proponents of NAFTA argue that the basic economic principle of comparative advantage would necessarily lead to a more efficient use of resources as manufacturers sought to limit waste and thus minimize costs, but they also posited that rising national income as a result of an increased volume of trade would help to slow and then gradually improve environmental degradation. Once the state reached a certain economic “tipping point”—estimated by early studies to be roughly U.S.$5,000 per capita (Gallagher 2004)—then: (1) once prohibitively expensive pollution abatement technologies would be seen as affordable and worthwhile investments to both state and industry actors; and (2) a new, wealthier, middle class would begin to demand more stringent policies to promote a cleaner and healthier environment. (Gallagher 2004) Additionally, free traders argued that there would be a transfer of modern (and thus cleaner) technologies from the United States to Mexico as multinational corporations found it simpler, more effective, and efficient to apply the same technology in all of their locations. (Audley et al 2004)

Despite the claims of the free traders, the drafters of NAFTA ultimately found that there was sufficient evidence to include specific provisions and institutions designed to prevent the realization of environmentalists concerns. Towards this end, the three governments that signed onto NAFTA “wrote sustainable development into NAFTA’s preamble,” acknowledged that all major environmental agreements with trade provisions will take precedence over NAFTA, and vowed that “NAFTA would not drive down the region’s environmental standards.” (Mumme 1999) Most important of all, however, was the creation of three new institutions that collectively were charged with development, monitoring and enforcement of environmental regulations, and encouraging cooperation among NAFTA signatories, the public and NGOs.

The primary group, the North American Commission for Environmental Cooperation (NACEC or CEC), is a three part organization that includes a Council of environmental ministers from each country, a Joint Public Advisory Committee of appointed government officials who advise the council, and an independent Secretariat of professional staff who conduct research and work with citizen petitions designed to prevent trade conflicts between the countries and enforce environmental laws. The CEC provides a forum for regular meetings among NAFTA countries to discuss environmental issues, resources, and challenges of enforcement as reported by both the regular studies of the Secretariat and public petitions and submissions. (Bolterstein 1999)  The North American Development Bank (NADB) and Border Environmental Cooperation Council (BECC) are sister development institutions—financed by the three member states of NAFTA—that coordinate, design and mobilize financing for environmental infrastructure projects along the U.S/Mexican Border. (Tiemann 2000) Both institutions work with local communities and private investors to build affordable and self-sustaining projects designed to improve the overall health of the environment and the populations living at the border. These provisions were lauded at their creation, and many believed that they would provide the framework necessary to make sure that economic growth did not come at direct cost to the environment. However, approaching 20 years since their implementation, their efficacy in safeguarding the environment and human health has proven mixed at best.

Since the implementation of NAFTA, environmental degradation in Mexico has worsened as trade has increased. The number of factories in the maquiladora doubled (see graph at left), and by 1994 the zone was responsible for 58% of Mexican exports, as opposed to only 12% eleven years earlier. (ATTAC 2000) As a result, from 1985 to 1999, municipal solid waste production in Mexico grew by 108%, water pollution by 29%, and urban air pollution by 97%. (Gallagher 2004) Only 12% of the eight million tons of hazardous waste produced in the maquiladoras is properly treated and disposed, and 70% of it remains within Mexico’s borders. (Sierra Club 2004) Toxic emissions and particulate matter produced as a byproduct of  the manufacturing and transportation industries—note that 70% of all NAFTA goods are transported by trucks whose emission standards do not meet U.S. regulations—have been connected to increased threats of cancer, asthma and respiratory diseases, as well as a number of serious birth defects near the border. (Ibid) Indeed, one study conducted in four Texas border counties found that between 1993 and 1996 (three years following NAFTA) the number of babies born with anencephaly (a birth defect that causes partial development of brain and skull) jumped to more than twice the U.S national average (Bolterstein 1999). The timing of the increase can in no way be coincidental. While all these problems have been mounting, the Kuznets Curve belief of free traders has not come to fruition because although Mexico’s manufacturing has increased and its GDP/capita has risen, investment in pollution abating technology and waste storage and treatment facilities has remained scarce. (World Bank 2010)

Thus, it is clear that NAFTA has failed to protect the Mexican environment in spite of the addition of specific safeguards. There are several reasons that can account for this failure. The NAFTA side agreement institutions (NACEC, NADB, BECC) simply were not provided with the financial means to carry out the important task of monitoring corporations in Mexico and ensuring enforcement of regulations. After massive cuts following its inception, the NACEC was left with an annual budget of $9 million—a meager sum for a multinational organization charged with overseeing the environment across three countries. (Gallagher 2004). Within this budget, only one-third of the funds went towards spending on environmental issues in Mexico, the member nation of NAFTA with the lowest environmental standards and in most need of funding from the NACEC to harmonize up.[2] The NADBank and BECC also experienced major spending cuts—$100 million and $5 million, respectively—undermining their ability to introduce environmentally beneficial technologies and infrastructure projects (Gallagher 2004). This lack of adequate funding for the side agreement organizations caused the number of environmental inspections of manufacturing plants and factories in Mexico to fall by 45% since NAFTA’s inception in 1993, even though the manufacturing industry grew by more than 4% a year over the same period. (Gallagher 2004) This has limited the state’s capacity to enforce environmental regulations (however weak they may be), and has allowed corporate and trade interests to continue to run roughshod over environmental policy in the state.

Mexican and United States policymakers should seek to strengthen the NAFTA environmental provisions and institutions so as to allow them to fulfill their original monitoring, enforcement, and development mandates, while also reforming some of the language of NAFTA which has been liable to abuse by corporate interests. The first step that needs to be taken is strengthening the autonomy of the side agreement groups. To be able to effectively enforce its policies, the NACEC needs the ability to rebuke companies who violate environmental law, hold liable governments that do not enforce sanctions for such violations (Malkin 2008), and veto environment-degrading trade initiatives (Gallagher 2004). In looking at the language of NAFTA, the language which stipulates “domestic environmental laws should not discriminate against trade” (NAFTA) gives corporations the ability to overrule environmental regulations, and thus must be changed.

Funding needs to increase so that these organizations no longer suffer “staff shortages, fewer programs, and less efficient performance of mandated functions” (Muume 1999). On top of this reform, NAFTA groups also have to work to build and strengthen local capacity for environmental improvement, which will mean increasing partnerships between federal governments of NAFTA nations with local ENGOs and municipalities (Gallagher 2004). Lastly, the United States, Mexico, and Canada must commit to making Mexico a priority in terms of environmental regulation. Since the country currently has the lowest environmental standards in the agreement, the countries must commit to gradually harmonizing up. One way of doing this would be for all three states to contribute to a fund specifically for Mexico to build infrastructure (waste storage, water treatment) and develop alternative energy. (Gallagher 2004)

 

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Works Cited:

Audley, John J. et al (2004). NAFTA’s Promise and Reality: Lessons from Mexico for the Hemisphere. Retrieved October 20, 2011, from the Carnegie Institute for International Peace: http://carnegieendowment.org/files/nafta1.pdf

ATTAC Marseilles Working Group (2010), “Free Trade Zones and Free Trade Agreements.” Retrieved October 10, 2000. http://local.attac.org/13/documents/ZF_en.PDF

Bolterstein, E. (1999). Environmental Justice Case Studies: Maquiladora Workers and Border Issues. Retrieved October 22, 2011, from UMich.edu: http://www.umich.edu/~snre492/Jones/maquiladora.htm

Esty, D. C. (2011). Economic Integration and Environmental Protection. In R. S. Axelrod, S. D. Vandeveer, & D. L. Downie, The Global Environment (pp. 155-171). Washington D.C.: CQ Press.

Gallagher, Kevin (2004, Sept 17). Free Trade and the Environment: Mexico, NAFTA and Beyond. Retrieved October 22, 2011, from Tufts.edu: http://ase.tufts.edu/gdae/Pubs/rp/NAFTAEnviroKGAmerProgSep04.pdf

Korves, Nicolas, Inmaculada Martínez-Zarzoso and Anca Monika Voicu (2011). “Is Free Trade Good or Bad for the Environment? New Empirical Evidence, Climate Change, Socioeconomic Effects.”  Available from: http://www.intechopen.com/articles/show/title/is-free-trade-good-or-bad-for-the-environment-new-empirical-evidence

Lipford, J. W., & Yandle, B. (n.d.). NAFTA, Environmental Kuznet’s Curves, and Mexico’s Progress. Retrieved October 22, 2011, from Perc.org: http://www.perc.org/files/Kuznets%20Yandle%20Lipford.pdf

Malkin, E. (2008, April 22). Re-examining NAFTA in Hopes of Curing US Manufacturing. Retrieved October 22, 2011, from New York Times: http://www.nytimes.com/2008/04/22/business/worldbusiness/22nafta.html?pagewanted=all

Mumme, S. P. (1999, Oct 1). NAFTA and Environment. Retrieved October 22, 2011, from Foreign Policy in Focus: http://www.fpif.org/reports/nafta_and_environment

Mumme, S. P. (2007, May). Trade Integration, Neoliberal Reform, and Environmental Protection in Mexico. Latin American Perspectives, 34(3), 91-107.

Tiemann, M. (2000, March). NAFTA: Related Environmental Issues and Initiatives. Retrieved October 18, 2011, from U.S. Department of State: Diplomacy in Action: http://fpic.state.gov/6143.htm.

World Bank (2010). Mexico: Data. Retrieved October 20, 2011, from The World Bank: http://data.worldbank.org/country/mexico.