- The renegotiation of the North American Free Trade Agreement (NAFTA) has been progressing along a very rocky path, with the U.S., Canada and Mexico all threatening at one point or another to exit the pact. But slow progress is being made toward a new agreement.
- However, experts warn that the resulting trade treaty is unlikely to benefit the environment and the general public, unless major changes are made. These proposed NAFTA alterations, as outlined in this story, could also provide a template for future enviro-friendly international trade agreements.
- Among the changes needed: remove NAFTA Chapter 11 or reform the ISDS, remove any reference to water as a common commodity, remove the energy proportionality rule, include the Paris Climate Agreement and Sustainable Development Goals, and protect supply management and sustainable agriculture.
- Also, axe regulatory cooperation and harmonization, fully fund the Commission for Environmental Cooperation (CEC) and give it some teeth, Acknowledge indigenous and native rights (not free trade incentives), and most importantly: make a place at the bargaining table for the people and the planet.
With the North American Free Trade Agreement negotiations (let’s call it NAFTA 2.0) still in a state of limbo, experts worry Mexico, Canada and the U.S. may bail out of what President Donald Trump has repeatedly called “the worst deal ever made.”
The possibility of a tariff and trade war over steel and aluminum has complicated and delayed the negotiations. And earlier foot dragging has already resulted in Brazil being the recipient of large scale corn and other commodities sales to Mexico that would have otherwise gone to U.S. farmers. If NAFTA negotiations fail, U.S. agriculture could take a further blow, along with American automotive and electronics industries; even potentially upsetting global economic stability.
But the unlikely winner in this newest rendition of the Art of the Deal could be North America’s, and by extension the world’s, environment.
Though the original NAFTA agreement included environmental add-ons that appeared progressive, those provisions mostly existed on paper. And the three-country agreement has done little environmental good, and a whole lot of bad. The secret NAFTA 2.0 negotiations now underway – which include input from government and transnational corporations but not environmental NGOs – seem unlikely to enforce those add-ons. So once again, it seems whatever negotiators agree to, there’s little hope tough environmental standards will be included or implemented.
From a purely environmental perspective, scrapping the treaty may be the best outcome for everyday people and the planet.
The wish list of things that need to change in order for NAFTA 2.0 to be environmentally friendly is daunting and unlikely to occur in the current political climate. But Mongabay spoke with experts from across North America to compile that wish list anyway, with the hope that if it isn’t approved as part of NAFTA 2.0, it might be adopted for future trade agreements.
Remove Chapter 11 or reform the ISDS
The top issue experts identified as the overarching problem with NAFTA 1.0, and very likely NAFTA 2.0, is Chapter 11 and the infamous Investor State Dispute System (ISDS), which allows private companies and corporations to seek taxpayer compensation for failed investments, a strategy that can often result in the undermining and bypassing of national environmental laws and regulations.
Two-thirds of the ISDS cases brought against Canada have involved environmental resources or legislation, and Canada and Mexico have paid a combined $376 million dollars of taxpayer’s money to pay for failed ISDS suits, with billions more still unsettled.
Mongabay has delved deeply into the various flaws with ISDS in the past, and as Sujata Dey, Trade Campaigner at the Council of Canadians, summarizes: “No matter what other changes they make, unless ISDS and Chapter 11 are removed from NAFTA outright, it won’t be a good deal for people or the planet.”
Experts agree that if Chapter 11 is left standing as part of NAFTA 2.0, then ISDS would have to be reformed and disputes settled in domestic courts or state-to-state mechanisms, not in secret courts that operate beyond the national rule of law. In a move of epic irony, the Trump administration announced a preference for Chapter 11 to be available to each nation on an opt-in or opt-out basis. It seems that at some point during negotiations, or likely afterwards, each country would decide whether or not to adopt Chapter 11 and all its associated risk, or allow trade lawsuits to go through domestic courts. With no U.S. cases currently pending with ISDS, and the Canadian government facing a 500-million dollar plus ISDS fine, Trump’s proposal seems a questionable request.
Several experts point to Canada’s Investor Court System (ICS), recently accepted under the Comprehensive Economic Trade Agreement (CETA) with the European Union, as a potential replacement for ISDS. Scott Vaughan, an official with the International Institute for Sustainable Development (IISD), noted that countries with growing economies, like Brazil, have been developing more equitable investment models with improved dispute resolution systems, mechanisms that could become part of NAFTA and other future trade agreements.
Remove any reference to water as a common commodity
An annex of NAFTA defines water as a “commodity and service,” meaning it can be both traded and invested in.
Canada has one of the world’s largest remaining supplies of clean drinking water. While Canadian experts noted that this provision appears favorable to Canada, it isn’t. All of Canada’s individual provinces currently prohibit the bulk export of water, but if one province altered the rules, a corporation could use ISDS to force a change in domestic laws to gain approval of water export from the others.
“As water is becoming more scarce, companies are recognizing its value,” Dey warns. “Water is becoming an investment tool much like oil once was; it’s lucrative and full of derivatives. It’s time to start thinking about one of our most precious natural resources differently in trade deals.”
Remove the energy proportionality rule
Under a clause in NAFTA known as the energy proportionality rule (EPR), Canada is required to maintain or increase its rate of energy exports to the U.S. in perpetuity. Canadian energy exports to the U.S. have risen approximately 527 percent since NAFTA was signed, and nearly all of that growth has been through crude oil exports. Mexico has now indicated its desire to adopt the proportionality clause to bolster their oil and natural gas markets.
Clearly, the EPR can be used to tie a nation’s hands, preventing it from taking needed steps to curb climate change. “If Canada wanted to cut back on oil exports and prop up renewables, the proportionality clause would not allow that,” Dey explained, adding “studies have shown, that under the rule, the transition to renewables will take much more time, money and resources.”
Ben Beachy, Director of the Sierra Club’s Responsible Trade Program, confirms that view, adding, “Some goods are simply not compatible with free trade and the public good, and fossil fuels are one of them.”
Tom Russo, President and founder of Russo on Energy LLC, and former Manager and Senior Energy Industry Analyst at the Federal Energy Regulatory Commission (FERC), cites a hypothetical example to show how the NAFTA agreement could have a totally unforeseen, but positive, environmental impact: “Mexico is currently looking to green their energy market by replacing coal-fired electric plants with cheap and plentiful American natural gas easily accessible through already extensive and expanding pipelines. Losing NAFTA could cause increased tariffs; making American natural gas exports more expensive and far less alluring.”
“Mexico has a proud, independent heritage,” Russo added. “It could easily be persuaded to look to others for help developing their energy markets, like China and Russia. If Mexico is successful in greening their electric sector, it opens the door for renewable energy development in the country, and eventually its neighbors in the Caribbean. The General Electrics of the world are in Mexico looking to invest, and Mexico is looking to make big traction on Paris Agreement commitments by announcing their intent to develop solar and wind energy. There could be a bright spot there.”
Include the Paris Climate Agreement and Sustainable Development Goals
Despite the fact that there has been no clear mention by any of the three countries’ trade representatives who are negotiating the new agreement, every expert interviewed noted that NAFTA 2.0 must include global, binding climate commitments.
“We’re realizing more and more that the environment is the ultimate determinant of health,” said Dr. Courtney Howard, President of the Canadian Association of Physicians for the Environment (CAPE). Dr. Howard explained that everything necessary for human civilization to thrive also contributes to human health, such as access to clean drinking water and air, and stable social and economic systems. Policies that were previously considered relevant only to the environment must now be considered relevant to human health, she concluded.
Groups like CAPE have taken up that cause by demanding NAFTA renegotiations include health, environmental, societal and cultural impact assessments. “Now that climate is finally at the top of everyone’s mind, we need to act” Dr. Howard urged.
Along with other Canadian civil society groups, CAPE is also calling for NAFTA 2.0 to remove ISDS, to include Paris Agreement principles, and dispose of intellectual property laws, like those proposed in the TPP, Trans-Pacific Partnership, trade agreement, that may interfere with Canada’s prescription drug market.
People don’t always think of trade agreements as obvious climate agents, but Vaughn points out that the TPP treaty (signed by Canada, Mexico, and nine Asian-Pacific nations but not the U.S.) includes language concerning low-carbon transitions, renewables and clean energy.
“NAFTA is a [negative] climate agent in the sense that it incentivizes the perpetual production and dependence on fossil fuels,” said Beachy, who added, “if we could get positive, forward-thinking environmental and climate ideas into a new NAFTA, it would be a very good thing.”
Protect supply management and sustainable agriculture
The NAFTA model revolves around exporting more goods at cheaper prices, but at what cost? As the move towards more competitive, large-scale industrial agribusiness farms accelerates from the cornfields of Mexico, to the winter wheat fields of western Alberta, the economic pressures on small scale, family farms to compete and survive keep on building.
“When it comes to agriculture,” Sharon Anglin Treat, a Senior Attorney with the Institute for Agriculture and Trade Policy (IATP), noted that “the result has been a real race to the bottom with massive consolidation of the entire industry across all three countries. By conservative estimates, at least 2 million Mexican small farms, and 200,000 American small farms, have been lost in the wake of NAFTA.”
Treat uses recent changes to livestock production as an example of the impact NAFTA has had on agriculture: an estimated 90 percent of small pig farms in the United States have shut down in the past two decades and been replaced with a complex industrial process reliant on an incredible amount of wasted resources. Remarkably, most North American pigs now spend a portion of their lives being shipped between Canada and the U.S., and even Mexico, before they’re ready for slaughter, following cheap feed and relaxed standards.
“There are still pig farms,” explained Treat. “They’re just owned and operated by a handful of transnational corporations who are also involved in producing biotech animal feed, growth chemicals and running slaughterhouses.” Karen Hansen-Kuhn, Director of Trade and Global Governance with IATP, adds that this shift catalyzed by NAFTA has resulted in 85 percent of the U.S. meat industry now being controlled by only four companies.
There are other examples of NAFTA’s devastating effects on small farmers. Many staple crops in North America are now sold below the cost of production, especially corn and soy, to improve exports. “NAFTA has led to a 400 percent increase in the amount of corn exported from the U.S. to Mexico” said Hansen-Kuhn. “This has led to the displacement of more than 2 million Mexican family farmers, many of whom moved to cities, sought factory work, or moved to the United States.”
On the table for NAFTA 2.0 is an American demand that Canada drop its Dairy and Poultry Supply Management System. Hansen-Kuhn explained that Canada’s system tracks the sale of all dairy and poultry products within Canada, including imports and exports, then uses this information to create a set of production quota, prices, and trade restrictions.
“This ensures fairly stable prices for farmers and producers, and greatly reduces the risk of oversupply,” Hansen-Kuhl explained. “Canada’s standard hormone-free milk is roughly the same price as hormone-free certified milk in the U.S. where the strategy is to just keep overproducing even as prices continue to fall.”
Hansen-Kuhl said U.S. dairy farmers have openly supported Canada’s Dairy Supply Management System, and want it exempted from NAFTA 2.0. It’s unclear just what will play out, given the past tendency of large farm organizations to align themselves with big industry interests.
“Overall, NAFTA may seem like a good idea in the grocery store [where prices may be lower], but in terms of sustainable agriculture and the communities that it supports, it’s been devastating,” Treat said. “We should have stopped using this model a decade or more ago, hopefully now’s the right time to make a change.”
Axe regulatory cooperation and harmonization
“Regulatory cooperation and harmonization” is trade-lingo for trying to make each trading country’s domestic regulations more consistent with one another in an effort to remove so-called needless trade barriers.
The problem occurs when biotech, chemical, and pesticide industries all want to lower the regulatory requirements needed to approve products and deem them safe under the guise of regulatory cooperation and harmonization. Treat noted that one proposal would allow a product approved in one NAFTA country to be automatically approved in all three – that could result in another race to the bottom environmentally.
Treat also points out that all sorts of government labeling requirements are likely to be challenged utilizing NAFTA 2.0, as has happened under NAFTA 1.0. And a myriad of battles involving animal welfare and food production regulations are on the current negotiation docket.
“A proposal in the TPP made it harder for producers to label their products, which ultimately makes it harder for consumers to choose what they buy and eat, and to support sustainable farming by selecting local products over ones shipped from, say, China,” Treat said. “This kind of thinking seems pretty out of whack with modern-day demands for smaller scale, local, ethical farming.” Again, what is good for transnational agribusiness is not necessarily good for local people, their communities or the environment.
Fully fund the CEC and give it some teeth
It seems the only major environmental drawback to losing NAFTA outright would be the loss of the Commission for Environmental Cooperation (CEC), the eco-watchdog council established under NAFTA’s Environmental Side Agreement.
Currently running on a shoestring budget (estimated at US$9 million annually), and lacking legal power, the CEC is meant to coordinate environmental efforts between Canada, the U.S. and Mexico. It’s tried to be useful, but without proper financial resources or legal authority, the CEC has been hobbled.
The CEC has created some valuable environmental tools, many in the form of large data sets like the North American Pollutant Release and Transfer Register (PRTR) project, which makes industrial pollutant data available across North America. Most experts agree the CEC needs more support, credit and money to continue its unique mission. “You get what you pay for,” Scott Vaughan of the IISD said. “While the CEC has always been pretty low-profile, it’s done a lot of good work and improved our understanding of the state of the environment across North America.”
Linda Duncan, a Member of Parliament for Edmonton Strathcona, and the former head of law and enforcement for the North American Commission for Environmental Cooperation, said that the three NAFTA parties themselves were to blame for the CEC’s shortcomings: “Having worked for the CEC, I know first hand that it’s a very valuable institution, and would be even more so if the environment ministers could do their job and hold governments accountable for all the things actually in the [NAFTA] Side Agreement.”
The CEC is meant to work alongside each nation’s Free Trade Commission, ensuring a place at the table for civil interests and environmental concerns. In trade deals Canada has signed since NAFTA, it allowed government bureaucrats to evaluate whether environmental policies are being enforced in what many critics see as an incredible conflict of interest.
“The system already set in place by the Side Agreement in NAFTA, having an independent, paid body of people reviewing and enforcing environmental actions of governments, is far preferable to current practice,” Duncan emphasized, “and though I entirely agree the Side Agreement needs to be moved into the NAFTA text, we should not completely discount the mechanisms and institutions it established. If anything they certainly should be incorporated and strengthened in a new NAFTA.”
If the CEC was fully funded and supported, she adds, it could effectively hold President Trump and the U.S. accountable for walking away from the Paris Agreement, or cutting environmental funding. Despite that possibility, the U.S. has indicated a desire to move the Environmental and Labor Side Agreements into the main text of NAFTA 2.0 to “establish or maintain a senior-level Environment Committee, which will meet regularly to oversee implementation of environment commitments, with opportunities for public participation in the process.”
The U.S. position fails to mention the CEC, so it is difficult to ascertain negotiators’ intent, though it doesn’t take a crystal ball to predict that the Trump administration will not be pushing to boost CEC funding or power, given its stated goal of dismantling domestic environmental programs and regulations.
Acknowledge indigenous and native rights, not free trade incentives
Canada’s list of NAFTA 2.0 goals includes a chapter on Indigenous Rights. While no one is sure what that means exactly, it sounds like a good idea considering that natural resource exploitation projects frequently impact indigenous lands and communities. But so far it seems, experts said, that the only purpose of this new chapter in NAFTA 2.0 is to increase indigenous trade, rather than provide protections.
“As far as we can see, Canada is taking an economic approach to indigenous trade, not a rights-based one,” Dey said. “We would like to see the UN’s Declaration on the Rights of Indigenous Peoples brought into the [NAFTA] chapter at the very least. We must protect [Canadian] rules that dictate indigenous people are always consulted on trade deals and laws.”
Neither the U.S. nor Mexico has made mention of a stance on indigenous trade rights. In Mexico, however, the war to save the country’s native maize industry and indigenous farming practices rages on, so there’s a minor chance for traction.
Make a place at the bargaining table for people and planet
Since the very beginning of the NAFTA negotiations, various environmental and civil groups have argued that the trade treaty offers a great deal to big business, but an empty promise to everyday people and the planet.
“The reason for many of the ultimate problems with NAFTA is that it’s an agreement written behind closed doors by polluters, and the public is entirely shut out,” Beachy said. “Many elements of NAFTA allow corporations to move operations to a place with the lowest cost of business and the loosest environmental regulations, and even challenge, and eventually weaken, or toss out, domestic regulations they don’t like.”
“This isn’t a hypothetical race to the bottom, it’s a concrete one,” Beachy concluded.
He cites a clear-cut example in a case of lead poisoning in Mexico. American factories used to recycle lead-acid batteries until 2009, when new regulations made the process more expensive. In response to the regulations, factories began shipping batteries to Mexico where environmental restrictions regarding lead are looser, and most environmental laws poorly enforced. “In this case the U.S. lost recycling jobs and Mexico got [toxic] lead. NAFTA effectively allows corporations to export their pollution.”
In Naucalpan de Juárez, a Mexican town that saw a surge in American lead-acid battery imports, babies are now being born with lead in their blood, lead-associated birth defects, and low body weight.
An uncertain future for NAFTA 2.0
Treat worries that in the end, NAFTA 2.0 negotiators will settle on some sort of TPP-style agreement, even though Trump withdrew from those negotiations. “The TPP is, in essence, the NAFTA model made far worse by things like regulatory cooperation,” she explains. Based on the few NAFTA 2.0 documents the U.S. has released so far, environmental concerns may be framed just as in the TPP: lofty, vaguely defined and not legally binding.
CAPE’s Dr. Howard hopes NAFTA 2.0 will receive a full analysis by the Canadian government and the Canadian people before being ratified: “The more experts review the text and have a chance to provide feedback, the better. There’s always the chance we could get positive thoughts in the text before everything’s said and done. A lot of the real underlying issues with free trade agreements stem from a lack of outside, public involvement and awareness.”
Vaughn echoed this optimism: “If there was ever a time when the climate and environment needed to be redrafted in the context of free trade, it’s now. I don’t believe we have to give up on the idea of free trade, just improve the process of how we go about it pretty substantially.”
As NAFTA 2.0 negotiations drag on, each of the three governments involved has indicated at one time or another that they would consider walking away from the bargaining table. Canada actually did once before during 1987 negotiations for the US-Canada Free Trade Agreement, and over the same sticking point as that cited today: the removal of Chapter 19 protections against anti-dumping and countervailing.
The public, thanks to the determined outreach work done by environmental and civil NGOs, along with devoted politicians, has come to recognize the inherent threats associated with large free tree agreements and treaties. Protests in the United States, Canada, Mexico, and Europe have threatened to derail all four of the most recent major trade agreements on the table globally: TPP, TTIP, TISA, and CETA, and that was long before Trump walked away from TPP, or threatened to do the same with NAFTA.
The clock is ticking: experts say NAFTA 2.0 negotiations must be concluded before Mexico’s upcoming election on July 1st, with a left wing, anti-establishment candidate, Andres Manuel Lopez Obrador, favored to win. The U.S. is also negotiating on borrowed time, with the President’s fast track authority for trade negotiations expiring on July 1st. Even if NAFTA 2.0 negotiations can prevail, the new agreement will still need to be ratified by a U.S. Congress, which is facing mid-term elections in November.
A new NAFTA will also need to be ratified by the Canadian House of Commons, and provincial elections will occur this year in New Brunswick, Ontario and Quebec. Currently under NAFTA, the Canadian government is set to potentially pay out at least CDN $116 million to Tennant Energy, LLC, who claims their wind-farm venture was subject to “unfair treatment” by the Ontario government. Canadian taxpayers are also on the line for an additional CDN $118.9 million or more in damages to Lone Pine Inc. because the Quebec government passed a fracking moratorium that wound up revoking the company’s permit to explore for natural gas and petroleum under the Saint Lawrence River.
The eighth round of NAFTA negotiations began on April 8th in Washington, D.C. and talks are slated to run until April 18th.
Despite all the uncertain odds, and unsettled conflicts, there have been hints so far that the U.S., Canada and Mexico may still be slowly shaping a viable NAFTA 2.0. The Trump administration even made minor concessions leading up to this round of talks, chiefly by dropping the threat to implement tariffs on Mexican and Canadian steel and aluminum imports if the countries agree to a new NAFTA (a logical move given recently imposed U.S. tariffs on Chinese steel and aluminum imports). And there were rumors that some sort of an “agreement in principle” might be revealed at this month’s Summit of the Americas in Lima, Peru, which Vice President Pence, Trudeau, and Peña Nieto are all attending, though anonymous sources familiar with the negotiations told Reuters that a deal is unlikely to be made before the end of the month.
No matter how confusing, frustrating or secretive the NAFTA negotiations continue to be, the experts consulted for this story agree that the best, and perhaps only way, to make NAFTA 2.0 environmentally and ethically sound is for the people to get involved in a powerful way: talk directly to your local member of congress or parliament.
“Calls can be avoided, emails deleted in a second,” Dr. Howard emphasized. “Nothing beats going and visiting your local representative.” A new NAFTA agreement that works for the planet needs to be backed by the voices of the people.
Correction: This story originally abbreviated the Trans-Pacific Partnership as the TTP. This has been corrected to read TPP.
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