Some thoughts on ecology, evolution and economics

The greener side of trade

tankerIn October 1992, shortly before his victory over George H. Bush, Bill Clinton declared that trade deals should “require each country to enforce its own environmental and worker standards”. Clinton was trying to distance himself from the NAFTA trade deal that the Republicans had negotiated with Canada and Mexico without denying its expected economic benefits. This tussle between public intrest and economic performance continues today with President-elect Trump distancing himself from the off-shoring  and immigration effects of this same treaty.  Today, I am going to look a little closer at the environmental protections in NAFTA and CETA, Canada’s trade agreements with North America and Europe.

There is no explicit protection for the environment or labour in the North American Free Trade Agreeement (NAFTA). These protections are contained in a pair of side agreements. Though the Commission for Environmental Co-operation works to highlight the environmental impacts of economic activity arising out of NAFTA, it has been largely ineffective in stopping anti-environmental decisions by the dispute settlement mechanism in NAFTA’s chapter 11.

By contrast, the Comprehensive Economic and Trade Agreement (CETA) cetabetween Canada and the European Union includes chapters on the environment, labour and sustainable development.  This latter is important since it encourages development in an environmentally sustainable manner, not just the prevention of environmental harm.  Still, CETA includes language similar to chapter 11 of NAFTA to provide binding decisions about whether the interests of investors are protected or not. These tribunals have sided with investors over public interest on such matters as gasoline additives, fracking and pesticides.  Meanwhile, the dispute settlements available to non-investors for labour or environmental reasons are non-binding.  The trouble with chapter 11-type mechanisms is that they provide an end run around a country’s existing laws if an investor does not like them.  In fact, the flaw  is well expressed in the grand-daddy of all trade deals, the General Agreement on Tariff and Trade. Article 20 of the agreement states that environmental provisions should not be a “disguised restriction on trade”.  Since so much of the work of globalization has involved extracting the business logic of a transaction from the wide range of cultural differences between countries, it is likely that the tendency for tribunals to favour investors over non-investors will contnue.

Clinton’s requirement for countries to follow their own environmental standards, even as they trade with other countries, was a good beginning for giving the environment an international context.  The Paris Climate Change Agreement, which came into force in 2016, should also provide some mechanisms to air environmental differences – at least as they affect carbon emissions.  CETA provides opportunities for a “balanced” representation of investors and non-investors to discuss trade practices that do not diminish the water we drink, the air we breath or the wildlife we enjoy. Again, the outcomes of these discussions between the civil societies of Canada and Europe will be non-binding, yet it is important that they will be heard.

The environmental clauses of CETA focus on forestry and fisheries and not mining or energy where the more significant environmental impacts are likely to come  – probably at the request of both negotiating teams. Drinking water is given protection from investor influence under CETA but waste water management is not. The Canadian Environmental Law Association argues that this could lead to issues in applying Canada’s new wastewater treatment standards as European firms bid on contracts for constructing and managing new facilities to meet the requirements.

Overall, however, the inclusion of public interest in working conditions and the environment in trade agreements puts us on the right trajectory for an international community that responsibly shares risks as well as wealth.  Bill would be pleased.