Introduction
This research seeks to determine the impact of NAFTA on environmental performance across its three member states: Canada, Mexico, and the United States. It addresses common expectations prior to the implementation of NAFTA, as well as the concerns of skeptic or critical environmentalists. First, a historical overview of NAFTA – the reason for its creation and preceding negotiations – are discussed. Second, a brief overview of the different environmental institutions borne of NAFTA negotiations is presented so that we have an understanding of the institutional system within which environmental policy is implemented across member nations.
Later, this research applies a comparative, qualitative, analysis of environmental performance indicators in terms of agricultural and air quality effects, to assist in determining the impact of NAFTA since its implementation in 1994. Furthermore, three assumptions presented by critics of NAFTA throughout the 1990s are explored: As a result of NAFTA, has Mexico become a “pollution haven”? (Mayrand and Paquin, 2003; Hufbauer et al, 2000; Ederington, 2007). Has the expected increase in economic growth lead to an increase in industrial pollution? Has NAFTA had a negative effect on the application of domestic environmental regulation as demonstrated by a “race to the bottom”? (Hufbauer et al, 2000, p. 1; Carpentier, 2006; Esty, 2002) This article will close with a concluding section that draws together all of the preceding discussion to assess the impact of NAFTA on environmental issues in a more broad and general overview.
NAFTA – Historical Overview and Contextualization
Creating a free trade zone encompassing all of North America came to the fore as a result of Ronald Reagan’s presidential campaign of 1980 (Ford, 2008). During Reagan’s second term as president, negotiations between the United States and Canada began, culminating in the creation of the Canada-US Free Trade Agreement (FTA) in January of 1988. During that same time, negotiations with Mexico began. In January of 1991, the negotiations between the United States and Mexico became trilateral in nature when Canada requested permission and was permitted to participate (FINA-NAFI). On 18 December, 1991, President Bush, Selinas of Mexico, and Prime Minister Mulroney of Canada, participated in the official signing of NAFTA. NAFTA was officially implemented in January of 1994 which sought to remove trade barriers between the US, Canada, and Mexico by removing tariffs on imports and exports between the three countries (Duke Law).
During the negotiation of NAFTA, the US environmental community was the home of much debate. Many environmentalists predicted a number of negative environmental impacts resulting from more liberalized trade between the three countries (Mayrand and Paquin, 2003; Hufbauer et al, 2000; Ederington, 2007). Canada and the United States were both considered major actors in the industrialized north. NAFTA marked the first free trade agreement, “equally joining countries of the developed north and the developing south” (Kirton, 2006). Critics of NAFTA argued that Mexico would become a “pollution haven” – or in other words – pollution intensive industrial production would migrate south seeking less stringent environmental regulations (Ederington, 2007). Other critics suggested that NAFTA’s liberalized markets would increase competition for goods and services, weakening domestic environmental regulations in the process, often referred to as “the race to the bottom” (Hufbauer et al, 2000, p. 1; Carpentier, 2006; Esty, 2002). Furthermore, environmentalists argued that economic and industrial growth would increase overall pollution output. Specifically speaking, critics predicted transportation to “expand massively as a result of increased trade, with significant impacts on air quality in North America” (Mayrand and Paquin, 2007). Governmental officials in all three countries worked to address the concerns of the North American environmental community.
As a result of the campaign promises made by Clinton leading up to the election, and the environmental debate amongst policymakers and critics, the “environmental side-agreements” of NAFTA came into existence. These agreements were borne of the robust debate in the US about the absence of environmental oversight represented in the main text of NAFTA. In 1993, the main text of NAFTA was coupled with the “side-agreements” to create the “NAFTA Package” (Audley, 1997, p. 112). This package consisted of the main NAFTA text (dealing primarily with trade) and the supplemental institutions; the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC) (Kirton, 2006).
Environmental Institutions of NAFTA
The North American Agreement for Environmental Cooperation (NAAEC)
The consequence of environmentalist pressure throughout the negotiation of NAFTA was demonstrated by the creation of the North American Agreement for Environmental Cooperation (NAAEC). The NAAEC was charged with encouraging the creation of “cooperative initiatives to improve North America’s environment and to provide a mediating mechanism for environmental disputes”, and providing “North America with a trilateral framework for environmental governance (Hufbauer et al, 2000, p. 17).
This trilateral framework was broken up into five parts. Part one consists of a broad set of objectives that seek to enhance “protection and improvement of the environment”, promote “sustainable development”, and increase “compliance with and enforcement of environmental laws and regulations.” Part two requires that the US, Canada, and Mexico issue periodic reports “on the state of their environment”; create “environmental emergency preparedness measures”; “promote environmental education”; “develop environmental technology and scientific research”; “assess environmental impacts”; “use economic instruments for environmental goals”; and “ensure that their laws and regulations provide for high levels of environmental protection”. Part three of the framework established the Commission for Environmental Cooperation (CEC), one of the other three institutions that will be addressed later in this section. This part defined the CEC’s institutional structure, its procedures, and its powers. Part four addresses cooperation and communication amongst NAFTA members. It requires “prior notification of proposed or actual environmental measures”; “prompt provision of information upon CEC request”; and “cooperation in the interpretation and application of the NAAEC”. The last part was designed to deal with dispute resolution between parties to NAFTA. If a “persistent pattern of failure” to enforce environmental regulation is exhibited, a party may seek arbitration via two-thirds vote in the CEC’s Council. If a party is found to be guilty of “nonenforcement” of environmental regulation, the CEC can suspend NAFTA benefits. Even though this last part is embedded in the objectives of the NAAEC, an environmental institution, this “dispute mechanism…is more concerned with the unfair trade aspect of nonenforcement…than the environment per se” (Hufbauer et al, 2000, p. 18).
The Commission for Environmental Cooperation (CEC)
One of the NAAEC’s tasks was to create a commission to oversee the implementation of the environmental “side-agreement”. This CEC has three goals: “mediate environmental disputes”; “ensure appropriate implementation of environmental legislation”; and “improve environmental conditions through cooperative initiatives” (Hufbauer et al, 2000, p. 20). The Commission is comprised of “three distinct components”; the Council of Ministers (the governing body), the Secretariat, and the Joint Public Advisory Committee (JPAC) (Audley, 1997, p. 119). A “cabinet-level or equivalent” representative from each of the three member states makes up the Council of Ministers. The Office of the Secretariat is headed by an executive director that is chosen by the Council of Ministers for either one or two, three year terms. As Audley explains, the institutional structure of the CEC “was meant to balance environmentalists’ desire to give the Secretariat independence from political pressures…with pressure from governments to keep the Secretariat responsive to their demands” (1997, p. 120). Fifteen presidential appointments (three from each NAFTA member state) make up the body of JPAC (Hufbauer et al, 2000, p. 21).
Each of the three bodies composing the CEC is charged with a particular set of tasks. The Council of Ministers is expected to foster environmental cooperation; approve budgets for the CEC; oversee the activities of the Secretariat; assist in the resolution or prevention of environmentally related trade disputes, make recommendations about data collection and enforcement concerns; and cooperate with the Free Trade Commission (FTC) of NAFTA to achieve the overarching goals of NAFTA (Hufbauer et al, 2000, p. 21). The Secretariat duties are executive in nature. This office creates reports for the Council outlining the concerns of NAFTA’s members; prepares the coming year’s program and budget; and oversees the daily activities of the CEC (Audley, 1997, p. 120). JPAC is an advisory board that gives each member state’s citizens a voice in the discussion of environmental issues as related to NAFTA. JPAC sets priorities for the NAAEC by allowing constituent input through appropriate channels, and aggregating advice and recommendations from NGOs (Hufbauer et al, 2000, p. 17; Audley, 1997, p. 121).
The CEC assisted in ushering in the implementation of the Sound Management of Chemicals (SMOC) agreement as well as the North American Pollutant Release and Transfer Register (PRTR) across member states. Kirton’s assessment of NAFTA found that:
“SMOC has delivered clear, concrete deliverables that have brought substantial environmental improvement to Canada and to critical Canadian populations, notably indigenous peoples in Canada’s Arctic. It has done so by eliminating or reducing in Mexico the use of harmful chemicals that flow north into Canada to do demonstrable damage there… In particular, the program has eliminated new sources of DDT and chlordane from the environment” (Kriton, 2006).
Further, the PRTR “seeks to harmonize national programs, in the limited sense of comparing and informing the public throughout North America, rather than adjusting national programs to operate in the same way”. As a result, the PRTR has pressured the Mexican government to be more transparent with the public in regard to pollutant releases into the biosphere (Kirton, 2006).
The Border Environmental Cooperation Commission (BECC) and the North American Development Bank (NADB)
The US and Mexico have a long history of bilateral treaties and commissions. In 1889 the International Boundary Commission was formed. This boundary commission was converted, by addition of the Water Treaty, into the International Boundary and Water Commission in 1944. By 1983, Mexico and the US broadened the scope of their bilateral environmental relations by creating the Agreement for the Protection and Improvement of the Environment in the Border Area (Hufbauer et al, 2000, p. 42).
The BECC came into existence as a “direct response to concerns expressed by NGOs over the effect expanding trade would have on the Mexico-US border region” (Audley, 1997, p.122). The NADB was developed in concert with the BECC to facilitate the development, certification, and finance of environmental infrastructure projects in the border region (Hufbauer et al, 2000, p. 43). The BCEE is separated into three core components. The ten person Board of Directors is the final decision in determining which projects are approved or declined by BCEE staff. The daily functions of the BCEE have been charged to a Deputy Assistant and General Manager, whom are both appointed by the Board of Directors. Lastly, to ensure participation of border communities in the decision-making process, an eighteen person Advisory Board was created. These three bodies work together “to develop solutions to environmental problems affecting communities within sixty-two miles of the international boundary” (Audley, 1997, p. 122). The NADB can be understood as the financial arms of the BECC. The bank has been charged with organizing financial packages for environmental infrastructure projects that have been certified by the BECC (Hufbauer et al, 2000, p. 44).
Comparative Model
This comparative analysis was designed to assess the environmental impact of NAFTA since its implementation in 1994. Policy convergence and or divergence is an important indicator of the impact of a free trade regime on the environment (Schreurs et al, 2009; Carmin and VanDeveer, 2005). Has NAFTA resulted in environmental policy convergence or divergence between member states? Renewable energy and automobile standards are examined to determine if there’s evidence for convergence or divergence. The study poses this question given the evidence that demonstrates that policy convergence among European Union member states has in some cases resulted in more stringent application of environmental policy. This approach is applicable given the similarity between Mexico as a “developing” nation and ascension states seeking membership or having just attained member state status in the European Union.
A second question is posed to further assess the impacts of NAFTA on environmental performance across member states. Agricultural environmental impacts of NAFTA are examined by taking a look at water quality and distribution, the use of fertilizers and insecticides, and biodiversity. Air quality impacts are addressed by examining greenhouse gas (GHG) emissions and the effects of the “transportation corridor” (Congressional Research Service, 2004). Within these selected areas of environmental policy we address the question – Has NAFTA resulted in the improvement of specific environmental performance indicators? These indicators were chosen given the possible affects of these three areas across the entirety of the member states of NAFTA.
Abundant in pre-ratification discussion were assumptions and expectations from environmentalists as well as anti-free trade activists about the impacts of NAFTA (Mayrand and Paquin, 2003; Hufbauer et al, 2000; Ederington, 2007). In this closing section of the article, three prevailing assumptions are examined to determine if some of these expectations came to fruition. Has NAFTA caused Mexico to become a “pollution haven”? (Mayrand and Paquin, 2003; Hufbauer et al, 2000; Ederington, 2007). Has NAFTA resulted in increased economic growth and as a consequence of that growth has industrial pollution increased in turn? Lastly, has NAFTA had a negative effect on domestic environmental regulation as demonstrated by a “race to the bottom” across member states?
Convergence or Divergence?
The importance of environmental policy convergence as related to environmental performance is clear (Schreurs et al, 2009; Carmin and VanDeveer, 2005). In the subsequent section, this study will examine two fields of environmental policy looking for evidence of convergence in renewable energy policy and automobile standards.
In the face of an absence of a NAFTA wide, bilateral, or intra-national schemes or certificates for renewable energy trading, there’s been a substantial increase in “cross-border exports of green energy”. Local and subnational groups are using “renewable energy portfolios”, but divergence is demonstrated by the lack of uniformity in how renewable energy is defined across the different jurisdictions (Howse and van Bork, 2006).
Provisions within NAFTA that effect the trade of energy within member states may prove to be a great source of divergence, but that has yet to be demonstrated. Howse and van Brok, in a study written for the CEC, they explain the central nature of mutli-level governance as it relates to renewable energy policy across member states. Renewable portfolio standards (RPS) that have been adopted on a subnational level might violate “National Treatment” provisions in NAFTA. Mexico’s status as a developing nation puts it at a disadvantage when it comes to a government institutional capacity for technical expertise. The overwhelming effect of NAFTA and its provisions on trade have opened up a number of doors for the further promotion of renewable energy throughout the member states (Howse and van Bork, 2006). National, subnational, and regional convergence on a renewable energy trading scheme is afoot. Mexico’s vast desert landscapes and their economic growth might very well drive an increase in the amount of renewable energy coming from the south. If this proves to be the trend, one can expect even more policy convergence as barriers to renewable energy sources are dissolved.
In the automobile industry, a high level of policy convergence as a result of the effects of NAFTA is demonstrated on multiple levels of governance as well as the private sector (Kirton and Rugman, 1998). This convergence is best demonstrated in two areas. First, Mexico has been introduced into the automobile production chain that was once just a bilateral relationship between the US and Canada. The market pressure has driven standardization of production to the fore, promoting a regional perspective about market accessibility. Thus, uniformity of standards is seen by North American auto firms as a means to ensure access to the largest possible market, which accounts for the levels of convergence on a voluntary basis. Second, a “total systems” approach to environmental regulation is being pursued across the production chain. OEM part manufacturers, assemblers, and after-market part producers are feeling the push from the US auto industry. The economic provisions of NAFTA are the primary cause for the harmonization of regulations amongst producers. The North American auto industry has a plan they are trying to implement: a global regulatory regime (Kirton and Rugman, 1998). It is this end-game they envision that pushes environmental performance forward – regionally in North America as well as across the Atlantic to Europe. US based auto companies have pushed the Mexican government to harmonize with US vehicle emission and ambient air quality standards. Free market pressures made this a trend before the implementation of NAFTA. Kirton and Rugman’s study, written only four short years after the implementation of NAFTA, shows that the trend that had begun well before NAFTA will be spurred on further by its free market initiatives.
This section demonstrates that market pressures have engendered environmental policy convergence in the North American auto industry and some divergence in renewable energy policy. The enormity of the North American auto market has been the main cause for environmental regulatory convergence in that industry. Mexican production being incorporated into the US-Canada production chain and the “total systems” approach to regulatory policy making also helped drive convergence. An absence of a uniform definition of “renewable energy” is at the heart of why Mexico, Canada, and the US see divergence in this field. There is hope that the greater trends of market effects – economic growth and foreign direct investment – create an atmosphere in which something akin to a pan-North American renewable energy certification regime could come into existence.
Environmental Performance Indicators
To further advance this study of NAFTA’s impact on environmental performance of its member states, I pose a second question. Has NAFTA resulted in improved environmental performance across specific indicators? The study looks at the performance of two salient areas of environmental concern; agriculture and air pollution. Addressed first are water supply/distribution and quality, fertilizer use, and biodiversity. Next air quality is addressed, focusing on greenhouse gas (GHG) emissions, and the “transportation corridor” – the main corridors of automobile freight traffic throughout member states.
Nearly 85% of all Mexican water usage is for agriculture (Vaughan, 2003). Shifts in the dynamics of agricultural trade between the US and Mexico has resulted in the concentration of certain high yield crops in farming sectors of Mexico to meet export demands. Export-oriented fruit farms “use greater amounts of groundwater per yield, compared to smaller farms” (Vaughan, 2003). A desire for increased yield has also lead to an increase in the use of fertilizer which exacerbates the scarcity of potable water. The Great Lakes region is also home to contentious water disputes. The liberal application of NAFTA regulatory provisions in Canada created a path for the Ontario government to exempt factory farms from municipal water pollution regulations culminating in citizen outrage (Elwell, 2001). “Farming is the leading source of pollution in Canada, Mexico, and the United States” (Vaughan, 2003). Nitrogen, a central component of fertilizer, is the main culprit. It pollutes groundwater, creates algae blooms, acidifies waterways, and helps to increase ground-level ozone. Mexico’s participation in NAFTA has created a market for large industrial scale farms that focus on exports. The large, historical, farming centers of Mexico engender this type of development given the absence of barriers to the trade of produce. Fertilizer consumption has remained relatively static since 1994, but the concentration of high intensity farms in certain regions has aggregated effects. Biodiversity in agriculture is another important policy area. Mexico banned the use of GM corn in 1998, but a study in 2001 found GM crops to be growing throughout Mexico. This worries many who take note of the significance of corn as an extremely diverse crop in Mexico. Mexico is said to be the home of thousands of varieties (Nadal, 2002).
Next the study turns to air quality. Greenhouse gas emissions have grown to be a salient issue in popular environmental discussion. In Canada, provisions of NAFTA are found to be in conflict with the Kyoto Protocol. This divergence can be accounted for by the underlying philosophies of each institution. In Kyoto, the precautionary principle shifts the burden of proof so that parties might err on the side of safety, as opposed to the unknown. Scientifically rigorous risk assessment is the nature of NAFTA’s philosophy (Hornsby et al, 2007). Hornsby et al (2007) point to economic-trade related conflicts between NAFTA and Kyoto. In addition, “the transportation corridor” has had an enormous impact on air quality. Liberalization in trade , as a direct effect of NAFTA, has increased automobile freight throughout the member states, in turn increasing emissions through these high impact corridors (Kirton, 2001). A study by the CEC found that increased freight traffic in five distinct corridors increases air pollution concentration into hot spots in urban areas, and especially at border crossings known for delays. “Cross-border” freight accounts for upwards of 11% of all mobile source nitrous-oxide and upwards of 16% of all mobile source fine particulate matter emissions (CEC, 2001).
The preceding section sought indicators of improvement in environmental performance in the fields of agriculture and air quality. Mexican agricultural intensity is increasing in certain locales and as a consequence 85% of all groundwater is used for farming. Potable water scarcity is now growing as a result of increased fertilizer use and the aforementioned jump in farming concentration and intensity. GM corn has managed to invade Mexican farms even given their restriction on the import of GM seeds. This invasion threatens the historical and cultural gravity of corn as a staple food for the indigenous peoples of Mexico. GHG emission policy is an area where NAFTA might undermine member state’s participation in the Kyoto Protocol. The differing philosophies of the two institutions account for their schism – NAFTA, known for its rigorous risk assessment, and Kyoto, known for its application of the precautionary principle. Trans-border freight in what has been termed the transportation corridor is expected to increase two to four fold by 2020. As it stands now, trucking accounts for 65% of NAFTA trade. With the implementation of new truck emission standards, studies suggest that air quality along the transportation corridor will remain for the most part static.
Assumptions and Expectations
Leading up to the implementation of NAFTA in 1994, many assumptions and expectations were aired by critics, scholars, and others with a vested interest. This section considers three of those assumptions or expectations.
The idea that the liberalization of trade leads polluting industries to migrate to developing countries in search of less stringent environmental regulation is called the “pollution haven hypothesis”. The body of scholarly study suggests that this is not the case (Mayrand and Paquin, 2003; Hufbauer et al, 2000; Ederington, 2007; Carpentier, 2006). Gallagher’s study (2004) of the hypothesis found that abatement costs for most firms do not reach the amounts needed to inspire a change in location. Furthermore, in Mayrand and Paquin’s study (2003) they found that industry location was more often influenced by labor markets, political stability (or absence thereof), and “market proximity”. Hufbauer et al (2000) also found zero evidence that a “pollution haven” had “materialized”.
The second assumption addressed is the position that economic growth and increased industrial pollution are directly related. “The expectation that economic growth generated by NAFTA would increase industrial pollution is supported by some evidence, but this increase is de-linked from GDP growth” (Mayrand and Paquin, 2003). In other words, air pollution emissions grow at a slower rate than GDP. This is a trend dating back before NAFTA and “confirms that economic growth cannot automatically be associated with a proportional increase in pollution indicators” (Mayrand and Paquin, 2003). Mayrand and Paquin suggest that regional context plays a more important role than GDP growth in accounting for increases in pollution. In other words, regions that have historically specialized in a specific industry, like cement production in Mexico and Canada; have improved their adverse environmental impact, while the US with a much higher GDP has worsened since NAFTA’s implementation (Mayrand and Paquin, 2003). This demonstrates the disconnection between GDP and an increase in environmental protection.
The last assumption to confront is; if the implementation of NAFTA had brought about a regulatory “race to the bottom” (Hufbauer et al, 2000, p. 1; Carpentier, 2006; Esty, 2002). In other terms, firms would pressure government to lower environmental standards with their new found leverage under NAFTA’s focus on removal of trade barriers. Zero of the referenced studies found any other evidence to support the theory. On the contrary, Carpentier’s study (2006) found evidence of the opposite. Upward environmental convergence in the private sector as well as on the state level has been noticed. More stringent livestock and chemical management policies were born of this process. Mexican businesses have also experienced an upward convergence in environmental regulation enticed by “additional exporting opportunities”. A study found that Mexican businesses that export to the US and Canada implement more “environmental management actions” than those that do not. Additionally, NAFTA was found to cause the Mexican government to increase environmental oversight by creating new institutions, implementing new regulations, and more “consistently enforcing” existing environmental regulation (Carpentier, 2006). The incentives created by NAFTA’s free market regime facilitated a migration in Mexico towards more harmonious application of environmental regulation in order to gain and or maintain access to the northern markets of the US and Canada.
Concluding Remarks
The sum of research examined in the preceding sections has demonstrated that that the free market philosophies engendered by NAFTA have been persuasive in motivating different actors to respond to environmental concerns through out member states. Trends of policy convergence in both renewable energies and the automobile industry is a positive sign when combined with the evidence for upward policy convergence as presented in the later sections of the article. The institutions born of the debate among policy makers and environmentalist critics have created the institutional framework that facilitates policy harmonization across member states. Indicators for environmental performance demonstrate that NAFTA has a negligible effect in that regard. Agricultural indicators point back to trends that have not changed much since 1993. Air quality indicators suggest that the transportation corridor will continue to be a problem for areas of concentrated traffic along the most frequented routes. Lastly, three assumptions were addressed to determine if the worst case scenarios of critics would come to fruition. This study found that there was very little evidence to support any of the expectations. Numerous studies found no support for what some coined “the pollution haven hypothesis” and that other factors were more likely to account for industry relocation. The relationship between economic growth and increased industrial pollution was proven to be tenuous. The fact that air pollution has grown slower in relation to GDP, and this trend has held true since 1993, demonstrates that other factors should be considered when examining increases in pollution. The feared “race to the bottom” has also been proven false. In fact, the lion’s share of substantiation supports the notion that NAFTA has actually done the opposite. Market based incentives drive policy convergence in the private sector as well as amongst states. In conclusion, this study found that the market based initiatives have been more persuasive in motivating actors to implement more stringent environmental policy.
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