Environmental Implications Of Nafta On North America

Essay, Research Paper

The Environmental Implications of

The NAFTA on North America

By

Jonathan Eidse

Political Science 101, s02

Prof. G. McDougal

November 18, 1998

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Introduction

Prior to 1994, trade and the environment were two entirely separate issues. There were no environmental regulations found in the General Agreement on Tariffs and Trade (GATT) or in the Free Trade Agreement (FTA). Upon the signing of the North American Free Trade Agreement (NAFTA) environmental concerns of North America as a whole were for the first time provided within a side agreement to the NAFTA. Finally there is a trade agreement that recognizes the concerns of North American citizens to maintain a healthy, sustainable environment, where the damaging effects of free trade could be minimized. The NAFTA entailed provisions for stricter environmental regulations on all of North America, and if a country did not abide by these regulations they would be accountable to a multinational panel and receive a proper penalty. In theory the NAFTA would be entirely beneficial to Mexico, the US, and to Canada, but due to low enforcement of the regulations, the opening of foreign resource markets along with several other implications has proved the NAFTA is far from ideal.

Environmental Regulations of NAFTA and their Effects

Previous trade agreements with our southern trading partners have been solely based on economic growth, but with the inclusion of and environmental side agreement to the NAFTA, environmental restoration was now a key factor. Proponents of this side agreement praised the NAFTA for its sensitivity to the pressing environmental concerns shared by Canada, the United States, and Mexico. Environmental regulations would be

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set in place for North America as a whole, eventually cleaning up our environment on a huge scale. Opponents of the NAFTA, however, were not convinced that the environmental regulations set in the NAFTA would improve the environment throughout North America. They saw that Mexico’s environmental regulations were less strict and those that were in place were loosely enforced. American industries would see Mexico as a pollution haven where they could set up less environmentally sound facilities to increase overall profit. Therefore, the NAFTA was seen as beneficial to the American environment at the expense of that of Mexico’s. A question that members of the NAFTA panel must ask themselves is “…is it economically efficient and morally justifiable for agents to satisfy their demand for high environmental standards by allowing others to despoil their environment?” (Kaufmann, par. 45).

Another fear of those opposed to the NAFTA was that environmental regulations already in place would deteriorate due to business competition. As Mexico has the lowest environmental regulations, Mexican businesses have an unfair advantage over Canadian and US markets as they can produce goods at a much lower price. This advantage would force the American and Canadian businesses to circumvent their local regulations to remain competitive in their respective markets, eventually leading to the decay of present environmental regulations. Mexican businesses are also faced with a competitive disadvantage due to the fact that in an open market, local businesses will “…be forced to compete with more technologically sophisticated firms from richer countries and, therefore, limit investments in pollution control equipment in order to keep

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their costs low”(Husted, par. 6). This problem was not entirely overlooked in the construction of the NAFTA as it entailed a provision warning governments against dropping regulations; unfortunately the provision establishes no requirements and cannot be grounds for an official complaint. Although the environmental regulations that the NAFTA has been set to encourage are a major step forward, lack of enforcement and uniformity amidst the three nations has greatly reduced their effectiveness at achieving a greener North America.

Effects of Combining Trade and Environment

When the NAFTA was initially proposed, no environmental side agreement was entailed. Environmental Non-Government Organizations (ENGOs) such as Green Peace, Sierra Club, and Friends of the Earth saw that the effect of freer trade on the environment was indeed noteworthy, and thus proposed that an environmental side agreement was necessary to minimize the damage to the Earth. Aside from their immediate environmental concerns, the ENGOs saw that the NAFTA could supply them with the means to expand their influence outside their nation’s borders. With this new trade agreement it was now possible to take environmental restoration to a global level.

Unfortunately, this international platform also gave the government the ability to make its own ideals felt abroad, which in many cases harmed foreign countries. Through the NAFTA the US would have the right to set trade sanctions and embargos on nations that did not comply with their own environmental regulations. The NAFTA, in effect, provides a mechanism to push American ideals down the throats of foreign countries. I

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say American ideals and do not include those of Canadian or Mexican because the US has the strictest and most comprehensive environmental regulations in the world, setting the standard for the other members of the NAFTA. This creates problems in less developed nations who rely on the exportation of their goods to North America as members of the NAFTA are required to refuse the importation of goods that do not comply to their environmental standards.

“ By injecting environmentalism into the terms of trade, the United States arrogantly imposes its global priorities and values on the developing world. Many of these states are financially simply not able to devote adequate resources to environmental issues without sacrificing development. By raising the threat of retaliatory tariffs and other trade sanctions for failure to meet American standards, the United States will close its markets to these poorer exporters, forever locking them in a vicious circle of debt and poverty”(Lash III, par. 6).

Free trade in North America is also beneficial to some less developed countries as it permits the importation of pollution control technologies that have been developed elsewhere, giving these countries the ability to clean up their environment with greater ease and efficiency.

Research performed worldwide has shown that environmental concern is directly correlated to economic growth.

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“As living standards improve because of increased trade, there will be greater concern with the quality of life and more information available about environmental hazards. This in turn will lead to stricter environmental regulations and ultimately greater protection of the environment” (Husted, par. 5).

“Only a prosperous society can have the confidence and the means to protect its environment”(Bill Clinton).

This sounds like an acceptable theory, but it does not only require a wealthy nation to turn it’s attention to environmental problems but also a concerned population as well as proper leadership. Another perspective is with economic growth, a higher income average income is associated, which in turn leads to higher consumption, which then results in a more rapid deterioration of the environment. To avoid this chain reaction it would require a whole new breed of citizens, consumerism would have to be brought to a halt. “The only way to control environmental degradation is to stimulate development without economic growth per se”(Husted, par. 5). To have a society strive for a static, stable economy and still have an increase in development is still yet to be seen.

The American Take-over of Canadian Resources

The moment Canada signed into the NAFTA Canada lost all power over it’s own resources. Water, oil, minerals etc. are now at the American’s fingers; Canada no longer has the right to stop the exportation of its own resources, regardless if it conflicts with the

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interests of its own citizens. Canada’s resource market has been opened up to US investment that gives American individuals and corporations the right to buy Canada’s oil supply, import it’s water to their own country, and buy mining rights to strip Canada of the very things it’s economy is based on, resources. Indeed, the US is paying for Canada’s goods, which does boost Canada’s economy for now, but what will become of Canada’s economy when it’s land is as devoid of resources as its southern neighbors? With virtually nothing left to export, trade between the US and Canada will slow to a mere trickle, and Canada’s economy will suffer greatly. The ability to buy into foreign resource markets is not limited to the US alone; only the US, being the wealthiest of the three nations, profits the most from it.

As US interests do not always match Canada’s, what can be the possible outcomes of US owned businesses running Canada’s resource market?

“US and Canadian investors could also gain new access to natural resources in Mexico such as forests, fisheries, plant genetic material, and minerals without concern for long-term conservation or the people who depend on them”(Rugman, par. 23).

The ability for the US to exploit Canada’s resources is definitely there. Canada is not their country so why would Americans care to maintain the sustainability in Canada’s forests and watersheds? What can Canada do to regain control over it’s own resources? There are many things they can’t do. If a law is passed on the federal, provincial, or municipal level that imposes US access to Canada’s free market, the law must be trashed lest Canada face repercussions in violation to the NAFTA. If any foreign company sees

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that Canada is subsidizing Canadian businesses in any way or that the local businesses have an unfair advantage of any sort, they can sue the Canadian government, at the expense of the taxpayers. The bottom line is anything that limits US profits or their future potential profits is unacceptable under the NAFTA.

Conclusion

The NAFTA is clearly a major step forward to cleaning up North America’s environmental problems, but it is far from a perfect trade agreement. It is widely agreed that without NAFTA conditions would certainly deteriorate from unrestrained development, however, with the NAFTA conditions are not improved equally throughout North America. The US, it seems, has achieved the highest benefits out of the NAFTA as they now have access to foreign markets, both business and resource, on either sides of their borders. Canada and Mexico do indeed benefit from this agreement as well as they have lower tariffs on importing US goods, as well as access to American markets, and cleaner environments; however, Canada with it’s lower dollar value does not enjoy the same ease at which the US is able to pick up foreign business, nor does Canada have the same resources to fund environmental regulatory enforcements that are par with the US. The NAFTA is in writing, good for the environment, but due to lack of enforcement of environmental regulations and penalties, the environmental side agreement is basically just words. Unless Canada wishes to relinquish even more power to the US, a way of maintaining control over it’s own resources must be found or it’s economy, even the nation’s sovereignty will be degraded.

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