Before the North American Free Trade Agreement (“NAFTA”), trade agreements seemed to place their only “green” concerns on avoiding environmental protection laws that might constitute non-tariff barriers to trade. However, during NAFTA negotiations, maybe for the first time, the potential negative effect of trade liberalization on the environment was one of the most discussed issues.
After years of discussion, the parties decided to enter into a side agreement on environmental cooperation, giving birth to the North American Agreement on Environmental Cooperation (“NAAEC”), through which environmental and sustainability policies and commitments were established. Although the decision to relegate environmental matters to a side agreement was severely criticized, and it effectively diluted the effect of these provisions, NAFTA was considered as the first international trade agreement that incorporated a green perspective.
The Trans Pacific Partnership (“TPP”), like NAFTA and NAAEC, recognizes the right of each party to establish its own levels of environmental protection and enact domestic environmental laws, and it retakes the submissions on enforcement matters and factual reports. Nevertheless, the TPP is significantly greener than NAFTA and NAAEC combined.
The first and most obvious difference is that the TPP creates: (i) obligations across a range of specific environmental matters that are not relegated to a side agreement, including compliance with other environmental agreements, ecosystems, and species protection; (ii) the elimination of counterproductive subsidies and tariffs to green goods; and (iii) the promotion and development of green technologies and renewable energy sources.
Furthermore, the TPP establishes an enforcement mechanism of the environmental obligations through the same settlement mechanisms for disputes arising under other chapters of the TPP, including the availability of trade sanctions, while the mechanism for dispute resolution provided in NAFTA and NAAEC provides remedies only for violations related to trade and investment issues.
Finally, while NAFTA establishes that specific environmental agreements would prevail over NAFTA, the TPP goes a step further by expressly requiring compliance with the Convention on International Trade in Endangered Species of Wild Fauna and Flora (“CITES”) and effective implementation of Multilateral Environmental Agreements already signed by the parties of the TPP.
NAFTA and NAAEC
NAFTA, which came into force on January 1, 1994, was one of the first trade agreements to recognize the importance of environmental protection. However, most environmental provisions were relegated to a side agreement, with an unwritten commitment that these provisions would be incorporated into the agreement itself at some later date, a situation that, although further discussed, never became effective.
NAFTA sought to establish free trade in a manner consistent with environmental protection and conservation and to strengthen the development and enforcement of environmental laws. It also provided that specific environmental agreements (including the CITES Convention, the Montreal Protocol on Substances that Deplete the Ozone Layer, and the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal) would prevail over NAFTA, provided that where a party has a choice among equally effective and reasonably available means of complying with such obligations, the party chooses the alternative that is the least inconsistent with the other provisions of NAFTA.
Furthermore, NAFTA recognized the right of each party to establish its own levels of domestic environmental protection and to enact or modify domestic environmental and sanitary laws standards and measures, as long as those efforts promote the harmonization of national and international environmental and sanitary standards and encourage the use of international measures when establishing national standards that affect trade.
NAAEC, which also came into force on January 1, 1994, provides that each party will effectively enforce its environmental laws and regulations.
In order to facilitate effective cooperation, the parties established the Commission for Environmental Cooperation (“CEC”), composed of a Council of Ministers, a Secretariat, and a Joint Public Advisory Committee.
The NAAEC provides that the CEC, through the Secretariat, may review enforcement submissions related to complaints presented by nongovernmental organizations and individuals with regard to a party failing to effectively enforce its environmental laws.
After the receipt of a submission on enforcement matters, the Secretariat may request the accused party to provide a response and may issue a factual report on the matter, describing the level of enforcement of environmental laws by that party; however, the CEC may not issue specific recommendations or obligate the party to enforce its environmental laws or regulations.
Factual reports contain no recommendations and are not binding. Thus, the intention behind publication of the submissions on environmental matters and factual reports is basically to provide evidence of the violation and generate international pressure.
Additionally, the NAAEC provides a mechanism for dispute resolution in case of a persistent failure by a party to effectively enforce its environmental laws in a manner affecting trade, (i.e., not enforcing regulations forbidding the use of toxic materials in specific products, allowing companies to produce goods at a lower cost, or creating a trade disadvantage for competitors).
This procedure resembles NAFTA’s dispute resolution process—establishing a formal consultation between the parties, presenting the matter before Council of Ministers, and then establishing an arbitral panel to resolve the matter. If the panel finds that the party has persistently failed to effectively enforce its environmental laws and regulations, an action plan to remedy the situation will be developed. If the panel finds that the party is not enforcing the action plan, the panel may impose a monetary enforcement assessment to be paid to the CEC, which will use the fund to improve the enforcement of environmental laws. Further, if after six months the complaining party finds that the accused party has not implemented the action plan, it may reconvene the panel to impose trade sanctions on accused party.
It should be noted that neither NAFTA nor NAAEC provides specific remedies for individuals against a party’s violation of its environmental obligations. Both are limited to providing remedies for violations related to trade issues only.
Like NAFTA and NAAEC, the TPP recognizes the sovereign right of each party to establish its own levels of domestic environmental protection and enact or modify domestic environmental laws and policies.
While the TPP commits all parties to effectively enforce their environmental laws and not to waive or derogate from environmental laws to attract trade or investment, it also addresses the original free trade agreements’ concerns by forbidding the use of restrictions on trade or investment disguised as environmental laws or measures and the enforcement of environmental laws through a sustained or recurring course of action or inaction in a manner affecting trade or investment.
The TPP incorporates specific environmental provisions and obligations, including: (i) implementation of the CITES Convention; (ii) combatting of illegal fishing, promotion of sustainable fishing and the long-term conservation of species, prohibition of harmful fisheries subsidies, and a limitation on new and existing fisheries subsidies; (iii) elimination of tariffs on environmental goods and conservation and sustainable treatment of biodiverse areas, recognizing the importance of maintaining indigenous knowledge and practices; (iv) promotion of energy efficiency, development of cost-effective, green technologies and alternative, clean, and renewable energy sources; (v) commitment to encouraging companies to voluntarily adopt corporate environmental and social responsibility policies and mechanisms; (vi) implementation of Multilateral Environmental Agreements already signed by the parties; (vii) implementation of new or existing consultative mechanisms regarding the implementation of the Environment Chapter; and (viii) commitment to ensuring access to administrative or judicial proceedings for enforcement of their environmental laws, and to providing remedies for violations of their environmental laws.
The TPP establishes an Environment Committee, composed of senior government representatives of the relevant trade and environmental authorities of each party, to oversee its implementation. It also provides that each party must develop mechanisms for the processing of written submissions from citizens of that party regarding the implementation of the Environment Chapter. If a submission asserts that a party is failing to effectively enforce its environmental laws, any other party may request that the Committee discuss the matter. The Chapter also includes a framework for establishing cooperation activities that support such implementation and public participation in these activities.
Additionally, the Chapter establishes different consultation mechanisms regarding its interpretation and application, including: (i) environmental consultations (between two parties); (ii) senior representative consultations (between the Committee representatives from two parties); and (iii) ministerial consultations (between relevant Ministers of the two parties).
The TPP establishes an enforcement mechanism of the environmental obligations through the same settlement procedures and mechanisms available for disputes arising under other chapters of the TPP Agreement, including the availability of trade sanctions. Thus, if the consulting parties have failed to resolve the issue through the different consultation mechanisms, parties may request the establishment of a panel. If a party that has been found not to have abided by its obligations fails to fix the violation, it may be subject to suspension of benefits or payment of monetary compensations.