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Dissecting and Unpacking the USMCA Environmental Provisions: Game-Changer for Green Governance?
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Dissecting and Unpacking the USMCA Environmental Provisions: Game-Changer for Green Governance?

Protecting the environment is not an extravagance but rather essential. The COVID-19 crisis with its economic and social impacts has reminded us of events that countries were not adequately prepared to address. Rising environmental issues leave countries vulnerable to diseases and disasters. Countries should always take steps to address environmental issues. International trade agreements like the United States-Mexico-Canada Agreement (USMCA) environmental provisions- play an important role in this arena.

The implementation of USMCA is fast approaching as it will enter into force on July 1, 2020. In December of last year, the US House of Representatives approved the USMCA by an overwhelming margin of 385-41. On January 16, the Senate passed the agreement 89-10. The US notified other USMCA parties that it has completed its domestic procedures to implement the agreement- the final step necessary for the USMCA to enter into force.

The USMCA is a revision and replacement for the twenty-five-year-old North American Free Trade Agreement (NAFTA), a regional trade agreement that has generated billions of dollars’ worth of goods and services traded among the three nations. The new trilateral agreement assures that duty-free and quota-free trade within North America will continue for at least sixteen years.

The USMCA mostly follows NAFTA with the addition of new laws on intellectual property protection, the Internet, investment, state-owned enterprises, and currency. Noteworthy changes in key areas include incentives to make vehicles in North America and to open Canadian markets for American dairy farmers. In addition, provisions were added to identify and prevent labor violations, particularly in Mexico. These new provisions require more protections for workers and block the import of goods made with forced labor. The revised free trade agreement sets up an independent panel that can investigate factories accused of violating labor rights and stop shipments of that factory’s goods at the border. The USMCA also recognizes a broad range of environmental topics for trilateral cooperation and introduced a separate chapter on environmental protection.

Environmental Protection

When NAFTA came into effect in 1994, it was the first free trade agreement to link the environment with trade. After a series of negotiations, a parallel agreement on environmental cooperation, known as the North American Agreement on Environmental Cooperation (NAAEC) was signed by all parties to address the concerns of the environmental community. The USMCA makes significant changes and additions to further strengthen and modernize environmental provisions by integrating an environmental chapter, which includes core obligations for parties to maintain high levels of environmental protection and robust environmental governance, including commitments to enforce environmental laws and to promote transparency, accountability, and public participation. The Environmental Cooperation Agreement (ECA), a parallel agreement signed by the US, Canada, and Mexico, requires the retention of the Commission for Environmental Cooperation and its Montreal based Secretariat established under NAAEC. This paper will highlight some of the key provisions in USMCA dealing with environmental protection.

Environmental Obligations Chapter 24

Chapter 24 in the USMCA contains the environmental protection provisions. Article 24.3 of the USMCA recognizes that each Party has “the sovereign right” to establish its “own levels of domestic environmental protection” and “the right to modify this as it sees fit”. The USMCA also calls on the parties to “strive to ensure” that its laws provide for “high levels of environmental protection.” This language is somewhat general and soft.

The environmental provisions of the USMCA are strengthened in several respects with the inclusion of a list of seven multilateral environmental agreements (MEAs) through Article 24.8, such as the Montreal Protocol, the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), and the UN Law of the Sea. In the event of a conflict between the USMCA provisions and an MEA, the latter will prevail. The parties are also required to implement their obligations under these seven MEAs, and a provision enables adding additional MEAs in the future. However, the USMCA fails to include a reference to the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement.

According to Article 24.20, the USMCA includes extensive disciplines on fishery subsidies. The USMCA includes vessel operators in the scope of the prohibition on fisheries subsidies and commits all parties to work towards addressing those subsidies in the World Trade Organization (WTO), which is particularly significant given that WTO Members have been working for eighteen years on an agreement on fishing subsidies and illegal fishing. The USMCA also includes commitments to adopt restrictions on whaling, consistent with existing international conventions, and in a manner recognizing the special importance of whaling in indigenous communities.

In Article 24.17.2, the USMCA addresses the distinction between standards regulating a final product and standards regulating the process of production of that product. The standards regulating the process of production of a product are known as process and production methods (PPMs). PPMs specify criteria for how a product is manufactured, harvested, or taken. Terms such as “made with”, “produced by”, and “harvested by” signify a PPMs standard. All PPM standards apply to the production stage, or before a product is placed on the market for sale. These standards specify the criteria for how a product is produced or processed. However, the PPM standard may address the environmental effects of a product during its entire life-cycle; from production to transportation, consumption, use, or disposal.

The USMCA provides for new obligations regarding combating marine litter. In Article 24.12, the agreement requires parties to take action to prevent and reduce marine litter. Examples include addressing land and sea-based pollution, promoting waste management infrastructure, and advancing efforts related to abandoned, lost, and discarded fishing gear.

Article 24.7 of the USMCA introduces a requirement to conduct environmental impact assessments for central government projects that may have an effect on the environment. Parties are required to undertake environmental impact assessments of proposed projects that may cause significant effects. Although this language appears to be a new addition to trade agreements, existing laws in many countries already require environmental impact assessments for new projects.

In light of Article 24.32, parties to the agreement are to bring environmental disputes to the same dispute settlement system applicable to all USMCA commitments. In the event that the parties cannot resolve the dispute after a panel ruling, complaining parties can impose proportional trade measures against the violating party in the same manner authorized for other violations. Despite subjecting environmental disputes to the same dispute settlement mechanism of other USMCA violations, such disputes, according to Article 24.4, can be brought only if the lowering of government standards creates a trade or investment advantage. The violation is done in a manner that affects trade. This requirement determines what violation is actionable or non-actionable. Only sustained action or inaction that “affects” trade is actionable. Therefore, environmental obligations are linked to trade in a manner that would otherwise be considered an intrusion into the domestic arena of the parties. Moreover, to measure whether parties of the USMCA have failed to “effectively enforce” their environmental laws, the agreement provides a test. This test requires a “sustained or recurring” course of action or inaction in a manner affecting trade between the parties. The USMCA does not define the terms “sustained or recurring.”

Conclusion

NAFTA was the first free trade agreement of its type to specifically address the concerns of the environmental community. However, there has been significant concern about the extent to which these environmental provisions have lived up to their potential. All three parties to the new North America Trade Agreement acknowledge the importance of the conservation, protection, and enhancement of the environment in their territories. Chapter 24 in USMCA is envisioned as the most advanced and comprehensive chapter on the environment of any trade agreement. The USMCA provisions support sustainability.

Environmentalists raised their concerns about the protection of the environment. The USMCA does not meet the baseline criteria to protect the health and environment. Unfortunately, the USMCA fails to address climate change, the biggest challenge of our time. The USMCA addresses pollution and conservation issues but there is no carbon emissions clause to address the climate crises. Only carbon storage is mentioned in the sustainable forest management section and clean technology in a non-binding section on environmental good. Indeed, the inclusion of seven multilateral environmental agreements in the USMCA will bring a positive change, but treaties dealing with binding climate standards and commitments, such as the Paris Agreement, are ignored. This is in contrast with other specific provisions, such as Article 13.6 of the recent EU-Mercosur Trade Pact promoting “domestic and international carbon markets” and “energy efficient, low-emission technology, and renewable energy”. The provisions related to carbon emissions, climate change commitments, and renewable energy collaborations are crucial as USMCA is expected to serve as the new template for future trade agreements as did NAFTA in the past. We can do better for the environment and sustainability.

 

Bashar H. Malkawi is the Director of Knowledge Management at the Government of Dubai, Legal Affairs Department. Professor Malkawi holds an LLM in International Trade Law from the University of Arizona and SJD from American University, Washington College of Law.

Shakeel Kazmi is a Professor of Practice in Legal Studies at New York University Abu Dhabi. Professor Kazmi holds an LLM from American University, Washington College of Law and SJD and LLM in Environmental Law from Pace University.

 

Suggested citation: Bashar H. Malkawi and Shakeel Kazmi, Dissecting and Unpacking the USMCA Environmental Provisions: Game-Changer for Green Governance?, JURIST – Academic Commentary, June 6, 2020, https://www.jurist.org/commentary/2020/06/malkawi-kazmi-USMCA-environment/


This article was prepared for publication by Gabrielle Wast. Please direct any questions or comments to her at commentary@jurist.org


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