Public Citizen Analysis of NAFTA
From harelb@math.cornell.edu Mon Oct 18 09:18:05 1993
Date: Sat, 16 Oct 1993 00:22:40 -0400
From: Harel Barzilai 
To: newman@garnet.berkeley.edu
Subject: NAFA submission: Public Citizen's Analysis

 
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Topic 69	Public Citizen's NAFTA anal 
pcctw	Library of trade-related documents.	10:57 am  Oct 26, 1992 
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		THE NAFTA DOES NOT MEASURE UP 
		     ON THE ENVIRONMENT AND 
		   CONSUMER HEALTH AND SAFETY 
 
	  WHY PUBLIC CITIZEN CANNOT SUPPORT THIS NAFTA 
TEXT 
 
 
		     TABLE OF CONTENTS: 
 
     INTRODUCTION                                          1 
 
     I.NAFTA EXPOSES U.S. FEDERAL AND STATE CONSUMER AND 
     ENVIRONMENTAL STANDARDS TO CHALLENGE AS TRADE 
     BARRIERS                                              2 
 
			 SANITARY AND PHYTOSANITARY STANDARDS  2 
 
			 TECHNICAL STANDARDS               5 
 
			 NON-VIOLATION IMPAIRMENTS         8 
 
     II.NAFTA PROMOTES ENVIRONMENTALLY DETRIMENTAL 
     INVESTMENT                                            9 
 
     III.THE LONG LIST OF WHAT IS MISSING IN THE NAFTA ON 
     THE ENVIRONMENT                                       9 
 
     IV.DISPUTE RESOLUTION: TIGHT SECRECY MAINTAINED, 
     NON-VIOLATION IMPAIRMENT CASES ALLOWED               11 
 
     CONCLUSION                                           13 
 
INTRODUCTION 
 
     Unfortunately, both in what it contains and what it omits, 
the September 6, 1992 text of the North American Free Trade 
Agreement is not good news for environmental or consumer health 
and safety protection. 
 
     While Public Citizen has worked with Bush Administration 
officials for over a year to ensure that to ensure that NAFTA 
contains certain environmental and consumer safeguards, this text 
does not measure up.  Further, the September 6 text does not 
measure up to the consensus position on minimal environmental 
safeguards signed by 40 U.S., Mexican and Canadian environmental 
and consumer groups presented to the Administration in May 1992, 
nor to consensus documents, presented throughout the negotiation 
process, signed by American groups. 
 
     The terms of the NAFTA text expose numerous existing U.S. 
federal, state and local environmental and consumer laws to 
challenge as nontariff trade barriers under chapters on Sanitary 
and Phytosanitary Standards and Technical Standards. The standards 
provisions also create downward pressure on industrial and 
agricultural worker safety standards in the United States. 
Further, NAFTA would promote environmentally unsound commercial 
activity in the areas of agriculture, energy and in the incentives 
it creates for manufacturers to relocate to Mexico to avoid strict 
enforcement of environmental regulations. All of these problems 
are intensified by the absence in the NAFTA of enforcement or 
funding provisions for environmental protection. Moreover, the 
NAFTA text establishes highly secretive negotiation and dispute 
resolution processes that deny citizen oversight of NAFTA on vital 
citizen concerns such as food safety, consumer product standards 
and environmental regulations on hazardous substances. 
 
     The Bush Administration did take limited steps in the NAFTA 
to address environmental and consumer health and safety criticisms 
made about the final text of the Uruguay Round of GATT. The 
existence of any progress on environmental and consumer issues in 
the NAFTA has led at least one environmental group to support the 
NAFTA as a good first step. However, for many of the groups most 
involved in the NAFTA debate, the net negative effect of the 
September 6 NAFTA text on the environment makes the text 
unsupportable.  Several baby steps forward cannot overcome the 
sprint backwards in environmental and consumer protection the text 
as a whole could cause. 
 
     As the following analysis of several of the key environmental 
and consumer issues demonstrates, much of the Administration's 
attention in the NAFTA to environmental issues is merely cosmetic. 
The provisions that are substantive, though relevant, are not 
nearly sufficient to outweigh the many undermining provisions of 
the text. The extent and nature of the deficiencies will require 
that sections of the NAFTA are renegotiated. These core problems 
cannot be addressed in enabling legislation alone. The concepts 
underlying the economic integration of the United States, Canada 
and Mexico must be considered before any renegotiation of an 
agreement is even undertaken. 
 
I.NAFTA EXPOSES U.S. FEDERAL AND STATE CONSUMER AND 
  ENVIRONMENTAL STANDARDS TO CHALLENGE AS TRADE 
  BARRIERS 
 
  The NAFTA contains two section on standards. Sanitary and 
  Phytosanitary 
(SPS) rules pertain to food and foodstuffs. Technical Standards 
(TBT) cover all remaining manufacturing and agricultural 
standards. The Sanitary and Phytosanitary Standards text and the 
Technical Standards section can be thought of as rules for taking 
exceptions to the NAFTA's primary goal of removing obstacles to 
trade. In these two sections, the NAFTA lays out requirements that 
restrict measures taken by NAFTA countries which might have the 
effect of limiting trade.  These measures must meet this 
restriction or be considered illegal trade barriers. 
 
  The standards provisions of the NAFTA are slightly improved over 
those rejected in the GATT Uruguay Round text by nearly every U.S. 
environmental and consumer group. However, the SPS text in 
particular exposes numerous U.S. national and state laws to 
challenge.  It could stop progress in environmental protection in 
the area of pesticides and consumer health and safety in food 
labelling, inspection and other contaminant standards such as 
additives and preservatives. The TBT text's detrimental impact is 
on the process by which U.S. standards are now set. For instance, 
by requiring NAFTA countries to accept the conformity assessment 
procedures and bodies of other countries, the TBT text would 
undermine the role citizens and consumer and environmental 
advocates now have on standard-setting.  As written, neither the 
SPS nor TBT text are acceptable from a consumer or environmental 
protection viewpoint. 
 
SANITARY AND PHYTOSANITARY STANDARDS 
 
  A goal of the NAFTA SPS text is "harmonization of standards." 
  Under the NAFTA SPS text, federal, state and local standards 
that are more protective than named international standards must 
meet a series of requirements, or they can be declared illegal 
barriers to trade if challenged by another NAFTA country. Thus, 
although the Bush Administration has stated that the U.S. 
maintains the right to exclude products that do not meet our 
current standards, the U.S. could face a trade challenge for doing 
so. If the U.S. law was ruled not to comply with the terms of 
NAFTA, the United States would be required to eliminate the law, 
stop enforcing it against imports or pay "damages" to a successful 
challenger. The pressure to lower standards would be great under 
this paradigm. 
 
	       Unfortunately, the named international standards 
	       for food in NAFTA are those 
of the Codex Alimentarius, a Rome-based UN subgroup whose 
standard-setting process has involved numerous food, chemical and 
agribusiness companies, but until recently no representatives of 
consumer or health interests. Not surprisingly, many Codex 
standards are lower than current U.S. law. For instance, Codex 
allows chemicals long-banned in the U.S. such as DDT on grains, 
meat and dairy products.  Fruits and vegetables are allowed to 
contain residues of many banned or severely restricted pesticides 
such as heptachlor. 
 
  Only domestic standards that are the same as Codex are presumed 
to comply with the NAFTA. If a U.S. food safety standard is higher 
than Codex, it would only survive challenge if: 
 
(*)The chosen level of protection it is meant to achieve is based on
  risk assessment and science. Some of the strongest U.S. food safety
  laws, such as the Delaney Clause which prohibits carcinogenic
  additives in food and carcinogenic pesticide residues on processed
  foods, are not based on risk assessment. Rather, the Delaney Clause
  is based on a Congressional decision not to expose Americans to
  carcinogens in the food supply. It is a health only, zero risk
  standard.
 
(*)It is judged by a NAFTA dispute resolution panel to be 
 "necessary" to achieving a NAFTA-allowed goal, which does not include
  environmental protection in pesticide standard-setting.  The term is
  otherwise undefined in the SPS text.  It is understood in GATT
  jurisprudence to have a limiting effect.  This requirement raises
  the question of why a NAFTA panel of trade officials should
  second-judge a democratic decision on what is necessary in consumer
  or environmental protection.
 
(*)It is not "arbitrary and unjustifiable" which is understood to mean
  that it must be the least trade-restrictive measure possible to
  achieve a level of protection regardless of political or other
  considerations that might call for another measure.
 
(*)It is not inconsistent with the level of risk allowed in different
  regulatory circumstances. NAFTA as written would require a country
  to choose one acceptable level of risk. Thus, not only could the
  differentiation between pesticide standards for raw and processed
  foods under the Delaney Clause be exposed to attack, but different
  levels of risk allowed for entirely unrelated areas of regulation --
  salmonella in chicken versus carcinogenic food additives --could be
  the basis for a challenge.
 
  Further, the NAFTA only allows counties to set standards that 
  could have the 
effect of limiting trade if such laws do not extend beyond their 
geographic borders.  This is a very important point because many 
existing environmental laws particularly are aimed at protecting 
the environment beyond U.S. borders. For instance, the Endangered 
Species Act, laws banning whale and ivory products and the 
provisions of the Clean Air Act prohibiting import of products 
manufactured with ozone- depleting substances aim at protecting 
the environment or species in the global commons or in another 
country. One of the bases for a 1991 GATT ruling that declared the 
Marine Mammal Protection Act of 1972, which prohibits import of 
tuna caught killing large numbers of dolphins, to be an illegal 
trade barrier was that the law was "extra-territorial," i.e. it 
aimed to protect dolphins that were outside of U.S.  territory. 
 
  Also, under the NAFTA SPS text, the U.S. cannot limit imports of 
a product based on its production method. Thus, product 
prohibitions based on child or other labor practices or certain 
environmentally-damaging production methods such as drift netting 
could be labelled trade barriers. Once so labelled, such measures 
would have to be eliminated, or the U.S. would have to pay the 
country which had made the successful challenge to maintain them. 
 
  The NAFTA text has more detrimental impact than the Uruguay 
Round text on U.S. standard-setting procedures. For instance, the 
rules for determination of equivalence of standards between 
countries requires countries to accept other countries scientific 
data as a basis for judging equivalence. Further, the NAFTA 
weakens the U.S. requirement for safety pre-approval of additives 
and other substances, by requiring consideration of using 
international standards as interim measures. In another section on 
notification and standards-setting, the NAFTA creates a right for 
consideration of comments by the Mexican and Canadian governments 
as to their interest in the setting of U.S., federal and state 
food and agricultural standards. 
 
  The NAFTA SPS text applies to state and local governments, and 
requires the federal government to take all necessary steps to 
ensure state and local compliance.  In a February 1992 GATT panel 
ruling on U.S. state alcohol regulations and taxes, the Bush 
Administration admitted in a panel submission that as a matter of 
international law, terms of executive agreements such as GATT (and 
NAFTA) trump state and local law. The GATT panel ruled that the 
U.S. had failed to meet its obligation to take all "reasonable 
steps" to ensure compliance of its subnational entities because it 
had not taken all steps available within its 
constitutionally-granted powers. Thus, under GATT the federal 
government would be required to take preemptive legislative 
action, sue a state for compliance or cut off any support of 
non-complaint activities.  The NAFTA text on state compliance is 
even less forgiving than the GATT text that generated that strong 
ruling.  In NAFTA there is no limitation that the country take 
only "reasonable" measures. This provision is very worrisome.  It 
could put the federal government into the position of preempting a 
state law because of NAFTA requirements that it would have no 
grounds to preempt under existing federal law.  The impact of this 
provision could be especially detrimental to the overall strength 
and progress of environmental and consumer protection, because 
states have traditionally played a role as an engine to pull 
forward federal standards. 
 
TECHNICAL STANDARDS 
 
  The coverage of the Technical Standards rules is quite broad, 
applying to any standards-related measures of a Party not covered 
in the SPS text that directly or indirectly affect trade in goods 
or services.  Unfortunately, the NAFTA TBT text does not provide 
any exception for standards based on production or process methods 
that limit trade, except those directly related to a product's 
physical characteristics. Thus, except for specific exceptions for 
labelling and packaging standards, under NAFTA rules countries 
cannot regulate based solely on the process of production or 
harvesting of a product, which as described in the SPS section is 
a serious problem. 
 
  The NAFTA TBT text contains both some improvements on the 
existing GATT and proposed Uruguay Round TBT texts, and also in 
the area of standard-setting procedures, some additional problems. 
However, Article 903 of the TBT text gives the existing GATT TBT 
text precedent over the NAFTA TBT text in the case of conflict. 
Thus, areas of greater trade liberalization, such as the NAFTA 
standard-setting procedures, could be permissible. Areas of 
greater restriction, such as the NAFTA recognition of environment 
or consumer safety as a basis for a technical regulation, could be 
in conflict with the GATT TBT text. This clause largely undermines 
the real progress made in other sections of this text, as it 
provides for the worst of both worlds. 
 
  The NAFTA TBT text would allow maintenance of a wider range of 
standards related measures than the NAFTA SPS text.  TBT does not 
require science or risk assessment in the setting of levels of 
protection.  TBT considers a wider range of objectives for 
regulation to be legitimate (including consumer issues relating to 
quality and sustainable development.)  TBT also allows for 
different levels of protection across different regulatory 
circumstances. Further, unlike the SPS text, the TBT text defines 
what is an unnecessary obstacle to trade, and does so in a fashion 
that would be less likely to ensnare legitimate regulatory 
measures. Like the SPS text, the TBT text confirms that in the 
case of a dispute resolution challenge under this text, the burden 
to show a violation of the NAFTA would fall on the challenging 
Party. Finally, the TBT text generally places slightly less 
responsibility on the federal government than the rest of the 
NAFTA to see that state and local governments comply. 
	       Despite TBT's many superiorities to the NAFTA SPS 
	       text, the TBT text still 
requires that countries use international standards or 
international standards whose completion is imminent except where 
such standards would be ineffective or inappropriate.  The TBT 
text presumes only such standards not to be inconsistent with the 
TBT text.  However, it limits this requirement by allowing an 
international standard's failure to meet a country's chosen level 
of protection to be a legitimate excuse, which the GATT does not. 
For international standards, the TBT text lists Codex, as well as 
several standard-setting bodies not listed in the SPS text such as 
the World Health Organization and the Food and Agriculture 
Administration of the United Nations. 
 
  The clauses on the use of international standards highlight the 
main goal of the TBT text, which is harmonization of standards. As 
compared to the harmonization clauses of the NAFTA SPS text and 
both the SPS and the TBT texts of the GATT, the NAFTA TBT text 
seems least likely to promote downward harmonization of actual 
standards. Rather, the harmonization clauses of the TBT text focus 
strongly on processes to facilitate harmonization.  Thus, Parties 
are required: 
 
(*)"to the greatest extent practicable, [to] make compatible their
  respective standards-related measures so as to facilitate trade in a
  good or service..."
 
(*)to "accredit, approve, license and otherwise recognize 
  conformity of assessment bodies in the territory of another Party on
  terms no less favorable than those accorded to such bodies in its
  territories" with a four year phase-in period before this clause
  pertains to Mexico;
 
(*)"recognizing the existence of substantial differences in the
  structure, organization and operation of conformity assessment
  procedures in their respective territories, make compatible to the
  greatest extent practicable such procedures."
 
(*)"upon the request of another Party, to promote compatibility of a
  specific standard or conformity assessment procedure..."
 
(*)to "accept the results of a conformity assessment procedure
  conducted in the territory of another Party, provided that it is
  satisfied that such procedure offers an assurance..." and
 
(*)to treat the standard of another country as equivalent to domestic
  standards if the exporting Party can show its technical regulation
  adequately fulfills the importing Party's NAFTA-legitimate
  objectives.
 
  The impact of these procedural harmonization clauses of the 
  NAFTA TBT text 
on current U.S. standards-setting procedures is very worrisome. 
For instance, the notion of accepting another country's conformity 
assessment that a U.S. standard and that of another NAFTA country 
are equivalent, rather than following some publicly- accessible 
U.S. notice and comment procedure under the Administrative 
Procedure Act, means consumer and environmental advocates are cut 
out of the standard- setting process. Similarly, accrediting the 
assessment bodies of other countries as equivalent to parallel 
domestic agencies eliminates the role of citizen and Congressional 
oversight of the functioning of such bodies. 
 
  Throughout the TBT text, disturbing procedural issues are 
raised. For instance, the TBT text establishes the same rights of 
notice and comment for other NAFTA Parties as the SPS text. Thus, 
the issue of the appropriateness of requiring special 
consideration of Mexican and Canadian government comments on U.S. 
rule-making is raised here as well. Further, the text establishes 
another new organization, the Committee on Standards-Related 
Measures, comprised of representatives from each government. The 
Committee's main duty is to facilitate harmonization. 
 
  To accomplish harmonization goals, the Committee is required to 
set up four subcommittees. The timelines and mandates of two of 
those groups undermine environmental and consumer protection. 
 
  The Subcommittee on Land Transportation Standards is mandated to 
implement the following work plan for making standards compatible 
for motor carriers, although Mexican trucks have been granted 
immediately effective additional rights for access to the U.S. in 
anticipation of the NAFTA: 
 
(*)one and one half years for non-medical driver standards such as 
  language use and age; 
 
(*)two and one half years for medical-related standards for 
  drivers; 
 
(*)three years for standards on emissions and environmental pollution,
  inspection, maintenance and repair, brakes, securement of cargo,
  weights and dimensions; and
 
(*)three years for standards on motor carriers' safety compliance. 
 
  Thus, despite immediate access for Mexican trucks to U.S. roads, 
consistent environmental and safety rules will only apply after 
years. For railroads, there is six year phase-in for compatibility 
of rules on transportation of dangerous goods. 
 
  Another subcommittee on Automotive Standards is mandated to make 
compatible standards concerning automotive goods based on impact 
on industry integration, extent of barrier to trade, level of 
trade affected and the extent of such disparity. The subcommittee 
is allowed, but not required, to consider other closely related 
measures such as emissions. Auto safety is not included. Finally, 
for Automotive standards, a special stronger rule for state 
compliance is established. The special rule replicates the GATT 
language interpreted in the alcoholic beverages case described 
above in which the federal government was required to take all 
measures within its constitutional powers to force state 
compliance. This clause seems aimed at states such as California, 
which have led the country in auto standards. Because California 
is such a large car market and production must be geared to meet 
California's requirements, California's requirements have had the 
effect of raising the standards of cars sold in other states. 
 
  Additionally, the text suggests the Committee set up working 
groups on a variety of issues important to consumer and 
environmental protection. Again, this section raises worrisome 
procedural issues. While the TBT text allows that such working 
groups should attempt to include state level representatives, it 
does not provide a role for consumer or environmental advocates. 
Thus, decision-making on issues currently accessible to citizens 
and their representatives through the Administrative Procedure Act 
and the legislative process would be moved to working groups of 
government officials whose primary mandate is harmonization for 
trade expansion. 
 
NON-VIOLATION IMPAIRMENTS 
 
  While the specific rules of the NAFTA SPS and TBT text expose 
legitimate U.S.  consumer and environmental laws to being ruled 
trade barriers, the U.S. could be forced to pay "damages" even if 
a U.S. standard meets the NAFTA tests. In a section called 
"Nullification and Impairments", the NAFTA allows countries to 
bring cases in both the SPS and TBT areas for national measures 
that do not violate the NAFTA rules, but that cause another NAFTA 
country to miss an economic opportunity it could "reasonably" have 
expected to accrue to it. This provision for "non-violation 
impairments" is extremely troublesome, as it would put into place 
the same pressures to lower and cap standards even for standards 
that pass the NAFTA tests. 
 
II. NAFTA PROMOTES ENVIRONMENTALLY DETRIMENTAL INVESTMENT 
 
	       The Bush Administration initially argued that the 
	       NAFTA contained provisions 
that would limit the lowering of environmental standards to 
attract investments.  However, during intense questioning in a 
Ways and Means hearing, EPA Commissioner Reilly admitted that in 
fact, the only investment clause pertaining to the environment was 
not enforceable. That provision states that countries "should not" 
lower their standards to attract investment. Unlike the other 
mandatory provisions of the investment text, failure to follow the 
so-called "green" provision of the investment rules can not 
trigger action through the NAFTA dispute resolution mechanism.  In 
effect, this provision meekly encourages countries not to lower 
their standards in order to attract investment.  Where standards 
seem to be lowered to attract investment, the agreement calls for 
consultations.  This provision fails on two major counts: 
 
(*)It misses the main current problem which is lax enforcement of
  existing laws, rather than the lowering of standards to attract
  investment.
 
(*)It does not address the problem that regulatory disparities may
  widen if one country tightens its regulations, while the other
  partner countries leave their standards at current levels.
 
  Meanwhile, large portions of several U.S. industries with high 
  environmental 
costs such as furniture manufacturing and smelting have moved to 
Mexico where enforcement of environmental standards is minimal. An 
August 1992 GAO Report studying a random sample of twelve U.S. 
companies operating plants in Mexico found that not a single plant 
was following Mexican environmental rules. Under NAFTA, the 
products of such American companies, as well as those of Mexican 
and Canadian companies, would have equal access to the U.S. 
market. This would put U.S. companies who are following 
environmental rules at a competitive disadvantage to those who 
have relocated to Mexico to avoid environmental compliance. This 
perverse incentive will both push downwards U.S. standards and 
promote relocation of industry to the location of least 
environmental protection. 
 
III. THE LONG LIST OF WHAT IS MISSING IN THE NAFTA ON THE 
  ENVIRONMENT 
 
  Noticeably missing from the NAFTA are any mechanisms for strong, 
enforceable, funded environmental provisions to shape the nature 
of trade and investment under the NAFTA. 
 
  For instance, environmentalists have advocated for a "polluter 
pays" provision to generate a steady source of income for the 
environmental programs that will be needed to counter increased 
industrialization from the NAFTA, and also to create a set of 
incentives for environmentally-sound business practices. 
Supporters of the NAFTA estimate that merely cleaning up the 
environmental devastation along the U.S.-Mexico border caused by 
unregulated trade in the Maquiladora zone will cost minimally $5 
billion. Instead of providing for a "polluter pays" funding 
provision, the Administration's funding focus has been to bash 
Congress for cutting a $200 million request for water treatment 
plants along the border. Although the Administration has touted 
the construction of the much-needed plants as the programmatic 
aspect of their border clean up, the plants were needed and 
planned separately from the NAFTA. There is no program or funding 
for clean up of the toxics contaminating the ground and air in the 
border zone where the rate of toxics-related birth defects and 
illness on both sides of the border has soared to many times the 
national averages for such problems. There is no plan for 
preventing further environmental damage from the increased 
industrial activity that the NAFTA would promote. 
 
  Such clean up, and funding for environmentally sound practices 
in the future, must come from the businesses who will benefit from 
the NAFTA trade rules. It is unconscionable that the taxpayers of 
the NAFTA countries should subsidize such business activity by 
paying for corporate environmental expenses. 
 
  Even the four environmental promises, seen by many 
environmentalists to be woefully inadequate, made by President 
Bush to gain extension of the fast track procedure for 
Congressional consideration of trade agreements have not been 
meaningfully met: 
 
(*) Comprehensive Border Environment Plan: The Bush Administration
  released a plan which suggested no mechanism for enforcement or
  funding for border cleanup or environmental protection in the
  future.  The plan has been harshly criticized as insufficient in
  scope and enforcement by national environmental groups, who call it
  the "Where's the bun and where's the beef plan. No real program and
  no funding." The only actions under the plan are for several much
  needed water treatment plants along the border.  Other provisions
  merely call for more study and better cooperation.  What is needed
  is a well-
funded plan for real action. 
 
(*) Adequate Environmental Impact Assessment: The Administration
  prepared a very limited environmental analysis of NAFTA premised on
  a presumption that U.S. companies would not relocate to Mexico to
  avoid environmental regulation. The study thus concluded that the
  environmental impacts of the NAFTA would be negligible. The
  Administration has refused to undertake comprehensive environmental
  impact statements as required by the National Environmental Policy
  Act (NEPA).  Under the Act, Environmental Impact Statements are
  required for all major federal actions, including international
  agreements. For instance, the Panama Canal treaty was scrutinized
  specifically in an Environmental Impact Statement. Public Citizen on
  behalf of itself, the Sierra Club and Friends of the Earth are
  currently suing for enforcement of NEPA in the U.S. District Court,
  District of DC.
 
(*)Safeguard U.S. Environmental and Consumer Laws: As this memo points
  out, numerous U.S. environmental and consumer laws are exposed to
  challenge by the NAFTA text announced September 6.
 
(*)Parallel Negotiations on the Environment: To date, the
  Administration has claimed no accomplishments in rule-making,
  enforcement or funding except talk of cooperation between the U.S,
  Mexico and Canada through a North American Environmental Commission.
  What this Commission's jurisdiction, enforcement powers and scope
  will be is unclear. Even if the Administration had negotiated
  comprehensive parallel measures, history has shown that such
  agreements are meaningless unless they have strong
  economically-linked enforcement, for instance inclusion within the
  NAFTA.  For example, two long-standing pacts on border environmental
  issues between U.S. and Mexico, the La Paz Agreement and the
  Interboundary Water Commission, are not enforced and have had no
  impact.
 
 
IV.DISPUTE RESOLUTION: TIGHT SECRECY MAINTAINED, NON- 
VIOLATION IMPAIRMENT CASES ALLOWED 
 
  Under NAFTA dispute resolution: 
 
(*)one country can challenge existing and proposed environmental or
  consumer laws of another country as noncompliant with NAFTA rules,
  and
 
(*)under a clause on "non-violation impairments," can bring cases
  against measures that do not violate the NAFTA rules, but that cause
  another NAFTA country to miss an economic opportunity it "could
  reasonably have expected to accrue to it."
 
  This latter provision is outrageous, allowing another NAFTA 
  country to bring 
a U.S. federal or state environmental or consumer law into dispute 
resolution merely on the basis that it has impaired an economic 
expectation of the other country. This provision greatly 
undermines the meaningfulness of the specific rules of the NAFTA. 
It puts the United States in the position of having its trading 
partners interfering with environmental and social choices that 
could impact their trade, but meet the NAFTA requirements. 
 
  If a law is found either to violate the NAFTA's rules or to 
cause impairment of an economic benefit, NAFTA dispute resolution 
requires that the law be removed or not implemented. Failing such 
a resolution, one NAFTA country can pay the challenging country 
compensation for the economic loss caused by maintenance of a 
successfully-challenged law. The possibility of paying to maintain 
environmental and consumer laws is used by the Bush Administration 
as support for the position that the United States can maintain 
any law it chooses. However, considering current 
budgetary constraints and political pressures for deregulation of 
environmental and 
consumer standards, it seems that the pressure to eliminate or 
lower such a ransomed standard would be immense. 
 
  NAFTA dispute resolution maintains the tight secrecy that 
plagued the NAFTA negotiations. In fact, the NAFTA secrecy 
language is stronger than that of GATT, requiring strict 
confidentiality on all documents submitted in dispute resolution, 
actual dispute proceedings and panel reports until absolutely 
finalized.  Opening up trade policy to the sunshine of public 
participation was a major goal of environmental and consumer 
activists. This is particularly important because the NAFTA gives 
to the Executive branch the sole role of protector of challenged 
environmental and consumer laws. 
 
  While absolute secrecy is mandatory, the much-touted allowance 
of scientific review boards for environmental, health safety or 
other scientific matters is only allowed at the consent of the 
disputing parties. If the Parties agree to allow such input, the 
NAFTA text requires the panel to take it into account. However, 
the scientific boards when allowed, are limited to questions of 
fact. Thus, under NAFTA 
dispute resolution, five person panels of trade officials meeting 
in tight secrecy will be empowered to second guess the non-factual 
aspects of environmental and consumer laws such as the priorities 
set by national and state democratic political bodies. 
 
  The Bush Administration has made an important, though narrow, 
improvement in the NAFTA dispute resolution in comparison to that 
of GATT. 
 
  For two narrow categories of cases: 
 
(*)those arising under the Sanitary and Phytosanitary or Technical
  Standards texts concerning factual issues concerning environmental,
  health, safety or conservation, including directly related
  scientific matters,
 
(*) those concerning conflicts with three named environmental treaties
  (Convention on Trade in Endangered Species, the Montreal Protocol,
  and the Basel Convention)
 
a defending Party can insist that a case that could arise under 
GATT or NAFTA be taken to NAFTA. It seems this provisions would 
not apply to many environmental and consumer health and safety 
issues because they do not rise under the SPS or TBT chapters. 
Additionally, if a challenge of an environmental law does not 
raise factual issues, it seems the defending Party would not have 
the NAFTA option and could be forced into GATT dispute resolution 
where the defending Party bears the burden of proof in all cases. 
 
  Finally, the NAFTA creates a new North American organization, 
the Free Trade Commission. The Commission has broad powers to 
interpret and apply the NAFTA. The Commission is empowered to 
establish Model Rules of Procedure for NAFTA dispute resolution. 
The only procedural rules the Commission is required to include 
are for secrecy and the right to a hearing and the submission of 
written documents to dispute panels. Yet, it seems that other 
rules are contemplated though not set out in the text. For 
instance, reference is made to "scientific bodies set out in the 
Model Rules..." yet no such bodies are described. Why a complete 
reporting of planned procedural rules wouldn't be part of the 
NAFTA text is disconcerting. 
 
CONCLUSION 
 
  The above analysis is only a summary of problems found in 
several of the sections of the NAFTA important to environmental 
and consumer protection. On the 
basis of the information in this memo alone, the NAFTA text 
published September 6, 1992 is not acceptable from an 
environmental or consumer standpoint. 
 
  More detailed analysis of these issues is now available and 
analysis is underway of other sections including: energy, trade in 
natural resources, agriculture, impacts on international 
environmental agreements, consumer issues in banking, 
pharmaceuticals and health care.