Mexico: Trade and the Environment

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History and Background

What is NAFTA?

The North American Free Trade Agreement (NAFTA) was put into practice on January 1, 1994 and eliminated most barriers to trade between the U.S., Canada and Mexico. Some barriers were removed right away while others were eliminated over longer periods of time, ranging from five to fifteen years. The agreement addresses energy, textiles and apparel, agricultural products, transportation, investment, and intellectual property, among other things. Two related agreements were created after NAFTA to address environmental and labor issues.

Negotiations before the Treaty

The agreement itself was signed on December 17, 1992, by Mexican President Salinas de Gortari, U.S. President George Bush and Canadian Prime Minister Brian Mulroney. Incoming President Bill Clinton asserted the need for side agreements to go along with NAFTA, and a number of talks and meetings were held in Washington, Mexico City and Ottawa to negotiate the terms of the two side agreements. The side agreements were signed by all three countries on September 14, 1993 and NAFTA was passed by the United States Senate and Congress on November 20, 1993.

The North American Agreement on Environmental Cooperation (NAAEC)

The North American Agreement on Environmental Cooperation (NAAEC) calls for environmental impact analyses by each nation that is a member of NAFTA. The agreement encourages the respective states to consider the interconnectedness of their environments, to promote sustainable development, enforce and comply with environmental regulations, and use pollution prevention practices.

The North American Agreement on Labor Cooperation (NAALC)

The North American Agreement on Labor Cooperation was established to foster the creation of new jobs, improvements in wages and living conditions, and the protection of the rights of workers. More secure markets were intended to result in a rise in productivity of firms and the quality of goods. The agreement calls for each country to develop their own laws and regulations concerning labor standards, while also establishing cooperative standards. A secretariat performs publicly accessible studies of labor conditions in each country in order to promote transparency.

Controversial Legislation

Chapter 11

Chapter 11 of NAFTA concerns issues of investment, and the conflict between economic life standards of parties to the agreement and trade or business standards. Disagreement over chapter 11 concerns whether or not NAFTA should follow a system of neutral laws, or one that helps developing countries. Under the chapter, the governments of the U.S., Canada, and Mexico can be liable for the losses of companies or individuals. Chapter 11 allows international panels to examine the domestic policies of those governments, which is also a disputed issue.

Chapter 19

Chapter 19 of NAFTA concerns antidumping and countervailing measures, “Review and Dispute Settlement in Antidumping and Countervailing Matters.” Parties to the agreement can use their own antidumping and countervailing laws with goods produced in that country. There is controversy over judicial review of the law. Issues pertaining to Chapter 19 can be reviewed by a panel made up of representatives from the two concerned parties, instead of being reviewed by an Article III court from the Court of International Trade in the U.S., and similar courts in Canada and Mexico. Decisions made by the panels are final.

Chapter 20

Chapter 20 concerns the settlement of disputes about NAFTA policies and their implementation. First, there is discussion between the two concerned parties, then a meeting between the trade ministers of the two parties, then a meeting of a five member panel. There are also scientific and review boards to gather and analyze relevant information.

Economic Impacts

North American Free Trade Agreement FAS Fact Sheet

Article from Lee Hudson Teslik

Environmental Impacts

The introduction of NAFTA carries a continuous impact the environment in Mexico; it is difficult to say definitively whether this is for better or for worse as there is a balance between the inadvertent effects and the institutions introduced as a part of the agreement.

Positive Impact

NAFTA introduced legislation meant to integrate environmental policies and enforcement in North America. This is particularly significant for Mexico, which has very progressive environmental laws on the books but lacks the means to enforce them effectively.

NAFTA also created cooperative improvement projects across the Mexican-American border. These projects were created with the goal of equalizing the distribution of resources across the border as well as assisting the Maquiladoras with environmental concerns. These projects also focus on trans-national provision of technical assistance that will help with sewage treatment and sanitation of drinking water among other things.

NAFTA has also had positive effects on environmental spending in Mexico. Since 1994 the Mexican government spends more on environmental policy and enforcement, which can arguably be attributed to the increase in trade that the agreement encouraged.

Since 1994 Mexico has seen environmental improvements in the industrial sector. Waste produced by American owned Maquiladoras, for instance, is now shipped to the US for treatment in greater quantities. Also, the Mexican government is far more likely to respond to environmental emergencies now than it was prior to NAFTA. There have also been improvements in emissions standards, however as the vast majority of air pollution in Mexico stems from automobiles, this effect is marginal in the grand scheme of things.

Negative Impact

One of the major weaknesses of NAFTA’s environmental policies is that the organizations in charge of enforcing them are institutionally weak. The lack the means to actually ensure adherence to the policies they are tasked with upholding. This creates obvious problems, as there is legislation on the books without an appropriate means of enforcement.

There is also debate as to whether or not the legislation provides enough protection to counter balance the increased stress of higher levels of trade. As production and transport increases, more waste will be produced. It is not entirely clear whether the new legislation is enough to deal with the increase in pollution.

Abuse of the nature of the free trade agreement is also an issue. Because firms have the right to challenge environmental policies if they can be construed as barriers to trade as defined by the legalese of NAFTA, it has in some ways become easier to dodge environmental legislation.

There are also certain specific examples of negative effects associated with NAFTA. For instance, since the agreement entered into effect, the amount of American corn sold in Mexico has increased. While this is not a problem in and of itself, the prevalence of gene-modified corn entering Mexico has caused problems for Mexican corn farmers. The modified corn tends to intersperse with regular corn making it very hard to separate the two. When modified corn breeds with natural corn it may have unforeseen effects, but more importantly it tends to drive out native species of corn, creating problems with bio-diversity as the modified corn breeds and pushed out the native species.