NAFTA’s Chapter 11 and the Environment by Jan Weaver
The North American Free Trade Agreement, or NAFTA, is a trade agreement between Canada, the U.S. and Mexico designed to lower barriers to trade between the three countries. One of the major concerns about NAFTA was that it might launch a “race to the bottom” by companies seeking to lower costs of environmental compliance by moving operations to a country with lower standards. To prevent that, side agreements on the environment (and labor) were negotiated to offer specific protection against a race to the bottom.
However, environmentalists and governments appear to have been blindsided by NAFTA’s Chapter 11. Article 1110 of Chapter 11 specifically states that no party can nationalize or expropriate except a) for a public purpose; b) on a non-discriminatory basis; c) in accordance with that country’s legal standards; and d) on payment of compensation. Some of the more entrepreneurial members of the business community have made Chapter 11 claims against all three countries for regulations apparently put in place to protect the environment. They argue that these “regulatory takings” amount to expropriation and that they should be compensated.
What makes these claims of special concern is that they are settled, as are all NAFTA claims, by a 3 person tribunal (whose members are selected by the business making the claim and the country being sued) which meets and deliberates in secret. There is no provision for public scrutiny of the process, for friend of the court briefs, or for appeal. And, unless one or more of the parties agrees, the fact that a claim has been filed or how it was settled, does not have to be made public.
On the surface the cases settled so far appear to undermine environmental protections. Ethyl Corp. (a U.S. company) sued Canada for $250 million for passing a public health law against their product MMT. MMT is a gasoline additive that has manganese, a known human neurotoxin. After learning that the NAFTA tribunal might support Ethyl Corp., Canada repealed the law and settled out of court for $13 million. Metalclad (a U.S. company) sued Mexico because although it had obtained federal permits to build a hazardous waste facility, it was unable to get municipal permits to operate it. It received a $16.5 million judgement against Mexico.
However, both cases involve circumstances that make their relevance to other claims based on environmental regulations unclear. In Canada’s case, its domestic courts found the ban on MMT arbitrary so it could not claim there was a public purpose to banning the additive. In Mexico’s case, the federal government had repeatedly assured Metalclad that local permits would be no problem when in fact they could not guarantee those permits.
The pending cases are more troubling. The biggest involves Methanex (a Canadian company) that is suing the U.S. government for $970 million because California passed a law phasing out the gasoline additive MTBE. MTBE readily migrates from storage tanks to groundwater supplies, is a neurotoxin, causes cancer in animals and is a potential human carcinogen. But Methanex claims the California law discriminates against MTBE in favor of ethanol (produced by Archer Daniels Midland) and that the law is not the “least trade restrictive” solution to the problem (as required by the rules governing NAFTA). It is unlikely the tribunal has the expertise to consider the environmental arguments and it is not clear how they weigh such arguments against trade concerns.
Because of the huge risk such claims entail, there is considerable alarm that Chapter 11 will have a chilling effect on environmental regulations at the national, state and local level. However it is not just environmentalists that are concerned. Chapter 11 can be used to attack any government action. For example UPS (U.S.) is suing Canada claiming Canada’s national mail system has an unfair advantage over UPS in parcel delivery. And a funeral home conglomerate, Loewen Group (Canada) is suing the U.S. for $725 million because of a judgement against it for unfair business practices in a Mississippi court. These flagrant attacks on government operations and court proceedings via NAFTA could seriously undermine national sovereignty, and by extension, global trade. Big Government definitely has its problems, but it is the only thing between us and Big Business.
To find out more:
legal analysis of settled environmental cases: http://www.northamericaninstitute.org/naminews/nn27/kass.htm
PBS special on Chapter 11: http://www.pbs.org/now/indepth/020102_td.html
BioRegional Quiz: How many species of skunks are there in Missouri and why do they stink?
Job Opportunity: Nautralist, MDC, Powder Valley Conservation Nature Center in Kirkwood, MO: Conduct interpretive presentations on natural history and conservation topics; develop programs and tours for school -aged groups and a wide variety of audiences; participate in planning/coordination of special events for the gneral public; assist Interpretive Programs Supervisor with volunteer training; interpret natural resources through the media; assist with a monthly newsletter and write articles for the Missouri Conservationist magazine; plan or assist with interpretive displays, exhibits or signage, assist with trail layouts and improvements. Qualifications: BS/BA in Interpretation, Biological or Physical Science, Botany, Forestry, Wildlife or Fisheries Management or closely related subjects with 1 year interpretation experience or equivalent. To apply, contact: Missouri Department of Conservation, Human Resources Division, PO Box 180, Jefferson City MO 65102-0180. Phone: 573-751-4115. Applications are also available at ww.conservation.state.mo.us/about/jobs/.
Special Events/Classes/Programs/Talks:
MU ORGANIZATIONAL MEETINGS AND CONTACT INFORMATION:
Answer to BioRegional Quiz: There are two species of skunks in Missouri, the familiar striped skunk, which inhabits forest borders and brushy fields or fence rows, and the lesser known spotted skunk which more often inhabits open prairies. The striped skunk is the larger of the two. The skunk’s disagreeable scent is secreted by two internal scent glands into nipples located at the base of the tail. When the tail is down, the nipples are hidden. The skunk exercises voluntary control over the nipples and can aim the discharge in all directions, including to the front. The scent glands contain approximately one tablespoon of thick, oily liquid, enough for five or six rounds. Skunks leave their dens in the late afternoon or early evening and forage most of the night.
Feedback - Got an opinion about something we’ve written, or about a current environmental issue? If we have space, we will consider publishing it; submit it by email (envstudy@showme.missouri.edu), snail mail (Environmental Studies, 211 Lowry Memorial Union, MU, Columbia MO 65211), or call Jan Weaver to talk about it (882-7116). MU Environmental Network News is published by MU’s Environmental Studies Initiative. All opinions expressed are the responsibility of the editor. Any part of this newsletter may be copied for distribution but please give us credit.