Executive Order 13141 – Environmental Assessment of Trade Agreements

Professor Jim Salzman
Washington College of Law
American University

Introduction
While the "Battle in Seattle" on the streets outside the World Trade Organization’s meeting of trade ministers in December 1999 grabbed all the newspaper headlines, the most important legal developments occurred one month earlier. On November 16, 1999, President Clinton issued Executive Order 13141, for the first time ever committing the government to conduct environmental reviews of trade agreements. Vice President Al Gore boldly declared that the "executive order being signed by President Clinton today will ‘revolutionize the way the environment is dealt with in all future trade talks.’" Ceci Connolly, U.S. to Give Trade Pacts Eco-Review, Washington Post, Nov. 17, 1999, at E1.

Assessing the Impact of Trade
Dating from the 1969 National Environmental Policy Act ("NEPA"), environmental reviews have become a cornerstone of environmental law not only in the United States but globally. Over 70% of the world’s nations have now adopted environmental impact assessment requirements for certain types of governmental projects. When one takes into account sub-national requirements, well over 200 governmental authorities mandate reviews. Indeed Principle 17 of the Rio Declaration states that "environmental impact assessments, as a national instrument, shall be undertaken for proposed activities that are likely to have a significant adverse impact on the environment and are subject to a decision of a competent national authority." Environmental reviews have been adopted in a number of multilateral agreements, as well, including the Convention on Biological Diversity, the Convention on the Law of the Sea, and the World Charter for Nature. The World Bank and other regional banks undertake environmental assessments for major loans.

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...the USTR has never prepared an environmental impact statement as part of its negotiating activities.

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Dating from the 1969 National Environmental Policy Act ("NEPA"), environmental reviews have become a cornerstone of environmental law not only in the United States but globally. Over 70% of the world’s nations have now adopted environmental impact assessment requirements for certain types of governmental projects. When one takes into account sub-national requirements, well over 200 governmental authorities mandate reviews. Indeed Principle 17 of the Rio Declaration states that "environmental impact assessments, as a national instrument, shall be undertaken for proposed activities that are likely to have a significant adverse impact on the environment and are subject to a decision of a competent national authority." Environmental reviews have been adopted in a number of multilateral agreements, as well, including the Convention on Biological Diversity, the Convention on the Law of the Sea, and the World Charter for Nature. The World Bank and other regional banks undertake environmental assessments for major loans.

Despite NEPA’s enormous influence both at home and abroad, environmental reviews of trade agreements have been exceedingly rare. While President Carter’s Executive Order 12114 (issued in 1979) called for the review of major federal actions significantly affecting the environment of the global commons or natural/ecological resources of global importance, the Order has never been applied to trade agreements. NEPA has never been applied to such an agreement, either. During the NAFTA negotiations, a number of environmental groups sued to force an environmental review. In Public Citizen v. Office of the United States Trade Representative, however, the D.C. Circuit held that NEPA’s requirements could not force reviews of trade agreements both because the Unites States Trade representative’s ("USTR") negotiation was not final agency action and because the president is not an agency.

As a result, the USTR has never prepared an environmental impact statement as part of its negotiating activities. Acknowledging that trade agreements can have significant environmental impacts, however, both the Bush and Clinton administrations have voluntarily carried out environmental reviews of NAFTA, the Uruguay Round, and the Accelerated Tariff Liberalization of timber products. These reviews have served a number of useful purposes. The NAFTA review, for example, highlighted the likely environmental degradation caused by maquiladoras along the U.S.-Mexico border and led to a separate Border Plan and funding mechanism for border area environmental problems. Concerns over potential race-to-the-bottom pressures (i.e., pressure to lower environmental protections as an inducement for industry location) informed the NAFTA’s environmental side agreement. And these, in turn, led to the requirement that the Commission on Environmental Cooperation "consider on an ongoing basis the environmental effects of the NAFTA."

At their best, then, environmental reviews of trade agreements can inform both the public and decisionmakers of the potentially positive and negative environmental effects resulting from increased flows of goods and services. These impacts may take various forms: (i) scale effects, e.g., the impact of increased trade on the overall level of economic activity and growth; (ii) structural effects, e.g., how increased trade influences the patterns of economic growth and investment within sectors; (iii) product effects, e.g., impacts from trade flows of environmentally sound (clean technologies) or harmful (hazardous waste) products; and (iv) regulatory effects, e.g., the impacts on domestic environmental policies and standards as well as international environmental agreements. Importantly, identifying potential impacts also reveals potential mitigation measures to minimize adverse consequences. The net result should be more informed decisions that take account of potential opportunities and vulnerabilities prior to negotiation.

Meeting the Challenge
Despite these attractive benefits there are, of course, significant challenges to reviewing a trade agreement. Unlike the review of a specific, physical project such as a dam, factory, or mine, for example, trade negotiations are fluid and often secretive. The final positions may not be reached until the 11th hour, or later. What, then, should be reviewed at the outset of the negotiation? Moreover, the relationships between increased trade and environmental impacts are complex. Trade liberalization shifts productive resources from certain uses to others. The net result may increase consumption and production with attendant pollution and resource degradation, or the economic growth may provide the means to address and reduce environmental harms. Not only is such a review difficult, but unlike the tools developed to assess impacts from planned projects, the skill base to review the environmental impacts of trade agreements is weak. This is not surprising, as little money has been spent in the field, but it makes a daunting methodological task even more challenging. As the old saying goes, predicting is difficult, particularly when it’s about the future.

In the face of these challenges, Executive Order 13141 is terse. It gives USTR and the Council on Environmental Quality ("CEQ") joint responsibility for the Order’s implementation. Written environmental reviews must be prepared for comprehensive multilateral rounds, bilateral or plurilateral free trade agreements and major liberalization agreements in natural resource sectors. It is anticipated that most other agreements (such as sectoral liberalization agreements) will not require a review, though the inter-agency Trade Policy Staff Committee may determine on a case-by-case basis whether "the significance of reasonable foreseeable environmental impacts" justifies a review. The review commences with the scoping process – initially determining whether a written review is warranted, the significant issues to examine, and whether the focus should be solely on domestic impacts – that should take place early enough in the process to inform the development of negotiating positions. Public comment will be solicited at the scoping stage and at the time of the review’s first draft. The final review will also be made public. In general, the focus of the reviews will be on domestic impacts, examining global and transboundary impacts "as appropriate and prudent."

Conclusion
By and large, the environmental community has welcomed the Order while criticizing its geographic and substantive focus. The Guidelines reinforce the presumption against review of trade agreements’ global and transboundary impacts (and virtual exclusion of impacts in other countries) by permitting their exclusion from review based on considerations of data availability, and diplomatic considerations. The net result, critics have charged, will shield from review the most significant consequences of increased trade.

The Order is being taken seriously by the administration having completed its review of the U.S.-Jordan Free Trade Agreement and commented on analysis of the environmental effects of the Free Trade Area of the Americas agreement. Formally considering environmental issues farther upstream in the trade negotiation process than ever before could have very positive implications for all the parties involved – NGOs will need to prioritize their concerns and engage early in the process, USTR will need to standardize its procedures to incorporate environmental considerations, and agencies will need to consider the negotiation as a whole rather than focusing on specific aspects in isolation. The likelihood of the Order leading to reviews at the WTO is far less certain. While the European Union has commenced a Sustainability Impact Assessment program to review the environmental impacts of the Millennial Round, developing countries are deeply suspicious that demands for environmental reviews may mask developed countries’ demands of conditionalities and linkages. Depending on the implementation of the Executive Order, however, the international situation may look very different in two years.

Editor’s Note: The United States Trade Representative issued final guidelines on the implementation of E.O. 13141 on Dec. 19, 2000. 65 Fed. Reg. 79442 (Dec. 19, 2000).