The Free Trade Area of the Americas Agreement and the Environment: Getting Beyond the Barricades, Tear Gas and Declarations

Ignacia S. Moreno
Washington, D.C

Introduction
Most of us have now seen the protests: the burning effigies, molotov cocktails, tear gas and barricades. Police wearing heavy riot gear march abreast to push back protesters who are now savvy enough to wear gas masks. If you only saw the pictures, you would never guess that at issue is free trade and liberalized investment and that the most unlikely of coalitions has banded together to force the governments of the Western Hemisphere to give equal play to the environment, worker rights and other social issues.

Despite the hyperbole on both sIdes of the barricades, the importance of finding a consensus point to address what are significant policy interests can not be minimized. Recent history has witnessed a tremendous growth in efforts to spur economic development and to liberalize world trade by breaking down barriers to the free flow of goods. At the same time, increased awareness of the environmentally harmful effects of industrialization and other human activities has led to greater efforts to protect the global environment and to use natural resources in a sustainable manner.

Economic development and protection of the environment and natural resources (hereinafter collectively "the environment") are goals that often appear to be in conflict. Both, however, are important and necessary means for advancing and protecting the public welfare and must be made "mutually reinforcing," as recognized by the Leaders of the States and Governments of the Western Hemisphere at the Third Summit of the Americas in Quebec, Canada, on April 20-22, 2001. How we get beyond the violent street protests and lofty declarations by our world leaders will present a daunting challenge that may require a shift in existing paradigms.

The creation of a free trade area of the Americas ("FTAA") involves the negotiation of a complex trade and investment agreement that may incorporate NAFTA, WTO-based and/or other approaches in regional trade on investment agreements with respect to certain key obligations. The negotiations are structured around nine negotiating groups: market access; investment; services; government procurement; dispute settlement; agriculture; intellectual property rights; subsIdies, anti-dumping and countervailing duties; and competition policy. Business interests from throughout the region are represented in Business Forums that have been meeting since 1995 to develop recommendations to the governments during the course of the negotiations. Business groups and other components of civil society, including academia and environmental and labor groups, are making their views known to the governments through the Committee of Government Representatives on the Participation of Civil Society. The structure of the FTAA Agreement negotiations includes three other committees, on smaller economies and e-commerce, and a newly formed Technical Committee on Institutional Issues. The Technical Committee, established at the most recent meeting of the Hemisphere's Trade Ministers in Buenos Aires, Argentina in April 2001, will consIder general cross-cutting provisions that would be applicable to the scope of the Agreement, institutional mechanisms, transparency and other related matters.

All constituencies must consIder how the development of trade disciplines and investment rules in an FTAA Agreement and the treatment of environmental and labor concerns in such an agreement will affect their interests, stand ready to be players in shaping the debate, and offer creative solutions and suggestions for government proposals in the negotiations. This article summarizes the current developments in the FTAA negotiations and how they relate to the environment, and Identifies open issues that will need to be consIdered in the course of the negotiations.

The FTAA Negotiations: An Overview

Timeframe
At the Third Summit of the Americas, the leaders of the 34 democratically elected governments in the Americas directed their Trade Ministers to conclude the negotiations of the FTAA no later than January 2005, and to seek the entry of the Agreement into force no later than December 2005. Final Declarations, Summit of the Americas, 2001, at 3 (April 22, 2001) ("Summit Declaration"). The reservation by the Government of Venezuela to the 2005 timeframe, Id. at 5, casts some doubt on the success of efforts by the United States to get a solId commitment to this deadline. The Governments of Argentina and Brazil, among others, rebuffed earlier efforts by the United States to move the timeframe up for the completion of the Agreement up to the year 2003.

At the Sixth Meeting of the Hemisphere's Trade Ministers, the Ministers agreed that the FTAA Trade Negotiations Committee ("TNC") would hold at least three meetings over the course of the next 18 months in Nicaragua, Venezuela, and the Dominican Republic, successively. The TNC, the executive body for the negotiations, will prepare a second draft of the FTAA Agreement, "including chapters from each Negotiating Group and chapters covering general and institutional aspects," for consIderation at the Trade Ministers October 31, 2002 meeting in Ecuador. Negotiating Groups were instructed to submit recommendations on modalities and procedures for the negotiation of disciplines in their respective areas by April 1, 2002 so that market access negotiations may begin no later than May 15, 2002.

Sustainable Development, Public Participation and Transparency
In their Summit Declaration, the leaders pledged to work with all sectors of civil society "to ensure that economic activities contribute to sustainable development" in the Americas. In the context of the FTAA negotiations, they reiterated their view that free trade "will promote regional prosperity, thus enabling the raising of the standard of living, the improvement of working conditions of the people in the Americas and better protection of the environment." Summit Declaration at 3. As a general matter, they also "commit[ted]" their governments to: "Strengthen environmental protection and sustainable use of natural resources with a view to ensuring a balance among economic development, social development and the protection of the environment, as these are interdependent and mutually reinforcing. [The] goal is to achieve sustainable development throughout the Hemisphere. Id.

The Leaders called upon citizens in the Americas to participate in the Summit process, and acknowledged that "openness and transparency are vital to building public awareness and legitimacy for [their] undertaking." Id. at 5. As a "clear demonstration" of their commitment to transparency and "sustained communication" with the public, the Leaders agreed to release a preliminary draft of the FTAA Agreement to the public. Id. at 3. The draft consolIdated Agreement, which includes all government proposals made to date, will be published in four languages. The results achieved during the negotiation process will also be made available to the public after each meeting of the leaders at subsequent Summits. This important step will ensure that public debate on trade and investment disciplines in the Agreement is informed.

In another significant development, the Trade Ministers breathed new life into the Committee of Government Representatives on the Participation of Civil Society ("the Committee"). They instructed the Committee to: (i) "foster a process of increasing and sustained communication with civil society[;]" (ii) develop a list of options communication within/society for consIderation and decision by the TNC at its next meeting, (iii) analyze the possible inclusion of more information about the FTAA process on the FTAA web page, and (iv) forward contributions submitted by the public to the Negotiating Groups for their consIderation. Nonetheless, outsIde of proposals for transparency and public participation, the concept of addressing the environment in the negotiation of the FTAA Agreement is highly controversial.

"Environmental" Proposals: The Political Debate
From the outset, Latin American and Caribbean governments have shown antagonism toward consIdering environmental or "green" proposals in the negotiations. Although the United States endorsed the Idea of establishing a study group on the environment during the course of negotiations, this proposal dId not receive any support and was eventually rejected. In August 1997, the heads of twelve Latin American countries stressed that the FTAA should not incorporate trade-related environmental issues, indicating instead that they should be dealt with in the context of the Committee on Trade and the Environment at the World Trade Organization ("WTO"). These sentiments were expressed in a joint declaration by the "Rio Group," consisting of the Southern Cone Common Market ("MERCOSUR") countries of Argentina, Brazil, Paraguay and Uruguay, the Andean Group countries of Bolivia, Ecuador, Colombia, Peru and Venezuela, and Mexico, Chile and Panama. The foreign ministers of Guyana and Honduras, representing the Caribbean Community and Central America, respectively, also signed the document. See Latin Leaders Signal Desire to Build FTAA Without Labor, Green Issues, Americas Trade, Sept. 4, 1997, at 11-13. The continued desire of our future trading partners to exclude consIderation of the environment in the FTAA talks will present special challenges for the United States and Canada, both of which have experienced public opposition during the negotiation of the North American Free Trade Agreement ("NAFTA") on this issue.

How the Bush administration proposes to address environmental consIderations in the negotiation of the FTAA Agreement is yet unclear. To the extent that the United States took a position on the environment in the negotiations during the Clinton administration, key issues are open and it remains to be seen what the Bush administration will do and whether we can get the support of important trading partners, such as Mexico and Chile, for any additional United States proposals. PresIdent Bush has made securing fast-track or trade promotion authority a top priority. Some of our FTAA negotiating partners, such as Chile, are paying close attention to this issue. The fast-track debate is sure to be as divisive as during the Clinton administration. Despite the PresIdent's desire to secure trade promotion authority this year, there are those who are certain that there will be no action on fast-track legislation any time soon.

In addition to fast-track legislation, the desire of the United States to conclude a Free Trade Agreement with Chile by the end of 2001 will force decisions on key trade/investment and environment issues. The Bush administration continues to work to formulate negotiating positions on trade and investment disciplines that may have an impact on the environment, an issue that was debated vigorously without resolution during the Clinton administration. There is also an ongoing public debate on whether the approach taken by the Clinton administration in the U.S.-Jordan Free Trade Agreement (and speficially, environmental provisions subject to dispute resolution) will survive, let alone serve as a model for future agreements.

The development of United States Government positions on investment disciplines and other obligations that may impact environmental protection, and the ability of federal agencies to regulate and enforce environmental laws, are sure to bedevil even the savviest policymaker. Assuming that environmental concerns are addressed in some manner either as an integral part of the FTAA Agreement, which is considered a long shot, or in side commitments, what in fact is at issue? As they say, the devil is in the details.

The Details
The nuances of the environmental issues in the FTAA are many. For the sake of brevity, I will focus on the United States' position on the environment in the FTAA and issues that are open in the Negotiating Group on Investment. There are also issues in the negotiation of trade disciplines that raise environmental concerns, but these are beyond the scope of this article.

The United States Position on FTAA and the Environment to Date
On January 17, 2001, former United States Trade Representative Charlene Barshevsky released detailed summaries to the public of the United States' FTAA negotiating positions and its position on the environment and the FTAA, among other things. See www.ustr.gov. To date, this is the latest articulation of environmental approaches in the FTAA supported by the United States. The summary notes that negotiators for the United States are working within the framework of the nine FTAA Negotiating Groups and the TNC "to Identify and incorporate relevant environmental consIderations into the FTAA agreement." See www.ustr.gov/regions/whemsiphere/envir.pdf, at 1. An example of this approach is the United States' support for the inclusion of an anti-pollution haven provision in the Investment Chapter, modeled on Article 1114 of the NAFTA, "obligating FTAA countries to strive to ensure that environmental laws are not relaxed to attract an investment." Id. The Bush administration announced on April 20, 2001, that it would continue to conduct written environmental reviews of trade agreements under Executive Order 13141 and its implementing guIdelines, and that the environmental review of the FTAA would continue. There has been no other public articulation by the Bush administration on how environmental consIderations may be taken into account in a FTAA Agreement.

Key Open Issues in the FTAA Investment Chapter
What is it that must be decIded with respect to the investment disciplines? Plenty, and it will be difficult to arrive at a consensus. Environmentalists, regulators and others first raised concerns in the context of the Multilateral Agreement on Investment ("MAI") negotiations (conducted under the auspices of the Organization for Economic Cooperation and Development) on the possible adverse effects of investment disciplines on the environment and the ability of governments to protect the environment through regulation and the enforcement of environmental laws. Many of the issues consIdered in the MAI negotiations are now once again before United States policymakers.

The United States has made proposals in the FTAA Negotiating Group on Investment on provisions that were at issue in the MAI, such as provisions on national treatment and most favored nation treatment and performance requirements. See www.ustr.gov/regions/whemisphere/invest.pdf at 1,2. It has also proposed, as noted previously, an anti-pollution haven provision and provisions on transparency to ensure that laws, regulations and administrative practices are made available to the public, and that the public has an opportunity to comment on proposed laws, among other things. Id., at 3. The United States has yet to submit its proposals for several key provisions, including expropriations, general treatment-fair and equitable treatment, general exceptions, and investor-state dispute resolution, Id. at 1-3, which continue to be controversial.

Conclusion
Each of the open investment and environmental issues raise fundamental policy questions that are answered very differently depending on whether the predominant interest is to protect the interests of United States investors abroad or to protect the ability of Federal and state agencies to protect the environment through regulation and enforcement actions. Since both are significant policy interests, it will be difficult to find the right balance and defend the point at which one interest may have to yield to the other. So, how will it all be resolved? Only time will tell and the challenges will abound. So, tighten your seat belt and get ready for the wildest of rIdes.

Editor's Note: Ms. Moreno recently left the United States Department of Justice Environment and Natural Resources Division, where she advised the Division's Assistant Attormey General on trade/environment matters.