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Published in Fall 2000
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Assessing the environmental effects of free trade
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CEC organizes first public symposium
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What are the environmental impacts of free trade? Does pollution grow or shrink as economies become interlinked through trade agreements? Do environmental regulations become weaker or stronger because of trade rules? And what is the role of the public in examining these and other environment and trade issues?
The first North American Symposium on Understanding the Linkages between Trade and Environment will help answer these questions. Fourteen original research papers examining such issues as the impacts of NAFTA on freshwater, fisheries, forests, hazardous wastes and domestic environmental laws will be presented.
You can follow the symposium at: <http://www.cec.org/symposium>. There you will find a live audio webcast of all the sessions (in English, French and Spanish), comprehensive coverage provided by IISD's Sustainable Developments bulletin, and all the symposium documents, including abstracts of each of the papers to be presented.
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By Scott Vaughan
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The public is clearly worried that unprecedented rates of global economic expansion—fuelled partly by trade liberalization—and unprecedented rates of global environmental degradation are related. Many argue that a possible correlation between environmental quality and free trade, direct or indirect, is grounds enough to stop any new trade initiatives until the environmental consequences of existing trade commitments are clearly understood, and adequate policy responses are put in place to minimize environmental costs and maximize environmental benefits.
Given the public profile of the trade-environment debate, it is surprising that only tentative or hypothetical observations have thus far been made linking environmental impacts to international trade; this is all the more surprising in light of recent advances in environmental impact assessments. In the last decade, these assessments have become more accurate and encompassing, built upon rigorous and comprehensive environmental data sets, baselines and aggregated indicators. They have become more robust, featuring geographic information systems and various mapping techniques, as well as ecological, economic and other models. As well as utilizing these and other approaches, environmental impact assessments are grounded in and legitimized by full transparency and by the early and regular input of the public.
Many of the techniques of environmental impact assessments guide current efforts to assess the environmental effects of free trade. At the same time, environmental effects arising from project-specific plans, such as new factories, dams or electricity transmission lines, present altogether different methodological challenges from assessing macroeconomic policy initiatives like trade policy reform. This distinction between project-specific and policy-related environmental impacts means that a lot more work needed to get assessment methodologies right.
Although differences exist in methodological approaches, experience now suggests that two complementary areas warrant close scrutiny. First, what are the effects of trade policy reform-for instance, NAFTA, the GATT Uruguay Round or the proposed Free Trade Area of the Americas (FTAA)—on domestic and international environmental policies? Does trade policy alter environmental policies and if so, how? Questions arising from this policy-to-policy inquiry include whether free trade sparks a "race to the bottom" in domestic environmental regulations, fuelled by a bid to attract foreign investment and jobs, or whether countries that maintain high environmental standards face investment and job losses to countries with lower environmental laws (called the "pollution haven" effect). And second, what is the relationship between actual trade flows and environmental quality? For example, does a trade-related shift in the composition of a domestic economy from, for example, forestry products to textiles or telecommunications alter the environmental "profile" of that economy, expressed for example in pollution generated per unit of output, or pollution per unit of export? And with trade-induced changes in the economy, what can one say about the overall environmental characteristics of a new economy, as opposed to an old one? Is it cleaner, dirtier, or largely unchanged?
For the past five years, the North American Commission for Environmental Cooperation (CEC) has concentrated on developing a methodology to assess the environmental effects of trade. Indeed, this work remains the underlying reason for the creation of the Commission in 1994: when people began looking at the proposed NAFTA, they wanted to know how that agreement would affect North America's environment. They asked if hard-fought domestic environmental laws would be constrained by new trade disciplines and arbitration.
By late 1999, CEC released its Analytic Framework for Assessing the Environmental Effects of NAFTA, setting out a linear method of analysis to help assess the environmental impacts of the agreement. The Analytic Framework represents the most comprehensive guide developed to disentangle complex, dynamic links between changing trade-related economic activity and indicators of environmental quality. It is the product of many hands, including environmental nongovernmental organizations, industry, labor and consumer groups, research institutes and representatives of the three NAFTA parties, Canada, Mexico and the United States. Although the Analytic Framework was developed for the NAFTA context, it is being used to examine the effects of other trade accords, including the World Trade Organization (WTO) and the FTTA.
The next and most important phase of CEC's work involves inviting the public to put the Analytic Framework to work. In that spirit, CEC will host the first North American Symposium on Understanding the Linkages between Trade and Environment, in Washington, DC, on 11-12 October 2000. The symposium will be chaired by Dr. Pierre Marc Johnson, former Prime Minister of Quebec, and will bring together roughly 300 people. Fourteen research papers have been selected for public presentation. The authors are largely from nongovernmental groups based in Canada, Mexico and the United States, as well as from two international organizations (the Economic Commission for Latin America and the Caribbean and the Organisation for Economic Co-operation and Development). These studies will attempt to provide, for the first time, concrete answers about NAFTA's environmental consequences. The WTO's Seattle meeting served as a reminder of the deep public interest in such answers, as well as in the transparency and accountability of the process leading to them.
Contributors presenting the results of their research will explore such important topics as: the extent to which NAFTA has altered key pollution indicators like air and water quality; changes in the design, stringency or enforcement of domestic environmental laws and whether such changes are linked to NAFTA; whether a "race to the bottom" can be discerned; whether certain sectors have changed production location because of differences in the cost of environmental regulations and subsequent competitive effects; as well as newer issues, including whether assessing environmental effects of trade in services differs from assessing trade in goods.
For more information about the symposium, please consult <http://www.cec.org/symposium>.
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Global trade and the environment Building policy integration in the post Seattle context
By Pierre Marc Johnson
In the closing days of the twentieth century, the protests that disrupted the ministerial meetings of the World Trade Organisation in Seattle also crystallised an important shift in the public?s mind about the course and implications of economic globalisation. The causes behind the protests were many: from the sweatshops of developing countries which produce many of the goods we buy today, to the erosion of human rights and widening gulf between the rich and poor everywhere; the concentration of decision-making in fewer hands, to the alarming pace of environmental degradation that continues to affect industrialised and poor countries alike.
Public concerns on these issues cannot be ignored if policymakers wish to build and maintain the constituencies required to proceed further on the road of economic integration. While it is clear that trade liberalisation has brought considerable benefit to the global economy over the last fifty years, it has also induced or amplified significant environmental side-effects such as increased pollution, climate change, ecosystem degradation and biodiversity loss. One the great challenges of this new century, therefore, is to understand in a robust sense the many links between trade, economic expansion and environmental change, and begin tailoring policies that integrate our economy and our environment.
The North American Commission for Environmental Cooperation (NACEC) was created by the environmental side-agreement to the North American Free Trade Agreement (NAFTA) to address such policy coordination challenges in the context of North American free trade. Over its first five years of existence, NACEC has developed considerable expertise in the trade and environment field. It has also been instrumental in developing an extensive environmental cooperation program in North America around four major themes: environment, economy and trade, conservation of biodiversity, pollutants and health, and law and policy. This has all been realised in a rigorous and transparent fashion with the systematic participation of civil society. Consequently, NACEC has achieved considerable credibility among the public and private sector, as well as within the NGO community. This is a rare and exceptional achievement for a trade-related body?especially in the post-Seattle context.
In October 2000, NACEC will convene the first ever-symposium of experts, governments, industry, environmental organisations and the public to forward some answers to the questions about environmental impacts of free trade.
The symposium will provide answers to a range of questions, from the impacts of NAFTA on the quality of our air, freshwater, forests, and fisheries, to the links between free trade and growing rates of hazardous waste shipments between Canada, Mexico and the United States, the NAFTA partners. In addition to providing some answers to the question of whether there are direct environmental quality impacts linked to NAFTA, the symposium will also explore a issue of central importance to the public: what does the free trade agenda do to our hard-fought domestic environmental regulations? Does free trade create, as many believe, increased competitive pressures on industry, which in turn creates a powerful lobby for government to lower their domestic environmental standards? Or, will countries with higher environmental standards lose economic activity and jobs to the lowest bidder, the "giant sucking sound" that Ross Perot said he heard of US jobs going south to Mexico because of NAFTA?
In addition to shedding light on what is happening to our environment because of NAFTA, the symposium will begin pinpointing the policy choices we need to take to ensure a healthy environmental future. And it will identify who needs to be involved in making these decisions.
While the lessons of Seattle continue to be disentangled, one message is crystal clear: the public opposes the isolation of trade policy from social and environmental concerns, and key decisions being made in secret, behind closed doors. The WTO, as well as the World Bank and IMF, all face similar criticism about their strictly economic approach and secretive nature. In a pointed criticism of the IMF, Joe Steiglitz?the highly respected former chief economist of the World Bank, noted that, "Smart people are more likely to do stupid things when they close themselves off from outside criticism and advice."
NACEC remains a unique intergovernmental body founded on principles of transparency and public participation. The analysis to be presented at the October symposium is not the product of closed committees, but rather the response of the public to a call for papers issued last year, based on a rigorous framework developed by NACEC for assessing trade and environment linkages. As chair of the symposium, and someone long-active in public service, it is my strong belief that public policy can only gain enduring public support when the public itself is engaged early, and often. This environmental symposium on the effects of free trade promises to bring valuable lessons to those in civil society, governments, the private sector and organisations like the WTO and IMF on building new institutions responsive to our post-Seattle world.
Pierre Marc Johnson is a lawyer and physician. He is a former Premier of the province of Quebec and a member of IUCN (The World Conservation Union) Council.
About the contributor
 Scott Vaughan
Scott Vaughan joined NACEC in September 1998 as head of the Environment, Economy and Trade program. Prior to that, he was a counselor at the World Trade Organization (WTO), where he worked on a range of issues in support of the WTO Committee on Trade and Environment. He has also held a number of positions with the United Nations Environment Programme (UNEP), including chief, Environment, Trade and Financial Services; coordinator, External Relations, during preparations for the United Nations Conference on Environment and Development; and senior policy analyst to the executive director. While at UNEP, he initiated and was responsible for UNEP's pioneering work with the commercial bank, pension fund and insurance sectors. He has also worked as policy advisor for the head office of the Royal Bank of Canada, as legislative assistant to the federal minister of the environment, and as a researcher for the Parliamentary Center for Sustainable Development. Scott has graduate degrees from Dalhousie University, University of Edinburgh and the London School of Economics. He has published extensively on trade and environment, and environmental financing.
Related web resources
North American Symposium on Understanding the Linkages between Trade and Environment
http://www.cec.org/pro
grams_projects/trade_
environ_econ/sustain_
agriculture/index.cfm
?varlan=english
NAFTA Transportation Corridors: Approaches to Assessing Environmental Impacts and Alternatives
http://www.cec.org/pro
grams_projects/trade_
environ_econ/sustain_
agriculture/index.cfm
?varlan=english
Pollutants and Health Program
http://www.cec.org/pro
grams_projects/trade_
environ_econ/sustain_
agriculture/index.cfm
?varlan=english
Next regular session of the Joint Public Advisory Committee
http://www.cec.org/pro
grams_projects/trade_
environ_econ/sustain_
agriculture/index.cfm
?varlan=english
Related web resources
NAFTA
http://www.cec.org/pro
grams_projects/trade_
environ_econ/sustain_
agriculture/index.cfm
?varlan=english
Free Trade Area of the Americas
http://www.cec.org/pro
grams_projects/trade_
environ_econ/sustain_
agriculture/index.cfm
?varlan=english
World Trade Organization
http://www.cec.org/pro
grams_projects/trade_
environ_econ/sustain_
agriculture/index.cfm
?varlan=english
Economic Commission for Latin America and the Caribbean
http://www.cec.org/pro
grams_projects/trade_
environ_econ/sustain_
agriculture/index.cfm
?varlan=english
Organisation for Economic Co-operation and Development (OCDE)
http://www.cec.org/pro
grams_projects/trade_
environ_econ/sustain_
agriculture/index.cfm
?varlan=english
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