Cut NAFTA terms that undermine environmental and conservation policies and add strong environmental standards that are subject to swift and certain enforcement.

How does NAFTA 2.0 measure up?

The ISDS fix eliminates major threats to environmental policies. ISDS has been a top target of environmentalists’ trade reform demands, given decades of outrageous NAFTA ISDS attacks on conservation and environmental policies. All but one of the NAFTA ISDS payouts related to environmental issues involved U.S. firms attacking Canadian toxics bans and timber, energy, mining and other policies. The new text’s termination of ISDS between the United States and Canada would prevent numerous future cases, albeit with continuing exposure during the three-year phase-in. The main U.S.-Mexico Investment Annex (14-D) ends the investor rights (including Minimum Standard of Treatment (MST)/Fair and Equitable Treatment, Indirect Expropriation, pre-establishment National Treatment and Performance Requirements) used by ISDS tribunals to rule in favor of corporations on all NAFTA ISDS attacks against environmental policies to date. For instance, the tribunal in the infamous Bilcon mining case based its ruling on pre-establishment National Treatment and MST. Metalclad was Indirect Expropriation and MST. ExxonMobil was Performance Requirements. Lone Pine Resources, the fracking case, is an Indirect Expropriation and MST claim.

However, as noted above, a supplemental U.S.-Mexico Investment Annex (14-E) is very problematic. It provides a carve-in for firms that have contracts with a federal government in specified economic sectors to access the full set of substantive investor protections in past pacts, if Mexico or the United States continues to provide these rights under other pacts. Most sectors listed in the annex are meaningless in practice because neither the U.S. nor Mexican federal governments use contracts in those sectors. The U.S. federal government does not use contracts in oil and gas. The footnote to the definition makes clear that permits, licenses, authorizations and the like do not qualify. However, during the past several years of the outgoing Mexican government’s partial privatization of Pemex, nine U.S. oil and gas firms obtained 13 contracts. Those firms would be carved in. Given that the incoming Mexican president has declared he will stop further privatization, the prospect of new contracts is limited now. But if that annex remains, a future Mexican president could issue new contracts. None of the past NAFTA ISDS cases would have qualified for the carve-in. But three of the nine firms have used ISDS before, two them against Canada in NAFTA.  

Provisions forcing countries to export natural resources have been eliminated. NAFTA’s natural resources “proportional” sharing rules that required exports of oil, gas, timber and even water based on previous years’ export levels are removed in the new text. These terms, found in the original NAFTA’s Energy Chapter and in its Trade in Goods Chapter, meant that if a country began to export lake water, for example, then that resource would be considered “commodified,” and continuing exports would be required based on previous years’ volume – even if that country sought to end such activity or otherwise conserve that resource. The terms also undermined efforts to eliminate environmentally damaging production processes, in that a country would still be obliged to export set levels of a resource produced using such processes.

Like all U.S. trade agreements since the George W. Bush administration, the revised NAFTA text includes environmental standards in the core text rather than in an unenforceable side agreement, an improvement over the original NAFTA. However, the new Environment Chapter fails to require each party to adopt, maintain, implement and enforce domestic laws that provide policies that fulfill a list of seven core multilateral environmental agreements that were subject to this obligation in past U.S. trade pacts. The new Environment Chapter replicates the TPP’s Environment Chapter in only making one multilateral environmental agreement (MEA), the endangered species treaty known as CITES, subject to this obligation. The new agreement also eliminates the only environmental provision included in the original NAFTA, Article 104. That provision specified that to the extent of inconsistency between the NAFTA text and five listed international environmental agreements, all of which also were included in the MEA obligation noted above in past agreements since 2007, the international environmental agreements prevailed. The new text provides no savings clause to give priority to any environmental agreements in the case of conflicting obligations. One small improvement relative to the TPP is clarification of the obligation for countries to enforce their environmental laws. This reflects clarifications made to the Labor Chapter with respect to “sustained or recurring course of action or inaction” and “manner affecting trade.” Shamefully, like the TPP, the revised NAFTA text fails to mention the words “climate change,” much less address climate issues, which is a glaring omission at a time of climate crisis.

Given that the original NAFTA text and its environmental side agreement ignored conservation issues altogether, their inclusion in the renegotiated NAFTA may seem like a gain. In reality, while the wording of these provisions differs in some places relative to the ineffective TPP terms on conservation matters, the effect is the same: There are few real obligations. Most of the prose focuses on “recognition” of problems and goals, but with few requirements to do anything to achieve improvements.