November 20, 2020

The USMCA Contains Enhanced Environmental Protection Provisions but Will They Lead to Substantive Environmental Protection Outcomes?

Anne-Catherine Boucher

The United States-Mexico-Canada Agreement (USMCA), a revision and replacement of the 25-year-old North American Free Trade Agreement (NAFTA), came into force on July 1, 2020. Considerable uncertainty on the fate of environmental provisions in the renegotiated agreement surrounded the negotiation process. Following its execution by the parties, the USMCA was both hailed as being the “most comprehensive-highest-standard Chapter on the environment of any trade agreement” and criticized by environmental groups as a missed opportunity to address climate change

This article first reviews the original approach to environmental protection taken by the NAFTA framework and then considers the changes brought by the USMCA and the key issues to watch for as the parties progressively implement this new agreement and adjust to its provisions.

Environmental Provisions under NAFTA

Under NAFTA, the few environmental protection provisions were limited in their scope. Parties committed not to relax, waive, or derogate from domestic environmental, health, or safety measures to protect or encourage foreign investments. If a party did not comply with these commitments, the only redress was government-to-government consultation. Most of the environmental protection provisions within the NAFTA framework were provided under the North American Agreement on Environmental Cooperation (NAAEC), a side agreement adopted by the NAFTA parties to strengthen NAFTA’s environmental provisions.

To promote accountability, transparency, and public participation regarding the duty to effectively enforce environmental laws, the NAAEC established two measures:

  1. The Submission on Enforcement Matters (SEM), which consisted of a citizen-driven accountability mechanism that allowed the filing of complaints alleging that a party has failed to effectively enforce its environmental laws; and
  2. a party-to-party dispute resolution process that could lead to monetary sanctions or to loss of NAFTA benefits as a last resort, occurring at the outcome of a complex and lengthy procedure.

The NAAEC created the Commission for Environmental Cooperation (CEC), which was assisted by a secretariat and was responsible for administering the SEM process. The secretariat received complaints from citizens of any of the three NAFTA countries alleging the failure by another party to effectively enforce its environmental laws and, if authorized by the CEC Council (comprising cabinet-level environmental representatives of each NAFTA country), prepared and published a factual record. As its name suggests, the aim of a factual record is to objectively present the facts relevant to the alleged failure to enforce environmental laws and to allow the reader to draw its own conclusions regarding a party’s environmental law enforcement. The SEM process does not include any enforceable sanctions or requirements to take specific remedial action but may lead to domestic enforcement of laws simply as a consequence of public exposure. The SEM process was the most innovative aspect of the NAFTA approach to environmental protection and remained one of the most accessible existing international environmental processes.

Environmental Provisions under the USMCA

The USMCA now includes a full chapter (Ch. 24) on environmental matters with extensive provisions aimed at strengthening environmental protection. These provisions include core obligations for parties to maintain high levels of environmental protection and robust environmental governance, including commitments to enforce environmental laws and promote transparency, accountability, and public participation. The main environmental protection changes brought by the USMCA include, notably, the following:

  • Issue-specific provisions on a broad range of environmental matters. Chapter 24 now contains issue-specific environmental provisions, including new commitments relating to illegal wildlife trade, illegal fishing and depletion of fish stocks, species at risk, conservation of biological diversity, sustainable forest management, ozone depletion, marine litter (including plastic litter and microplastics), and environmental impact assessment with public participation for projects involving central government action likely to cause significant impacts and improved air quality. This follows the tendency of European trade deals to include such issue-specific provisions. The USMCA also recognizes the role of Indigenous people in conservation and protection of the environment.
  • Consultation and cooperation. The USMCA adopts a similar approach to environmental cooperation as NAFTA where the parties agree to consult and cooperate as appropriate with respect to environmental issues of mutual interest.
  • Multilateral environmental agreements (MEA). The parties affirm their commitment to implement the MEAs to which they are bound, but do not commit to entering into additional MEAs. The agreement refers to seven MEAs with respect to which the parties agree to adopt, maintain, and implement laws and regulations as well as all other measures necessary to fulfill their respective environmental obligations. Critics were quick to note that the USMCA fails to include a reference to the United Nations Framework Convention on Climate Change and the Paris Agreement.
  • Dispute settlement mechanism. The environmental provisions under chapter 24 are now subject to the agreement’s state-to-state trade dispute settlement mechanism and are fully enforceable through trade penalties. An innovation brought by the USMCA is that while such disputes can be brought only if a country’s action or inaction creates a trade or investment advantage, environmental violations are presumed to affect trade and investment unless otherwise demonstrated. These new provisions also provide for the phasing out of the investor-state dispute settlement process after three years, subject to a limited number of disputes between the United States and Mexico (i.e., regarding investors challenging environmental regulatory measures alleged to constitute regulatory expropriation).
  • CEC and SEM. The parties also agreed to the Environmental Cooperation Agreement (ECA)––the side agreement to the USMCA, which notably retained NAFTA’s CEC and the secretariat––who will continue to be responsible for the SEM process, now set out under chapter 24. The USMCA provides shorter timelines for the various stages of the SEM process, which is a welcome addition since the process was known to drag on for several years in certain cases. The ECA specifically directs the three nations to answer information requests needed to develop factual records, a weakness in the previous agreement. The Parties have also agreed to provide sufficient funding to empower the CEC to carry out its mandate, as it faced a shortfall in resources in the past.

Conclusion

The enhanced status of the environmental chapter by its inclusion under the main agreement, greater procedural and substantive environmental protection provisions as well as the presumption that environmental violations affect trade have led many to characterize the USMCA as a widespread improvement and having more teeth than its predecessor. It remains to be seen whether the environmental provisions being subject to the state-to-state trade dispute mechanism will result in substantive environmental protection as there is the possibility under the agreement for potentially extensive delays or the blockage of panel formation. The survival of the CEC and the SEM process and the procedural hallmarks of the NAAEC were welcomed by observers and it is certainly hoped that with increased funding, the CEC will be reinvigorated to fulfill its mandate.

While there has been disappointment about the failure of the USMCA to address climate change, the agreement does include a six-year review clause, which will make it easier for the agreement to evolve through time and eventually include climate change considerations. It can also be expected that the environmental provisions of the USMCA will serve as a starting point for the negotiation of future trade agreements.

Anne-Catherine Boucher

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Anne-Catherine Boucher is an environmental lawyer at Blakes, Cassels & Graydon LLP in Montreal, Canada. She advises clients on a broad range of environmental matters, including permitting and environmental assessment processes, regulatory obligations with respect to greenhouse gas emissions, the rehabilitation of contaminated sites, and environmental investigations and prosecutions.