Marking the 20-year anniversary of the passage of the North American Free Trade Agreement, the Sierra Club published a report on NAFTA’s impact and legacy.
By eliminating most trade tariffs between the United States, Canada, and Mexico, NAFTA indeed helped to revitalize trade between these countries and has likely contributed to economic growth. Though intraregional trade began to spike prior to NAFTA’s implementation, NAFTA has certainly expanded trade liberalization. In principle, the deal represents an admirable focus on regional trade integration.
However, NAFTA’s successes are undercut by its deplorable treatment of the environment, of local communities, and even of governments. Its lax environmental “side agreement” carves out avenues by which multinational corporations can evade regulation, resulting in a model of weak public interest laws and corporate profits favored over policy.
NAFTA’s structure has proven inadequate for truly achieving its goals of generating jobs and bolstering economies. Its failures are most visible in Mexico, which has seen growth in its manufacturing sector at the expense of the environment, of the middle class, and of the legal safeguards meant to roadblock abuse.
Big Agribusiness in Mexico
Prior to NAFTA, Mexico’s working class was largely comprised of subsistence farmers who grew corn and other regional crops. As the Mexican economy began to liberalize and privatize under NAFTA, public support systems were dismantled, leaving poor farmers to compete with large agribusiness:
“NAFTA encouraged the growth of large-scale, export-oriented Mexican farms, which significantly destabilized the livelihoods of poor Mexican farmers. By eliminating the tariffs and quotas that had been used to control and manage trade in agricultural products, NAFTA opened Mexico’s agricultural sectors to the full demand of U.S. consumers for fresh fruits and vegetables. However, only-large scale agribusinesses had the information, resources, and transportation networks necessary to respond to these changes and shift their farming activities towards the production of these export-oriented food commodities.”
Large-scale farming not only destabilizes local farming communities, but also threatens the environment in vulnerable areas. As the Sierra Club reports, Mexico’s large-scale farms, which require large-scale irrigation, are located, more often than not, in water-stressed regions.
Similarly, the genetically modified corn crops the U.S. produces for export “are estimated to have added 77,000 tons of nitrogen, phosphorus and other chemicals into U.S. waterways, with this pollution affecting the already polluted Mississippi River Delta the most.”
The Impact of Maquiladoras
NAFTA has leveled the landscape of not only Mexico’s farming economy, but also of its manufacturing sector. Export-oriented factories called maquiladora plants boosted Mexico’s exports following NAFTA’s passage, but these foreign-owned companies have not helped Mexican workers. On the contrary, the proliferation of maquiladoras caused wages to stagnate and adds a dearth of environmental troubles to the country’s list.
In 1997, all industries in Mexico generated an estimated 12.7 million tons of hazardous waste, 10.5 million of which were attributable to the chemical industry. Further, “only about 10 percent of Mexico’s hazardous waste receives proper treatment, which means that millions of pounds of toxic waste have contaminated the Mexico-U.S. border since the signing of NAFTA,” the report states.
NAFTA encourages pollution-intensive manufacturing sectors, and all three North American countries have felt the environmental effects. Cross-border traffic has leapt since NAFTA was passed, and idling vehicles at passover points spurt carbon emissions into the air. “Between 1997 and 2001, more than 36,000 were rushed to emergency rooms in the border city of Ciudad Juarez due to breathing problems. During the same time period, one-third of infant deaths in Ciudad Juarez were found to be related to respiratory illness,” according to the Sierra Club.
Policy Pitted Against Profit
In theory, NAFTA should be environmentally accountable. The North American Commission for Environmental Cooperation (CEC) was established to oversee NAFTA’s impact on the environment.
The CEC’s recommendations, though, are non-binding. Thus “the potential environmental achievements of the CEC have been circumscribed by its limited mandate” and a paltry $9 million budget. Mexico incurred $120 billion in environmental damages in 2010, and “the CEC has been too institutionally weak or poorly funded to play a meaningful difference.”
NAFTA’s Chapter 11 on investment also stacks the cards against public policy. Unlike the CEC’s recommendations, NAFTA’s policies on how countries deal with foreign corporations are legally binding. Investors are guaranteed “fair and equitable treatment,” which has meant “the right to claim damages simply when the value of an investment has been reduced.”
As a result, environmental regulations are consistently attacked under NAFTA. These complaints are settled in private trade tribunals, which bypass domestic court systems and are all too frequently used by corporations aiming to dodge environmental safeguards.
The International Centre for Settlement of Investment Disputes (ICSID) is the arbitration tribunal most frequently consulted. Last year it had 169 cases pending for oil-, mining- or gas-related issues. In 2000, there were three such cases pending.
One example of the types of cases tribunals see: In 1997 the local government of a Mexican town contaminated with 20,000 tons of toxic waste denied a U.S. landfill management firm the permission to build an additional toxic waste site. The tribunal ruled in favor of the firm, and the Mexican government was charged a compensation fee of nearly $16 million.
Outlook for NAFTA and Trade Deals
Though NAFTA is deeply flawed, it was the first multilateral, free-trade agreement of its kind, and as such it has been cast as something of a model. Modifications to NAFTA are often suggested by policymakers and talking heads, including President Obama–but due to political factors, renegotiations have not been achieved. Obama, for one, highly values the image of a strong North America and therefore has avoided changing the U.S.-Canada-Mexico trade relationship.
When new trade agreements like the Trans-Pacific Partnership (TPP) are proposed, they often reflect NAFTA in design. The TPP will apply to 12 countries, and it “stands to replicate many of the worst elements of NAFTA,” including skewed investor-state dispute settlements and environmental nightmares.
NAFTA did represent, in 1994, an impressive move toward intraregional trade. Over its 20-year lifespan, however, its measurable effects have shown to cause more harm than good. The NAFTA model is ill-suited to our current economic and environmental realities, crippling working classes and local governments while devastating our air and land.
At this 20 year mark, we need to shift our attention toward building truly cooperative trade agreements–ones that honor public interest, local economies and the planet at large.