Long after Donald Trump ceases to be President, the newly renegotiated North American Free Trade Agreement may be harming the environment. As Ben Beachy of the Sierra Club describes it, the new agreement “will encourage further outsourcing of pollution and jobs, includes special handouts to some of the world’s most notorious polluters, [and] would help lock in fossil fuel dependency.”
Beachy was discussing the United States, Mexico and Canada Agreement, or USMCA, a name that seems designed to be hard to remember or know how to pronounce. The full text of the agreement, designed to replace NAFTA, was released on October 1, but must be verified to come into effect.
Besides continuing NAFTA’s quarter century legacy of environmental degradation, the USMCA has new wrinkles likely to worsen pollution. It moves backwards from current language included in the most recent free trade agreements signed by the U.S., to protect endangered species, ocean health, and wetlands, among other issues.
And it doesn’t even mention climate change.
It does have a few provisions that might help the environment. U.S. farmers appear relieved by the stability it offers, and labor should be happy, since several provisions seem designed to help working people.
While labor unions are reluctant to discuss the USMCA until they have time to fully review the complex agreement, United Auto Workers President Gary Jones put out a statement that “the idea and concept of the USMCA could have the potential to provide some needed relief for America’s working families.” He added that “Given the history of loopholes in NAFTA, the UAW will withhold final judgment until all the pieces are put in place in order to determine whether this agreement will protect our UAW jobs and the living standards of all Americans.”
Most notable of the pro-labor provisions is the requirement that 40 percent of the components in cars produced in the three countries must be made by labor paid at least $16 an hour. This may leave companies vulnerable to foreign competition, but overall will boost wages.
Pro-labor provisions may leave companies vulnerable to foreign competition, but overall will boost wages.
In addition, the USMCA requires Mexico to make it easier for workers to form unions.
“These rules are a first step,” Manuel Perez-Rocha of the Institute for Policy Studies tells me in an email. “However, there are also strong concerns about the lack of specific mechanisms for enforceability.”
Perez-Rocha expects that the incoming administration of Mexico’s newly-elected president, Andrés Manuel López Obrador, often known as AMLO, will also facilitate improved collective bargaining rights.
Overall, the labor rules in the new agreement are “better than the original NAFTA,” says Sujata Dey, trade campaigner for the Council of Canadians, even though they still don’t “have enough teeth to really fight against the globalizing impulses which are bringing wages down and bringing in more inequality.” The proof is always in the enforcement. Trade agreements can contain many pretty words that are never implemented.
If the United Auto Workers and other unions do throw their support behind ratifying the USMCA, the agreement could lead to a split between labor and environmentalists. Beachy, however, argued for solidarity, explaining that labor and environmental organizations “share a common cause in calling for strong and binding labor and environmental standards with swift and certain enforcement.”
One change that ought to greatly hearten environmentalists and labor groups alike is the removal of the Investor State Trade Dispute Settlement (ISDS) mechanism. Bitterly opposed by environmental and labor groups alike, ISDS has been in multiple trade agreements since NAFTA. Its critics charge that it allows corporations to attain huge financial settlements, chilling government regulations to protect workers and the environment.
Under the USMCA, ISDS will be phased out in Canada in three years and will be partially phased out in Mexico.
Yet the USMCA giveth and the USMCA taketh away. The Mexican exceptions to removing ISDS include U.S. oil and gas companies, which will have a variety of tools to block environmental laws. Chevron and Exxon Mobil, “the number one and number two largest climate polluters in history,” will thus be protected, says Beachy. This is like “keeping away all animals from the henhouse, except for foxes.”
This is like keeping away all animals from the henhouse, except for foxes.
Perez-Rocha further characterized the new agreement as unfair to Mexico, calling it “inconceivable that ISDS, while apparently scrapped for the U.S. and Canada, remains for Mexico, creating a two tier system.” Although Obrador has agreed to abide by the new agreement, this may prove too constraining once he is in office. Perez-Rocha thinks that when Obrador “tries to improve things in the Mexican countryside he will realize he will need changes” in the new agreement also.
For Dey, too, the USMCA will intrude on national sovereignty, in this case Canada’s. She explains that, despite the removal of ISDS, rules in the new agreement would enable, for instance, an energy company building a tar sands oil pipeline to influence regulations and even legislation, since it will now be privy to details in advance. This will likely also hinder Mexico’s transition to a clean energy economy, says Beachy.
Another key weakness in the original NAFTA that the USMCA would largely maintain is the ability of companies to export pollution to countries with lower environmental standards, in this case Mexico. This has happened with the dumping of lead waste, since Mexico’s standards are only a tenth as strong as those of the United States. Globally, waste often ends up in poor countries, where it poisons the air and water.
Climate pollution is also being exported to countries with lower standards as factories move to developing countries (although, of course, it ultimately affects us all). Dey explains that the agreement “doesn’t mention the [United Nations] Paris climate agreement at all, doesn’t actually have a section to deal with global warming.” Without binding standards, it will be virtually impossible for countries to meet their climate emissions targets, says Beachy.
Climate change isn't even mentioned.
Another holdover from NAFTA is a rule that “bars the U.S. government from determining whether or not gas exports to Mexico are in the public interest,” adds Beachy. This means that the USMCA will encourage fracking in Texas for export to Mexico along with additional cross-border pipelines.
Beachy also points to two steps forward in environmental protections: Canada will no longer be mandated to exporting tar sands oil to the United States, due to the elimination of the proportionality rule that, under NAFTA, forced Canada to maintain oil exports to the U.S. In addition, fishery protections will be strengthened. Yet these two glimmers of hope only begin to point to the robust environmental policies and enforcement standards that should be included in free trade agreements, says Beachy.
Another key issue that affects both the environment and trade is Canada’s protection of its dairy industry, which will be weakened under the USMCA. This will allow “huge farms with big emissions” to undercut “buy local” movements and family farms, says Dey. It also means that Canadians will be exposed to milk from animals given growth hormones that are illegal in Canada.
Finally, Dey mentions, new rights for pharmaceutical companies will raise the price of drugs. Americans used to buying (relatively) inexpensive drugs from Canada may see prices rise dramatically on life-saving medication.
Given its many weaknesses, but also a few strengths, the USMCA can be expected to generate a bruising battle in the U.S. Congress, not to mention Mexico and Canada. Environmental groups will almost certainly oppose it, but the position of labor organizations remains to be seen.