Transboundary Environmental ImpactAssessment Under the North AmericanFree Trade Agreement

I. IntroductionThe environmental effects of modern development are increasingly being recognized not only as local or regional problems, but as national and international concerns.1 Consider this statement by the Commission on Environmental Cooperation:Now more than ever, we live in an interconnected, integrated world. Information and financial investments move electronically at the speed of light. And the intercontinental movement and transfer of people, raw materials, manufactured goods, invasive species, and diseases occur in hours or days. The most remote ecosystems and the cells of every human being contain persistent toxic substances made, traded, and released to the environment by other humans. Animals and plant species, many much older than we, are going extinct at unprecedented rates, often because of decisions and actions taken by humans half a world away.2The increased recognition of environmental problems as issues of international-or transboundary-concern demonstrates the insufficiency of national solutions to address certain environmental problems.3 The recognition that national solutions are no longer sufficient illuminates a weakness in international trade agreements that have traditionally emphasized liberalized trade, while addressing environmental issues only minimally, if at all.4Free trade agreements are premised on the idea that all nations involved in the agreement benefit from trade that is free (or freer) from restrictions-that is, an equal playing field.5 However, a free trade agreement no longer lives up to its "free" character if the agreement allows one nation to gain a competitive trade advantage over another by exporting the environmental costs-or negative externalities-onto another nation. In other words: "If the basis for the price of a product does not incorporate the costs of cleaning up the mess made in the process of producing the product, the costs are being externalized, that is, dumped upon other parties."6 By exporting the negative environmental costs of an action, a nation gains for itself and the polluter the equivalent of a subsidy on that action.7 Put differently, the goal of creating an equitable playing field for trade between the signatory nations is undermined if the environmental consequences of economic action can be exported without trade consequences.The goal of an equal playing field can also be subverted if a nation chooses to have lower environmental standards in exchange for the economic advantage of cheaper production costs. Such a domestic policy choice can produce the equivalent of a subsidy on that nation's production by reducing environmental compliance costs. This can result in a distortion in trade by making that nation's goods appear artificially cheap. This balance between economics and environmental protection is, however, one that all nations must strike. As long as the environmental costs of the domestic policy occur within the nation setting that policy there is less of an unfair distortion; rather, that nation is simply choosing to expend its "natural capital" in exchange for economic growth. It is only when the negative environmental consequences are exported onto other nations that such a decision begins to severely subvert the purposes of liberalized trade.Although there is a fundamental inequity inherent in gaining the benefits of a free trade agreement while exporting the negative environmental consequences to another signatory, this inequity has not yet resulted in a solution in the North American context.8 A logical solution would be a transboundary environmental impact assessment (TEIA) mechanism implemented under the North American Free Trade Agreement (NAFTA)9 to ensure that nations are on an equal footing with regard to exported environmental harm. To this purpose, Part II of this Note first examines the potential for transboundary environmental harms in North America.10 Part II then considers the possible benefits of a TEIA mechanism in mitigating or reducing that harm. …