Free Trade Agreements: Office of the U.S. Trade Representative Should Continue to Improve Its Monitoring of Environmental Commitments
Published: 2014-11-06T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The United States has signed free trade agreements that lower barriers to trade with 20 countries, including 5 Central American countries and the Dominican Republic. Reflecting Congress's interest in balancing commercial interests with environmental protection, the United States and FTA partners have agreed to strengthen environmental protection. In 2009, GAO recommended improved FTA monitoring. GAO was asked for an update.
This report examines, among other things: (1) steps selected partners have taken, with U.S. assistance, to implement FTA environmental commitments; (2) resources to assist partners in implementing environmental commitments; and (3) U.S. agency monitoring of cooperation activities and partner compliance with their FTA environmental commitments.
GAO reviewed FTA environmental provisions and cooperation agreements; analyzed U.S. funding data for cooperation activities from fiscal years 2003 through 2013; and evaluated documentary and testimonial evidence. GAO visited Guatemala and El Salvador, two of six CAFTA-DR countries, and Peru and Chile, and met with U.S., host government, private sector, and NGO officials. GAO selected these countries because they reflect a range of per capita income, U.S. assistance, environmental progress, and challenges.
section_title: What GAO Found
paragraphs: The four free trade agreement (FTA) partners that GAO selected for this review all passed environmental laws and established institutions to improve environmental protection, in line with their FTA commitments to strive to improve their laws on and levels of environmental protection. For example, Chile created enforcement agencies and modernized its system for evaluating the environmental impact of projects; El Salvador launched a National Environmental Strategy; and Guatemala created a unit to verify compliance with natural resource protections. According to U.S., Peruvian, and nongovernmental organization (NGO) officials, U.S. assistance has helped Peru improve management and monitoring of its forest resources. However, each FTA partner continues to face challenges in capacity and enforcement of environmental protection.
Peruvian Officials Conduct Timber Inspection
U.S. resources for cooperation activities have declined since 2009 because of shifting priorities. Peru and countries in the Dominican Republic–Central America–United States Free Trade Agreement (CAFTA-DR) received 90 percent of the roughly $151 million of total funding for FTA cooperation activities from fiscal years 2004 through 2013. CAFTA-DR countries received over $87 million from fiscal years 2004 through 2013, and Peru received nearly $49 million from fiscal years 2009 through 2013. However, in fiscal year 2013, U.S. funding for environmental cooperation activities to CAFTA-DR countries was 18 percent of its 2009 level, and funding for Peru FTA activities was 41 percent of its 2009 level.
The Department of State has improved monitoring of environmental cooperation activities since 2009, and the Office of the U.S. Trade Representative (USTR) developed a plan for monitoring partner compliance with FTA environmental commitments. However, USTR's monitoring lacks timeframes and performance indicators to measure partner progress in meeting FTA environmental commitments. In addition, the U.S.-Peru bilateral action plan addresses specific challenges in Peru's forestry sector and identifies actions for Peru to take, but does not include timeframes and indicators. Lack of timeframes and performance indicators precludes stakeholders and the public from having a clear understanding of the extent to which Peru is meeting its commitments since agreeing to the terms of the bilateral action plan.
section_title: What GAO Recommends
paragraphs: GAO recommends that USTR establish timeframes and indicators to assess the extent to which Peru is meeting commitments in the bilateral action plan and establish timeframes and indicators to implement its plan for enhanced monitoring across all FTA partner countries.

section_title: Letter
paragraphs: Free trade agreements (FTA) phase out barriers to trade in goods with  particular countries or groups of countries and contain other commitments  to open access for services and investment, and have become an  important component of U.S. trade policy. By 2014, the United States had  signed free trade agreements with 20 countries, including 5 Central  American countries and the Dominical Republic as part of a regional  arrangement known as the Dominican Republic–Central America–United  States Free Trade Agreement (CAFTA-DR). These 20 countries are as  diverse as Australia, Chile, Colombia, Honduras, Korea, Morocco, Oman,  Panama, and Peru. The United States is also in negotiations on a  proposed regional Asia-Pacific trade agreement, known as the Trans- Pacific Partnership, and a free trade agreement with the European Union  known as the Transatlantic Trade and Investment Partnership.
Congress expressed an interest in balancing U.S. commercial interests  with other goals, including environmental protection, when it gave the   In addition, the May 10,  President trade promotion authority in 2002.2007 Bipartisan Agreement on trade policy between congressional  leadership and the administration committed the United States to  negotiate for strengthened environmental provisions in FTAs, among  other things. For example, the May 10, 2007 agreement called for FTA  environmental obligations to be enforced with the same remedies,  procedures, and sanctions as FTA commercial obligations. In addition,  the agreement recognized a previous U.S. commitment to work with Peru  on comprehensive steps to address illegal logging and to restrict imports  of products that are harvested and traded in violation of the Convention  on International Trade in Endangered Species of Wild Fauna and Flora  (CITES). Certain FTAs also create a process that allows members of the  public to formally raise concerns if they believe that a party is not  effectively enforcing its environmental laws. This is known as a “public  submissions” process.
In 2009, we issued a report on four of the first FTAs concluded under  2002 trade promotion authority and made recommendations to improve  how U.S. agencies monitor implementation of those FTAs. We  recommended that the Department of State (State) work with other  agencies to develop a more structured approach to manage and monitor  the implementation of environmental projects and that the Office of  the  United States Trade Representative (USTR), in cooperation with other  agencies, prepare updated plans to implement, enforce, monitor, and  report on compliance with and progress under the FTAs’ environmental  provisions. In 2012, we found that State and USTR were making progress  to address our recommendations.partner progress and compliance with FTA environmental provisions is  discussed later in this report.
You asked us to provide an update on agency and partner actions,  including the current status of partners’ implementation of FTA  environmental commitments, and to review U.S. monitoring and  enforcement efforts. This review of FTA environmental provisions  examines (1) steps selected partners have taken, with U.S. assistance, to  implement FTA environmental commitments; (2) selected partner  mechanisms to process public environmental submissions; (3) U.S.  resources to assist partners in implementing environmental commitments;  and (4) U.S. agency monitoring of cooperation activities and partner  compliance with their FTA environmental commitments.
To address these objectives, we reviewed text and associated annexes of  the environmental chapters of 11 FTAs that went into effect (that is,  entered into force) from 2003 through 2013; the May 10, 2007 Bipartisan  Agreement; and reports and other FTA documents such as environmental  cooperation agreements, work programs, and FTA implementing  legislation.
We met with officials from State and USTR who are, respectively,  responsible for implementing and monitoring partner cooperation projects  and enforcing compliance with FTA commitments. We also met with  officials from other U.S. agencies involved in carrying out environmental  cooperation activities with FTA countries, including the United States  Agency for International Development (USAID), the Department of the  Interior (Interior), the Department of Agriculture’s U.S. Forest Service, the  Environmental Protection Agency (EPA), the Department of Commerce’s  National Oceanic and Atmospheric Administration (NOAA), and the  Department of Justice (Justice). We also made site visits to El Salvador,  Guatemala, Peru, and Chile, where we met with U.S. and host  government officials and representatives of the private and public sectors,  to obtain firsthand perspectives and current information on partner efforts,  the nature and impact of cooperation activities, and ongoing challenges.  We selected countries for site visits and associated FTAs on which to  focus based on several factors, for example FTAs that entered into force  before the May 10 2007 Bipartisan Agreement (CAFTA-DR, which  includes El Salvador and Guatemala) and after (Peru), and to follow up  on a country that had been one of the four covered in our 2009 report  (Chile). These countries also reflect a range of income, U.S. assistance,  environmental progress, and challenges. We also met with officials at the  CAFTA-DR Secretariat for Environmental Matters, which is responsible,  on behalf of CAFTA-DR signatories, for receipt, evaluation, and reporting  on environmental submissions. In Geneva, Switzerland, we met with  officials, including the Secretary General of CITES, since protection of  certain CITES-listed species is specifically referenced in the Peru FTA, as  well as with officials from the United Nations Environment Program and  the World Trade Organization. We also discussed monitoring of CAFTA- DR partner progress with officials from the Organization of American  States, in Washington, D.C. To obtain information on U.S. resources to  help FTA partners improve environmental protection and meet FTA  commitments and to assess U.S. agency monitoring, we interviewed  USTR, State, and USAID officials, and obtained and reviewed data and  documents. See appendix I for further details of our scope and  methodology.
We conducted this performance audit from August 2013 to November  2014 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: FTAs—which phase out barriers to trade in goods with particular  countries or groups of countries and contain rules designed to improve  access to foreign markets for U.S. goods, services, and investment— remain a major component of U.S. trade policy. Collectively, according to  USTR, FTAs with 20 countries accounted for about 40 percent of U.S.  trade in goods in 2013. Eleven of these 20 FTAs were negotiated under  trade promotion authority in the Trade Act of 2002, went into effect from  2003 through 2013, and involved 16 partner countries.
The 20 FTAs involve partners ranging from high income countries such  as Australia, Bahrain, Singapore, Chile, Korea, Oman, and Canada to  lower middle income countries such as Morocco, El Salvador, Guatemala,  Honduras, and Nicaragua. Colombia, Costa Rica, the Dominican  Republic, Jordan, Mexico, Panama, and Peru are upper middle income  countries. The two CAFTA-DR countries (El Salvador and Guatemala)  and the two countries with bilateral FTAs (Peru and Chile) that we visited  reflect a range of national per capita incomes. See fig.1.
Chile, El Salvador, Guatemala, and Peru also face a range of  environmental challenges.
Chile—According to Chilean officials, the country’s environmental  challenges (described later in this report) relate to natural resource  and extractive industries, including mining, fishing, forestry, and  agriculture. For example, Chile’s agriculture and mining sectors are  water-intensive, placing strains on its water supply. Chile is a top  producer and exporter of fish, and mitigating the fishing sector’s water  pollution and impact on ecosystems is a challenge.States and Chile have been working together under the framework of  the FTA as well as a June 2003 environmental cooperation  agreement and related work program to assist Chile in addressing its  environmental challenges and FTA commitments.
El Salvador and Guatemala—countries under CAFTA-DR. According  to Salvadoran and Guatemalan officials, environmental challenges  facing one or both of these countries include preservation of  biodiversity and threats to endangered species, water and air  pollution, deforestation, and degradation of marine resources. To  assist these countries in addressing their environmental challenges  and FTA commitments, the United States and these countries have  been working together under the framework of the FTA as well as a  February 2005 environmental cooperation agreement and related  work programs.
Peru—Peru has about 13 percent of the world’s tropical forests.
These forestry resources include forestry concessions used for  logging, natural protected areas, and reservations for indigenous  communities.  Peru’s myriad environmental challenges include  deforestation and water contamination from small mining operations.  Because of concerns related to illegal logging, the FTA included an  annex on forest sector governance. To address Peru’s environmental  challenges and FTA commitments, the United States and Peru have  been working together under the framework of the FTA as well as a  July 2006 environmental cooperation agreement and related program.
subsections: section_title: Recent FTAs Contain Environmental Provisions in Environmental Chapters
paragraphs: The 11 agreements negotiated under trade promotion authority include  environmental chapters as part of the agreements.  The environmental  chapters contain several provisions that call for strengthened  environmental protection and allow for increased public participation in  the implementation of environmental provisions. For example, the 11  FTAs include provisions for formal opportunities and mechanisms for  public participation in government environmental decision making. Four of  the 11 FTAs additionally provide for submissions to a secretariat by  persons or organizations of an FTA partner country asserting that the  FTA partner country is failing to effectively enforce its environmental laws;  the secretariat is to consider these claims and may develop a report,  known as a “factual record,” about them. CAFTA-DR, which entered into  force in 2006, was the first to include such a mechanism, and the Peru  FTA also includes one. The three FTAs that were the focus of our review  (Chile FTA, CAFTA-DR, and Peru FTA) contain provisions regarding  partner countries’ levels of protection and strengthening of their  environmental laws. For example, these three FTAs commit each partner  country to ensure that its laws provide for high levels of environmental  protection and to strive to continue to improve those laws or levels of  protection; to strive to ensure that it does not waive or otherwise derogate  from such laws in a manner that weakens or reduces the protections  afforded in those laws as an encouragement for trade with another party;  and to ensure that judicial, quasi-judicial, or administrative proceedings  are available under its laws to sanction or remedy violations of its  environmental laws. Finally, each of the three FTAs commits the parties  “to not fail to effectively enforce its own environmental laws, through a  sustained or recurring course of action, in a manner affecting trade  between the parties.” This provision is enforceable, meaning a party that  fails to comply is subject to dispute settlement, under the respective FTA.
The Peru FTA, which entered into force following the May 10, 2007  Bipartisan Agreement, also includes commitments that each party shall  adopt, maintain, and implement laws, regulations, and other measures to  fulfill certain obligations under seven listed multilateral environmental  agreements, and that the parties will not fail to enforce their laws,  regulations, and other measures to fulfill those multilateral environmental  agreement obligations. Unique among FTAs, it also contains an annex on  forest sector governance with detailed requirements pertaining to  improved forest management and protection of CITES-listed endangered  species, including big-leaf mahogany and Spanish cedar.
According to USTR officials, an Environmental Affairs Council, involving  both trade and international environment ministries of the FTA parties  (State and USTR in the United States), is charged with overseeing the  FTA environmental chapter. Each of the 11 FTAs includes an article on  environmental cooperation that provides for, among other things,  negotiation of a separate agreement on environmental cooperation  among the parties to the FTA. State has the lead in negotiating and  administering these agreements, which have typically been concluded  about a year after the FTAs enter into effect; implementation is overseen  by an Environmental Cooperation Commission.  Environmental  cooperation is programmed through agreed-upon work plans covering  specified periods, and involves such activities as professional exchanges,  workshops, and in-country projects aimed at improving laws, institutions,  and practices that may involve U.S. funding.
section_title: State Is Responsible for Overseeing Cooperation Activities and USTR for Monitoring Compliance with FTA Commitments
paragraphs: State is primarily responsible for overseeing implementation of  environmental cooperation activities, while USTR is responsible for the  negotiation and administration of trade agreements and has lead  responsibility for monitoring and enforcing compliance with FTA  commitments. State supports cooperation activities that enable FTA  countries to develop capacity to meet their FTA environmental  commitments.areas carry out cooperation activities. According to USTR officials, they  rely on a network of other agencies to support their monitoring and  enforcement functions. Accurate monitoring is necessary to track the  extent to which partners are complying with FTA commitments and  ensure that resources are targeted to areas where they can be most  effective, according to U.S. officials.
section_title: Partners Have Taken Steps to Improve Enviromental Protection, with U.S. Assistance, but Continue to Face Challenges
paragraphs: According to officials in Chile, Peru, El Salvador, and Guatemala, their  countries passed or made changes to their environmental laws and  established or strengthened environmental institutions since signing their  respective FTAs. U.S. agencies worked with these partners under  environmental cooperation agreements to help them build capacity to  meet FTA environmental commitments. However, these countries  continue to face challenges, including limited technical capacity and  inadequate resources for enforcing environmental protection.
subsections: section_title: FTA Countries Have Passed Environmental Laws and Established or Strengthened Environmental Institutions
subsections: section_title: Chile
paragraphs: According to State, Chile has taken steps to strengthen environmental  standards since signing the FTA and improved enforcement of its  environmental laws. In addition, according to Chilean officials, the country  continues to take steps to increase transparency of government  information on the environment and has made progress in increasing  public participation in government environmental decision making.  According to U.S. and Chilean officials, much of the progress was the  result of a new environmental law, approved in 2010 that they said  reformed the country’s environmental framework by establishing new  agencies. For example:
Environment Ministry—along with the president, is responsible for  designing and implementing environmental policies, plans, and  programs.
Environmental Superintendency—responsible for enforcing  environmental laws and regulations, including assessing fines and  sanctions for violations.
Environmental Evaluation Service—responsible for managing and  modernizing Chile’s environmental impact assessments for both  public and private sector projects to ensure compliance with  applicable environmental standards.
Environmental tribunals—responsible for judicial review of  Environmental Superintendency decisions and settling environmental  challenges or resolution of environmental damage claims, and hearing  other environmental cases.
section_title: CAFTA-DR: El Salvador and Guatemala
paragraphs: According to Salvadoran officials, a key step in El Salvador’s meeting its  CAFTA-DR environmental commitments was the 2012 reform of its 1998  Environmental Law. The law established the Ministry of Environment and  Natural Resources, with the authority to protect the environment and  conserve, restore, and promote the use of natural resources. The ministry  is responsible for implementing the environmental law as well as the  Natural Protected Areas and Wildlife Conservation laws. According to  Salvadoran officials, the 2012 reform allowed for the creation of  environmental tribunals and establishment of the tribunals as legal  authorities responsible for determining the civil liability for acts against the  environment. According to State officials, another important step was  taken in 2013, when the ministry launched its National Environment  Policy and Strategy to address sanitation, biodiversity, climate change,  and water resources. In addition, according to a Salvadoran official, the  establishment of an environmental “hotline” in 2011 increased the  opportunity for public participation in oversight.
According to a Guatemalan official, Guatemala’s legal reforms  established a Ministry of Environment and Natural Resources in 2000.  The ministry is responsible for formulating and implementing  environmental policies and approves and oversees compliance with  environmental impact assessments. Guatemala joined the CITES  convention in 1980. According to a Guatemalan Environment Ministry  official, its 2013 climate change legislation was another important step in  meeting the CAFTA-DR environmental commitments.regulations are included in other sector-specific laws and regulations,  including the Forest, Hydrocarbons, and General Fishing and Aquaculture  laws, according to a ministry official. According to this official, other key  steps include the ministry’s creation in 2011 of the Environmental Auditing  Unit and the setting up of the environmental hotline for persons to make  environmental submissions.
Although we focused on El Salvador and Guatemala for our site visits,  CAFTA-DR officials we met with in Washington, D.C., provided examples  of steps their countries have taken to improve environmental protection.  For example, according to these officials, Honduras improved waste  water treatment; the Dominican Republic created programs for issuing  environmental permits; and Costa Rica increased its use of renewable  energy.
section_title: Peru
paragraphs: U.S., Peruvian, and NGO officials credit the FTA with helping the country  take steps to improve environmental protection. Peruvian officials cited  actions that include establishing the Environment Ministry, with an  investigative arm, to verify compliance with environmental legislation and  oversee the process of obtaining environmental impact assessments;  establishing an independent forestry oversight body to conduct audits of  forestry concessions and take administrative enforcement actions, assess  monetary fines, and cancel concessions for noncompliance; and enacting  a new Forestry and Wildlife Law in 2011. According to State officials,  Peru also undertook a public consultations process to collect input from  all interested stakeholders, including indigenous communities, on draft  implementing regulations for the new law. In addition, according to USTR,  Peru did the following: adopted laws and administrative procedures for managing and  supervising the issuance of export permits for big-leaf mahogany and  Spanish cedar, two endangered CITES-listed timber species;  strengthened the Organismo de Supervision de los Recursos  Forestales y de Fauna Silvestre (OSINFOR), an independent forestry  oversight body that conducts post-harvest audits to limit illegal  logging; amended the criminal code to include substantial penalties for illegal  activities related to the environment, such as illegal logging and  wildlife trafficking; developed and began implementing a national anti-corruption plan for  forestry and wildlife.
According to U.S., Peruvian, and NGO officials, the FTA helped motivate  Peru to establish its National Forest Service and increase staff and  capacity of OSINFOR. For example, according to Peruvian officials, post- harvest verifications of concessions increased from 49 in 2009 to 1,255 in  2013. According to the Ministry of Culture, which is responsible for  addressing issues that affect indigenous people, since entry into force of  the FTA and enactment of the new environmental laws, Peru has taken  steps to increase consultation with indigenous groups during the drafting  of regulations to help them benefit from resources located on their  traditional lands.implementation of the new environmental law and sustainable actions for  environment protection will require finalization and implementation of  regulations, and setting up viable mechanisms to assure the law is  implemented.
section_title: U.S. Assistance Helped Partners Build Capacity to Meet FTA Commitments
subsections: section_title: Chile
paragraphs: The overall objective of U.S. environmental cooperation with Chile was to  establish a framework for cooperation to promote the conservation and  protection of the environment, the prevention of pollution and degradation  of natural resources and ecosystems, and the rational use of natural  resources in support of sustainable development. According to U.S. and  Chilean officials, Chile benefited from cooperation activities, including  exchange programs with EPA, Interior, the Park Service and NOAA. For  example, in 2010, Chilean officials traveled to the United States to  observe how EPA addresses environmental disasters. According to  officials from the Ministry of Environment, assistance provided by Interior  and EPA in the areas of biodiversity, oversight of protected areas,  conservation of endangered species, and implementation of multilateral  environmental agreements has been valuable. Chile continues to receive  help in meeting FTA commitments. For example, a World Wildlife Fund  official described the fund’s work with the Chilean government, under a  grant from State, to help Chile  implement its 2013 fishing and  aquaculture law, which aims to protect vulnerable marine ecosystems and  bring Chile’s practices in line with international standards.
Chilean officials stated that EPA and Interior helped them establish the  new Risk Assessment Unit at the Ministry of Environment, focusing on  hazardous chemicals and pesticides and their impact on biodiversity. As  part of this effort, EPA and Interior hosted Chilean officials in the United  States to share best environmental practices for mining, strengthen  processes for mine closure, and improve risk assessment and evaluation  through workshops and a study tour, according to EPA officials. EPA also  provided assistance for managing risk assessment related to working and  closed mines. According to Chilean Ministry of Environment officials, in  2014, the Risk Assessment Unit plans to complete a map of  contaminated areas and implement the National Environment Risk  Assessment Plan that it developed in 2012, with assistance from EPA.
Since 2004, the government of Chile has worked in partnership with  NOAA to develop a cooperation program on marine protected areas that  includes training. Since 2009, NOAA’s National Ocean Service has  worked with the National Park Service to establish an interagency  cooperation program on marine and terrestrial protected areas with the  government of Chile. Representatives of Chile’s Forest Service we met  with in Santiago indicated their agency has had a very good relationships  with several national parks, with Interior’s National Park Service, and the  U.S. Forest Service under “sister park-to-park memorandums of  understanding.” For example, there is a 5-year agreement with Yosemite  National Park and an arrangement with Redwood National Park in  California that have enabled Chilean Forest Service officials to make  several U.S. visits to observe how to manage wildfires. According to  Chilean  Environment Ministry officials, in 2009, NOAA, with the support  of the National Park Service, organized a Chilean delegation visit to  Glacier Bay National Park and Preserve, and 2 years later, the United  States and Chile developed the first bilateral marine-related sister park  agreement.
section_title: CAFTA-DR: El Salvador and Guatemala
paragraphs: According to State, the CAFTA-DR parties identified the following four  thematic areas for environmental cooperation: (1) institutional  strengthening; (2) biodiversity and conservation; (3) market-based  conservation; and (4) private sector performance.
Government and NGO officials we met with in El Salvador and  Guatemala confirmed cooperation activities with U.S. agencies have  helped these countries improve their capacity to meet CAFTA-DR  environmental commitments. In addition, according to U.S. officials, State  and USAID have supported the operations of the CAFTA-DR Secretariat  for Environmental Matters. USAID and other agencies, including Interior,  EPA, Justice, and NOAA, supported capacity building activities to help  strengthen institutions to improve environmental protection.example, according to USAID officials, USAID supported the Central  American Commission on Environment and Development by providing  equipment and software to strengthen information and management   For  systems in El Salvador. To support biodiversity and natural resource  conservation, Interior helped El Salvador draft and adopt new legislation  to achieve CITES category 1 status, indicating that El Salvador’s  legislation fully implements the CITES agreement, according to Interior  officials. These officials stated that Interior supported the creation of the  Central American Wildlife Enforcement Network, of which El Salvador and  Guatemala are participants. The network brings together government  officials across relevant agencies to combat the illegal wildlife trade at  national and regional levels. The wide range of activities Interior worked  on for the network included arranging technical advice by the U.S. Fish  and Wildlife Service and supporting countries in developing studies to  update scientific information. According to USAID officials, to improve  private sector environmental performance and cleaner production, USAID  and the Central American Commission on Environment and Development  completed cleaner production assessments in the pig, poultry, and dairy  sectors to identify areas for savings by implementation of improved  production practices. At one dairy production facility that we visited,  USAID and its partner, the World Environment Center, provided  assistance that helped decrease the cost of production by reducing  inputs. World Environment Center consultants pointed out several  instances in which the company was wasting raw materials, energy, and  other inputs such as water, and helped the firm streamline operations,  according to an official at the facility. (See fig. 2.)
According to the Salvadoran Minister of Environment, EPA provided  expertise in areas where El Salvador could not have addressed issues  alone; for example, by providing assistance  for setting standards for lead  contamination and equipment, and advice to help set up a national water  quality reference laboratory. (See fig. 3.)
EPA and Justice participated in discussions with Salvadoran officials in  2008 regarding El Salvador’s efforts to establish environmental tribunals  and conducted a workshop on environmental adjudication for judges from  El Salvador in 2009. The Minister of Environment credited assistance  from EPA and Justice with helping the National Police and Attorney  General establish environmental units to address violations of  environmental laws and regulations. This assistance included attorneys  from Justice and EPA giving presentations and providing training in El  Salvador, Guatemala, and Costa Rica, according to Justice officials.
According to U.S. and Guatemalan officials, environmental cooperation  activities in Guatemala have helped strengthen Guatemalan institutions  and capacity to meet environmental standards and enforce its  environmental laws. According to U.S. and Guatemalan officials, USAID- supported activities helped the Guatemalan government draft a cleaner  production policy and encouraged market-based conservation. For  example, a related State-sponsored program also supported a number of  training activities and has helped introduce cleaner production into the  curriculum in universities in the CAFTA-DR countries. At the Guatemalan  Cleaner Production Center, an official told us that the project was  instrumental in expanding their work with the Ministry of Environment and  Natural Resources and private enterprises, and that it had a major impact  in both strengthening institutions and helping small- and medium-sized  enterprises participate in the cleaner production program that decreased   According to this official, U.S. support helped  electricity and water use.the center and the Ministry of Environment and Natural Resources  decrease the cost of production by reducing the waste of raw materials,  energy, water, and other inputs and helped the ministry achieve the  following key steps:  Issuing a National Cleaner Production Policy in 2010—In 2011,  Guatemala established a National Cleaner Production Committee to  implement the policy.
Conducting environmental diagnostics by sector—The center is  partnering with industry associations to help companies implement  recommended improvements.
Working in rural Guatemala—The center provided training to  familiarize 10 small- and medium-sized restaurants and hotels in the  Panajachel region with legal requirements for environmental  protection and helped them implement cleaner technology.
According to a ministry official, EPA assistance helped Guatemala set up  a reference laboratory for testing waste water by providing training,  books, manuals, and equipment that enable them to analyze chemical,  physical, and microbiological samples. According to this official, the waste  water reference laboratory is recognized as one of the best in the region.
According to Guatemalan officials, assistance from Justice and EPA  helped improve the capacity of judges and adjudicators to address  environmental issues. For example, Justice and EPA officials spoke at  two workshops for Guatemalan judges on environmental adjudication that  addressed subjects including principles of environmental law; regulations;  permits; health and ambient based standards; public participation in  environmental decision making; case management by judges. According  to these officials, workshops also addressed civil and criminal penalties.
Under a State-funded cooperative agreement (grant), the Humane  Society International conducted a number of outreach and public  awareness projects centered on biodiversity and endangered species  conservation in Guatemala and other CAFTA-DR partner countries,  according to State officials. For example, the Humane Society  International awarded grants to two NGOs in Guatemala for public  outreach campaigns that have reached 195,000 people, including  students and farmers. According to a Humane Society International  official, getting people from the public and private sectors to recognize the  importance of environmental protection and compliance is challenging,  but many, including regional government officials, are beginning to value  environmental preservation. We visited a wildlife rescue center run by a  Humane Society International grant recipient. The grant was used to help  maintain the center for endangered species, including construction of a  quarantine center for birds and mammals. (See fig. 4.)
We also visited a USAID-supported community forestry enterprise  sawmill, run by a timber industry consortium representing a group of  companies that have logging concessions in the protected area. USAID  funding to the Rainforest Alliance helped the group improve certification  of logging for timber production, according to an executive at the sawmill.
section_title: Peru
paragraphs: The objective of the U.S. environmental cooperation agreement with Peru  was to establish a framework for enhancing bilateral and regional  environmental cooperation between the parties to protect, improve, and  preserve the environment, including the conservation and sustainable use  of their natural resources. According to USTR officials, the focus of  cooperation activities was on commitments included in the FTA forest  sector annex and improvement of forest sector governance. Key themes  and objectives outlined in the work program include:  institutional and policy strengthening for effective implementation and  enforcement of environmental laws;  transparency and public participation in environmental decision  making and enforcement;  community and market-based activities; and   improved environmental performance in the productive sector.
To support these objectives and help Peru build capacity to combat trade  associated with illegal logging, enhance forest governance, and promote  legal trade in timber products, U.S. agencies supported a variety of  cooperation activities. For example, according to officials, Interior  provided assistance to help develop the institutional framework for  effective management of indigenous territories, as well as sustainable  forest, fisheries, and wildlife management. A USAID project helped Peru  develop regulations for implementing its new forestry and wildlife law and  enhance public participation in environmental decision making. In  addition, a representative from an organization representing indigenous  communities said that USAID helped his group recognize the threat that  subsistence farming by poor indigenous people poses to the forest and  identify options that are less damaging. The U.S. Forest Service is also  helping Peru build technical capacity for forest management and  monitoring, and improve institutional capacity for forest administration,  according to its officials. Forest Service officials said a key activity to help  Peru increase effective implementation and enforcement of its  environmental laws and multilateral commitments was a project to  develop a prototype for an information and control system for forest and  wildlife resources. The system tracks timber that originates from the  Amazon forest in Peru by creating electronic records of harvested timber  that allows officials to monitor the flow of the timber, including CITES- listed species. Forest Service officials also said the prototype is designed  to replace a paper-based system, which is subject to fraud and  falsification of documents, and allow operators to limit opportunities for  illegally harvested timber to enter the chain of custody. The U.S. Forest  Service has also helped Peru provide training and outreach to civil  society—particularly indigenous communities—in order to solicit  comments on the draft regulations and enhance public participation in  environmental decision making. In addition, the U.S. Forest Service  helped Peru implement an online portal to gather public comment on the  regulations, and provided training to Peru on management and analysis  of public comment. Finally, the U.S. Forest Service supported Peru in  developing the methodology, management, dissemination, and legal  framework for field-based forest inventory data as well as remote sensing  data for improved coordination and management of the Amazon forest,  according to officials. (See fig. 5.)
section_title: Partners Continue to Face Environmental Challenges, Including Limited Technical Capacity and Resources for Enforcement of Environmental Laws
subsections: section_title: Chile
paragraphs: Chile continues to face environmental challenges, including water  contamination due to mining and fish farming, according to U.S. officials.  In addition, threats to biodiversity and marine biodiversity are ongoing  concerns, according to U.S. and Chilean officials. Officials also identified  the challenge of the government’s limited technical capacity and  resources in the regions to conduct investigations and enforce  environmental laws and standards. In January 2013, the United States  and Chile approved a work program that established priorities for  cooperation activities. These priorities include strengthening  implementation and enforcement of environmental laws and encouraging  development of sound environmental practices, according to State.
section_title: CAFTA-DR: El Salvador and Guatemala
paragraphs: El Salvador and Guatemala continue to face environmental challenges,  including water pollution, deforestation, threats to endangered species,  and limited capacity and resources to enforce environmental laws,  according to U.S. officials.
According to Salvadoran officials, water quality remains a concern in El  Salvador, where only 5 percent of surface water meets water quality  standards. Other challenges include toxic waste from abandoned  industrial facilities, destruction of forests and habitat for endangered  species, air pollution, urban sprawl, solid waste pollution, coastal  pollution, and depletion of marine resources, according to officials. U.S.  officials cited limited resources and technical capacity at the Ministry of  Environment and Natural Resources to enforce environmental laws and  regulations as an ongoing challenge. Similarly, Guatemala faces  challenges including water pollution, deforestation, and illicit trade of  endangered species, according to Guatemalan officials. According to an  official from the Environment Ministry, of key concern are water  contamination and degradation of the country’s watersheds and the  impact of climate change. Guatemalan officials stated that limited  capacity and resources continue to challenge Guatemala’s ability to  enforce environmental laws. Guatemalan officials also cited the high  turnover in ministries and agencies responsible for environmental  protection as a challenge.
section_title: Peru
paragraphs: Peru continues to face environmental challenges, including illegal  activities on protected lands, illegal logging and mining, and limited  resources and enforcement capacity, according to U.S. officials.  Deforestation for agricultural production, including production of palm oil  and illegal cultivation of coca, was also cited by an industry group and  NGOs as a growing threat. They said that while the focus of the  implementation of the FTA forest sector annex is on illegal logging of  CITES-listed species, deforestation and transformation of the forest into  agriculture production, including for illegal production of coca and  expanded production of palm oil and coffee cultivation, is a significant  threat to conservation of forest resources. Timber officials said that small- scale gold mining in the forest is also contributing to deforestation in the  Peruvian Amazon forest. In addition, according to NGO officials, lack of  resources and low wages for government officials limit environmental  enforcement. An NGO official also noted that cuts in funding for  OSINFOR, the agency responsible for auditing forest concessions, has  led to a drop in inspections and limits training opportunities for regional  staff and restricts its ability to enforce sanctions. According to this official,  decentralization of authority to regional governments presents strains on  resources for environmental protection, because funds have not been  allocated to support delegation of functions from the central government  to the regions. In addition, NGO officials noted the lack of coordination  between the Ministries of Environment and Agriculture. For example,  according to an NGO official, the Ministry of Agriculture is allowing the  expansion of deforestation for agricultural production, while the Ministry of  Environment’s mission is to protect the forest from clear-cutting, which  removes all trees from a given tract of forest, threatening the area’s  ecological integrity.
section_title: Partners Are Establishing Secretariats to Process Submissions Regarding Environmental Issues
paragraphs: Representatives from the United States and other CAFTA-DR countries  have established a Secretariat for Environmental Matters. The United  States is also working with Peru, Panama, and Colombia to establish  similar institutions. The secretariat provides a means for members of the  public to submit allegations that the country is failing to enforce its  environmental laws and, by investigating and publishing the findings, can  bring pressure on the FTA countries to increase enforcement.
subsections: section_title: Negotiations to Establish the Peru Secretariat Have Taken Longer than Anticipated
paragraphs: The United States, Peru, and the Organization of American States  continued to negotiate the establishment of the Peru Secretariat for  Submissions on Environmental Matters as of July 2014, more than 5  years after the FTA entered into force. The FTA commits the United  States and Peru to establish a secretariat to receive submissions about a  party’s effective enforcement of environmental laws. In 2010, the  Environmental Cooperation Commission agreed to an Environment  Cooperation Work Program for 2011-2014, which listed establishing a  secretariat to receive submissions on environmental matters as an  objective.
According to USTR and State officials, the negotiations have included a  number of complex issues, such as the structure of the secretariat’s  substantive functions and financial issues arising from the secretariat’s  operations. As of June 2014, USTR and State officials informed us that  the United States and Peru had concluded negotiations on a bilateral  Secretariat Agreement and on three Environmental Affairs Council  decisions pertaining to issues such as staffing. USTR also indicated that  the United States, Peru, and the Organization of American States agreed  to the final terms of an agreement. According to USTR and State officials,  final documents are all expected to be signed by the parties and  approved by the council before the end of 2014.
In the absence of an operational Secretariat for Submissions on  Environmental Enforcement Matters, the United States and Peru  established an interim procedure to receive environmental submissions  from the public, consistent with the FTA. According to these procedures,  both governments shall provide written responses to submissions  addressed to them, and shall make such submissions and responses  publicly available in a “timely and accessible manner.” In June and July  2013, USTR received submissions—in the form of two letters—from an  environmental organization based in Lima expressing concerns over palm  oil cultivation in Peru to the detriment of Peru’s forests and wildlife.
On July 31, 2013, in its response to the organization, USTR indicated that  United States officials had been in touch with their governmental  counterparts in Peru and would consider raising the matter with Peru at  the Environmental Affairs Council. USTR also referred the representative  from the environmental organization to a June 2013 joint communiqué  that highlighted the interim procedure for submissions, and recommended  that the environmental organization engage with the Peru Ministry of  Trade. The organization sent updates to the June and July letters, and  USTR officials told us that they met with representatives from the  environmental organization on two occasions after providing the July  response, in November 2013 and March 2014.
section_title: U.S. Resources for Cooperation Activities Have Declined Since Fiscal Year 2009
paragraphs: U.S. funding resources for FTA-related cooperation activities have  declined since fiscal year 2009, because of a decline in CAFTA-DR  funding and shifting budget priorities. In fiscal year 2013, funding for  cooperation activities to countries under CAFTA-DR was 18 percent of its  fiscal year 2009 level, while funding under the Peru FTA was 41 percent  of its fiscal year 2009 level. In general, funding levels for cooperation  activities have varied for partner countries under FTAs for fiscal years  2004 through 2013. For example, cooperation activities in Peru and  CAFTA-DR partner countries received over 90 percent of the almost $151  million of funding for cooperation activities from fiscal years 2004 through  2013. More specifically, countries under CAFTA-DR received over $87  million in funding for cooperation activities from fiscal years 2004 through  2013, and Peru received nearly $49 million from fiscal years 2009 through   Cooperation activities in Chile received over $4 million in funding  2013.since fiscal year 2009, as well. Funding for environmental cooperation to  other FTA countries—including Morocco, Oman, Panama, and Jordan— totaled almost $10 million from fiscal years 2004 through 2013. (See fig.  7.)
State and USAID provide funds for cooperation activities, spelled out in  the environmental cooperation agreement work plans between the United  States and an FTA country in order to achieve specific long-term goals.  For example, the CAFTA-DR environmental cooperation program has  structured cooperation activities under the following five objectives: (1)  institutional strengthening for effective implementation and enforcement  of environmental laws; (2) multilateral environmental agreements,  biodiversity, and conservation; (3) market-based conservation; (4)  improved private sector environmental performance; and (5)  implementation of specific CAFTA-DR commitments. For CAFTA-DR,  State and USAID provided the largest share of funding (45 percent) for  strengthening environment-related legal institutions. For the Peru FTA,  USAID provided nearly all of the $49 million funding to support forest  conservation activities, of which 51 percent was used to implement  activities through a contractor and 49 percent through the U.S. Forest  Service. For the Chile FTA, State provided the largest portion of funding  (35 percent) for development of environmental practices and  technologies.
section_title: State and USTR Improved Monitoring, but USTR’s Process Lacks Key Elements
paragraphs: Since 2009, State has improved its management and monitoring of U.S.- funded FTA cooperation activities, by working with the Organization of  American States and a private firm that specializes in monitoring and  evaluation. According to USTR officials, a focus of its efforts to monitor  compliance and implementation of environmental commitments has been  on the Peru FTA and its Annex for Forest Sector Governance. In terms of  the remaining 19 FTA partners, USTR has taken initial steps to improve  monitoring FTA partner country compliance with environmental  commitments—such as developing a monitoring plan. However, its  monitoring plan lacks key elements, such as indicators and time frames,  to effectively track progress and partner countries’ compliance with their  FTA commitments. Internal control standards require establishing and  reviewing performance measures and indicators and conducting ongoing  monitoring to assess the quality of performance over time.
subsections: section_title: State Improved Monitoring of United States-Funded FTA Cooperation Activities
paragraphs: Since our 2009 report, State has improved its monitoring and reporting of  the results from environmental cooperation activities. In 2009, we found  that State lacked mechanisms that would allow it to assess the  effectiveness or efficiency of cooperation activities, among other things.  Since then, State has funded contracts with the Organization of American  States and a private firm to improve monitoring and evaluation, and  reporting of cooperation activities in CAFTA-DR countries, and bilateral  FTA partner countries such as Chile, Morocco, and Oman, according to  State officials. USAID manages and funds cooperative efforts related to  improving Peru’s forest sector governance and therefore is responsible  for monitoring activities in the Peru Forest Sector Initiative, according to  State and USAID officials. State officials told us that USAID program  managers in Peru provide them with quarterly reports.
Since 2009, the Organization of American States has published four  reports on monitoring and evaluation of cooperation activities in CAFTA- DR countries. Implementing agencies that provide assistance to the FTA  countries, such as Interior, provide data and information on the results of  the cooperation activities, according to Organization of American States  officials. These officials then analyze the information and publish a public  report, on behalf of State, on the extent to which the cooperation activities  are achieving the broader objectives of the environmental cooperation  agreement. Organization of American States officials added that, initially,  implementing agencies did not align their performance indicators with the  objectives of the environmental cooperation agreement. As a result,  sometimes the activities did not reflect the needs of the partner country,  and it was difficult to measure progress that resulted from the activities.  According to Organization of American States officials, they conducted  workshops for officials in the implementing agencies on developing  indicators that focused on results of the cooperation activities. In addition,  these officials assisted implementing agencies by providing them with the  performance management framework that the Organization of American  States created to guide the efforts of the implementing agencies, which  reduced the amount of duplicative activities implementing agencies  conducted with partner countries in the region, according to Organization  of American State officials. In addition, Organization of American State  officials developed a reporting template and distributed the template to  implementing agencies to streamline data collection from the  implementing agencies. This addressed a problem identified in the  Organization of American States’ first evaluation report of cooperation  activities—that aggregating information to assess the extent to which  cooperation activities achieved results was difficult because of the lack of  a standardized reporting format. In addition, Organization of American  States officials worked with officials from the partner countries to get them  to agree on broad environmental principles and priorities and have them  develop a vision of what environmental improvements they wanted to  achieve. Next, the Organization of American States officials linked  specific projects to those broad goals of the partner countries and the  environmental cooperation agreement, according to Organization of  American States officials.
Similarly, since 2010, State has contracted with a private sector firm to  monitor and evaluate cooperation activities in Chile, Morocco, and Oman.  According to a representative of the firm, these efforts included:
Developing indicators that measured the results of the cooperation  activities, rather than measuring the amount and types of activities  conducted.
Conducting workshops with officials from implementing agencies to  assist them with developing indicators suited to measuring the impact  of their activities. In these workshops, representatives from the private  sector firm also provided training to officials from implementing  agencies on ways to harmonize indicators to streamline the reporting.  This included developing harmonized indicators based on State’s  standard foreign assistance indicators, known as F-indicators. For  State and some implementing agencies, using the F-indicators as a  basis to develop additional indicators for measuring outcomes of the  cooperation activities was important, because State and other  agencies are required to report on them separately.
Assisting implementing agencies with developing a reporting  template, using the harmonized indicators, to streamline the data  collection process. According to implementing agencies, the reporting  template has simplified processes, giving them a more defined scope  when developing cooperation activities, and has enabled them to  report with targeted, specific indicators and outcomes.
In addition, State has created formal and informal mechanisms to share  information with stakeholders involved with conducting cooperation  activities and officials in the partner countries. For example, State  established a website to provide information to stakeholders involved in  implementing cooperation activities in CAFTA-DR countries. In addition,  State has instituted quarterly conference calls between agencies  managing projects in the region to support coordination and avoid  duplication of efforts.
section_title: USTR Has Pledged More Robust Enforcement and Uses Bilateral Meetings with FTA Partner Countries as a Mechanism for Monitoring Implementation
paragraphs: USTR has pledged to vigorously monitor and enforce trade agreements,  and included specific goals related to implementation of FTAs and FTA  environmental provisions in its recent strategic and performance plans.  USTR’s 2014-17 Strategic Plan states that USTR will establish and lead a  robust interagency program for monitoring implementation of FTA labor  and environment obligations across all FTA partners. It also states that  USTR will promptly analyze issues identified through monitoring and  develop appropriate strategies to resolve them. In addition, its 2015  Performance Budget sets a performance goal to monitor implementation  of each of the FTAs to ensure full compliance with all FTA and related  commitments.
The Government Performance and Results Act Modernization Act of 2010  sets several requirements for performance plans, including that they  provide a basis for comparing results. For example, performance plans  should include a basis for comparing actual program results with the  established performance goals and a description of how the goals are to  be achieved, including defined milestones.
Some FTAs provide for establishment of a body under a different name; such bodies  function in the same manner as an Environmental Affairs Council. agreements. In some instances, officials from USTR meet with officials  from FTA partner countries several times within a year, according to  USTR officials. For example, USTR officials told us that they have met— either through the council, or informally—with cabinet-level officials from  CAFTA-DR countries to discuss implementation and environmental  challenges, and to coordinate activities by country, or regionally. Most  FTAs in our review also require that the councils host a public session,  unless the United States and the FTA partner agree otherwise. USTR  officials stated that the public sessions provide an opportunity for citizens  and groups to introduce environmental issues to USTR and the FTA  partner country, and raise implementation issues; these issues can  become part of ongoing discussions or future council meetings.
section_title: Much of USTR’s Monitoring Efforts Have Focused on the Peru FTA and Its Annex for Forest Sector Governance
paragraphs: USTR officials told us that they have focused much of their efforts to  improve FTA monitoring and enforcement since our 2009 report on Peru  because of the extensive environmental commitments contained in the  Peru FTA and the forest sector annex, and associated work underway to  enable Peru’s compliance. The officials stated that their efforts were in  response to inputs from U.S. environmental stakeholders about what is  important, as well as resource limitations. USTR developed several  mechanisms for monitoring compliance with, and implementation of,  commitments in the environmental chapter and Annex for Forest Sector  Governance of the Peru FTA. For example, the Subcommittee on Forest  Sector Governance was established under the annex to facilitate  cooperation for activities specified in the annex and provide a forum for  the United States and Peru to share views and information on any matter  arising under the annex. For example, the forest sector annex includes  specific commitments, such as the development of a system that will track  and verify the chain of custody for wood harvested in Peru´s forests, and  the supervision and issuance of permits for timber species covered by  CITES. The subcommittee has met on several occasions.
USTR formally reviews the progress that Peru and the United States have  made in ensuring effective implementation of, and compliance with,  commitments in the environmental chapter of the Peru FTA in the  Environmental Affairs Council, according to USTR. The environmental  chapter established the Environmental Affairs Council, and states that it  should convene at least yearly, unless otherwise determined by the  United States and Peru.
Officials in Peru created a matrix that tracks the status of implementation  of commitments from the environmental chapter and the annex, and  shares this information with the public and with USTR. According to  USTR officials, they use information from this matrix to help them oversee  how Peru is addressing issues outlined in the forest sector annex of the  FTA. In addition, according to these officials, USTR coordinates with  State, USAID, and U.S. Forest Service staff in Peru to corroborate the  information contained in the matrix. Stakeholders in the environmental  and forestry sectors can access the matrix to verify the validity of the  information published by the Peruvian government. Stakeholders,  including environmental groups, with which GAO met in Peru said that  they had taken such opportunities to seek clarification, request more  robust steps, and encourage progress. Nevertheless, an NGO official told  us that the timetable for action is not precisely defined and that progress  is not meeting officials’ expectations. Additional information on the lack of  time frames is further discussed later in this report.
subsections: section_title: Environmental Group Petitioned the Timber Committee to Request Peru to Audit Timber Exporters
paragraphs: Following the entry into force of the FTA, the President established the  Interagency Committee on Trade in Timber Products from Peru (Timber  Committee). The Timber Committee has authority to oversee operation of  the agreement’s forest sector annex, including requests to the  government of Peru to conduct audits of particular exports and producers  in Peru and verifications of particular export shipments to determine  compliance with Peruvian law, according to U.S. agencies. The Timber  Committee is chaired by USTR and composed of senior officials from the  Departments of State, Justice, Interior, and Agriculture. Representatives  from the Department of Homeland Security and USAID serve as  observers.
In April 2012, an environmental group petitioned USTR to exercise its  authority under the Peru FTA Annex on Forest Sector Governance to  request Peru to conduct an audit or verification of certain timber  shipments, producers, and exporters of big-leaf mahogany and Spanish  cedar that it considered to have been illegally harvested and exported to  the United States. The environmental group also released an  investigative report alleging the systematic export of timber from Peru to  the United States it claimed was illegally harvested, transported, and  traded.
According to USTR, the Timber Committee investigated the allegations,  but declined to exercise its authority under provisions in the forest sector  annex to request the government of Peru to conduct audits and  verifications of certain exporters, citing a significant decline in reported  exports of these species and actions taken by the government of Peru in  response to the investigation, among other things. However, in order to  address challenges highlighted by the review and contribute to ongoing  reform efforts undertaken by Peru, the committee decided to take the  following actions:  seek agreement with Peru on specific actions it will undertake to  address challenges Peru faces regarding management of big-leaf  mahogany and Spanish cedar;  target U.S. capacity-building resources to assist Peru to carry out  such actions; and  regularly monitor Peru’s progress.
section_title: Bilateral Plan Developed to Address Concerns of the Petition, but It Lacks Performance Indicators and Time Frames for Achieving Objectives
paragraphs: In January 2013, less than 1 month after the Timber Committee issued its  decision, USTR staff traveled to Peru and reached agreement on a  bilateral plan to address specific challenges in Peru’s forestry sector. The  bilateral plan covers areas addressed in the forest sector annex, but with  greater specificity, reflecting challenges identified by the Timber  Committee in its review of the petition. For example, the bilateral plan  includes details not included in the forest sector annex, such as  expanding Internet connectivity of transportation check points to improve  systems to track and verify the chain of custody of timber products.  According to the plan, the targeted set of actions includes:  strengthening physical inspections of big-leaf mahogany and Spanish  cedar contained in harvesting plans prior to their approval, in  accordance with Peru’s forest and wildlife laws and regulations;  strengthening accurate harvest plan development and implementation  by improving capacity of forest sector stakeholders, such as forest  engineers, and native communities, among other stakeholders; ensuring timely criminal and administrative proceedings to sanction  any party who violates Peru’s forestry and wildlife laws;  improving systems to track and verify the chain of custody of timber  exports of big-leaf mahogany and Spanish cedar; and  strengthening the implementation of Peru’s National Anti-Corruption  Forest and Wildlife Sector Plan.
Federal internal controls standards call for ongoing monitoring. This  includes establishing performance indicators and time frames to track  performance over time. Although the bilateral plan identifies a targeted  set of actions for Peru to undertake to address challenges in its forestry  sector, the lack of performance indicators and time frames for completing  action precludes USTR from having a clear understanding of the extent to  which Peru is meeting its commitments in the bilateral plan. For example,  USTR was unable to provide us data on the extent to which Peru has  improved the verification of the chain of custody of timber exports.  Moreover, an NGO official stated that the stakeholders and the public do  not know the extent to which Peru is meeting its commitments because  there are no time frames or performance indicators included in the plan.
section_title: USTR Has Taken Steps to Improve Monitoring FTA Partner Country Compliance with Environmental Commitments, but Its Process Lacks Key Elements
paragraphs: USTR has taken some important steps to strengthen monitoring. In 2012,  USTR established a subcommittee for monitoring partner countries’  compliance with, and implementation of, their FTA commitments.  In our  2009 report, we said that USTR lacked plans to enforce, monitor, and  report on progress under the FTAs, and recommended that USTR take  steps to improve its plans. In April 2013, the subcommittee developed a  plan for monitoring partner countries’ compliance with commitments  across all agreements, according to USTR. More specifically, the goal of  the plan is to assist the monitoring subcommittee in identifying any  positive or negative developments, and to develop strategies to address  any concerns, according to USTR. The monitoring plan consists of four  elements: (1) gathering facts from relevant and reliable sources, (2)  assessing and evaluating the information obtained, (3) identifying and  prioritizing issues, and (4) developing a strategy for addressing priority  issues.
USTR began implementing the first element of its monitoring plan— gathering facts from relevant and reliable sources—in 2013, after it  requested that U.S. embassies in partner countries provide information, in  reporting cables, on the major environmental developments that have  occurred in those countries in the past 5 years. USTR officials stated that  the subcommittee meetings, held in December 2013 and April 2014,  featured an initial assessment of information collected from all FTA  partners in the reporting cables prepared in response to USTR’s request  (step 2). USTR indicated that it has begun to identify issues (step 3) and  in some cases begun to take steps to address concerns (step 4), such as  by gathering additional information, engaging in discussions with FTA  partners, raising issues in meetings of institutional bodies, or working on  targeted capacity building.
According to USTR officials, they are executing their monitoring plan on a  partner-by-partner basis. For example, USTR indicated that based on  information learned through fact gathering, it has raised several issues in  recent Environmental Affairs Council meetings with Colombia, Panama,  and the CAFTA-DR partner countries, as well as technical discussions  with Peru. Further, it is working to develop an updated environmental  cooperation work plan with Oman.
Although USTR’s plan for monitoring FTA environmental chapter  implementation calls for processes, such as developing strategies and  solutions on a partner-by-partner basis, as previously discussed, federal  internal control standards call for monitoring that includes establishing  indicators and time frames to track performance over time and ensure  that the priorities identified as a result of its monitoring processes are   USTR’s monitoring process is missing these key  promptly resolved.elements. USTR officials told us that FTA-related environmental issues  do not lend themselves to monitoring in the form of identifying  performance indicators or designating a specific completion date for  measuring progress. However, as noted above, the Government  Performance and Results Act Modernization Act of 2010 requires  agencies to provide a means for assessing performance. Although the  matrix Peru has developed is useful for tracking the status of steps Peru  is supposed to take under its FTA environmental chapter and forest  sector annex, use of the matrix does not preclude the internal control  criteria requiring performance indicators and time frames. Establishing  performance indicators and time frames would improve USTR’s ability to  monitor progress and ensure that each partner country is meeting its FTA  environmental commitments.
section_title: Conclusions
paragraphs: Chile, El Salvador, Guatemala and Peru continue to face environmental  challenges, including limited technical capacity and enforcement  resources. Chile has taken significant steps to meet its FTA obligations  since 2009, while concerns remain about Peru’s capacity to enforce  protection of endangered timber species and address emerging  deforestation threats to the Amazon. Given the decline in funding for  environmental cooperation activities in recent years, it is particularly  important that State and other U.S. agencies target resources in ways  that will most effectively assist partner countries in addressing continued  and emerging environmental challenges. USTR has taken several steps  to improve monitoring since we issued our 2009 report, but its plan for  monitoring all 20 FTA partner countries’ compliance, and the U.S.–Peru  bilateral plan to address specific challenges in Peru’s forestry sector, lack  time frames and performance indicators to assess progress. Notably,  USTR is unable to determine the impact of the verification system in Peru  and assure stakeholders and the public that Peru is meeting its  commitments in the bilateral action plan. The lack of time frames and  indicators also limits USTR’s ability to provide accurate information on the  extent to which all FTA partners are meeting their environmental  commitments. In addition, information on the status of each FTA partner’s  progress in meeting its environmental commitments will enable USTR to  provide guidance on where State and other implementing agencies  should best target resources. Improved monitoring would help ensure that  expanded trade does not come at the expense of environmental  protection.
section_title: Recommendations for Executive Action
paragraphs: To enhance its ability to monitor partner compliance with FTA  environmental commitments and provide timely and useful information to  help target assistance where it is most needed, USTR should: establish time frames and develop performance indicators to assess  the extent to which Peru’s actions are meeting the commitments of  the U.S.–Peru bilateral action plan to address specific challenges in  Peru’s forestry sector, and work with its interagency monitoring subcommittee to establish time  frames and performance indicators to implement its plan for enhanced  monitoring of implementation of FTA environmental commitments  across all FTA partner countries.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to State and USTR, as well as USAID,  Interior, the Department of Agriculture’s U.S. Forest Service, EPA, the  Department of Commerce’s NOAA, and Justice for review and comment.   We received technical comments from State, USTR, Interior, Justice, and  NOAA, which we incorporated, as appropriate. The Department of  Agriculture’s U.S. Forest Service provided written comments which we  have reprinted in appendix II.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, the Secretary of State, the U.S.  Trade Representative, and other interested parties. In addition, the report  will be available at no charge on the GAO website at http://www.gao.gov.
If you or your staff has any questions about this report, please contact  Kimberly M. Gianopoulos at (202) 512-8612 or GianopoulosK@gao.gov.  Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this report. GAO staff who made  major contributions to this report are listed in appendix III.
section_title: Appendix I: Scope and Methodology
paragraphs: To examine steps selected partner countries have taken with U.S.  assistance to implement free trade agreement (FTA) environmental  commitments, we analyzed the structure and provisions of the  environmental chapters of the 11 FTAs that entered into force from 2003  through 2013 to identify the range of their provisions and the procedures,  if any, for the receipt and consideration of public environmental  submissions under those FTAs. We also examined in detail the  environmental chapters in the Chile FTA, Dominican Republic–Central  America–United States Free Trade Agreement (CAFTA-DR), and Peru  Trade Promotion Agreement to identify similarities and differences among  their key environmental provisions. We interviewed officials from the  Office of the United States Trade Representative (USTR), Department of  State (State), and United States Agency for International Development  (USAID) in Washington, D.C., and State, USAID, and host government  and nongovernmental organization (NGO) officials in two CAFTA-DR  countries, El Salvador and Guatemala, as well as in Chile and Peru. To  discuss illustrative examples of assistance provided by U.S. agencies to  help partners meet FTA environmental commitments, we interviewed  officials from State, USTR, the Interior Department (Interior), the  Environmental Protection agency (EPA), the Department of Justice  (Justice), the National Oceanic and Atmospheric Administration (NOAA),  and the U.S. Forest Service  prior to making field visits to El Salvador,  Guatemala, Chile, and Peru, where we interviewed State, USAID, and  U.S. Forest Service staff and host government, NGO, and private sector  officials.
In addition, in the four countries we visited a number of project sites. For  example, in El Salvador we visited the wastewater reference laboratory  that EPA helped set up, as well as several private firms that participated  in cleaner production activities, including a boutique hotel, a producer of  dairy products; and a dairy and pig farm. Among the project sites we  visited in Guatemala were the Cleaner Production Center, the ARCAS  Wildlife Rescue Center, and a sawmill in the Petén region. In Chile, we  met with World Wildlife Fund officials and a group of olive oil producers  participating in a clean production program. Finally, we visited a number  of project sites in the Ucayali province in Peru. For example, we visited a  site where logs are transported from the Amazon region down the river to  sawmills for processing. We witnessed a demonstration of USAID’s and  U.S. Forest Service’s prototype of an electronic tracking system. In  addition, we met with regional government officials and officials  implementing the USAID/ Peru-Bosque project to enhance public  participation by helping local groups and indigenous people comment on  draft regulations for the new Forestry and Wildlife Law.
To examine selected partner mechanisms to process public  environmental submissions, we reviewed the environmental chapters of  FTAs, which entered into force from 2003 through 2013, to determine  which agreements required the establishment of an independent body,  such as a secretariat, to receive and respond to citizen submissions. We  interviewed officials at State, USTR, and USAID. In addition, we  interviewed officials at the CAFTA-DR Secretariat for Environmental  Matters in Guatemala City, Guatemala; and analyzed data obtained from  the CAFTA-DR Secretariat to determine the number of citizen  submissions it had received, and the number of factual records published  since the establishment of the CAFTA-DR Secretariat. To determine the  status of negotiations for establishing the Peru Secretariat for  Environmental Matters, we interviewed officials from USTR, State, and  the Organization of American States; and submitted questions to officials  in the government of Peru.
To examine U.S. resources to assist partners in implementing  environmental commitments, we collected budget data on funding of FTA  environmental activities from State and USAID. To show trends in total  funding for environmental activities by FTA, we aggregated funding for  each FTA across agencies and plotted total funding over the years in  which the FTA was in effect. We depicted total resources for each FTA by  adding available funding data across both agencies and years in which  the FTA was active. We also used FTA-level budget data to show the  allocation of funding across programs. We asked USTR officials for  estimates of staff resources dedicated to FTA implementation and  monitoring. We assessed the reliability of the data by (1) performing  electronic testing for errors in accuracy and completeness and (2)  interviewing agency officials knowledgeable about the data sources. We  determined that the data were sufficiently reliable for illustrating trends in  FTA-related environmental assistance across agencies.
To examine how State monitors FTA environmental cooperation activities  and USTR monitors partner compliance with FTA environmental  commitments, we interviewed officials at State and USTR and  implementing agencies, including EPA, Justice, Interior, USAID, the U.S.
Forest Service and NOAA. In addition, we interviewed officials from the  Organization of American States and Le Groupe-conseil Baastel  (Baastel), a private firm, which have assisted State with collecting,  analyzing, and reporting the results of nine partner countries under four  agreements. Furthermore, we reviewed documentation, such as data  collection templates, monitoring reports, and performance management  plans from State, the Organization of American States, Baastel, and  supporting U.S. agencies, such as EPA and USAID. We interviewed  officials at USTR, and reviewed documentation, such as its plan to  monitor compliance and implementation. Furthermore, we reviewed  cables detailing the status of the environment in partner countries over  the past 5 years. USTR requested this information—through State—from  U.S. embassies in partner countries, to collect information as part of its  plan to monitor progress under the provisions. We interviewed officials at  USTR to identify mechanisms that it uses—such as the Interagency  Timber Committee—to monitor compliance and implementation of  provisions in the environmental chapter of the Peru Trade Promotion  Agreement, and its Annex on Forest Sector Governance. Also, we  reviewed documentation, such as the environmental chapter of the Peru  Trade Promotion Agreement, and its Annex on Forest Sector  Governance, the matrix detailing the status of implementing provisions  provided to USTR and the public by the government of Peru, and the  Joint Communiqué of the Meetings of the Governments of the United  States and Peru Regarding Forest Sector Governance.
We conducted this performance audit from May 2013 to November 2014  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
section_title: Appendix II: Comments from the Department of Agriculture’s U.S. Forest Service
section_title: Appendix III: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgements
paragraphs: In addition to the contact named above, Kim Frankena, (Assistant  Director), Tom Zingale (Analyst-in-Charge), Kyerion Printup and John  O’trakoun made key contributions to this report. Sada Aksartova, Juan P.  Avila, Karen Deans, David Dornisch, Ernie Jackson, and Oziel Trevino  provided additional assistance.