Updated December 6, 2016
Environmental Provisions in Free Trade Agreements (FTAs)
Overview
of general exceptions to its provisions—including
Linkages between trade and environmental protection have
exceptions for natural resources and protection of human,
long been a concern to some U.S. policymakers and
animal, or plant life, and public health—that could allow
stakeholders. The central question is whether trade
for environmental policy measures. Since its establishment
liberalization (i.e., the removal of barriers on the free
in 1995, the World Trade Organization (WTO)—the
exchange of goods and services between nations) advances
successor to GATT—has addressed environmental issues
shared economic and environmental goals. Some observers
through its dispute settlement system and through Doha
argue that economic expansion brought on by trade
Round negotiations concerning the relationship between
liberalization adversely impacts the environment. Among
existing WTO rules and international environmental
other concerns, they contend that for developing countries,
treaties, known as “multilateral environmental agreementsâ€
international competition may lead them to adopt less
(MEAs). While there has been much focus on the GATT
stringent environmental standards or to engage in more
and WTO dispute settlement systems, there have been only
polluting activities. Thus, they claim that environmental
nine Article XX cases on environmental issues to date.
provisions are necessary in trade agreements to help raise or
maintain international standards and protect U.S. businesses
In addition to the WTO’s Doha Round, a plurilateral group
and workers from perceived unfair competition. Other
of WTO members is negotiating the elimination of tariffs
policymakers and stakeholders believe that trade
on environmental goods such as wind turbines or solar
liberalization and environmental protection can be mutually
panels. Further, the reduction or elimination of fishing
supportive. They argue that while economic growth may
and/or fossil fuel subsidies is being negotiated in the WTO,
adversely impact the environment during the initial stages
G-20, and U.S. free trade agreements.
of industrialization, it can also provide resources to mitigate
such effects as countries develop. They also argue that trade
Current Key Environmental Provisions in U.S. FTAs.
liberalization can support U.S. environmental goals through
A party shall:
the elimination of tariffs on environmental goods, and the
reduction of trade-distorting subsidies.
ï‚·
Not fail to effectively enforce its environmental laws in a
manner affecting trade and investment.
Trade-related environmental provisions in U.S. FTAs were
ï‚·
Not waive or derogate from environmental laws to
first introduced in the North American Free Trade
promote trade or investment.
Agreement of 1994 (NAFTA), Through the years, they
ï‚·
Fulfill obligations under certain multilateral environmental
have moved from side agreements to integral chapters
agreements (MEAs).
within FTA texts, and increasingly have incorporated
ï‚·
cooperation and dispute settlement (DS) mechanisms.
Develop mechanisms to enhance environmental
performance.
President George H.W. Bush instituted the first
environmental assessment of a trade agreement with
ï‚·
Retain the right to exercise the “reasonable “or “bona fideâ€
NAFTA in 1992, and President Clinton formalized the
exercise of discretion in enforcement.
practice by executive order in 1999. In the Trade Act of
Other provisions include:
2002 (P.L. 107-210), Congress included environmental
provisions as a principal trade negotiating objective in
ï‚·
Enforceable dispute settlement and consultations.
renewing the President’s Trade Promotion Authority (TPA)
ï‚·
Cooperation and trade capacity building.
(previously known as fast-track) legislation. Since then, the
ï‚·
Environmental Affairs Council.
United States has been at the forefront of using trade
agreements to promote core environmental protections.
Source: CRS.
Additional negotiating objectives were incorporated into the
Environmental Provisions in U.S. FTAs
Bipartisan Comprehensive Trade Priorities Act (TPA)(P.L.
114-26), enacted into law on June 29, 2015. Environmental
Although the WTO has played an important role in global
provisions in the proposed Trans-Pacific Partnership (TPP)
environmental discussions, bilateral and regional FTAs
and the potential Transatlantic Trade and Investment
have also impacted environmental policies. FTAs
Partnership (T-TIP) are currently under debate.
commonly include more detailed provisions than the WTO
on trade-related issues such as the environment. A brief
The GATT and the WTO
evolution of these provisions is outlined below.
Mechanisms to address environmental protection have been
a part of international trade agreements since the General
The North American Free Trade Agreement (NAFTA).
Agreement on Tariffs and Trade (GATT) was signed in
The first U.S. bilateral FTAs—with Israel (1985) and
1947. While the GATT does not contain affirmative
Canada (1988)—did not contain environmental provisions.
environmental commitments, Article XX lays out a number
NAFTA (1994, with Canada and Mexico), however,
included a list of MEAs whose provisions generally would
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Environmental Provisions in Free Trade Agreements (FTAs)
supersede NAFTA in the event of conflict. President
ï‚· Affirm commitments to certain MEAs to which TPP
Clinton, fulfilling a campaign promise, further negotiated
countries are a party. Include subject matter obligations
an environmental side agreement to NAFTA. The North
related to other MEAs, while not requiring joining or
American Agreement on Environmental Cooperation
adhering to the MEA itself.
contained 10 objectives on environmental cooperation in
ï‚· Obligate countries to address illegal trade in flora and
matters affecting trade, technical assistance, and capacity
fauna in their own countries.
building. It also included a dispute settlement arrangement
 Prohibit the “most harmful†fisheries subsidies and
distinct from NAFTA that could levy a monetary
include commitments on sustainable use of biodiversity,
assessment, with the suspension of trade benefits as a last
conservation and management of fisheries.
resort. Since NAFTA, all U.S. FTAs have included
ï‚· Liberalize trade in environmental goods and services.
environmental provisions. The U.S. FTA with Jordan
(2001) contained the first environmental provisions
Investment Provisions
incorporated directly into the agreement, but with less
In addition to environmental chapters, the United States
rigorous dispute settlement provisions than more recent
also negotiates investment chapters in U.S. FTAs, as well as
agreements.
separate bilateral investment treaties (BITs). The FTA
FTAs Under the 2002 Trade Promotion Authority. The
commitment not to derogate from environmental laws to
G.W. Bush administration negotiated 11 FTAs with 16
attract investment (see above) first appeared in the
countries under the five-year TPA put in place by the Trade
investment chapter in NAFTA. TPP recognizes a
Act of 2002. The environmental provisions in these
government’s right to adopt or maintain measures to protect
agreements went beyond the U.S.-Jordan FTA in terms of
legitimate public welfare objectives, which the TPP
scope, but they included only one enforceable provision: a
specifically mentions, and indirect expropriation is defined
party shall not fail to effectively enforce its environmental
to exclude such regulatory activity except in rare
laws “in a manner affecting trade between the parties.â€
circumstances. Nonetheless, some stakeholders believe that
Procedures for environmental disputes capped limits on
the investor-state dispute settlement (ISDS) provision
monetary penalties at $15 million, with suspension of
allows investors to seek compensation for environmental
benefits as a last recourse. Other provisions include: (a)
laws and administration contrary to their interests, and may
commitments not to derogate from one’s own
create a chilling effect on the future use of regulatory
environmental laws to encourage trade and investment; (b)
authority in environmental matters. The USTR and other
extensive provisions for cooperation and capacity building;
stakeholders maintain that ISDS provides a neutral and
and (c) the creation of an Environment Affairs Council.
transparent venue for the adjudication of basic rights and
protections already afforded to investors under U.S. law.
TPA-2015. TPA was renewed until July 1, 2021, subject to
Issues for Congress
a resolution of disapproval vote in 2018. TPA-2015
enhanced U.S. trade negotiating objectives on the
In considering the TPP, future TPA legislation, or future
environment from the 2002 TPA in several ways. It:
trade agreement negotiations, Congress may wish to
examine the use and application of environmental
ï‚· Requires the incorporation of seven referenced MEAs in provisions. Issues could include:
a country’s laws.
ï‚·
ï‚·
Alters the non-derogation obligation for environmental
The impacts of increased trade and economic growth on
laws from a “strive to†to a “shall†obligation.
both the domestic and international environment.
ï‚·
ï‚·
Calls for all FTA environmental obligations to be
The effectiveness of including environmental provisions
enforced under the same dispute settlement procedures
in FTAs as a means of protecting U.S. businesses and
as other provisions in the agreement.
workers from perceived unfair competition.
ï‚· The appropriateness of using FTAs as a vehicle for
improving environmental practices in other countries.
Aspects of the May 10, 2007, agreement were included in
ï‚·
2015 TPA, which strengthened the negotiating objectives of
The appropriateness of using FTAs as a means of
the 2002 TPA and were applied to U.S. FTAs with
enforcing independently negotiated international
Colombia, Panama, Peru, and South Korea.
environmental treaties (i.e., MEAs).
ï‚· The effectiveness of Environment Affairs Councils in
TPP. The TPP negotiations were concluded in October
FTAs to provide technical assistance and capacity
2015, and U.S, Trade Representative Michael Froman
building, and to resolve or prevent disputes without
signed the agreement on February 4, 2016, in New Zealand.
recourse to dispute settlement.
President-elect Donald Trump announced on November 21,
ï‚· The effectiveness of dispute settlement provisions as
2016, that the United States would withdraw from the TPP
they are applied to environment issues.
on his first day in office. TPP included several new features
ï‚· The extent to which investment provisions, including
in addition to core provisions noted above from TPA-2015;
investor-state dispute settlement (ISDS), preserve a
however, it is unclear whether they would be retained in
country’s right to regulate in its national interest.
any future bilateral FTAs, the negotiation of which the
President-elect has indicated he favors. They include
Richard K. Lattanzio, Specialist in Environmental Policy
obligations to:
Ian F. Fergusson, Specialist in International Trade and
Finance
IF10166
https://crsreports.congress.gov
Environmental Provisions in Free Trade Agreements (FTAs)
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