Updated February 3, 2021
Environmental Provisions in Free Trade Agreements (FTAs)
Overview
environmental commitments, its Article XX lays out a
Linkages between trade and environmental protection have
number of general exceptions to its provisions—including
long been a concern to some U.S. policymakers and
exceptions for natural resources and protection of human,
stakeholders. The central question is whether trade
animal, or plant life, and public health—that could allow
liberalization (i.e., the removal of barriers on the free
for environmental policy measures. Since its establishment
exchange of goods and services between nations) advances
in 1995, the World Trade Organization (WTO)—the
shared economic and environmental goals. Some observers
successor to GATT—has addressed environmental issues
argue that economic expansion brought on by trade
through its dispute settlement system and through Doha
liberalization adversely affects the environment. Among
Round negotiations concerning the relationship between
other concerns, they contend that for developing countries,
existing WTO rules and international environmental
international competition may lead them to adopt less
treaties, known as “multilateral environmental agreements”
stringent environmental standards or to engage in more
(MEAs). While there has been much focus on the use of
polluting activities. Thus, they claim that environmental
GATT/WTO dispute settlement, there have been only nine
provisions are necessary in trade agreements to help raise or
Article XX cases on environmental issues to date.
maintain international standards and protect U.S. businesses
and workers from perceived unfair competition. Other
In addition to the WTO’s Doha Round, WTO members are
policymakers and stakeholders believe that trade
also negotiating the reduction or elimination of fishing
liberalization and environmental protection can be mutually
subsidies. A plurilateral group of WTO members engaged
supportive. They argue that while economic growth may
in negotiations to eliminate of tariffs on environmental
adversely affect the environment during the initial stages of
goods such as wind turbines or solar panels. However, these
industrialization, it can also provide resources to mitigate
negotiations appear to be in limbo.
such effects as countries develop. They also argue that trade
liberalization can support U.S. environmental goals through
Environmental Provisions in U.S. FTAs
the elimination of tariffs on environmental goods, and the
Although the WTO has played an important role in global
reduction of trade-distorting subsidies.
environmental discussions, bilateral and regional FTAs
have also addressed environmental policies. FTAs
Trade-related environmental provisions in U.S. FTAs were
commonly include more detailed provisions than the WTO
first introduced in a side agreement to the North American
on trade-related issues such as the environment. A brief
Free Trade Agreement of 1994 (NAFTA), Through the
evolution of these provisions is outlined below.
years, they have moved from side agreements to integral
chapters within FTA texts, and increasingly have
Current Key Environmental Provisions in U.S. FTAs.
incorporated cooperation and dispute settlement (DS)
A party shall:
mechanisms. In 1992, President George H.W. Bush
instituted the practice of conducting an environmental
Not fail to effectively enforce its environmental laws in a
assessment of trade agreements in conjunction with the
manner affecting trade and investment.
consideration of NAFTA, and President Clinton formalized
Not waive or derogate from environmental laws to
the practice by executive order in 1999. In the Trade Act of
promote trade or investment.
2002 (P.L. 107-210), Congress included environmental
Adhere to certain multilateral environmental agreements
provisions as a principal trade negotiating objective in
(MEAs).
renewing the President’s Trade Promotion Authority (TPA)
legislation. Since then, the United States has been at the
Develop mechanisms to enhance environmental
performance.
forefront of using trade agreements to promote core
environmental protections. Additional negotiating
Retain the right to exercise the “reasonable “or “bona fide”
objectives were incorporated into the Bipartisan
exercise of discretion in enforcement.
Comprehensive Trade Priorities Act (TPA)(P.L. 114-26),
Other provisions include:
enacted into law on June 29, 2015. Environmental
provisions in the United States-Mexico-Canada Agreement
Enforceable dispute settlement and consultations.
(USMCA) were, in part, based on these negotiating
Cooperation and trade capacity building.
objectives.
Environmental Affairs Council.
The GATT and the WTO
Source: CRS.
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.
NAFTA (1994, with Canada and Mexico), however,
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Environmental Provisions in Free Trade Agreements (FTAs)
included a list of MEAs whose provisions generally would
The USMCA, in addition to the provisions in the text box
supersede NAFTA in the event of conflict. President
above, includes:
Clinton, fulfilling a campaign promise, further negotiated
an environmental side agreement to NAFTA. The North
A presumption that an environmental dispute affects
American Agreement on Environmental Cooperation
trade and investment unless a respondent party can
contained 10 objectives on environmental cooperation in
prove otherwise;
matters affecting trade, technical assistance, and capacity
Obligations to address illegal trade in flora and fauna;
building. It also included a dispute settlement arrangement
Prohibitions on the “most harmful” fisheries subsidies;
distinct from NAFTA that could levy a monetary
Commitments on sustainable use of biodiversity,
assessment, with the suspension of trade benefits as a last
conservation, alien species, and management of forests
resort. Since NAFTA, all U.S. FTAs have included
and fisheries;
environmental provisions. The U.S. FTA with Jordan
(2001) contained the first environmental provisions
Provisions on air quality and marine litter;
incorporated directly into the main text of the agreement,
Promotion of trade in environmental goods and services.
but with less rigorous dispute settlement provisions than
Investment and ISDS
more recent agreements.
In addition to environmental chapters, many U.S. FTAs
FTAs Under the 2002 Trade Promotion Authority. The
contain investment chapters, provisions which also appear
G.W. Bush administration negotiated 11 FTAs with 16
in bilateral investment treaties (BITs). The FTA
countries under the five-year TPA put in place by the Trade
commitment not to derogate from environmental laws to
Act of 2002. The environmental provisions in these
attract investment (see above) first appeared in the
agreements went beyond the U.S.-Jordan FTA in terms of
investment chapter in NAFTA. U.S. business and other
scope, but they included only one enforceable provision: a
stakeholders maintain that ISDS provides a neutral and
party shall not fail to effectively enforce its environmental
transparent venue for the adjudication of basic rights and
laws “in a manner affecting trade between the parties.”
protections already afforded to investors under U.S. law.
Procedures for environmental disputes capped limits on
Other stakeholders argue that the investor-state dispute
monetary penalties at $15 million, with suspension of
settlement (ISDS) provision allows investors to target
benefits as a last recourse. Other provisions include: (a)
environmental laws and practices contrary to national
commitments not to derogate from one’s own
policies, and may create a chilling effect on the future use
environmental laws to encourage trade and investment; (b)
of environmental regulation. USMCA, however, eliminated
extensive provisions for cooperation and capacity building;
ISDS provisions between the United States and Canada,
and (c) the creation of an Environment Affairs Council.
and restricted its use between the United States and Mexico.
Issues for Congress
TPA-2015. TPA-2015 enhanced U.S. trade negotiating
objectives on the environment from the 2002 TPA in
In considering future TPA legislation or future trade
several ways. It:
agreements, Congress may examine the use and application
Mandates adherence to seven referenced MEAs as well
of environmental provisions in FTAs. Issues could include:
as other MEAs to which both the United States and one
or more other parties to the negotiations are full parties
The impacts of increased trade and economic growth on
and agree to be included.
both the national and the global environment;
Alters the non-derogation obligation for environmental
The effectiveness of including environmental provisions
laws from a “strive to” to a “shall” obligation.
in FTAs as a means of protecting U.S. businesses and
workers from perceived unfair competition;
Requires enforcement of all FTA environmental
obligations under the same dispute settlement
Whether USMCA is a template for future environment
procedures as other provisions in the agreement.
chapters in U.S. FTAs;
TPA-2015 also prohibits the negotiation of obligations
Whether or how climate change may be addressed in a
related to climate change in FTAs. TPA-2015 expires on
future TPA or future FTAs;
July 1, 2021.
The appropriateness of using FTAs as a vehicle for
improving environmental practices in other countries or
USMCA. The USMCA largely incorporated the trade
enforcing independently negotiated MEAs;
negotiating objectives of TPA-15. USMCA was signed on
The effectiveness of Environment Affairs Councils (and
November 30, 2018 after the Trump Administration
the Environmental Cooperation Agreement in USMCA)
launched negotiations in the spring of that year. Subsequent
to provide technical assistance and capacity building,
negotiations between Members of Congress and the
and to resolve or prevent disputes without recourse to
Administration resulted in changes to the environmental
dispute settlement;
and other provisions of the agreement and were added as a
The effectiveness of dispute settlement provisions to
Protocol of Amendment (PA) to USMCA, which was
enforce environmental provisions in FTAs; and
signed by the three countries on December 10, 2019.
The future incorporation of ISDS in U.S. FTAs.
Implementing legislation subsequently was enacted by
Congress and signed by President Trump on January 29,
Richard K. Lattanzio, Specialist in Environmental Policy
2020 (P.L. 116-113). USMCA replaced NAFTA on July 1,
Ian F. Fergusson, Specialist in International Trade and
2020. See CRS Report R44981, The United States-Mexico-
Finance
Canada Agreement (USMCA).
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Environmental Provisions in Free Trade Agreements (FTAs)
IF10166
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https://crsreports.congress.gov | IF10166 · VERSION 11 · UPDATED