Updated January 13, 2022
Environmental Provisions in Free Trade Agreements (FTAs)
Linkages between trade and environmental protection have
Agreement on Tariffs and Trade (GATT) was signed in
long been a concern to some U.S. policymakers and
1947. While the GATT does not contain affirmative
stakeholders. The central question is whether trade
environmental commitments, its Article XX lays out a
liberalization (i.e., the removal of barriers on the exchange
number of general exceptions to its provisions—including
of goods and services between nations) advances shared
exceptions for natural resources and protection of human,
economic and environmental goals. Some observers argue
animal, or plant life, and public health—that could allow
that economic expansion brought on by trade liberalization
for environmental policy measures. Since its establishment
adversely affects the environment. Among other concerns,
in 1995, the World Trade Organization (WTO)—the
they contend that international competition may lead
successor to GATT—has addressed environmental issues
developing countries to adopt less stringent environmental
through its dispute settlement system and through Doha
standards to encourage producers to relocate from
Round negotiations concerning the relationship between
jurisdictions with more stringent environmental standards.
existing WTO rules and international environmental
Thus, some observers argue that environmental provisions
treaties, known as “multilateral environmental agreements”
are necessary in trade agreements to help raise international
(MEAs). There has been much focus on the use of
environmental standards and protect U.S. businesses and
GATT/WTO dispute settlement and there have been nine
workers.
Article XX cases on environmental issues to date.
Other policymakers and stakeholders believe that trade
In addition to the WTO’s Doha Round, WTO members are
liberalization and environmental protection can be mutually
also negotiating the reduction or elimination of fisheries
supportive. They argue that while economic growth may
subsidies. A plurilateral group of WTO members engaged
adversely affect the environment during the initial stages of
in negotiations to eliminate of tariffs on environmental
industrialization, it can also provide resources to mitigate
goods, such as wind turbines or solar panels. However,
such effects as countries develop. They also argue that trade
these negotiations appear to be in limbo.
liberalization can support U.S. environmental goals through
the elimination of tariffs on environmental goods, and the
Environmental Provisions in U.S. FTAs
reduction of trade-distorting subsidies, among other actions.
Although the WTO has played an important role in global
environmental discussions, bilateral and regional FTAs
Trade-related environmental provisions in U.S. FTAs were
have also addressed environmental policies. FTAs
first introduced in a side agreement to the North American
commonly include more detailed provisions than the WTO
Free Trade Agreement of 1994 (NAFTA). Through the
on trade-related issues, such as the environment. A brief
years, they have moved from side agreements to integral
evolution of these provisions is outlined below.
chapters within U.S. FTA texts, and increasingly have
incorporated cooperation and dispute settlement (DS)
Current Key Environmental Provisions in U.S. FTAs.
mechanisms. In 1992, President George H.W. Bush
A party shall:
instituted the practice of conducting an environmental
assessment of trade agreements in conjunction with the
Not fail to effectively enforce its environmental laws in a
consideration of NAFTA, and President Clinton formalized
manner affecting trade and investment.
the practice by executive order in 1999. In the Trade Act of
Not waive or derogate from environmental laws to
2002 (P.L. 107-210), Congress included environmental
promote trade or investment.
provisions as a principal trade negotiating objective in
Adhere to certain multilateral environmental agreements
renewing the President’s Trade Promotion Authority (TPA)
(MEAs).
legislation. Since then, the United States has been at the
Develop mechanisms to enhance environmental
forefront of using trade agreements to promote core
performance.
environmental protections. Additional negotiating
objectives were incorporated into the Bipartisan
Retain the right to exercise the “reasonable “or “bona fide”
Comprehensive Trade Priorities Act (TPA) (P.L. 114-26),
exercise of discretion in enforcement.
enacted into law on June 29, 2015. Environmental
Other provisions include:
provisions in the United States-Mexico-Canada Agreement
(USMCA) were, in part, based on these negotiating
Enforceable dispute settlement and consultations.
objectives.
Cooperation and trade capacity building.
The GATT and the WTO
Environmental Affairs Council.
Mechanisms to address environmental protection have been
Source: CRS.
a part of international trade agreements since the General
https://crsreports.congress.gov
Environmental Provisions in Free Trade Agreements (FTAs)
The North American Free Trade Agreement (NAFTA).
signed by the three countries on December 10, 2019.
The first U.S. bilateral FTAs—with Israel (1985) and
Implementing legislation subsequently was enacted by
Canada (1988)—did not contain environmental provisions.
Congress and signed by President Trump on January 29,
NAFTA (1994, with Canada and Mexico), however,
2020 (P.L. 116-113). USMCA replaced NAFTA on July 1,
included a list of MEAs whose provisions generally would
2020. See CRS Report R44981, The United States-Mexico-
supersede NAFTA in the event of conflict. President
Canada Agreement (USMCA).
Clinton, fulfilling a campaign promise, further negotiated
an environmental side agreement to NAFTA. The North
USMCA, in addition to the provisions in the text box
American Agreement on Environmental Cooperation
above, includes:
contained 10 objectives on environmental cooperation in
matters affecting trade, technical assistance, and capacity
A presumption that an environmental dispute affects
building. It also included a dispute settlement arrangement
trade and investment unless a respondent party can
distinct from NAFTA that could levy a monetary
prove otherwise;
assessment, with the suspension of trade benefits as a last
Obligations to address illegal trade in flora and fauna;
resort. Since NAFTA, all U.S. FTAs have included
Prohibitions on the “most harmful” fisheries subsidies;
environmental provisions. The U.S. FTA with Jordan
Commitments on sustainable use of biodiversity,
(2001) contained the first environmental provisions
conservation, alien species, and management of forests
incorporated directly into the main text of the agreement,
and fisheries;
but with less rigorous dispute settlement provisions than
more recent agreements.
Provisions on air quality and marine litter; and
Promotion of trade in environmental goods and services.
FTAs Under the 2002 Trade Promotion Authority. The
G.W. Bush Administration negotiated 11 FTAs with 16
Investment and ISDS
countries under the five-year TPA put in place by the Trade
Investor-state dispute settlement (ISDS) provisions have
Act of 2002. The environmental provisions in these
long been a part of U.S. trade agreements. Such provisions
agreements went beyond the U.S.-Jordan FTA in terms of
provide a mechanism for investors to challenge policies that
scope, and included one enforceable provision: a party shall
may violate the terms of a trade agreement. Many U.S.
not fail to effectively enforce its environmental laws “in a
businesses and other stakeholders maintain that ISDS
manner affecting trade between the parties.” Procedures for
provides a neutral venue for the adjudication of basic rights
environmental disputes capped limits on monetary penalties
and protections already afforded to investors under U.S.
at $15 million, with suspension of benefits as a last
law. Other stakeholders argue that ISDS enables investors
recourse. Other provisions included: (a) commitments not
to target environmental laws and creates a chilling effect on
to derogate from one’s own environmental laws to
the future use of environmental regulation. USMCA,
encourage trade and investment; (b) extensive provisions
eliminated ISDS provisions between the United States and
for cooperation and capacity building; and (c) the creation
Canada, and limited its use between the United States and
of an Environment Affairs Council.
Mexico, a major revision to NAFTA and a break with
practice under past U.S. FTAs.
TPA-2015. TPA-2015 enhanced U.S. trade negotiating
objectives on the environment from the 2002 TPA in
Issues for Congress
several ways. It:
In considering future TPA legislation or future trade
agreements, Congress may examine the use and application
Mandated adherence to seven referenced MEAs and
of environmental provisions in FTAs. Issues could include:
other MEAs to which both the United States and one or
more other parties to the negotiations are full parties and
The impacts of increased trade and economic growth on
agree to be included.
both the national and the global environment;
Altered the non-derogation obligation for environmental
laws from a “strive to” to a “shall” obligation.
The effectiveness of including environmental provisions
in FTAs as a means of protecting U.S. businesses and
Required enforcement of all FTA environmental
workers from perceived unfair competition;
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;
The appropriateness of using FTAs as a vehicle for
TPA-2015 also prohibited the negotiation of obligations
improving environmental practices in other countries or
related to climate change in FTAs. TPA-2015 expired on
enforcing independently negotiated MEAs;
July 1, 2021.
The effectiveness of Environment Affairs Councils (and
the Environmental Cooperation Agreement in USMCA)
USMCA. The USMCA largely incorporated the trade
to provide technical assistance and capacity building,
negotiating objectives of TPA-15. USMCA was signed on
and to resolve or prevent disputes without recourse to
November 30, 2018, after the Trump Administration
dispute settlement; and
launched negotiations in the spring of that year. Subsequent
The effectiveness of dispute settlement provisions to
negotiations between Members of Congress and the
enforce environmental provisions in FTAs.
Administration resulted in changes to the environmental
and other provisions of the agreement and were added as a
Protocol of Amendment (PA) to USMCA, which was
Richard K. Lattanzio, Specialist in Environmental Policy
https://crsreports.congress.gov
Environmental Provisions in Free Trade Agreements (FTAs)
IF10166
Christopher A. Casey, Analyst in International Trade and
Finance
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https://crsreports.congress.gov | IF10166 · VERSION 12 · UPDATED