Updated February 28, 2023
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. The agreements
adversely affects the environment. Among other concerns,
establishing the World Trade Organization (WTO) in 1995
they contend that international competition may lead
maintained these exceptions, which have been the subject
developing countries to adopt less stringent environmental
of several disputes resolved by the WTO’s dispute
standards to encourage producers to relocate from
settlement system.
jurisdictions with more stringent environmental standards.
Thus, some observers argue that environmental provisions
The WTO has hosted a variety of multilateral and
are necessary in trade agreements to help raise international
plurilateral negotiations. The Doha round of multilateral
environmental standards and protect U.S. businesses and
negotiations were supposed to, among other things, clarify
workers.
the relationship between existing WTO rules and
multilateral environmental agreements. A plurilateral group
Other policymakers and stakeholders believe that trade
of WTO members is also engaged in negotiations to
liberalization and environmental protection can be mutually
eliminate tariffs on environmental goods, such as wind
supportive. They argue that while economic growth may
turbines or solar panels. However, both these negotiations
adversely affect the environment during the initial stages of
have stalled. In 2022, WTO Members finalized a limited
industrialization, it can also provide resources to mitigate
agreement that prohibits subsidies to certain fisheries in
such effects as countries develop. They also argue that trade
order to reduce overfishing. The agreement would enter
liberalization can support U.S. environmental goals through
into force if it is ratified by two-thirds of WTO members
the elimination of tariffs on environmental goods, and the
reduction of trade-distorting subsidies, among other actions.
Environmental Provisions in U.S. FTAs
Although the WTO has played an important role in global
Trade-related environmental provisions in U.S. FTAs were
environmental discussions, bilateral and regional FTAs
first introduced in a side agreement to the North American
have also addressed environmental policies. FTAs
Free Trade Agreement of 1994 (NAFTA). Through the
commonly include more detailed provisions than the WTO
years, they have moved from side agreements to integral
on trade-related issues, such as the environment. A brief
chapters within U.S. FTA texts, and increasingly have
evolution of these provisions is outlined below.
incorporated cooperation and dispute settlement (DS)
mechanisms. In 1992, President George H.W. Bush
Current Key Environmental Provisions in U.S. FTAs
instituted the practice of conducting an environmental
A party shall:
assessment of trade agreements in conjunction with the
consideration of NAFTA, and President Clinton formalized
Not fail to effectively enforce its environmental laws in a
the practice by executive order in 1999. In the Trade Act of
manner affecting trade and investment.
2002 (P.L. 107-210), Congress included environmental
Not waive or derogate from environmental laws to
provisions as a principal trade negotiating objective in
promote trade or investment.
renewing the President’s Trade Promotion Authority (TPA)
Adhere to certain multilateral environmental agreements
legislation. Since then, the United States has been at the
(MEAs).
forefront of using trade agreements to promote core
environmental protections. Additional negotiating
Develop mechanisms to enhance environmental
performance.
objectives were incorporated into the Bipartisan
Comprehensive Trade Priorities Act (TPA) (P.L. 114-26),
Retain the right to exercise the “reasonable “or “bona fide”
enacted into law on June 29, 2015. Environmental
exercise of discretion in enforcement.
provisions in the United States-Mexico-Canada Agreement
Other provisions include:
(USMCA) were, in part, based on these negotiating
objectives.
Enforceable dispute settlement and consultations.
Cooperation and trade capacity building.
The GATT and the WTO
Environmental Affairs Council.
Mechanisms to address environmental protection have been
a part of international trade agreements since the General
Source: CRS.
https://crsreports.congress.gov
Environmental Provisions in Free Trade Agreements (FTAs)
The North American Free Trade Agreement (NAFTA).
Implementing legislation subsequently was enacted by
The first U.S. bilateral FTAs—with Israel (1985) and
Congress and signed by President Trump on January 29,
Canada (1988)—did not contain environmental provisions.
2020 (P.L. 116-113). USMCA replaced NAFTA on July 1,
NAFTA (1994, with Canada and Mexico), however,
2020. See CRS Report R44981, The United States-Mexico-
included a list of MEAs whose provisions generally would
Canada Agreement (USMCA).
supersede NAFTA in the event of conflict. President
Clinton, fulfilling a campaign promise, further negotiated
USMCA, in addition to the provisions in the text box
an environmental side agreement to NAFTA. The North
above, includes:
American Agreement on Environmental Cooperation
A presumption that an environmental dispute affects
contained 10 objectives on environmental cooperation in
trade and investment unless a respondent party can
matters affecting trade, technical assistance, and capacity
prove otherwise;
building. It also included a dispute settlement arrangement
Obligations to address illegal trade in flora and fauna;
distinct from NAFTA that could levy a monetary
assessment, with the suspension of trade benefits as a last
Prohibitions on the “most harmful” fisheries subsidies;
resort. Since NAFTA, all U.S. FTAs have included
Commitments on sustainable use of biodiversity,
environmental provisions. The U.S. FTA with Jordan
conservation, alien species, and management of forests
(2001) contained the first environmental provisions
and fisheries;
incorporated directly into the main text of the agreement,
Provisions on air quality and marine litter; and
but with less rigorous dispute settlement provisions than
Promotion of trade in environmental goods and services.
more recent agreements.
Investment and ISDS
FTAs Under the 2002 Trade Promotion Authority. The
Investor-state dispute settlement (ISDS) provisions have
G.W. Bush Administration negotiated 11 FTAs with 16
long been a part of U.S. trade agreements. Such provisions
countries under the five-year TPA put in place by the Trade
provide a mechanism for investors to challenge policies that
Act of 2002. The environmental provisions in these
may violate the terms of a trade agreement. Many U.S.
agreements went beyond the U.S.-Jordan FTA in terms of
businesses and other stakeholders maintain that ISDS
scope, and included one enforceable provision: a party shall
provides a neutral venue for the adjudication of basic rights
not fail to effectively enforce its environmental laws “in a
and protections already afforded to investors under U.S.
manner affecting trade between the parties.” Procedures for
law. Other stakeholders argue that ISDS enables investors
environmental disputes capped limits on monetary penalties
to target environmental laws and creates a chilling effect on
at $15 million, with suspension of benefits as a last
the future use of environmental regulation. USMCA, in a
recourse. Other provisions included (a) commitments not to
major revision to NAFTA and a break with practice under
derogate from one’s own environmental laws to encourage
past U.S. FTAs, eliminated ISDS provisions between the
trade and investment; (b) extensive provisions for
United States and Canada, and limited its use between the
cooperation and capacity building; and (c) the creation of
United States and Mexico.
an Environment Affairs Council.
Issues for Congress
TPA-2015. TPA-2015 enhanced U.S. trade negotiating
In considering future TPA legislation or future trade
objectives on the environment from the 2002 TPA in
agreements, Congress may examine the use and application
several ways. It
of environmental provisions in FTAs. Issues could include
Mandated adherence to seven referenced MEAs and
The impacts of increased trade and economic growth on
other MEAs to which both the United States and one or
both the national and the global environment;
more other parties to the negotiations are full parties and
The effectiveness of including environmental provisions
agree to be included.
in FTAs as a means of protecting U.S. businesses and
Altered the non-derogation obligation for environmental
workers from perceived unfair competition;
laws from a “strive to” to a “shall” obligation.
Whether USMCA is a template for future environment
Required enforcement of all FTA environmental
chapters in U.S. FTAs;
obligations under the same dispute settlement
The appropriateness of using FTAs as a vehicle for
procedures as other provisions in the agreement.
improving environmental practices in other countries or
TPA-2015 also prohibited the negotiation of obligations
enforcing independently negotiated MEAs;
related to climate change in FTAs. TPA-2015 expired on
The effectiveness of Environment Affairs Councils (and
July 1, 2021.
the Environmental Cooperation Agreement in USMCA)
to provide technical assistance and capacity building,
USMCA. The USMCA largely incorporated the trade
and to resolve or prevent disputes without recourse to
negotiating objectives of TPA-15. USMCA was signed on
dispute settlement; and
November 30, 2018, after the Trump Administration
The effectiveness of dispute settlement provisions to
launched negotiations in the spring of that year. Subsequent
enforce environmental provisions in FTAs.
negotiations between Members of Congress and the
Administration resulted in changes to the environmental
and other provisions of the agreement and were added as a
Richard K. Lattanzio, Specialist in Environmental Policy
Protocol of Amendment (PA) to USMCA, which was
Christopher A. Casey, Analyst in International Trade and
signed by the three countries on December 10, 2019.
Finance
https://crsreports.congress.gov
Environmental Provisions in Free Trade Agreements (FTAs)
IF10166
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https://crsreports.congress.gov | IF10166 · VERSION 14 · UPDATED