U.S.-Jordan Free Trade Agreement: Analysis of Environmental Provisions

U.S.-Jordan Free Trade Agreement: Analysis of Environmental Provisions

Order Code RS20999
Updated October 16, 2001
CRS Report for Congress
Received through the CRS Web
U.S.-Jordan Free Trade Agreement:
Analysis of Environmental Provisions
Mary Tiemann
Specialist in Environmental Policy
Resources, Science, and Industry Division
Summary
The U.S.-Jordan Free Trade Agreement (FTA) was signed on October 24, 2000,
and submitted to Congress on January 6, 2001. The FTA’s entry into force required the
completion of necessary domestic legal procedures by each Party, and the Jordanian
Parliament approved the agreement in May. This trade agreement generally was greeted
with broad bipartisan support; however, it generated controversy because the text
includes potentially precedent-setting provisions on environment and labor, and the
provisions are subject to the agreement’s dispute settlement process. The environmental
provisions parallel those included in the North American Free Trade Agreement
(NAFTA) environmental side agreement. Some interests view the inclusion of these
provisions to be a model for addressing environmental issues in future trade negotiations,
but others object to making the environmental provisions subject to dispute settlement
and possibly sanctions. The Administration did not seek to alter the U.S.-Jordan FTA to
address concerns with its labor or environment provisions, but the two governments
exchanged letters stating their intent to try to resolve differences without recourse to
formal dispute settlement procedures. On July 31, the House passed implementing
legislation (H.R. 2603) by voice vote. The Senate passed H.R. 2603 by voice vote on
September 24. The bill was signed into law (P.L. 107-43) on September 28. (For more
details, see CRS Report RL30652, U.S.-Jordan Free Trade Agreement.) This report
examines environmental provisions in the U.S.- Jordan FTA and compares them with
related provisions in NAFTA and its environmental side accord.
During the past decade, environmental issues have gained an increasing level of
attention in trade liberalization deliberations, although their inclusion in trade agreements
remains controversial. No consensus has emerged on how, whether, or to what degree
such issues might be addressed in trade agreements or in “fast track” legislation
authorizing expedited congressional consideration of these agreements. Consequently, the
U.S.-Jordan Free Trade Agreement (FTA) is of interest as it expands the consideration of
environmental matters in a trade agreement by including environmental provisions within
the body of the agreement and making these provisions subject to the FTA’s dispute
settlement process.
Congressional Research Service ˜ The Library of Congress

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Views on the specific environmental provisions have been quite divergent. Some
policymakers and environmental groups see the inclusion of these provisions to be either
a model or a starting point for future U.S. trade negotiating strategy on environmental
issues. Others view such provisions to be potentially protectionist by making enforcement
of environmental laws subject to dispute settlement and possibly sanctions. Opponents also
have expressed concern that such provisions could threaten U.S. sovereignty on domestic
environmental matters. Thus, while an FTA with Jordan was widely supported in
Congress, its environmental and labor provisions caused controversy. On June 21, U.S.
Trade Representative Robert Zoellick stated that the Bush Administration would not seek
to alter the FTA to address concerns regarding these provisions. However, the two
governments exchanged letters stating their intent to resolve any implementation issues
without recourse to formal dispute settlement procedures.
Overview of Environmental Provisions
Briefly, in the FTA, the United States and Jordan “recognize that it is inappropriate
to encourage trade by relaxing domestic environmental laws.” This provision, which
parallels NAFTA language, further states that each Party agrees to strive to ensure that it
does not waive or otherwise derogate from such laws to encourage trade with the other
Party. While calling for high levels of environmental protection, the FTA explicitly
recognizes the right of each country to establish its own levels of domestic environmental
protection, policies, and priorities. Perhaps most significantly, the FTA sets a precedent
in stating that “a Party shall not fail to effectively enforce its environmental laws, through
a sustained or recurring course of action or inaction, in a manner affecting trade between
the Parties.” While similar language appears in the NAFTA environmental side agreement
which has its own dispute settlement process, here this obligation is placed within the text
of the trade agreement and is subject to the FTA’s dispute settlement procedures. (See
Table 1 below for a comparison of environmental provisions in the U.S.-Jordan FTA with
similar provisions contained in the NAFTA and its environmental side agreement.)1
An unprecedented provision in NAFTA that is not included in the U.S.-Jordan FTA
concerns the relationship of the FTA to multilateral environmental agreements (MEAs).
NAFTA Article 103 lists three trade-related MEAs (e.g., the Montreal Protocol on ozone-
depleting substances) that may take precedence over NAFTA if implementation conflicts
arise, provided that the MEA is implemented in the least NAFTA-inconsistent manner.
Parties may add other MEAs to this list. This issue – defining the relationship of MEAs to
trade rules – has been on the agenda of the World Trade Organization’s Committee on
Trade and Environment for several years, and its resolution remains elusive.
Enforcement Obligation and Dispute Settlement Procedures
The strength of the obligation to effectively enforce domestic environmental laws is
directly related to the dispute settlement process. The U.S.-Jordan FTA sets out a
1 The U.S.-Jordan FTA and the NAFTA side agreement define “environmental laws” similarly for
purposes of the enforcement provisions,. They generally include a broad range of environmental
protection laws, including pollution laws and laws to protect endangered species. The NAFTA side
accord explicitly excludes laws for managing the commercial or subsistence harvesting of natural
resources. Both definitions explicitly exclude worker safety or health laws.

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multi-step procedure for dispute settlement. First, the United States and Jordan “shall
make every attempt to arrive at a mutually agreeable resolution through consultations” if
a dispute arises. If the Parties do not resolve the dispute within 60 days through
consultations, either Party has the right to refer the dispute to the Joint Committee. (The
Joint Committee is a continuing body established to supervise the implementation of the
Agreement and is composed of representatives of the Parties.) If the Joint Committee does
not resolve the dispute, generally within 90 days, the dispute may be referred to a specially
appointed three-person dispute settlement panel. The dispute settlement panel is
authorized to make non-binding recommendations to resolve the dispute. After the panel
issues its findings and recommendations within 90 days, the Joint Committee “shall
endeavor to resolve the dispute, taking the panel report into account.” If the Joint
Committee does not resolve the dispute within 30 days, then “the affected Party shall be
entitled to take any appropriate and commensurate measure.”
Proposals to make the enforcement of environmental (and labor) laws subject to
dispute settlement provisions and potentially sanctions under trade agreements have been
controversial. Thus, the inclusion of this approach in the U.S.-Jordan FTA intensified the
debate over this economically modest trade agreement. However, some supporters of the
enforcement obligation were concerned that it also gives Parties such a degree of
discretion in implementing it, that, in their view, it is unlikely that any circumstance would
be considered a violation. In contrast, others objected to this provision and the possibility
that an international tribunal would have authority to judge the adequacy of U.S.
environmental laws and policy. A further concern was that the language entitling a Party
“to take any appropriate or commensurate measure” would allow a Party to impose trade
sanctions in response to environmental disputes. To address these objections, the two
governments exchanged letters on July 23 stating their intent that each Party “would not
expect or intend to apply the Agreement’s dispute settlement enforcement procedures to
secure its rights under the Agreement in a manner that results in blocking trade.” Each
government also “considers that appropriate measures for resolving any differences that
may arise regarding the Agreement would be bilateral consultations and other procedures,
particularly alternative mechanisms, that will help to secure compliance without recourse
to traditional trade sanctions.” The letters satisfied opponents sufficiently to clear the way
for the advancement of implementing legislation, but supporters in the House objected to
what they consider “second-tier” treatment of environmental and labor matters.
Transparency. When signing the FTA, the United States and Jordan also signed
a Memorandum of Understanding on Transparency in Dispute Settlement (MOU). The
MOU provides for public participation and transparency in the dispute resolution process
and obligates the Parties to “solicit and consider the views of members of their respective
publics ...” after receiving a request for consultations under the agreement. If a dispute
panel is established, Parties must make their submissions to the panel publicly available,
and oral presentations before the panel must be open to the public. The panel is directed
to “accept and consider” amicus curiae submissions,2 and must release its report to the
public. The United States has long supported greater transparency in trade disputes, and
non-governmental stakeholders have sought the opportunity to provide input into the
process. Consequently, many view this MOU to be a significant complement to the FTA.
2 Amicus curiae submissions are briefs submitted by interested individuals or nongovernmental
groups that are not a party to the dispute.

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Joint Statement on Environmental Technical Cooperation
The U.S.-Jordan FTA is accompanied by a non-controversial Joint Statement on
Environmental Technical Cooperation which establishes a Joint Forum on Environmental
Technical Cooperation. The Forum has a mandate to “advance environmental protection
in Jordan by developing environmental technical cooperation initiatives, which take into
account environmental priorities, and which are agreed to by the two governments,
consistent with the U.S. country strategic plan for Jordan, and complementary to
U.S.-Jordanian policy initiatives.” The countries agree to consult with the public in
pursuing the Forum’s work. An annex to the joint statement details ongoing and future
U.S.-Jordanian environmental technical cooperation programs.
Environmental Review
In another environment-related action linked to the negotiation, the U. S. Trade
Representative (USTR) prepared a draft environmental review of the proposed FTA. This
environmental review, released in September 2000, was prepared in response to Executive
Order 13141, issued by President Clinton on November 16, 1999. The order commits the
United States to “factor environmental considerations into the development of its trade
negotiating objectives.” In the draft review, the USTR concluded that “the U.S.
Government (USG) expects that the FTA with Jordan will not have any significant
environmental effects in the United States.”3
Congressional Action
The U.S.-Jordan FTA states that its entry into force is “subject to the completion of
necessary domestic legal procedures by each Party.” Former President Clinton submitted
the FTA to the 107th Congress on January 6, 2001. The Agreement was approved by the
Jordanian parliament on May 9, 2001.
The Senate Finance Committee held a hearing on the FTA on March 20, 2001. On
July 17, the Committee held a mark-up session for S. 643 (implementing legislation
introduced by Senator Baucus), during which it approved an amendment in the nature of
a substitute offered by Senator Baucus making various technical corrections. The
Committee rejected an amendment offered by Senator Gramm that would have restricted
the scope of the FTA’s dispute resolution mechanism for purposes of addressing labor and
environmental issues. The Senate Finance Committee approved S. 643 by voice vote on
July 26, and reported S. 643 (S. Rept. 107-59) on September 4. In the House,
Representative Levin introduced a companion bill (H.R. 1484) on April 4, 2001, which
was referred to the House Ways and Means Committee and the Judiciary Committee. On
3 Although this was the first environmental review prepared for a trade agreement under the
executive order, it was not the first time such a review was undertaken. In 1992, environmental
groups called for the U.S. Government to prepare an environmental impact assessment under the
National Environmental Policy Act (NEPA) for the proposed trade agreement between the United
States and Mexico (and subsequently Canada). While a federal court ruled that the government was
not required to prepare such an assessment, the Office of the USTR did prepare an extensive
review of U.S.-Mexico environmental issues. (See Office of the U.S. Trade Representative, Review
of U.S.-Mexico Environmental Issues, February 1992. 231p.)

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July 26, the House Ways and Means Committee approved similar legislation, H.R. 2603,
amended. The Committee reported H.R. 2603 (H. Rept. 107-176, Part I) on July 31, 2001,
and the House passed it by voice vote the same day. The Senate indefinitely postponed
action on S. 643 and passed H.R. 2603 by voice vote on September 24. On September 28,
the President signed H.R. 2603 into law (P.L. 107-43), thus making way for the trade
agreement’s implementation.
The following table compares environmental provisions in the U.S.-Jordan FTA with
those in the NAFTA and its environmental side agreement, the North American Agreement
on Environmental Cooperation (NAAEC).
Table 1. Comparison of U.S.-Jordan FTA, NAFTA, and NAAEC
Key Environmental Provisions
Provision
U.S.-Jordan FTA
NAFTA
NAAEC
Relaxation of
Article 5.1. The Parties
Article 1114.2. The Parties
No comparable provision.
laws to
recognize that it is
recognize that it is inappropriate
attract
inappropriate to encourage
to encourage investment by
investment
trade by relaxing domestic
relaxing domestic health, safety or
environmental laws.
environmental measures.
Accordingly, each Party
Accordingly, a Party should not
shall strive to ensure that it
waive or otherwise derogate from,
does not waive or otherwise
or offer to waive or otherwise
derogate from, or offer to
derogate from, such measures as
waive or otherwise derogate
an encouragement for the
from, such laws as an
establishment, acquisition,
encouragement for trade
expansion or retention in its
with the other Party.
territory of an investment of an
investor. If a Party considers that
another Party has offered such an
encouragement, it may request
consultations with the other Party
and the two Parties shall consult
with a view to avoiding any such
encouragement.
Adoption of
Article 5.2. Recognizing the
Article 1114.1. Nothing in this
Article 3. Recognizing the
environ-
right of each Party to
Chapter (on investment) shall be
right of each Party to
mental
establish its own levels of
construed to prevent a Party from
establish its own levels of
measures:
domestic environmental
adopting, maintaining or enforcing
domestic environmental
levels of
protection and
any measure otherwise consistent
protection and
protection
environmental development
with the Chapter that it considers
environmental
policies an priorities, and to
appropriate to ensure that
development policies an
adopt or modify accordingly
investment activity in its territory
priorities, and to adopt or
its environmental laws, each
is undertaken in a manner
modify accordingly its
Party shall strive to ensure
sensitive to environmental
environmental laws and
that its laws provide for
concerns.
regulations, each Party
high levels of environmental
shall ensure that its laws
protection and shall strive to
and regulations provide for
continue to improve those
high levels of
laws.
environmental protection
and shall strive to continue
to improve those laws and
regulations.

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Provision
U.S.-Jordan FTA
NAFTA
NAAEC
Effective
Article 5.3(a). A Party shall
No comparable provision.
Article 5.1. With the aim
enforcement
not fail to effectively
of achieving high levels of
of environ-
enforce its environmental
environmental protection
mental laws:
laws, through a sustained or
and compliance with its
obligation
recurring course of action or
environmental laws and
inaction, in a manner
regulations, each Party
affecting trade between the
shall effectively enforce its
Parties, after the date of
environmental laws and
entry into force of this
regulations through
Agreement.
appropriate governmental
action, subject to Article
37... .
Article 37: Nothing in this
Agreement shall be
construed to empower a
Party’s authorities to
undertake environmental
law enforcement activities
in the territory of another
Party.
Effective
Article 5.3(b). The Parties
No comparable provision.
Article 45.1. For the
enforcement
recognize that each Party
purposes of this
of environ-
retains the right to exercise
Agreement: A Party has
mental laws:
discretion with respect to
not failed to “effectively
exercise of
investigatory, prosecutorial,
enforce its environmental
discretion
regulatory, and compliance
law” or to comply with
matters and to make
Article 5(1) in a particular
decisions regarding the
case where the action or
allocation of resources to
inaction in question by
enforcement with respect to
agencies or officials of that
other environmental matters
Party: (a) reflects a
determined to have higher
reasonable exercise of
priorities. Accordingly, the
their discretion in respect
Parties understand that a
of investigatory,
Party is in compliance with
prosecutorial, regulatory or
subparagraph (a) where a
compliance matters; or (b)
course of action or inaction
results from bona fide
reflects a reasonable
decisions to allocate
exercise of such discretion,
resources to enforcement
or results from a bona fide
in respect of other
decision regarding the
environmental matters
allocation of resources.
determined to have higher
priorities.