US Free Trade Agreements Are Bad Not Just For The Economy, But For The Environment, Too

from the what-was-the-benefit-again? dept

A couple of months ago, we reported on some interesting research into the reality of US trade agreements, in contrast to the rosy pictures always painted when they are being sold to the public by politicians. In particular, it turned out that far from boosting US exports and creating more jobs, both the North American Free Trade Agreement (NAFTA) and KORUS, the free trade agreement with South Korea, actually did the opposite -- increasing the US trade deficit with those countries, and destroying hundreds of thousands of American jobs.

But of course bare economic statistics don't capture the full effect of free trade agreements. For example, there is also the environmental impact to consider. An interesting press release from the Sierra Club reports on a meeting held to consider that aspect. It turns out that things look as bad there as they do on the economic front: "Nearly 20 years into NAFTA and the evidence is in," said Ilana Solomon, director of the Sierra Club’s Responsible Trade Program. "NAFTA led to an expansion of deforestation and unsustainable water use in order to support export-oriented agriculture. It gave massive rights to corporations to challenge environmental and climate safeguards in private trade tribunals. It expanded exports in dirty fossil fuels in a time when we should be moving beyond these outdated fuels and investing in clean energy. Governments must take a page out of the history books and stop negotiating trade pacts that gut protections for our air, water, land, workers, and communities." That last comment is a clear reference to TPP, but applies equally to TAFTA/TTIP. Both of these are likely to include investor-state dispute settlement (ISDS) measures that allow companies to sue entire nations for alleged "expropriation" of future profits in the "private tribunals" referred to above. One of the ways that governments can be accused of doing that is by strengthening safeguards for the environment, since that often has the knock-on effect of increasing costs for businesses, and thus reducing their future profits. Companies then try to claim ISDS provisions in trade agreements give them the "right" to sue for compensation -- Techdirt recently wrote about a case involving the Canadian province of Quebec.

The problem with ISDS is not just the literally limitless awards that can be made against governments, which have to be paid out of public funds. The mere threat of such actions can have a chilling effect on the formulation of national policy. It's been happening in Canada for over a decade, thanks to the ISDS chapter in NAFTA, as a former government official in Ottawa explained: "I've seen the letters from the New York and DC law firms coming up to the Canadian government on virtually every new environmental regulation and proposition in the last five years. They involved dry-cleaning chemicals, pharmaceuticals, pesticides, patent law. Virtually all of the new initiatives were targeted and most of them never saw the light of day." What this means in practice is that ISDS clauses in major US trade agreements currently being negotiated are likely to have the same negative effects on the environment as NAFTA, but on a much greater scale. That's because they involve far larger trade blocs, and recourse to ISDS tribunals has increased greatly in recent years, adding to the credibility of threats to use them unless plans for more stringent environmental policies are dumped. So alongside the dubious economic claims being made for them, which are undermined by the failure of both NAFTA and KORUS to produce the predicted exports or jobs, we can now add the hidden environmental damage as yet another reason to call into question the alleged benefits of both TPP and TAFTA/TTIP.

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Filed Under: economics, economy, environment, korus, nafta, tafta, tpp, ttip