Problems With Current U.S. Policy.

Key Problems

* NAFTA's trade protections are liable to abuse, threatening
deterioration of environmental standards within the region.

* Flaws in procedures and programs also impair NAFTA's environmental
institutions.

* NAFTA's environmental institutions are poorly funded by the three
governments.

The post-NAFTA environmental regime's capacity to cope with trade-related challenges suffers from fundamental impediments. Under NAFTA, for example, domestic environmental laws should not discriminate against trade; thus various of NAFTA'S dispute settlement provisions allow firms to challenge environmental regulations. Such mechanisms are liable to abuse, as seen recently in the case of NAFTA'S Chapter 11.B rules for investor protection. These rules obligate governments to compensate investors for regulations that expropriate an investor's future property. Fearing such penalties, states and provinces may retreat from imposing tough environmental regulations.

Flaws in procedures and programs also impair NAFTA's environmental institutions. Restrictions on CEC's autonomy and problems its citizen submission and government-to-government dispute resolution processes are hindrances to its effectiveness. At least one government, Mexico, has withheld its support for CEC programs contingent on external approval of the commission's projects, a significant limitation on CEC'S ability to discharge its mandate in a professional and unbiased manner.

The citizen submission process--a procedure under NAAEC's (North American Agreement on Environmental Cooperation) Articles 14 and 15 designed to trigger investigations of alleged nonenforcement of domestic environmental laws--may be faulted for its complex requirements and lack of transparency. Citizen-initiated complaints face numerous procedural hurdles and may be terminated with cause by the commission or withdrawn by the submitters. Transparency questions also persist--the CEC may still refuse to publish a factual record. A recent and largely governmental initiative to modify these procedural rules would have imposed even more procedures and requirements on the secretariat, further limiting its autonomy. Fortunately, concerted lobbying by environmental groups led the CEC to reject most of these proposals.

In addition to citizen submission problems, rules of procedure have not yet been established for resolving government-to-government disputes under NAAEC's Chapter V--a process that could actually result in penalties--rendering this highly publicized provision virtually toothless. At the program level, the CEC (by its own admission) has been slow to engage in constructive dialogue on environmental assessment and priority setting with NAFTA's Free Trade Commission and other NAFTA-linked institutions and has neglected exploring areas of interagency cooperation.

Along the U.S.-Mexico border, where the symbiotic BECC and NADBank institutions have been justly praised for injecting sorely needed resources for new environmental infrastructure, there is also room for improvement. Political pragmatism has narrowed BECC's policy scope to water supply and wastewater treatment issues, slighting other environmental infrastructure needs. And an admirable record of institutional transparency, public access, and public participation is still marred by limited Mexican participation in BECC'S decisions. Moreover, NADBank is still closed to public input in its internal deliberations.

The Border XXI Program, which shoulders the burden of border area environmental management, has generated numerous (some useful) initiatives, with 127 projects currently on its docket. Yet Border XXI remains a congeries of programs dominated by federal agencies on each side of the border, with little systematic programming of long-term commitments by the two governments. One core strategy, promoting decentralization of environmental programs and building local capacity for environmental improvement, has scarcely been addressed. Other projects are moving in haphazard fashion and are contingent on available funds, threatening long-term performance. Border XXI's much-touted environmental assessment program, for instance, is largely composed of "indicators in progress" not yet available for actual assessment.

All these post-NAFTA initiatives suffer from governmental neglect. None have been adequately funded. The CEC has limped along on $9 million annually, down from the $15 million originally promised. CEC's U.S. staffing component is the most inadequate of the three governments. Lack of funding is implicated in both the slow pace of processing citizen submissions and the tardiness in implementing CEC's important NAFTA Environmental Effects study. And BECC's operating fund has been in jeopardy from the start. Financing for its certified projects though the U.S. Environmental Protection Agency (EPA) and NADBank is also threatened. In August 1999, a U.S. House Appropriations Subcommittee voted to cut EPA's Border Infrastructure Fund--a vital financial resource for BECC-certified projects--by half, from $100 million to $50 million.

Stephen P. Mumme, Colorado State University