Addressing Trade and Climate Change through a ‘Simple Amendment’ in USMCA



Risa Schwartz | International Economic Law and Policy Blog

Ambassador Katherine Tai is currently hosting Mexico’s Secretary of Economy Tatiana Clouthier and Canada’s Minister of Small Business, Export Promotion and International Trade, Mary Ng at the inaugural Free Trade Commission of the United States-Mexico-Canada Agreement (USMCA). According to the media advisory issued by Global Affairs Canada, the meeting “will address important trilateral trade issues, including …the importance of strong labour and environmental protections, and mitigating the economic effects of climate change to ensure that North America emerges from the COVID-19 pandemic stronger, through an inclusive, sustainable recovery that works for everyone.”

Since taking office, Ambassador Tai has made it clear that her mandate includes using trade policy to strengthen environmental protection in free trade agreements. Instead of looking at fixing the environmental exceptions at the World Trade Organization, Ambassador Tai’s first step should be to correct the “most glaring omission” in USMCA by acknowledging the climate crisis through incorporation of the Paris Agreement in the Environment Chapter as well as in Chapter 1.

The lack of any serious consideration of greenhouse gas emissions resulting from North American trade in USMCA takes away from any achievements gained by a more robust environment chapter and a revamped Environmental Co-operation Agreement. USMCA only indirectly considers climate change in relation to the promotion of strategies and actions, such as areas of energy efficiency, alternative and renewable energy, and low-emission technologies. As the USMCA fails to address our most significant environmental issue, Ambassador Tai’s comments on illegal logging and overfishing are a bit like fiddling while the forest fires rage and ocean temperatures rise.

Fortunately, there is an option to amend USMCA to reflect the importance of the climate crisis. Prior to the signing of USMCA, it was re-tooled by the Protocol of Amendments. This Protocol added a new article (24.8) to USMCA’s Environment Chapter. This Article recognizes the Parties’ existing commitments to implement their obligations under certain multilateral environmental agreements (MEAs) to which they are a party[1]. Article 24.8 is enforceable[2] under dispute settlement, and requires each Party to “adopt, maintain, and implement laws, regulations, and all other measures necessary to fulfill its respective obligations under the listed MEAs”. Currently, the Paris Agreement is not a listed MEA in Article 24.8. However, Article 34.3 of USMCA providing a simple amendment procedure (at least from a legal perspective) which can be used by the Parties to add more MEAs in the future, including the Paris Agreement.

The same list of MEAs was also incorporated into USMCA by the Protocol of Amendment in a new Article 1.3. Article 1.3 is similar to Article 104 of the original NAFTA, although the rewritten language is an improvement and provides more scope for Parties to adopt measures that may be on their face inconsistent with USMCA, but are needed to comply with the obligations of the MEA. This article acts as a de facto exception clause, and allows Parties to take actions to protect the environment under the listed MEAs and not worry about the measure being inconsistent with USMCA, with one caveat that the measure cannot be primarily a disguised restriction on international trade. This clause would be especially interesting for the development of trade policy for Border Carbon Adjustment measures. Again, Article 1.3 can be amended in a simple process by the Parties, to add the Paris Agreement or any other future climate agreement ratified by the Parties, to the MEA list.

Ambassador Tai made a second statement on Earth Day 2021 where she again emphasized the need to address climate change through trade policy by embracing “our responsibility to help solve one of the defining challenges of our time by leveraging trade tools to avert an unfolding economic crisis and protect our planet.” Amending USMCA to list the Paris Agreement in Articles 1.3 and 24.8, would be an important signal that the USMCA Parties are ready to make difficult decisions for environmental protection, which may include prioritizing climate obligations over trade rules, and potentially using binding dispute resolution in USMCA to enforce environmental obligations in MEAs.

Risa Schwartz is a sole practitioner, focusing on international law and the intersections between trade and investment law, environmental law and Indigenous rights.

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