Ways and Means Trade Subcommittee Hearing: Enforcement in the New NAFTA



House Ways and Means Trade Subcommittee

On May 22, 2019, the House Ways and Means Trade Subcommittee held a hearing titled “Enforcement in the New NAFTA” to discuss enforcement provisions in the U.S.-Mexico-Canada Agreement, in particular related to labor and environmental provisions of the updated agreement.

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Beth Baltzan, Principal, American Phoenix Trade Advisory Services PLLC

Owen Herrnstadt, Chief of Staff to the International President, International Association of Machinists and Aerospace Workers

Sandra Polaski, Independent Expert, Former Deputy Director-General for Policy, International Labor Organization

Alexander von Bismarck, Executive Director, Environmental Investigation Agency, U.S.

Devry Boughner Vorwerk, Corporate Vice President, Global Corporate Affairs, Cargill, Inc.

Chairman Earl Blumenauer Opening Statement:

Good morning, and welcome to our witnesses and audience members. Thank you for being here.

We all agree that enforcement is critical and that the new NAFTA must have effective enforcement mechanisms that make the agreement’s provisions meaningful and provide confidence that problems with compliance can and will be corrected.

The NAFTA 2.0 is seeking to not just replace but also improve the existing NAFTA. Therefore, lessons from enforcement failures in NAFTA – especially with respect to labor and environment provisions – must guide our Committee’s work.

Following the May 10th Agreement, most of us have grown increasingly concerned regarding the effective enforcement of labor obligations.

In every case in which a labor complaint has been filed, there remain ongoing and serious concerns regarding compliance with the labor obligations. In the only case in which the United States has pursued dispute settlement—the Guatemala labor case—it took nearly a decade to receive a final ruling, and the United States lost the dispute.

Given the many challenges and the poor record on enforcement under the NAFTA, there is a particular need for new ideas for more flexible and versatile enforcement mechanisms.

There are similar concerns for environmental provisions.

Since 1993 environment provisions have been incorporated in the text of our trade agreements, yet no environmental dispute has ever been litigated. This record of general non-enforcement raises the question of whether environmental commitments will ever be enforced.

The Trump Administration may tout the renegotiated NAFTA as the most comprehensive enforceable environment chapter in a U.S. trade agreement to date. Yes, the new NAFTA does not require parties to adopt, maintain, and implement the seven relevant multilateral environment agreements identified in the May 10th Agreement. Sadly, but predictably, it doesn’t address the effects of climate change.

As we consider the implementation and enforceability of the new NAFTA environmental provisions, transnational pollution continues to devastate U.S.-Mexico border communities.

I welcome Mr. von Bismarck to discuss lessons from the Peru Forestry Annex.

We worked together on the U.S.-Peru trade agreement to include strong and enforceable environment standards that were the first (and so far, the only one) of their kind. These new standards included the Annex on Forest Sector Governance (the Forestry Annex) to ensure a Peruvian timber sector that would be free of illegally harvested wood.

Without the Forestry Annex, the Peru FTA would never have been approved by Congress.

A decade later, we still struggle with enforcement of the Forestry Annex. Illegal logging continues in the Amazon basin, yet the new North American Free Trade Agreement’s enforcement provisions are weaker than those in the Peru trade agreement.

When discussing enforcement, the Administration often points to the threat of unilateral investigations and sanctions under Section 301 to enforce commitments of the NAFTA 2.0.

Let’s be clear: Section 301 is no substitute for strong enforcement provisions in the new NAFTA.

The imposition of tariffs under Section 301 will likely be reciprocated in kind as they have been by China (and by Canada and Mexico in response to the steel and aluminum tariffs), leading to a “trade war” and not necessarily corrective action.

While Congress has strengthened the USTR’s enforcement power through creation of the Trade Enforcement Trust Fund, strong enforcement provisions must be baked into our trade agreements.

It is my hope that this hearing will help us learn from our prior agreements and explore proposals for stronger enforcement.