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Congressional Research Service
Informing the Iegitive  debate since 1914


                                                                                        Updated  February 28, 2023

Environmental Provisions in Free Trade Agreements (FTAs)


Linkages between trade and environmental protection have
long been a concern to some U.S. policymakers and
stakeholders. The central question is whether trade
liberalization (i.e., the removal of barriers on the exchange
of goods and services between nations) advances shared
economic  and environmental goals. Some observers argue
that economic expansion brought on by trade liberalization
adversely affects the environment. Among other concerns,
they contend that international competition may lead
developing countries to adopt less stringent environmental
standards to encourage producers to relocate from
jurisdictions with more stringent environmental standards.
Thus, some observers argue that environmental provisions
are necessary in trade agreements to help raise international
environmental standards and protect U.S. businesses and
workers.

Other policymakers and stakeholders believe that trade
liberalization and environmental protection can be mutually
supportive. They argue that while economic growth may
adversely affect the environment during the initial stages of
industrialization, it can also provide resources to mitigate
such effects as countries develop. They also argue that trade
liberalization can support U.S. environmental goals through
the elimination of tariffs on environmental goods, and the
reduction of trade-distorting subsidies, among other actions.

Trade-related environmental provisions in U.S. FTAs were
first introduced in a side agreement to the North American
Free Trade Agreement of 1994 (NAFTA).  Through  the
years, they have moved from side agreements to integral
chapters within U.S. FTA texts, and increasingly have
incorporated cooperation and dispute settlement (DS)
mechanisms.  In 1992, President George H.W. Bush
instituted the practice of conducting an environmental
assessment of trade agreements in conjunction with the
consideration of NAFTA, and President Clinton formalized
the practice by executive order in 1999. In the Trade Act of
2002 (P.L. 107-210), Congress included environmental
provisions as a principal trade negotiating objective in
renewing the President's Trade Promotion Authority (TPA)
legislation. Since then, the United States has been at the
forefront of using trade agreements to promote core
environmental protections. Additional negotiating
objectives were incorporated into the Bipartisan
Comprehensive  Trade Priorities Act (TPA) (P.L. 114-26),
enacted into law on June 29, 2015. Environmental
provisions in the United States-Mexico-Canada Agreement
(USMCA)   were, in part, based on these negotiating
objectives.

The   GATT and the WTO
Mechanisms  to address environmental protection have been
a part of international trade agreements since the General


Agreement  on Tariffs and Trade (GATT) was signed in
1947. While the GATT  does not contain affirmative
environmental commitments, its Article XX lays out a
number  of general exceptions to its provisions-including
exceptions for natural resources and protection of human,
animal, or plant life, and public health-that could allow
for environmental policy measures. The agreements
establishing the World Trade Organization (WTO) in 1995
maintained these exceptions, which have been the subject
of several disputes resolved by the WTO's dispute
settlement system.

The WTO   has hosted a variety of multilateral and
plurilateral negotiations. The Doha round of multilateral
negotiations were supposed to, among other things, clarify
the relationship between existing WTO rules and
multilateral environmental agreements. A plurilateral group
of WTO  members  is also engaged in negotiations to
eliminate tariffs on environmental goods, such as wind
turbines or solar panels. However, both these negotiations
have stalled. In 2022, WTO Members finalized a limited
agreement that prohibits subsidies to certain fisheries in
order to reduce overfishing. The agreement would enter
into force if it is ratified by two-thirds of WTO members

Environ      ental   Provisions in US. F TAs
Although the WTO  has played an important role in global
environmental discussions, bilateral and regional FTAs
have also addressed environmental policies. FTAs
commonly  include more detailed provisions than the WTO
on trade-related issues, such as the environment. A brief
evolution of these provisions is outlined below.

Current  Key Environmental   Provisions in U.S. FTAs
A party shall:
   Not fail to effectively enforce its environmental laws in a
    manner affecting trade and investment.
   Not waive or derogate from environmental laws to
    promote trade or investment.
   Adhere to certain multilateral environmental agreements
    (MEAs).
   Develop mechanisms to enhance environmental
    performance.
*   Retain the right to exercise the reasonable or bona fide
    exercise of discretion in enforcement.


Other provisions include:
   Enforceable dispute settlement and consultations.
   Cooperation and trade capacity building.
   Environmental Affairs Council.
Source: CRS.

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