Environmental Impact Analysis

Canada, the European Union and the United States all regularly conduct ex ante environmental impact analyses of their impending trade agreements, although using somewhat different approaches. Some other countries also carry out analyses to determine the impacts on the environment of their free-trade agreements — the OECD has recommended that environmental impacts of trade policies be reviewed (Alf et al. 2010). These assessments are an outgrowth of environmental impact analyses required since the United State’s 1969 National Environmental Policy Act (NEPA) for public sector projects and activities that can affect the environment (Salzman 2000). This experience led to a demand for environmental analysis during the NAFTA negotiating process where potential impacts on the environment were emphasized by critics of the trade agreement. A result was a number of analyses by economists and others to estimate the potential impacts of the agreement on the environment (see, e.g., Grossman and Krueger 1993). In fact, both the USTR and Canada prepared environmental reviews of NAFTA. Salzman (2000, p. 2), in commenting on the US review, said: The NAFTA review, for example, highlighted the likely environmental degradation caused by maquiladoras along the US-Mexico border and led to a separate Border Plan and funding mechanism for border area environmental problems. Concerns over potential race-to-the-bottom pressures (i.e., pressure to lower environmental protections as an inducement for industry location) informed the NAFTA’s environmental side agreement. And these, in turn, led to the requirement that the Commission on Environmental Cooperation “consider on an ongoing basis the environmental effects of the NAFTA.”