04/19/2002

MEDFORD, Mass.

IN NOVEMBER, by a single vote, the U.S. House passed a "fast-track" bill that gives the Bush Administration free reign to negotiate trade deals that give short shrift to the environment. With critical negotiations looming for the World Trade Organization and a hemispheric free-trade pact, the Senate should correct this when considering its version within the 18-day deadline decreed by the president on April 5.

The House bill is guided by the tired mantra on trade and environment: Free trade will lead to rising incomes, which by themselves will trigger citizen demands for a cleaner environment and foreign investment, which is assumed to translate into greater use of cleaner technologies.

The Senate doesn't need to travel far to see how misguided this notion is. Recent statistics from Mexico's National Institute for Statistics, Geography and Information Systems document how environmental degradation has diminished the benefits of trade-led economic growth in Mexico, the nation the Bush administration holds up as free trade's success story.

According to INEGI's figures, environmental problems have worsened since trade liberalization began in Mexico. The institute estimates that municipal solid waste has increased 85 percent; air pollution by 71 percent; and soil erosion by 62 percent since 1988, when Mexico began its transition toward economic integration. These trends have occurred faster than (and despite) the rising incomes that were supposed to offset environmental contamination.

During the same period, real economic growth has been slower than promised, but positive, rising 38 percent (only 17 percent in per-capita terms).

The INEGI studies estimate the financial costs of this environmental degradation at 10 percent of gross domestic product from 1988 to 1999, an average of $36 billion of damage each year. The destruction overwhelms the value of economic growth, which has been just 2.5 percent annually over the same period, or $14 billion a year.

In sum, the economic costs of environmental degradation are far outstripping the benefits of trade-led growth in Mexico.

The reason for this is all too clear. Because the proper mechanisms were not put in place to help Mexico manage its economic growth in an environmentally sustainable manner, free trade took its toll. This is unfortunate because, in the years leading up to the signing of the North American Free Trade Agreement, Mexico had begun to show environmental improvements.

Indeed, spending on environmental protection doubled and Mexico started a much-needed industrial environmental-inspection program. However, shortly after NAFTA was signed and fiscal and financial woes set in, attention to the environment nose-dived.

According to INEGI, since 1994 real spending on environmental protection declined by the equivalent of $200 million, or 45 percent.

The environmental "side" institutions created by NAFTA set some important precedents, but were not equipped to come to the rescue. At most, Mexico receives only a third of the $9 million annual budget of the North American Commission for Environmental Cooperation. NACEC has been effective in carrying out its limited mandate, but its $3 million budget is dwarfed by Mexico's budget shortfalls and buried by the $36 billion price tag of environmental degradation.

The Free Trade Area of the Americas that the Bush administration seeks with the proposed fast-track authority includes the controversial NAFTA-like investment provisions that let private foreign investors sue nations in the hemisphere for domestic environmental regulations that are deemed "tantamount to expropriation."

Again, Mexico serves as an example for what looms ahead for the Americas under the FTAA. Under NAFTA's investment rules, the Mexican government was forced to pay the U.S.-based Metalclad corporation $16.7 million because local elected authorities refused to let the company build a toxic-waste dump in an environmentally sensitive location.

Sen. John Kerry, D.-Mass., is sponsoring an amendment that will address some of these concerns. Senate environmental leaders often leave their environmental hats at the door when it comes to trade policy.

No self-proclaimed environmentalist should support a trade bill that fails to place the environment at the heart of trade agreements, create mechanisms for the U.S.and its trading partners to steer trade-led economic growth in a sustainable manner, and restrict foreign investors' ability to sue trading partners over environmental regulations.

Such senators as Lincoln Chafee, R.-R.I., James Jeffords, I-Vt., Joseph Leiberman, D.-Conn. and Paul Wellstone, D.-Minn., should support Kerry and lead a charge to bring a greener fast-track bill to the Senate floor.

The National Conference of State Legislators has now backed the Kerry amendment. If these legislators on the ground who will bear the cost of such actions support the amendment, those who stay in Washington should listen and follow suit.

Kevin Gallagher is a research associate at Tufts University's Global Development and Environment Institute, in Medford, Mass.