Free-Trade Talks Raise Questions That Alarm Environmentalists : Commerce: Activists are concerned that the byproducts of such an agreement could be filthy air, foul water and toxic contamination.

Are filthy air, foul water and rampant toxic contamination the inevitable byproducts of free trade?

Or do lower trade barriers offer people in poorer countries their best hope of ever being able to better their economic standard of living without destroying their environments?

The ongoing talks toward a free-trade agreement with Mexico mark the first time such questions have made their way to the political fore in international trade negotiations.

Even many who were active in the environmental movement admit they were slow to pick up on the link between trade and the environment.

“This is a new issue for us,” Sierra Club Chairman Michael McCloskey said. “But the more we got into it, the more alarmed we became, and the more we came to see there were profound implications.”

Now, environmentalists are saying they hope to make the North American Free-Trade Agreement with Mexico and Canada a model for “sustainable development,” which is the idea of channeling economic growth so the world’s poorer countries can take advantage of economic growth to improve their citizens’ lives without wrecking the air, land and water.

But in the five months since some environmental groups went to President Bush’s aid in his hard-fought battle for congressional authority to begin the talks, political tensions have been building. Without at least some support from environmentalists, the Administration will find it far more difficult to win final approval of any trade package it presents on Capitol Hill.

Although the President has vowed that the free-trade agreement will improve rather than harm the quality of the environment, activists say they are unimpressed with the progress they have seen thus far.

One of the few concrete proposals to emerge to date--a draft of the U.S. and Mexican governments’ much-touted border environmental plan--”is a big disappointment all around,” said Justin Ward, senior resource specialist for the Natural Resources Defense Council, an organization that has supported the talks.

Technically, that document is not directly connected to the free-trade talks, but is widely viewed as an indicator of how seriously the Administration is weighing the environment as a factor in the negotiations.

Activists say the plan was little more than a description of problems and the programs under way. It contains no new initiatives of funding commitments. “It’s a document of shoulds, coulds, woulds and maybes,” said Alex Hittle of Friends of the Earth. “There are no real teeth in it.”

Indeed, even as William K. Reilly, U.S. Environmental Protection Agency administrator, was unveiling the border plan draft in August, three groups--Friends of the Earth, Sierra Club and Public Citizen--were announcing a lawsuit against the U.S. trade representative’s office over its refusal to file an environmental impact statement with regard to the trade talks.

The Justice Department insists that no such statement is needed because the trade talks are not covered by the National Environmental Protection Act. That act mandates that federal agencies file voluminous impact statements whenever they undertake actions that could significantly affect the quality of the environment.

The closest the government came to an environmental impact statement is a 199-page draft review of the environmental effects of the trade agreement, released last month by the EPA and the trade representative’s office. It asserted that, in the worst case, the trade pact might worsen annual industrial growth along the border by a mere 1% or 2%. But it put far more emphasis on the beneficial effects that free trade might have.

Ward conceded that it is “difficult at this stage to fully elaborate all the alternatives.” But he complained that the review was little more than “a long version of the argument that the Administration has made all along.”

“What is missing,” he said, “is any credible explanation of the kinds of programs that will be instituted in the area of funding and the area of regulatory enforcement to make sure that becomes a reality.”

“We want alternatives,” said Hittle, of Friends of the Earth. He said that if the free-trade agreement is certain to increase truck traffic along the border, the review should spell out options for reducing air pollution, such as building more railroads or tightening air pollution standards.

Meanwhile, Administration officials contend that some opponents of the free-trade talks are using the environmental issue as a politically popular cover for their real concern, which is a fear of losing high-paying union jobs if industry moves south.

“For many people, (the environment) is merely a red herring and it always has been,” says one source close to the talks. “The reality of it is that congressmen in Michigan don’t (care) about the border environment.”

Both sides agree that the most delicate negotiations will be over the issue of reconciling the two nations’ vastly different standards for protecting the environment.

Administration officials insist that the United States will try to make sure that a free-trade agreement does not set off a stampede of U.S. businesses moving to Mexico to duck this country’s stricter regulations. However, they say that environmental arguments will not become a cover for economic concerns such as the prospect of lost jobs.

This means that U.S. negotiators want to make sure that Mexican farmers are not allowed to use pesticides banned in the United States on products they plan to ship to this country.

But they do not want to venture into less clear-cut areas--requiring, for example, that furniture makers along the California-Mexico border be required to operate within California’s air-pollution restrictions, which are higher--and costlier to meet--than U.S. federal standards. Otherwise, they say, the number of furniture makers moving out of the Los Angeles Basin will accelerate.

To go in that direction, one U.S. official said, would be “to fight the issue on competitiveness grounds. . . . We’re trying to stick strictly to the environmental issues.”

In virtually every speech he makes on free trade, President Bush touts it as Mexico’s best environmental hope. Although Mexican President Carlos Salinas de Gortari has taken some important steps, including passage of strict laws, the country lacks the resources to adequately enforce its regulations, Bush argues.

“Poverty and environmental improvement do not coexist,” said EPA’s Reilly.

Bush pledged last May that environmental issues would play a major role in shaping the final agreement with Mexico and Canada. Specifically, the President promised:

* To build on existing programs under way between the two governments, such as the recently released border environmental plan that would “parallel and complement” the free-trade agreement.

* To increase environmentalists’ input by appointing their representatives to several influential advisory panels, which already include members from business and labor.

* To produce a separate review of the potential environmental consequences of a free-trade agreement.

* To assure that the agreement will not allow the weakening of existing U.S. health and environmental laws, including standards governing pesticides, energy conservation and toxic waste.

Some environmentalists hailed the President’s commitments as a turning point. “From now on, free trade pacts are inherently statements of environmental policy,” National Wildlife Federation President Jay D. Hair wrote in a New York Times Op-Ed article.

“Mr. Bush has adopted this concept. His embrace is tentative, but that is less important than the precedent he has set,” Hair said. “He has made the commitment that for the first time in free-trade history, an environmental review will be part of the negotiations.”

A number of other groups sided with the National Wildlife Federation: The Administration had earned the benefit of their doubt.

Other environmentalists disagreed, and some of that friction lingers. “We were disappointed that other groups came to see it differently,” said the Sierra Club’s McCloskey, whose organization has been critical of the free-trade talks. “As they study it further, I think they will come to regret that position.”

With the environmental lobby split, Bush was able to overcome a formidable coalition of labor, agricultural and consumer groups to win congressional authorization--the so-called “fast track” vote--that made it possible to begin the trade talks in earnest in July.

“In political terms, it was very important that the environmental movement not be perceived as a monolith against us,” one of the Administration’s leading trade negotiators recalled, speaking on the condition that he not be identified.

But if Bush wants to build on that support, environmental groups say, the time for mere rhetoric is quickly passing. “At this point,” the NRDC’s Ward said, “things have to translate into serious and concrete action to clean up existing problems, as well as prevent new ones from occurring.”

U.S.-MEXICO TRADE

IMPORTS AND EXPORTS BETWEEN U.S. AND MEXICO Trade between the United States and Mexico has almost doubled since 1986, reaching more than $58 billion in 1990.

U.S. Exports U.S. Imports ’86 $12.4 $17.3 ’87 $14.6 $20.3 ’88 $20.6 $23.3 ’89 $25.0 $27.2 ’90 $28.4 $30.2

GROWTH / DECLINE IN STATE EXPORTS

Below are the top ten states in terms of exports to Mexico, ranked by dollar value of exports in 1990. Chart also tracks growth or decline in those states’ exports since 1987.

Percent Change State 1987 1988 1989 1990 1987-1990 Texas $6,465,123 $9,334,029 $11,010,627 $13,287,718 105.5 California 2,257,263 3,241,765 4,172,918 4,670,518 106.9 Michigan 1,007,870 1,317,396 1,720,558 1,432,058 32.9 Illinois 278,373 448,166 569,203 880,814 216.4 Arizona 644,677 761,786 759,494 850,613 31.9 New York 512,368 827,931 834,284 801,299 56.4 Louisiana 377,426 530,149 671,019 735,554 94.9 Pennsylvania 181,126 337,393 474,687 582,604 221.7 Florida 218,998 326,336 424,199 494,089 125.6 Ohio 245,232 381,331 464,034 444,490 81.3

PERCENT OF STATES’ EXPORTS GOING TO MEXICO Here are the percentages of those top ten states’ exports that went to Mexico each year since 1987.

State 1987 1988 1989 1990 1987-1990 Texas 25.5% 27.0% 28.9% 32.1% California 6.6% 6.8% 7.8% 8.0% Michigan 6.0% 6.3% 8.1% 6.8% Illinois 3.2% 3.9% 4.3% 5.6% Arizona 21.5% 21.5% 18.7% 17.8% New York 2.6% 3.1% 3.1% 2.6% Louisiana 2.8% 3.6% 3.8% 4.4% Pennsylvania 3.0% 4.3% 5.5% 5.6% Florida 2.1% 2.4% 2.9% 3.0% Ohio 2.4% 3.1% 3.5% 2.8%

Sources: Massachusetts Institute for Social and Economic Research and Mexican Embassy, Washington D.C.