NAFTA’s Future Is Far From Certain

WASHINGTON, D.C. -- Today, House Speaker Paul Ryan announced May 17 as the deadline for the U.S. Trade Representative to reach a final agreement on the North American Free Trade Agreement (NAFTA) with Canada and Mexico and send Congress the final text to review. Ryan said that without the final text by May 17, Congress will not be able to vote on NAFTA this year.

Earlier today, Commerce Secretary Wilbur Ross said a NAFTA deal will need to be reached in the next few weeks or the “political calendar will make it extremely difficult to do anything immediately. So it’ll either happen very quickly or be pushed over beyond these various elections. And in that case, who knows what the cast of characters will be like.”

Mexican Economy Minster Ildefonso Guajardo said that ministers “will be finding out through the day and tomorrow...if we really have what it takes to be able to land these things in the short run. We are finding out that possibility.”

In response, Sierra Club Responsible Trade Program Director Ben Beachy released the following statement:

"The future of NAFTA or any trade agreement shouldn’t be guided by political deadlines -- it should be guided by getting what’s best for workers, our communities, and our climate. NAFTA’s future is far from certain, but any deal that the Trump administration is able to strike in time to meet Speaker Ryan’s deadline will fall far short of what the people of North America deserve. Up to this point, corporate polluters have had access to the NAFTA text while the public has been shut out. It’s hard to believe that a rushed, closed-door process designed to score political points for Donald Trump will prioritize the interests of our communities. People across borders are demanding a trade agreement that protects communities and the environment, not a toxic deal that was brokered haphazardly and secretly to salvage Trump’s ratings.”

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Key findings from our new report NAFTA 2.0: For People or Polluters?

NAFTA’s Obstacles to Climate Progress

• NAFTA’s “proportionality” rule locks in tar sands oil extraction and fracking in Canada, while giving investors a permanent green light to finance new tar sands oil pipelines to the U.S. If Canada tries to meet its climate goals but remains bound by this NAFTA rule, the country will produce nearly 1,500 metric megatons more climate pollution by 2050 than if it ditched the rule. This cumulative NAFTA climate pollution penalty is twice Canada’s current annual emissions and more than 12 times greater than its 2050 climate pollution target.

• NAFTA has facilitated a fivefold increase in U.S. gas exports to Mexico by requiring those exports to be automatically approved. This has fueled increased fracking in the U.S., expansion of cross-border gas pipelines, and a crowding out of solar and wind power in Mexico. Only 1 percent of Mexico’s electricity comes from solar and wind while half now comes from gas, which has contributed more than any other fuel type to Mexico’s increased climate pollution.

• NAFTA could prolong the climate damage from the Trump administration’s regulatory rollbacks if NAFTA’s private legal system for corporate polluters remains intact. If “investor-state dispute settlement” (ISDS) remains in NAFTA, it could delay or weaken the re-establishment of U.S. climate policies after the Trump administration leaves.

• NAFTA allows corporations to evade climate policies by offshoring their production, pollution, and jobs to countries with weaker climate standards. Policymakers across North America regularly cite this climate pollution loophole as a reason not to enact stronger climate policies, for fear that doing so would spell job loss and a mere exporting of emissions.

New Climate Threats in NAFTA 2.0?

• NAFTA negotiators have explicitly stated that they intend for NAFTA 2.0 to lock in the recent deregulation of oil and gas in Mexico, which has encouraged increased offshore drilling, fracking, and other fossil fuel extraction. A future Mexican government may want to restrict such activities to reduce climate, air, and water pollution. However, NAFTA 2.0 could bar such changes with a “standstill” rule that requires the current oil and gas deregulation to persist indefinitely, even as the climate crisis worsens and demands for climate action crescendo.

• NAFTA 2.0 includes expansive rules concerning “regulatory cooperation” that could require Canada, the U.S., and Mexico to use burdensome and industry-dominated procedures for forming new regulations, which could delay, weaken, or halt new climate policies. These rules also could be used to pressure Canada and Mexico to adopt climate standards weakened by the Trump administration, making it harder to resume climate progress in the post-Trump era.

A Climate-Friendly NAFTA Replacement

• To allow governments to take climate action without fearing the offshoring of jobs and pollution, NAFTA’s replacement must require each country to enforce robust climate, labor, and human rights protections, in line with the Paris accord and other international agreements. In contrast, the Trump administration is proposing that NAFTA 2.0 replicate the weak environmental text of the Trans-Pacific Partnership, which did not even mention climate change.

• To prevent climate and other public interest policies from being challenged in trade tribunals, NAFTA’s replacement must include a broad “carve-out” that shields such policies from challenge, while eliminating ISDS and other overreaching rules. The Trump administration has proposed an opt-out for ISDS, but negotiators have given no indication that they plan to curtail other overreaching rules or exempt climate and other public interest policies from those rules.

• To support a just transition to a clean energy economy, NAFTA’s replacement must allow governments to swiftly phase out fossil fuel exports. The deal must eliminate NAFTA’s proportionality rule and the rule that requires automatic U.S. approval of gas exports. Instead, negotiators are reportedly contemplating either maintaining or even expanding these rules.