During President Obama's recent Asia trip, he was unable to announce the conclusion of a US-South Korean free trade agreement as he had hoped. The hang up? The US wants South Korea to lower its fuel economy standards so that US manufacturers can sell more of their cars there. Ford and Chrysler pressured US negotiators to reject the deal without those changes, complete with an ad blitz complaining about the imbalance in the number of Korean car imports to the US compared to US car exports to Korea. What a cynical way to take advantage of the job crisis in the US. The answer is not for South Korea to lower its fuel economy standards, but for US manufacturers to develop high efficiency models that can sell in global markets where higher fuel economy is required -- and by doing so accelerate the uptake of more fuel efficient cars in North America.
But there's a bigger problem here. Why is it that when it comes to trade, the public interest of the US is allowed to be dictated almost entirely by business interests, when so much more is at stake? In Europe, the rules on the free movement of goods, services, capital and people have evolved over the last 60 years in parallel with the development of European standards for the protection of health, environment and workers. The European approach short circuits arguments about protectionism and establishes a fair playing field. And both free trade rules and the environmental and social safeguards are enforceable in European courts. The formula at the global level and in North America is to have enforceable rules for trade, including the possibility of multi-million dollar awards for foreign investors under investment chapters like NAFTA Chapter 11, but weak provisions for environment and labor, and no mechanisms at all to deal with the aggregate environmental impact due to trade. And by the way, Chapter 11 is a waiver of US sovereign immunity to suit, lest anyone start waving the sovereignty flag. For global problems like climate change and biodiversity loss, we need global rules, global institutions and global jurisdiction.
The approach to trade and environment in the US, which was put in place in the environmental side agreement to NAFTA, is stale and outdated. It involves environmental cooperation with trading partners, meager capacity building, citizen suits on weak environmental enforcement that have toothless remedies, and provisions allowing trade sanctions for weak enforcement that have never been used -- and are not likely ever to be used. These provisions are no match to the rapidly worsening global ecological crisis. There have been tweaks to these provisions in the DR-CAFTA and US-Peru trade deals, but those supposed improvements still leave the environment provisions of trade deals toothless and marginal -- and those improvements are untested so far.
Toward the end of the Clinton administration, environmental reviews of trade agreements were added to the toolkit, but they have proven to be little more than shallow, boilerplate documents lacking the rigor of most environmental impact assessment processes and unequal to the ecological challenges that better leveraging of the trade arena would allow us to confront. For example, the interim review of the South Korean deal, from December 2006, doesn't even mention greenhouse gases, climate change, beef or fuel efficiency! Meanwhile, the ability to leverage the desire for trade deals to address climate change or other environmental crises like biodiversity loss is squandered. The old mantra that it is best to keep trade and environment apart, while camouflaged with these paper tigers since NAFTA, is by and large still carrying the day.
It is high time to expand the European Union's approach on integrating trade and environmental and other issues to regional trade in the Americas and global trade. Europe is far from perfect, but structurally, it makes no sense to have binding rules for trade, but not for all of the environmental and social impacts related to it. And for heaven's sake, let's forget about getting South Korea to lower its fuel efficiency standards!