Protecting the Environment in North America with Free Trade

Report Environment

Protecting the Environment in North America with Free Trade

April 2, 1992 23 min read Download Report
Wesley R.
Senior Visiting Fellow

(Archived document, may contain errors)

889 April 2,1992 PR0TEC"GTHEIE"MENT IN NORTH AMERICA WITH FREE TRADE INTRODUCTION Across the trail lending ma North Amuican fnee mdc acconi, some e nvironmfnEal cxtr#nistshavetossedagnenherring.Theyconcedethatfnee~willaiggnaMex rnmiststhen say,is bad.It is bad,thcymaineain, becauseecanamicgrowthwill spawn m~pollutinghdustries ts' cassadm- is the American Federation oflabor ApLrCIO) andother unions th a t contendafne Addingtothe COIlpSSofhdUSairrl aaderrreawill ~unitcdseaoescoanpanies tomwe a Mexico, where they al legedly can escape the saict laws andenfibarxment ofthe us. Envirrrnmeneal prosec iCan W, Mexican jobs, and Mexican living seandards. But this CSC CX- tion Agency or EPA.

It is with suchdire wamhgs that smnedogists and tradc union executives hope to dereiltheNtXthAmencan FneTrade Agmmcnt (NAFI'A) between the U.S.. Canada mndMeXic0, which will spureoanoa3ic growthin allthxeecounaics. Afree trade muc in North Amuica would be the largcstfxce trading region in the world, camprising ver360millionpeapleandproducingS6.2trillion worth ofgoodsandsenrices'a year. A North American free trade area not only would open new markets fmU.S pods, it also would he l p U.S. companies compete better against Emopean and Asian Diverting Discussion. These benefits, however, may be denied North Americans if opponents of NAFI'A get their way. Greenpeace and some other environmentalist groups argue that the econamic growth u nleashed in Mexico by the NAFTA will gen erate man pollution in Mexico and the U.S.The xemn: Economic growth, th9 say will mate mollc polluting indusaies that wish to take advantage of Mexico's pm dy lenient environmental laws and lax enforcement.

The critics' charges against NAFT'A are simply a gnen herring, designed to divcxt the discussion from the merits of NAFI'A. Then is no truth, mareover, to the claim that a NAFTA will make pollution worsc in North America tion, which until recently has bee n Mexico's fate. It is no accident that the environ petiuxs mmic growth is more conducive to a clean environment than economic stagna iments of advanced industrialized democracies rn cleaner than those of poor countries in-the -Third.World, Eastern -Europe ; -or-the former Soviet Union.-The industrialized de mocracies are wealthy and thus have the luxury of worrying about a clean environ ment. A NAFIA would unleash economic growth and bring that kind of wealth to Mexico. This wealth would create a large middl e class interested in a clean environ ment and thereby establish a political constituency for environmentalism. As it is now in Mexico, little grass-roots pressure exists to clean up the environment because most people a~e concerned primarily with making a living, and not with the quality of the air and water.

Strict Mexican Government. The charges of the U.S. labor unions also axe wrong.

American companies will not flee in large numbers to Mexico to escape the purport edly stricter environmental standards of the EPA. Ever since Mexican President Carlos Salinas de Gortari came to office in 1988, Mexico has been enacting environmental legislation comparable to that in the U.S. And enforcement of Mexican environmental laws is in some ways harsher than that i n the U.S. Some trade specialists, such as for mer Assistant United States Trade Representative Stephen hde, are even concerned that this rise in environmental enforcement in Mexico may hurt U.S. and Mexican com panies which need to compete against Asian f irms which enjoy laxer environmental standards. These strict environmental regulations will prevent Mexico from becoming an environmental dumping ground for U.S. companies.

Integrating the U.S. and Mexican economies into a free trade zone is far better for the environment than the economic isolation born of protectionism and hostile rela tions. A NAFTA would improve Mexicos chances of protecting its environment by in creasing the cooperation and interaction between Mexican and American companies and the U. S. and Mexican governments. As Mexican companies merge with American ones, or mive U.S. investors, they will be more inclined to adopt the clean environ ment policies of the U.S. companies.

Mexicos governmental agencies, meanwhile, will establish cooperati ve programs with Americas EPA. This cooperation, in fact, already has begun. For instance, this February 25, the EPA and Mexicos Secretariat of Ecology and Urban Development SEDUE) proposed a joint U.S.-Mexican plan to combat environmental problems along t he border. This plan culminates over a decade of close cooperation between the two nations federal, state, and local governments MEXICOS ECONOMIC STAGNATION AND POLLUTION Mexicos environment has deteriorated during the past four decades, even during pe ri o ds of economic growth. As in Eastern Europes former communist countries Mexicos environment suffered from the stifling hand of a government trying to run a centrally planned economy. Mexicans learned, like Poles and Hungarians, that planned economies and authoritarian governments cause far more pollution than free market and democratic systems.

This sad legacy began in 1929 when the Institutional Revolutionary Party (Partido Revolucionurio Instimiom1 or PRI) took control of Mexicos government. During the f ollowing 57 years, Mexico adopted increasingly socialist economic policies that wreaked havoc on the environment and the economy. The Mexican government pro 2 tected domestic industries through high import tariffs, import quotas, and licensing of industri es. It nationalized private property, heavily subsidized inefficient industries and strictly regulated the economy. The result: domestic industries grew inefficient and wasteful and foreign and domestic investment was discouraged.

Without an infusion of in vestment capital, old, polluting factories continued to spoil Mexico's air and water even as Western industry was becoming cleaner and more efi cient. Because they lacked the money to modernize their industrial plant, Mexican companies failed to adopt new e r and cleaner production methods and technologies. Na tionalized or heavily regulated industries also had little reason to obey environmental laws, since the government was loath to punish the polluting state-run companies which it owned air pollution in M exico City, for instance, comes from automobiles using low-grade leaded gasoline refined by the inefficiently run, government-owned oil monopoly Petroles Mexicanos or PEMEX. The remaining 24 percent of Mexico City's air pollu tion comes from factories, tw o -thirds of which only five years ago were controlled or owned by the government. Since that time over 85 percent of these have been sold by the government to private investors 1 Inefficient production eventually led to excessive pollution. Some 76 percent of the SALINAS'S GREEN CAMPAIGN President Salinas has tried to reverse this legacy of pollution. When he took office in December 1988 he made environmental protection one of his top priorities. Though Mexico's first environmental law had been passed sixte e n years earlier, setting mini mum limits on industrial pollution, Salinas was the first Mexican leader to give strong support to environmental protection. The Mexican equivalent of the U.S. EPA was es tablished bymsident Miguel de la Madrid in 1982, but i t was Salinas who expanded its activities. Wed the Secretariat of Ecology and Urban Development (Secretaria del Desarrollo Urbairo y Ecologia or SWUE), this agency had an annual budget of only 4.3 million in 1988; this year the budget is $88.4 million, a 6 13 percent increase from 1988.

Salinas has spent money on other enhnmental programs. The portion of govern ment spending on environmental protection grew from $12.5 million, or .05 percent of gross national product in 1988, to $1.1 billion, or .44 percent of Mexico's GNP in 1991 Mexico City began a program in 1991 to combat air-pollution..This alone.will cost $2.5 billion in the next four years2 Stepped-Up Powers. Salinas not only has increased government spending on envi ronmental protection, he has intro d uced strict environmental regulations. The 1988 Law of Ecological Balance and Environmental Protection gave SEDUE police as well 1 2 Aspects of the Environmental Situation in Mexico and Related policies Secretariat for Urban Developmental Ecology, Mexico C ity, April 1991, p. 6 U.S. MexicoTradc Information on Environmental Regulations and Enforcemenr Report to the Chairman Committee on Commerce, Science and Transpartation, U.S. Senate, May 1991, p. 3 3 as regulatory powers. Example: SEDUE can close factorie s that Violate environmen tal regulations. Last summer SEDUE closed approximately 70 factories in and around Mexico City for violating environmental laws. In this respect and others, the Mexican law is stricter than U.S. laws. In contrast to U.S. environme ntal laws, for instance Mexicos 1988 environmental legislation requires an environmental impact study fiom every new industry before construction permits are issued.

Cleaning the Air. SEDUE issued its first regulations under the 1988 environmental law in 19

90. Controlled now are dangerous chemicals, automobile and fac ry emis sions, hazardous materials, and dangerous waste residues from production. SEDUE requires that all cars m& after 1991 be equipped with catalytic converters that burn cleaner unleaded gasoline. This has farced Mexicos oil company, PEMEX, to begin producing unleaded gasoline. The government of Mexico City is converting tens of thousands of its public transportation vehicles to use cleaner burning natural gas.

Since coming to office, Sal inas has taken a personal interest in environmental protec tion in Mexico, often at considerable political cost. Last June, for example, his govern ment closed Mexico Citys Azcapotzalco gasoline refinery at a cost of $500 million in lost revenues. This re f inery was one of Mexico Citys most not&ous polluters, dump ing 224 tons of pollutants into the air daily. Closing the plant was politically risky throwing 5,000 PEMEX union workers out of their jobs. Salinas also requires pollut ing companies to pay the c osts of environmental damages.

In 1990 Salinas introduced his National Environmental protection Program, intend ing not only to clean up past environmental problems, but to prevent pollution. Under the plan, the federal government works with local governme nts and communities to avoid further urban congestion, create sound zoning laws, and use energy more efi ciently to reduce air pollution.

Saving Dolphins. Some U.S. environmental groups such as the Sierra Club, and even the AFL-CIO, argue that the Mexican government is not serious about environ mental ptection. They cite as an example a ban by the California Federal Court in 1990 on Mexican tuna imports. Mexican tuna fishermen were accused of unwittingly killing large numbers of dolphins. Yet now Mexican f ishing fleets use a special trap door net (called a purse seine net) which allows dolphins to escape. As a result, the number of dolphins killed in the last five years has dropped by 56 percent. Even Greenpeace, an environmental group strongly opposed to dolphin killings by tuna fish ermen, supports Mexicos policy of requiring observers to accompany Mexican boats and record the number of dolphins killed by tuna fishermen.

To be sure, environmental problems continue to plague Mexico. These include se vere air pollution in Mexico City, a lack of water treatment facilities along the U.S Mexico border, and continued deforestation of jungles in the southern part of Mexico.

The xeason for these, however, is the terrible legacy of pollution left by decades of ne glect and economic underdevelopment. Environmental enforcement problems along the U.S.-Mexico border arise from the SEDUE program being so new, and not from a 5 3 4 Ley G eneral del Equilibrio Ecologico y la Proteccion a1 Medio Ambiente (January 28,1988).

Aspem, op. cit p. 8 4 ample in 1988, SEDUE had fewer than fifty agents monitoring the U.S. maquiladora assembly-plants located just inside the US.-Mexican border. In Janua ry of this year however, that number increased to 200 Salinass campaign to fight pollution has Washingtons backing and is partly the re sult of increased environmental cooperation with the U.S. There have been eight US Mexican environmental agreementsin t h e past ten years? They were designed primar ily to protect the environment of the border areas and address the pressing problem of air and water pollution in Mexicos interior region. One of these was the 1983 Border Area Agreement, or La Paz Accord, signe d by Presidents Ronald Reagan and Mi el& la Madrid in La Paz,Tijuana in 19

83. This accord committed both countries to clean the air, water and land along a 61 mile region on both sides of the 1,933-mile 1 US.-Mexico border.

Out of this agreement came num erous U.S.-Mexico joint projects. One of those is the task farce created in September 1989 between EPA and SEDUE to police environ mental problems in the border region. In the past two years, SEDUE made 5,405 in spection visits to Mexican factories, shut down more than 1,000 polluting companies and hired an additional 50 inspectors to police the barder area.

According to EPA officeals working on the joint SEDUE/EPA project, SEDUE en forcement has been strict. SEDUE in 1990 temporarily closed down several U .S. busi nesses in Tijuana that were violating Mexicos environmental and safety standards. An unnamed U.S. company operating in Juarez City, Mexico, was fined $70,000 for vio lating SEDUEs regulations on emissions? SEDUE in the past six months shut down 7 0 plants on the Mexican side of the border for violating environmental laws8 Comprehensive Plan. During their November 1990 summit meeting in Monterrey Mexico, Salinas and Bush instructed their governments to devise a plan for controlling wastes and cleani n g up the environment along the US.-Mexico border. After holding over seventeen public hearings in border towns in the U.S. and Mexico, the EPA and THE U.S. AND MEXICO: TOGETHER CLEANING THE ENVIRONMENT 5 Framewatrk Agreement on Cooperation for Protection a nd Improvement of the Environment (Annexes I, II, III, N and V 1983 Bilateral Agreement for Prowtion of the Environment along the Border (1983 Agreement for the Conservation of Wildlife (1983 Memorandum of Understanding between Mexico and the United State s for the Creation of a joint committee on Wild Plant and Animal Life (1988 Memorandum of Understanding for the Creation of the Committee on Protected Areas in Mexico and the UNted States (1988 Cooperation Agreement for EnvirosUnental Protection and Improv ement in the Mexico City Metropolitan Area (1989 Agreement to Improve the Quality of Air in Mexico City and Its Metropolitan Area (1990 Integrated Environmental Plan for the Mexican-U.S. Border Area (First Stage, 1992-1994 1992).

Telephone interview with Kathleen Lohry, U.S. Environmental Protection Agency, December 4,1990.

Telephone interview with Ron Pettis, Chairman of the Environmental Working Group of the Border Trade Alliance, December 3,19

90. SEDUE regulations do not require disclosure of a companys violation of envifolunentalstandards.

Envifolunental Protection Agency, Summary: Environmental Plan far the Mexican4J.S. Border Area; First Stage 1992-1994 p. 13 6 7 8 5 SEDUE this February 25 issued their Integrated Environmental Plan far the Mexice U .S.'Barder Area This plan lists the worst pollution problems in the area and sets priorities on how to solve them. It establishes funding objectives of $1 billion far the next three years for projects to control industrial, municipal, and agricultural pol l ution in rivers and under ground waters along the U.S.-Mexico border. It sets guidelines far protecting air qual ity and monitoring the use of hazardous materials. It formulates emergency plans far dealing with accidents involving hazardous wastes. And it calls far placing environmental protection in the hands much as possible.

The Integrated Envi ronmental Plan suggests that privately owned uaquil&ras, assembly plants generally owned by U.S. companies and located on the Mexican si& of the U.S.-Mexico boni er, construct their own waste treatment fa cilities and that state seMces along the bur der be privatized to make them more effi cient.

Americans and Mexicans living along the border made it clear in the public hearings that they rank waste water matment as their number one environmental priority. Joint US.-Mexico water matment projects have been underway for several years. One is nearTijuana d San Diego while the other is near Nuevo Laredo, Mexico, and La Texas. Under the new Integrated Plan these projec t s will-be continued, but new ones will added to clean the waste water in other border areas, including Mexicali Mexico and Calexico, California; Nogales, Mexico and Nogales, Arizona; Matamoros Mexico and Bmwnsville, Texas; Reynosa, Mexico and McAllen, Tex a s; Ciudad Jumz, Mexico and El Paso, Texas; and San Luis Rio colorado, Mexico and Yuma, Ar izona UNITED STATES ofthe private secegr as owned waste disposal 1 9 10 U.S. Ellvin#rmental protection Agency/ sm De Desarrolh Urban0 y Ecologia, Integrated Environm entat Plan fa the Akican-U.S. Border Area (First Stage, 1992-1994 Feb~uary 1992, p. 1-6.

JwgeHaYnes Growth and the Environmenr speech given at The Heritage Foundation, November 14 1991 6 Salinass government has moved ahead with name conservation as well. M exico has 52 cooperative projects with the U.S. National Parks and Fish and Wildlife Ser vices. These include protecting the migratory Monarch Buttexfly at its wintering grounds in the states of Michoacan and Mexico City, and establishing the Vizcaino Ojo de Liebre Biosphere Reserve in Baja California Sur, a site where gray whales mate.

Meanwhile, the U.S. National Parks Service and private environmental groups such as Wetlands Conservation Council of America and the Mexico-Canada-United States Tripartite Committee have been working closely with the Mexican government and Mexican environ m ental groups to create 14,620,000 acres of protected lands in Mex ico. This is roughly 3 percent of Mexicos national territory, and is designed to protect marine turtles, the migratory Monarch Butterfly, gray whale breeding grounds, migra tory birds, and M exicos tropical rain forests. Since 1987 the Mexican government, in cooperation with U.S. environmental authorities, has recovered 3.75 million acres of wetlands for conservation purposes. It is doubtful such a comprehensive program would have been execut e d so quickly without close support and assistance from the U.S TWO REASONS WHY FREE TRADE HELPS THE U.S. AND MEXICAN ENVIRONMENTS Critics of the NAFIA argue that free trade will harm the U.S. and Mexicos environ ments. Ralph Naders Public Citizen group th inks free trade will bring environmental devastation to Mexico because, the group claims, Mexicans are too poor to be con cerned with pushing for the kind of high environmental standards found in the U.S.

For its part, the Sierra Club fears that U.S. compa nies will escape strict U.S. standards by moving to Mexico where standards allegedly are lower. These and other groups fear that industrialization in Mexico without stiffer environmental regulations and enfme ment will ruin the Mexican environment, while putting pressure on the U.S. to lower its environmental standards.

There axe two reasons why the critics are wrong REASON #1: Free trade will stimulate economic growth, which is the best The critics are right to claim that free trade will stimulate economi c growth in Mex ico. It will attract fareign investment in Mexicos economy, generate profits from greater exports to America and Canada, create more jobs in the export industry, and in stitutionalize the free market reforms which the Mexican government st arted six years ago.

But the critics axe wrong in arguing that economic growth harms the environment.

In fact, economic growth is the key to cleaning up Mexicos environment. Poor coun tries have dirty air and water because their people are impoverished. C aught in the daily grind of surviving, poor people in Mexico and other underdeveloped countries worry far more about where their next meal is coming from than about the quality of the air and water. As countries become wealthier and develop a large and pr o sperous middle class of property holders, they take a strong interest in such matters as protect guarantor of a clean environment I I 7 ing the environment. This middle class, in fact, is the backbone and main political con stituency of the large environm ental-movements in -America and Western Europe.

Mexicos economy has been improving since Salinas came to office in December 1988, and there is evidence that this has already begun to affect Mexicans attitudes about the environment. A Gallup Mexico, Inc. po ll conducted between last July 15 and 28 in 270 cities throughout Mexico, finds that over 60 percent of those polled believe that environmental protection should be the Mexican governments top priority. This share is almost double that of polls taken duri ng the early 1980s when the Mexican economy was in deep recession and people were womed primarily about jobs.

Private Sector Activism. With the Mexican economy growing, the number of new grass mots environmental groups is growing. So, too, is the support f or private sector environmental initiatives. Organizations such as the Group of 100, the Committee for Wildlife in Danger of Extinction, Naturalia, the Friends of Sian Kaan, and the Mexi can Ecologist Party are on the rise and are becoming more politicall y active government created the Sian Kaan wildlife refuge-1.3 million acres of mangrove swamps, and reefs along the Caribbean coast-after several private foundations and local farmers had developed a plan to protect the virgin area.

Protection of the envir onment requires more than a desire on the part of govern ments and individuals; it requires money. As the Mexican economy has grown during the past four years, the Mexican government has raised more revenue, even as it has lowered individual and corporate income taxes. In fact, the Mexican government en joyed a budget surplus in the first six months of last year, its first in 50 years. With this revenue the government is funding the Border Integration Program, part of Mexico Citys anti-air pollution progam , and other environmental projects.

Economic growth also gives Mexican companies the resources to comply with envi ronmental laws by cleaning up their pollution. When Mexican companies were heavily debt-ridden and on the verge of bankruptcy during the mid 198Os, it was difficult for the government to force compliance with environmental regulations. The government feared throwing people out of jobs if they closed polluting industries. Now those com panies have less of an excuse to pollute and the government is less restricted in enfm ing the environmental laws Preserving Rain Forests. The growth of the Mexican economy under a NAFIA also would prevent degradation of Mexicos rural lands. Every year 494,000 acres of Mexican jungle and forest are destroyed becau s e rural Mexicans seek out a living in the way that their ancestors did a century ago, through what is known as slash and burn farming. This involves clearing and burning the underbrush of rain forests and jungles to prepare the land for cultivation. The f r ee trade accord would help curb this type of farming by creating more jobs for Mexicos peasants in the manufacturing and construction industry This activism already has forced the government to take action: in 1986 the Mexican 11 This already is happening in theU.S.-Mexico maquiladora program, which gives special tax treatment to U.S companies that locate their operations in Mexico. Maquiladora factories employ mostly Mexicans from rural areas of the country, thus relieving the already over-worked countrys i de 8 A NAFTA will not only help protect Mexicos rain forests, but put pressure on the Mexican-government to eliminate the inefficient and environmentally harmful policies of the state-run agricultural system, known as the ejido. The ejido, or collective f a rm system, controls almost all of Mexicos agricultural production. Under the ejido sys tem, peasants work lands owned and regulated by the federal government. Last No vember, Salinas won parliamentary approval of his plan to allow private ownership of eji d o lands and to reduce dramatically government control of agriculture. With more agricultural land in the hands of private farmers, there will be less overuse of the land which under the ejido system-has exhausted the soiLand in some places made it barren.

This occurred because the federal government mismanaged water resources and pre vented private sector funding for more environmentally sound planting, irrigating, and fertilizing REASON #2: Free trade will foster closer ties with American companies and th e U.S. government, which will result in higher environmental stan dards for Mexico.

Global environmental protection requires close cooperation among nations and inter national organizations. Protecting the environment in North America likewise mands that the U.S., Canada, and Mexico cooperate. Americas growing commercial and political ties with Mexico during the past decade have not only persuaded many Mexican companies to improve their environmental record, but have increased cooper ation between the U.S . and Mexican governments in cleaning the border areas between the two states. A NAFTA will further strengthen these ties first by increasing com merce between the two nations, and second by fostering closer cooperation between the federal and state levels of the U.S. and Mexican governments. Mexican companies and the Mexican government will be more likely to adopt U.S. environmental stan dards as they work more closely with their counterparts in the U.S.

Mexicos dramatic increase in enforcement, however, m ay not be healthy for its fragile economy. There are free market alternatives that stop pollution without hanning economic growth. But the vast increase of Mexican government regulation at least proves that, partly because of U.S. influence, the Mexican g o vernment is not neglect ing the environment, as some NAFTA critics charge. To the contrary, the Mexican gov ernment is taking tough and bold steps to clean the environment Importing High Standards. In the private sector, for example, most U.S. multina tio n al companies adopt worldwide environmental standards. at their facilities regardless of where they axe located. A U.S. government Interagency Task Force Study, released October 15,1991, by the Office of the United StatesTrade Representative (U.S.T.R state s that U.S. fms, particularly the larger multinational fms most likely to under take large process industry investments [in Mexico], often hold subsidiaries to a world wide s dard, usually at least as high as standads with which they must comply in the U.S . An example is Ford Motor Company, which has a policy of apQing U.S. en vironmental practices in its automobile manufacturing plants in Mexico 12 Review of U.S.-Mexico Environmental Issues, Prepared by an Interagency Task Force coordinated by the Office of the United StatesTrade Representative, Draft, October 1991, p. 195 9 For this reason, U.S. companies in Mexico have some of the best environmental re cords in-that country, according to the American Chamber of Commerce in Mexico City.14 On average, mmver, the environmental performance of U.S. fms in Mexico is better than that of Mexican companies. This has created pressure from the Mexican government and Mexican workers to force the Mexican companies to adopt cleaner practices in the work place. U.S. compa n ies also use cleaner technology, such as ad vanced smoke stack scrubbers, fuel mixtures that burn cleaner, and more efficient pro duction processes that produce less toxic by-products. Mexican companies will have easier access to these technologies as the ir availability increases among U.S. compa nies working there.

Greater Cooperation. A free trade agreement will augment the U.S. governments influence over Mexicos environmental policies. The U.S.T.R.s Interagency Task Farce study concludes that The NAFTA also may stimulate even higher levels of co operation and commitment to address common environmental problems than would occur under a no-NAFTA alternative, and may offer a unique opportunity to explore technology transfer issues and to develop creative s o lutions to these problems. Indeed in the absence of a NAFTA, Mexico may have less incentive to fully develop and en force its environmental legal and regulatory regime 15 In fact, Mexicos 1988 Law of Ecological Balance and Environmental Protection and oth e r environmental decrees and regulations adopted by the Mexican government during the past several years by and large duplicate U.S. environmental law. Example All new cars purchased in Mexico must be equipped with catalytic converters and must burn unlead e d gasoline, as is required in the U.S. Example: SEDUE and EPA im pose the same restrictions on the use and disposal of hazardous materials along the US.-Mexico border, and have similar limits for water emissions. This has occurred be cause of the close an d cooperative relationship between Mexican and EPA authorities since the mid 1980s, such as the joint EPA-SEDUE policy efforts along the border and informal meetings between EPA and SEDUE during the last two years that occur on almost a weekly basis. In ad dition, EPA has been closely advising SEDUE on regu lations the Mexican agency is creating to enforce the 1988 environmental laws.

Dramatic Enforcement. The 1988 Mexican environmental law in fact is tough by U.S. standards. From March 1988 to December 1990 SEDUE performed 5,405 inspec tions nationwide, resulting in 980 partial closings of polluting factories, 1,139 tempo rary closing s and three permanent closings. From January 1 to May 15, 1991, Mexi o City alone had 275 plant inspections, 102 partial closing and 3 permanent closing.

Enfarcement has been so dramatic that many Mexican businesses have called SEDUE an ecotemrist government agency.

With such tough environmental regulations and enforcement in Mexico, there is no reason for U.S. companies to move to Mexico to escape U.S. environmental standards.

Mexican environmental regulations, moreover, require any company working within 15 13 Ibid 14 15 16 Telephone interview with American Chamber of Commerce official in Mexico City, Octobex 14,1991.

Review, op. cit p. 67.

Integrated Environmental Plan, Appendix A-2 10 62 miles of the border to comply not only with all EPA standards, but with the local en vironmental laws of the US. Restrictions on-hazardous waste usage and disposal pre vent U.S. companies from moving to Mexico to enjoy lax standards. In the maquiladora program any U.S. company using toxic materials in Mexican plants m ust dispose of those materials or their waste by-product by shipping them back into the U.S. SEDUE civil penalties for violations include closure of the plant, an $8O,OOO fine for first-time violators, administrative arrest for up to 36 hours, and crimina l penalties of up to six years in prison and $20,000 in fines.

Border Jumping. It is true that some American companies in certain regions of the U.S. have moved to Mexico to escape the unusually strict environmental laws of some local governments. Several dozen furniture makers based in Southern California, for in stance, apparently moved their facilities in 1990 and 1991 toTijuana, Mexico, while some furniture makers moved to other U.S. states, when new California rules set ex tremely low limits on the us e of solvent based paints and stains; However, this does not repment a general trend, according to a study by the U.S.T.R.3 Inter-Agency Task Force. l7 In fact, over the long term a NAFTA would help alleviate environmental problems in the most seriously af fected regions, such as the U.S.-Mexico border..The border re gions have grown rapidly during the past twenty years. This growth ha's occurred as U.S. companies relocate to Mexico to benefit from Mexican and U.S. tax incentives.

These allow U.S. companies to avoid most Mexican and U.S. import duties on the goods they assemble in Mexico and then ship back to the U.S. Under a NAFI'A, how ever, these border tax incentives gradually will be eliminated and the U.S.-Mexico bor der Egion will then become less att r active to U.S. companies. U.S. companies will re ceive those same tax benefits by locating anywhere in Mexico. This will encourage economic growth in the interior of Mexico and will, over the long term, reduce &e ben efits of locating in the already envir o nmentally burdened arid region of the border CONCLUSION The North American Free Trade Apment will help the environment of North America. Free trade will stimulate economic growth in all countrie!, but particularly in Mexico, which is plagued by the typica l ly high levels of pollution of an underdevel oped country. With the economic growth that follows free trade will come a greater awareness by Mexicans of the benefits of a clean environment. And with this greater awareness will come public demands for a cl eaner environment.

This greater awareness in Mexico has already started. Mexican environmental groups are flourishing. The Mexican government has set aside large reserves for pre texting endangered marine mammals and birds. And the government has set stric ter limits on air'and water emissions by industry and transportation sectors 17 "Review p. 1

94. TheTrade policy Staff of the Inter-Agency Task Force, during six public hearings held from August 20 September 11,1991, gathered data on the alleged movement of U.S. companies to Mexico for environmental reasons.lley found these allegations to be untrue, except in the specific case of furniture refinishing Companies relocating from Los Angeles to Mexico and other U.S. stab 11 The NAFTA will enable Mexico to bu i ld on the progress begun by President Salinas and clean up the Mexican environment even mm. One reason for this is that the NmA will increase environmental cooperation between the U.S. and Mexican gov ernments and companies. The result will be higher envi r onmental standards for Mexi can companies. U.S. Companies with cleaner production methods are already located in Mexico. Their example puts pressure on Mexican companies to adopt similar stan dards Resolving Environmental Challenges. The Mexican governmen t also will be more likely to work with the U.S. government on environmental issues after passage of the NAFTA. The Teason: The good will created by the agreement will engender greater en vironmental cooperation, The NAFIA will also indirectly require the two governments to work together to resolve the environmental challenges of the increased economic in tegration caused by the free trade zone.

Since free trade certainly will raise Mexicos environmental standards, the U.S. need not fear an exodus of Americ an companies to Mexico seeking to escape tougher U.S environmental laws. Because of Salinass campaign to clean the Mexican environ ment, and because of the higher environmental standards that have resulted from more economic growth, Mexicos environmental laws are now almost-as strict as U.S. laws.

And they will surely become even stricter as the American and Mexican economies be come more closely integrated as a result of the free trade zone The best solution to Mexicos environmental problems is to become an advanced in dustrial democracy like the U.S. Poverty and economic underdevelopment are the environments wont enemies. This is true not only in Brazil and Ethiopia and India but also in the former communist states in Eastern Europe and the Soviet Union. A NAFTA will help eliminate this poverty, and with it, Mexicos legacy of environmen tal degradation.

Wesley R. Smith Policy Analyst


Wesley R.

Senior Visiting Fellow

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