USMCA Environmental Considerations: The Implications of Chapter 24
Team Lead: Samantha Jennings
Primary Contributors: Joshua Swift & Erica Berry
On September 30, 2018, the United States, Mexico and Canada announced the completion of negotiations toward a new United States-Mexico-Canada Agreement (USMCA) to replace NAFTA. The USMCA contains a chapter on the environment, Chapter 24). Canada promised to advance a new progressive agenda during negotiations, and has since claimed the new deal is a success in this regard. The United States, stated that the environmental chapter includes the most comprehensive set of enforceable environmental obligations to combat environmental issues of any American agreement.[1] Chapter 24 of the USMCA mentions pollution, marine protection, the ozone layer and air quality.[2] The new environmental protections in this agreement create challenges for companies who have not needed to account for such regulations before. In this article we will discuss the potential impacts of three new regulations included in the USMCA. First, we examine the article to improve air quality, which has the potential to affect companies with high emissions. Second, we look at the new prohibitions on fishery subsidies that may affect businesses who rely on these forms of farming. Third, we consider how the new protections of marine environments will change the fishing industry.
Section 24.11 of the new agreement recognizes air pollution as a serious threat to public and ecosystem health and as a contributor to other environmental problems.[3] Similarly, Section 24.9 promotes the protection of the Ozone layer.[4] Section 24.11 also notes the benefits of reducing certain air pollutants and encourages parties to recognize the importance of reducing air pollution.[5] Although this section does not contain any binding rules to reduce such pollution, it does encourage countries to do so. If parties are to impose additional regulations to follow these new provisions, it could result in higher costs for companies who pollute the air, as seen with Canadian corporations following the implementation of a carbon tax. Although there are currently no binding rules in the USMCA that force corporations to reduce emissions, the language of the agreement suggests that additional regulations are a necessary future step. Thus, it is in corporations’ best interests to start reducing emissions now. Corporations that commit to lowering emissions before any formalized rules are set out will have already transitioned once binding measures are applied. These corporations that commit to lowering emissions before they are forced to will be at a competitive advantage over those that do not, as they will not have to incur the costs of future regulatory measures and have time to properly research and implement techniques that work best for them.
Article 24.20 of the new agreement prohibits subsidies that contribute to overfishing.[6] There are two categories of prohibited subsidies; first, those that negatively affect overfished fish stocks, and second, subsidies that are provided to a vessel or operator. This new provision could impact which fishing businesses qualify for subsidies. Misclassification or poor enforcement of this provision could result in unfair advantages between fishing businesses. Fishing companies are encouraged to invest in alternate fishing practices in order to gain access to new subsidies provided under the USMCA agreement. While misclassification or poor enforcement may lead to unfair advantage, it is ill advised for companies to plan on profiting in such a way. Eventually, as enforcements and classifications adjust to the new provisions, this will no longer be a source of advantage.
Article 24.10 was introduced to protect marine ecosystems from ship pollutants.[7] It calls upon parties to take measures to prevent the pollution of marine ecosystems from ships.[8] If these regulations are enforced, it could be a disadvantage for fishing ships that are unable to afford investing in safer equipment. The ships that cannot bear the expenses of updating their equipment to align with new regulations may no longer be able to operate. Despite these expenses, fishing companies are encouraged to update the equipment on their ships. While the price of updating may affect short-term profits, it is an intelligent investment that will pay off in the long run. Smaller companies or fishing vessels may have to resort to loans, or go into temporary debt; however, by investing in technology that will make their practices more sustainable, they will be better prepared for the future. Fishing companies should prepare for reduced profits in the short-run with the potential for long-term gain as the industry moves toward updated practices.
[1] Government of the United States. Office of the United States Trade Representative. “United States – Mexico – Canada Trade Fact Sheet Modernizing NAFTA into a 21st Century Trade Agreement.” Accessed December 06, 2018. https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2018/october/united-states–mexico–canada-trade-fa-1
[2] Government of Canada. “CUSMA: Canada – United States – Mexico Agreement.” Accessed December 06, 2018. https://international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cusma-aceum/index.aspx?lang=eng
[3] Ibid.
[4] Ibid.
[5] Ibid.
[6] Ibid.
[7] Ibid.
[8] Ibid.
