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National Law Center for Inter-American Free Trade
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COMMENT
I. INTRODUCTION
Voluntary environmental management standards present a powerful
opportunity to make progress on one of the most contentious environmental
issues under the NAFTA -weak environmental performance of industry
in
Mexico. Continuously improving and achieving, eventually, a high
level of
industrial environmental performance within the NAFTA market (including
strengthening weak performing enterprises in Canada and the United
States) is
critically important to the long-term effective functioning of
the trade
agreement. Without significant progress in upward harmonization
of industry
environmental performance, the "environmental issue"
will drag down the
treaty.
This Comment compares voluntary international environmental
management system standards as a means of improving industry's
environmental performance to a strategy relying on traditional
"command-and-
control" environmental regulatory legal processes and enforcement,
including
environmental enforcement mechanisms under NAFTA. The Comment
concludes that-especially for Mexico-voluntary environmental standards,
such as the forthcoming ISO 14001 Environmental Management System
standard, offer an important complement to, but an overall more
useful approach
than "command-and-control" regulations and enforcement
strategies in
strengthening industry environmental performance.
Although the NAFTA and its companion Environmental Side Agreement
clearly make room for voluntary environmental standards, the spotlight
has
shone consistently on environmental regulations and enforcement
to address
industry's environmental performance. In negotiations leading
up to NAFTA's
ratification, for example, three of the five basic demands by
a coalition of
environmental groups focused on strengthening environmental enforcement.
Recognizing the importance of the enforcement issue, the main
purpose of the
Environmental Side Agreement was to ensure that all three country's
environmental laws would be effectively enforced under the NAFTA-but
the
focus of concern was clearly Mexico.
Perhaps based on familiarity with the U.S. environmental "command-and-
control" regulatory and enforcement process, there seems
to be an expectation
by the U.S. public that a much stronger environmental enforcement
effort by
Mexican state and federal authorities will-by itself-be the most
effective
single strategy for solving most of the environmental issues associated
with
Mexico's industry. Similarly, the Environmental Side Agreement's
potential
use of monetary penalties and trade sanctions after a determination
of a
"persistent pattern of failure by a state party to effectively
enforce its
environmental laws" is viewed by some legal commentors as
a significant new
mechanism opening "the door to a new era of regional environmental
enforcement."
This Comment argues that giving highest priority to environmental
enforcement and remedies under the Environmental Side Agreement
is
misplaced. While a credible and consistent environmental enforcement
program
is essential, overly emphasizing enforcement and the legal process
runs the risk
of misallocating Mexico's scarce public and private environmental
resources. If
the objective is continuous improvement in industry's environmental
performance, instead of dwelling largely on enforcement, public
interest groups,
industry and the governments should now be looking at potentially
greater
environmental performance improvements from the new voluntary
ISO
environmental standards and market-based incentives.
The Comment outlines the emerging ISO 14001 EMS standard as a
realistic
model that can accomplish substantial environmental performance
improvements in Mexican as well as Canadian and U.S. industry.
In the case of
Mexico, where environmental policy is still in its formative stages,
the national
government has recently shown an even greater inclination than
the United
States to experiment with voluntary and economic incentives for
improving
industrial environmental performance. The Comment summarizes one
of
these initiatives, the voluntary, supervised environmental audit,
and shows how
it fits with the forthcoming ISO 14001 standard.
The Comment then discusses environmental enforcement in Mexico
and
some of the available international legal process tools such as
machinery in the
Environmental Side Agreement. It points out important limitations
to reliance
on an environmental regulatory and enforcement strategy and legal
process
remedies as principal vehicles for improving industry's environmental
performance.
In this context, the Comment discusses constraints in international
trade
and environmental enforcement legal processes in achieving two
related
environmental improvement expectations: reaching process production
methods
(PPMs) and forcing upward harmonization of environmental standards.
Environmental regulatory and enforcement legal standards and processes
are,
admittedly, an important base for achieving performance improvements
among
industry in the NAFTA region. But there are significant limitations
to an
environmental regulatory and enforcement strategy. Voluntary environmental
standards, despite their own set of limitations, offer an important
opportunity to
accelerate industry's environmental performance improvement while
minimizing trade friction over environmental issues.
II. ENVIRONMENTAL MANAGEMENT SYSTEM STANDARDS AND
MARKET INCENTIVES
Environmental management system standards are voluntary codes
that steer
industrial, commercial and other organizations toward continuously
improving
their environmental performance. The driving force behind environmental
management system standards is not legal enforcement but market
competition.
Their credibility relies primarily on standard verification, audit
or "conformity
assessment" procedures and the degree to which stakeholders,
competitors and,
ultimately, the market itself adopts the standard and is willing
to accept the form
of verification selected by the organization. The idea of taking
corporate
environmental management's "best practices" and shaping
them into formal
management system standards took hold first in Europe in the early
1990s. In
1992, the British Standards Institute (BSI) developed a voluntary
standard-
British Standard 7750 -designed to enable any organization to
establish an
effective environmental management system. The United Kingdom's
leadership
with a national environmental management standard was based substantially
on
its successful introduction of the national quality management
standard that
became the model for the International Standardization Organization's
(ISO)
9000 series quality management standards. The European Union followed
BS
7750 in 1993 with a regulation for voluntary participation in
an environmental
management and auditing system known as the Eco-Management and
Audit
Scheme (EMAS).
In 1992, spurred by the UN's Earth Summit conference in Rio and
initiatives from leading European and multinational industrialists,
exploratory
work began on developing voluntary international environmental
standards
harnessing industry to achieve the "sustainable development"
objectives
articulated in the UN Earth Summit's Agenda 21. The ISO formed
a Strategic
Advisory Group for the Environment (SAGE) to determine the feasibility
of
voluntary international standards for industry. The SAGE effort
successfully
concluded in 1993 with the formal launching of the ISO 14000 series
environmental standardization process.
During the past two years, the ISO 14000 process has advanced
rapidly. As
of July 1995, the forty participating national delegations reached
agreement on a
Draft International Standard for environmental management systems-ISO
14001. The ISO 14001 environmental management system standard
is
expected to be approved and become final by the Summer of 1996.
ISO 14001 is an auditable standard governing the essential elements
of an
environmental management system. Its requirements are stated broadly
to
accommodate any kind of organization, small or large, in different
economic,
social, cultural, and environmental settings. Yet, it contains
specific, "hard"
provisions that will force important environmental performance
improvements
in participating industrial and commercial organizations.
Key requirements of the ISO 14001 EMS standard are briefly summarized
below.
A. Environmental Policy
A cornerstone of the environmental management system is a written
environmental policy aligned with the organization's business
or mission which
also commits the organization to compliance with applicable laws
and
regulations, prevention of pollution, and continuous improvement.
B. Planning Processes
The environmental management system must have a documented planning
process that identifies the "environmental aspects"
of the organization's
activities, products and processes, as well as applicable legal
and regulatory
requirements. The planning process must result in specific environmental
objectives and targets-such as reducing specific types of air
or water
contaminants by specified amounts by a specified date. Environmental
objectives and targets must be measurable to the extent feasible,
and are
critically important to the organization's credibility with its
stakeholders in
demonstrating continuous improvement. Additionally, the planning
process
must include documented environmental management programs for
achieving
the environmental objectives and targets.
C. Implementation and Operation
Organizational structure and responsibilities are the architecture
of
implementation. There must be defined roles, responsibilities
and authorities
associated with essential components of the environmental management
system,
including a direct accountability link to senior management. Environmental
management responsibilities cannot be confined to the environmental
function,
but must extend to operations management and other important functions
in the
organization.
Training, awareness, and competence in managing the organization's
environmental aspects are key components. Training must ultimately
be carried
out at the individual employee level, connecting the individual
employee's job
with specific environmental aspects and measures the employee
should be taking
to protect the environment.
Communication processes are an essential component of implementing
the
ISO 14001 environmental management system. Communication processes
must
include internal systems for employees and managers, and external
systems for
"interested parties" such as customers, suppliers, the
community living near
operations facilities, shareholders, and regulatory agencies.
ISO 14001 does not
require the organization to issue a formal environmental report
on its activities,
but it must maintain a formal process for receiving, documenting,
and
responding to relevant information and requests from "interested
parties."
Operational Control procedures are another required component
of
implementation systems. The organization must identify specific
operations and
activities associated with significant environmental impacts (e.g.
industrial
boilers can create significant Nox emissions) and then develop
and document
operating and maintenance procedures (e.g. to monitor and control
Nox
emissions) to ensure each activity causing significant environmental
impacts is
carried out under specified conditions. Operational control procedures
must
cover significant environmental aspects of the organization's
products and
services as well as its manufacturing or other activities. For
example, an
organization that manufactures electronic products will need a
process for
minimizing significant environmental effects in or from its products
created by
hazardous materials in parts and components. This might be done
through
training and environmental requirements specifications to its
parts vendors.
Emergency preparedness and response plans and procedures are another
required component of implementation systems. Emergency procedures
must
include prevention and mitigation procedures such as spill prevention
and
cleanup measures.
Environmental management system documentation and document control
procedures are also required as a part of implementation systems.
D. Performance Measurement and Corrective Action
A critical requirement in the ISO 14001 EMS is a system of procedures
to
monitor and measure the organization's compliance with regulations
(e.g. an
audit program), its operational environmental performance involving
significant
environmental impacts (e.g. wastewater monitoring), and its overall
performance toward its environmental objectives and targets. An
important
part of this effort is an environmental management system audit
to determine if
the systems continue to conform to the requirements of ISO 14001.
The
organization must also maintain a process for investigating "non-conformance"
(e.g. non-compliance or incidents such as spills causing environmental
impacts),
for taking action to mitigate environmental impacts, and for initiating
and
completing corrective and preventive actions.
E. Management Review
The final component of the ISO 14001 standard requires the organization
to
have a system for conducting a management-level review of the
overall
effectiveness of the environmental management system. The management
review is not an audit or conformity assessment of the environmental
management system but rather more like a traditional management
operations
review. It includes an evaluation of how successfully environmental
management has been integrated with business operations. The management
review also serves to redirect the environmental management system.
For
example, if the organization is close to meeting a specific environmental
objective, the management review can initiate setting a new environmental
objective, consistent with its environmental policy and commitment
to
continuous improvement.
In summary, industrial enterprises electing to become certified
under ISO
14001 must commit to four action-forcing measures aimed at improving
environmental performance. First, they must articulate and implement
an
environmental policy that is aligned with their significant business
and
environmental issues. Second, they must have senior management
commitment,
organizational structure, training and implementation systems
including
regulatory compliance management. Third, they must set measurable
environmental objectives and targets. And fourth, they must establish
performance measurement systems, including an audit and review
of their
overall environmental management system, to determine if they
are, in fact,
making progress on their environmental performance.
ISO 14001's effectiveness in actually achieving environmental
improvement results for industry will depend in great measure
on market
competition. But, just as market forces have driven many companies
to adopt
voluntarily the ISO 9000 series quality standards (i.e. because
their customers
demand it), coalescing commercial and competitive forces are likely
to make the
"voluntary" ISO 14001 standard a de facto mandatory
requirement for many
companies marketing products in Europe, North America, and some
Pacific Rim
countries. Moreover, some government procurement agencies and
multinational
companies committed to ISO 14001 certification will put increasing
pressure on
their suppliers to demonstrate their environmental performance
through ISO
14001 certification. In addition, ISO 14001 certification will
likely be tied to
compliance with the European Union's "essential requirements"-the
mandatory requirements (including environmental, health, and safety)
relating
to products for the free movement of goods within the EU market.
Voluntary environmental management standards already have a footing
in
Mexico, as well as Canada and the United States. In Mexico, a
voluntary
environmental audit program (including management systems) was
introduced
by the federal Attorney General for Environmental Protection in
the Fall of
1993. Known as the "Términos de Referencia Para la
Realización de
Auditorías Ambientales," the voluntary audit program
was introduced as a way
of improving environmental, health, and safety performance at
high risk
facilities such as petrochemical plants without an adversarial
enforcement
process. The scope has since been extended to all industrial facilities.
Companies volunteering to have their facility audited notify the
federal
Environmental Attorney General, nominate a qualified third party
auditor
(typically an environmental consulting firm selected and paid
for by the
company), and sign an agreement committing to supervision of the
audit by a
third party selected by the Attorney General and to correct violations
or other
deficiencies identified in the audit. The Attorney General selects
a third party
audit supervisor to review the audit results. The audit supervisor
and the
audited company then negotiate an Action Plan to correct any violations
and
other deficiencies noted in the final audit report. There are
at least three
important incentives for a company to contract with the Environmental
Attorney
General for a voluntary, supervised environmental audit. First,
the company
receives assurances from the Attorney General that it will not
penalize or fine
the company for identified violations and will provide the company
a partial
"safe harbor" from formal enforcement proceedings during
the period of time
allocated in the agreement to correct violations and deficiencies.
Second, the
voluntary, supervised environmental audit is an efficient way
for a company to
identify significant environmental, health, and safety risks at
its facility and gain
a clear understanding of its compliance status as interpreted
by the
Environmental Attorney General in a non-adversarial medium. Third,
the
audited company gains preferred access to bank loans at lower
interest rates to
correct compliance and other deficiencies noted in the final audit
report and
Action Plan. Most environmental audits conducted thus far under
the program
have been at facilities operated by parastatal enterprises such
as PEMEX.
However, a small but growing number of private industrial facilities
are now
participating throughout Mexico.
It is important to note that Mexico's voluntary audit program
is much more
than a system for verifying compliance with environmental, health,
and safety
regulations. Although it tests compliance with applicable federal
environmental, health, and safety requirements, the scope of the
audit includes
identifying and reducing significant environmental, health, and
safety risks at
the audited facility, using appropriate international standards
and "best
practices." Thus, significant environmental, health, and
safety risks which are
not specifically regulated under Mexican state and federal law
are also targeted
for identification and correction by the audit. In this respect,
a key element of
the voluntary environmental audit program is testing the scope
and effectiveness
of the facility's environmental management system. Part E of the
Términos de
Referencia covers elements of the facility's environmental management
system
("Requisitos del Programa de Protección Ambiental").
Part E contains
important parallels with the requirements of ISO 14001's environmental
management system standard, such as a requirement for a documented
planning
process, an organizational structure with defined responsibilities,
an
environmental, health, and safety training program, the documentation
of
policies and procedures, a document management system, the documentation
of
operational controls, an emergency contingency plan process, an
internal audit
program, and a system for identifying and correcting non-conformance.
In summary, Mexico's voluntary environmental audit system uniquely
blends compliance verification with improvement in overall environmental,
health, and safety performance through a largely non-adversarial
process. The
Part E protocols for evaluating environmental management systems
strongly
parallel the new ISO 14001 EMS. As Mexico continues to innovate
with
market-based incentives for improving industry environmental performance,
one
practical opportunity allows substitution of ISO 14001 for Part
E in the
voluntary audit system, which provides participating industrial
enterprises with
an efficient mechanism to prepare for ISO 14001 certification.
III. LIMITATIONS ON THE USE OF REGULATORY AND
ENFORCEMENT PROCESSES FOR ACHIEVING ENVIRONMENTAL
IMPROVEMENTS IN THE NAFTA MARKET
A. Environmental Enforcement in Mexico
Mexico began serious efforts to enforce its environmental laws
in 1992 with
the establishment of the federal Office of the Environmental Attorney
General.
From June 1992 through April 1995, the Environmental Attorney
General
inspected 35,831 plants throughout Mexico, ordered 348 total plant
closures,
1758 partial closures, and fined or ordered corrective action
at an additional
25,570 facilities for lesser violations. Notwithstanding this
impressive
enforcement record and the continuing commitment to enforcement
by the new
Secretariat of the Environment, the effectiveness and quality
of Mexico's
environmental enforcement effort significantly lags behind those
in Canada and
the United States. It is unrealistic to expect that Mexico can
implement an
environmental enforcement program comparable to the enforcement
efforts of its
northern treaty partners. Moreover, one can seriously question
whether the kind
of expansive environmental enforcement envisioned by some advocates
would be
a rational allocation of Mexico's scarce public and private resources
available
for environmental performance improvement. Over-reliance on environmental
enforcement as a strategic measure for improving industry's environmental
performance in Mexico poses several serious concerns. First, industry
is apt to
resist and take a more adversarial role with the government. This
will reduce
opportunities for collaborative environmental improvement programs
and make
environmental enforcement more bureaucratic, more costly and less
effective.
Second, to the extent that it is effective, environmental enforcement
will tend to
focus narrowly on compliance. "Compliance with environmental
regulations"
will tend to dominate company environmental management decisions.
As the
U.S. experience has shown in the past twenty years, this is likely
to result in a
disproportionate investment in end-of-pipe pollution control and
treatment at the
expense of source reduction, pollution prevention, and broader
environmental
performance improvement such as industrial production "eco-efficiency."
Both
the environment and a company's operational efficiency and productivity
will be
better off if scarce resources are invested in prevention rather
than abatement.
Finally, a strategy to achieve environmental performance improvements
by
relying primarily on environmental enforcement lacks cultural
and political
underpinnings in Mexico. For example, a critical component in
effective
environmental enforcement-private enforcement litigation-is largely
missing
in Mexico. It will take many years of social and institutional
change before
Mexican citizens have the legal process and information infrastructure
to mount
effective environmental enforcement proceedings against government
agencies
that fail to enforce or directly against industrial polluters.
Of course, NAFTA and the Environmental Side Agreement obligate
Mexico
to enforce its environmental laws and regulations. Legal processes
in the
Environmental Side Agreement and other doctrines are available
to pressure
Mexico and even individual companies to improve their environmental
performance. But resorting to these legal processes will produce
few changes
unless undertaken in cooperation with the NAFTA parties and the
affected
governments and industry in a way that builds on self-regulation
and market-
based incentives such as the ISO 14001 EMS and Mexico's voluntary
environmental audit system. The shortcomings of an adversarial
legal process
strategy are briefly discussed below.
B. The Environmental Side Agreement
The Environmental Side Agreement's objectives expressly include
"[enhancing] compliance with, and enforcement of, environmental
laws and
regulations." In addition, Article 5 of the Environmental
Side Agreement
requires each Party to effectively enforce its environmental laws
governing
industrial pollution. Article 5 details "appropriate governmental
action" for
effective environmental enforcement. Examples include initiating
judicial,
quasi-judicial, and administrative proceedings to seek sanctions
and remedies
for violations of environmental regulations. Article 6 requires
each Party to
ensure that citizens "with a legally recognized interest
under its law in a
particular matter" have access to environmental enforcement
proceedings. All
of this sounds quite promising. But, while providing an important
new basis for
promoting environmental cooperation, the Environmental Side Agreement
has
very few teeth for compelling a NAFTA Party to enforce its environmental
laws.
Part 5 (Articles 22-36) of the Agreement contains procedurally
intensive
provisions for consultations and dispute resolution when one Party
believes that
"there has been a persistent pattern of failure" by
another Party "to effectively
enforce its environmental law." Yet the numerous steps in
the Part 5 procedures
are so biased towards a face-saving compromise that it seems inconceivable
for
an allegation of failure to enforce environmental laws to be formally
raised by
tne country against another with a serious aim of attaining environmental
enforcement improvement results, a monetary penalty, or a trade
sanction
remedy which lie at the end of the processes. At best, the Agreement's
Part 5
procedures are a means for one country to put diplomatic pressure
on another
when domestic politics force extreme measures.
Articles 14 and 15 of the Environmental Side Agreement provide
a more
practical means for calling attention to environmental enforcement
weaknesses.
Under Article 14, any person may petition (referred to as a "submission")
the
Secretariat of the North American Commission for Environmental
Cooperation
(NACEC) to conduct an inquiry and prepare a "factual record"
concerning the
petition's allegations that a Party is failing to effectively
enforce its
environmental law. But these provisions give the NACEC Secretariat
very
broad discretion to reject petitions. Moreover, the target country
can stop the
petition process simply by declaring that the matter is the "subject
of a pending
judicial or administrative proceeding." Ultimately, the Article
14
"submission" process can be effective only if the Secretariat
and the Parties
allow it to proceed in a way they believe will be constructive.
In sum, the
Environmental Side Agreement offers very uncertain prospects for
forcing a
NAFTA Party to increase its environmental law enforcement efforts
through
adversarial legal processes.
C. Process Production Methods
In a related context, some environmental groups and protectionist-oriented
companies have a degree of expectation that international trade
legal processes,
even apart from the NAFTA and its Environmental Side Agreement,
can be
shaped to sanction manufacturing and other process production
methods (PPMs)
deemed to be environmentally damaging. Current principles of international
trade law, including rules under the General Agreement on Tariffs
and Trade of
1994 (GATT), generally do not permit a country to restrict or
ban product
imports based on their production methods when the production
method is
unrelated to product "characteristics." But countries
may regulate the products
themselves to protect the environment, health, and safety, so
long as there is
equal treatment of "like" domestic products. For example,
alkaline batteries
produced in a "dirty" manufacturing process in Mexico
probably cannot be
barred from the United States based on their "dirty"
production process. But if
the batteries contain mercury in excess of regulatory limits or
lack
environmental labeling required by U.S. laws, the non-compliant
batteries can
be stopped at the border. One approach for extending valid product-based
environmental, health, and safety restrictions to products manufactured
with
environmentally damaging processes in another country is based
on the ability
of sophisticated instruments to detect the presence of minute
quantities (at the
parts per billion level) of toxic or hazardous materials in or
on the product. To
the extent that imported products contain detectable toxic materials
not
permitted in "like" domestically produced products,
the imported products
probably can be barred on environmental or health grounds even
though their
presence in or on the product is only attributable to manufacturing
processes or
PPMs.
While this indirect aspect of an environmental enforcement strategy
has
some potential to force environmental improvements in certain
manufacturing
processes, it is largely a scattershot approach, highly dependent
on whether toxic
materials in a particular production process will be detectable
on the product.
Many different products, after all, can be produced with environmentally
damaging processes without leaving even traces of toxic materials
because there
is no physical contact with toxic materials during production.
Moreover, there is a serious question as to the effectiveness
of a legal
strategy directly targeting PPMs. In the Tuna-Dolphin case, for
example, a
Federal District Court issued an order banning Mexican tuna imports
caught
using purse seine nets because this "production method"
incidentally killed large
numbers of dolphins in violation of the U.S. Marine Mammal Protection
Act.
Mexico successfully challenged the ban under the General Agreement
on Tariffs
and Trade (GATT) rules, winning a ruling by the GATT dispute settlement
panel that, inter alia, the U.S. ban improperly discriminated
against Mexican
tuna on the basis of production methods. But Mexico never pressed
its claim to
a formal conclusion in part because U.S. tuna producers had effectively
implemented the "Flipper" dolphin-safe labeling program
in the United States
making it virtually impossible for Mexican tuna (which would not
qualify for
the label) to compete in the U.S. market even with the import
ban technically
knocked out. The Mexican tuna industry has since elected not to
proceed with
its GATT remedies and has instituted significant measures to reduce
dolphin
kills in order to compete in a U.S. market in which customers-not
a legal
process-demand dolphin-safe tuna products. Thus, while other factors
were
influential, voluntary environmental improvements driven by competitive
forces
are arguably achieving dolphin-safer results faster than a legal
enforcement
strategy. Similarly, voluntary environmental management standards
driven by
competitive market forces have a greater potential for improving
environmentally damaging production processes than the application
of trade
law processes.
D. Upward Harmonization of Environmental Requirements
Attaining "upward harmonization" of environmental requirements
in the
NAFTA market is one of the objectives of the Environmental Side
Agreement.
Although not precisely defined, the Environmental Side Agreement
speaks of
achieving "greater compatibility of environmental technical
regulations,
standards, and conformity assessment procedures" in a way
that provides "for
high levels of environmental protection," "without reducing
levels of
environmental protection," from the Parties' existing legal
and regulatory
requirements.
Approaching "upward harmonization" of environmental
requirements
through formal legal processes such as legislative and regulatory
amendments
and enforcement policy changes faces formidable obstacles. The
problem lies
not so much in achieving "upward harmonization" of substantive
environmental
standards such as specific emission and effluent limits. Mexico,
after all, has
already adopted substantive environmental standards very similar
to those in
Canada and the United States in key areas. The barriers will be
found instead in
the underlying policy, regulatory, and enforcement mechanisms
in the different
countries' legal systems. Access to environmental information,
practical ability
to bring citizen enforcement suits, administrative review, and
due process
procedures are substantially different among the NAFTA Parties.
Social and
economic factors such as different values placed on environmental
quality in
different parts of the NAFTA market will strain regulatory harmonization.
Moreover, the sheer volume and enormous complexity of the U.S.
environmental regulatory apparatus at the local, state, and federal
levels poses
an almost impenetrable barrier to technical harmonization with
regulatory
systems in Canada and Mexico. Finally, a common political and
legal
institutional framework comparable to the European Union's is
lacking in the
NAFTA market. In sum, while opportunities for "upward harmonization"
of the
NAFTA Parties' environmental requirements exist in selected areas
-and
should be vigorously pursued-it is unrealistic to expect substantial
success at
the technical legal level in the short term.
By contrast, "upward harmonization" of industry's environmental
performance is more realistically attainable by taking a different
tack-
promoting common environmental management systems and other
environmental standards geared to competition and market forces.
NAFTA
supports this approach by requiring each Party to use international
standards as
a basis for its "standards-related measures" (including
environmental, health,
and safety technical regulations) unless the international standard
would be an
"ineffective or inappropriate means to fulfill its legitimate
objectives."
Moreover, NAFTA specifically provides that when a Party's "standards-related
measure" is based on an international standard, it is presumed
to meet the
"legitimate objective" test and otherwise not constitute
an "unnecessary
obstacle" in violation of the treaty. Thus, there is the
potential for Canada,
Mexico, and the United States to adopt the ISO 14001 EMS as a
NAFTA
environmental management standard and promote its use toward "upward
harmonization" through a gradual but continual improvement
of industry
environmental performance in the NAFTA region.
IV. CONCLUSION
Credible "command-and-control" environmental regulations
and
enforcement processes are essential components in improving industry's
environmental performance in the NAFTA region by keeping pressure
on
industry managers to avoid the business delays, costs, and potential
civil and
criminal sanctions from violations. But an environmental improvement
strategy
based primarily on environmental regulations and enforcement has
serious
limitations, especially for Mexico. In the United States, despite
impressive
accomplishments, the "command-and-control" approach
to environmental
improvement has evolved into an unwieldy, highly complex, unnecessarily
costly system rapidly approaching useful limits. It is not a good
model for
Mexico. Reliance on legal processes in the NAFTA, the Environmental
Side
Agreement, and other international legal regimes to force industrial
environmental improvements, also have very doubtful promise unless
they are
carefully used to promote cooperative government-sponsored programs.
The
environmental spotlight on Mexico raised by the NAFTA negotiations
and
aftermath, the introduction of the ISO's environmental management
standard,
and the new climate in Mexico favoring "eco-efficiency"
and other market-based
incentives for environmental improvement and productivity, now
make possible
significant improvements in Mexican industry's environmental performance.
This is true as well for the scores of thousands of small and
medium industrial
enterprises in Canada and the United States which currently have
less-than-
satisfactory environmental performance. By making business success
more
dependent on environmental performance, the voluntary ISO 14001
EMS offers
greater promise of environmental performance improvements than
a strategy
relying on regulatory and enforcement legal processes.
* C. Foster Knight of Knight & Associates, Winchester,
Massachusetts, is an
environmental attorney and environmental management consultant.
His practice includes
advising clients in Europe, Mexico, and the United States on implementation
of the ISO
14001 environmental management system standard.
End Notes
. North American Free Trade Agreement, Dec. 17, 1992, Can.-Mex.-U.S.,
32 I.L.M.
289, 605 (1993) [hereinafter NAFTA].
. CEEM Information Services, ISO 14001 Environmental Management
Systems-
Specifications with Guidance For Use, International Environmental
Systems Update,
Special Bulletin-TC 207 Meeting-Oslo, Norway, July 1995, at SB-24
[hereinafter ISO
14001 EMS].
. North American Agreement on Environmental Cooperation, Sept.
14, 1993, Can,-
Mex.-U.S., 32 I.L.M. 1482 (1993) [hereinafter Environmental Side
Agreement].
. See, e.g., NAFTA, supra note 1, arts. 905, 911.2 (providing
for using international
standards, including the ISO voluntary standards, as a basis for
their "standards related
measures" and in technical cooperation); Environmental Side
Agreement, supra note 3,
arts. 2.1(f), 5.1(c)-(f).
. John J. Kim & James P. Cargas, The Environmental Side Agreement
to the North
American Free Trade Agreement: Background and Analysis, 23 Envtl.
L. Rep. 10720,
10722 (Dec. 1993).
. Id. at 10725 (referencing President Clinton's speech on NAFTA
at North Carolina
State University, Oct. 9, 1992).
. Jared Blumenfeld, 1994: The Year That Regional Environmental
Enforcement
Gets Tough? An Analysis of NAFTA Environmental Side Agreement
and Maastricht
Treaty, 16 Int'l Envtl. Rep. (BNA) 959 (Dec. 15, 1993).
. See, e.g., Julia Carábias Lillo, head of the Secretariat
for Environment, Natural
Resources and Fisheries, statement at press conference in Mexico
City (Feb. 15, 1995)
(announcing the new Secretariat's 10 priorities). See also Government,
Industry Sign
Environment and Competitiveness Agreement, Environment Watch:
Latin America, vol.
5, at 3 (Aug. 1995) (reporting on the Agreement for Cooperation
on Environmental
Protection and Industrial Competitiveness, signed by President
Zedillo in July 1995,
establishing a national policy framework for promoting environmental
self-regulation and
other initiatives gearing environmental performance to competitive
forces); 18 Int'l
Envtl. Rep. (BNA) 677 (Sept. 6, 1995).
. Environmental Management Standards Policy Committee, Specification
for
Environmental Management Systems, British Standard 7750 (1994).
. Council Regulation No. 93 of Allowing Voluntary Participation
by Companies in
the Industrial Sector in a Community Eco-Management and Audit
Scheme, 1993 O.J. (L
168/1).
. Principally the member companies of the Business Council for
Sustainable
Development (BCSD). See Stephen Schmidheiny, Changing Course:
A Global Business
Perspective on Development and the Environment, Declaration of
Business Council for
Sustainable Development, xi-xvii (1992).
. CEEM Information Services, 'We Have A Dis' EMS, Auditing Delegates
Declare
Victory: Sector Specific Spec Withdrawn, International Environmental
Systems Update,
Special Bulletin-TC 207 Meeting-Oslo, Norway, July 1995, at SB-1-2
(with Voting
Summary of Delegates, at SB-22).
. ISO 14001 EMS, supra note 2, § 4.1(b), (c), (d).
. Id. § 4.2.1, 4.2.2.
. Id. § 4.2.3.
. Id. § 4.3.1.
. Id. § 4.3.2.
. Id. § 4.3.3.
. Id. § 4.3.6.
. Id. § 4.3.6(c).
. Id. § 4.4.1.
. Id. § 4.4.2.
. Id. § 4.5.
. Motivated by competitiveness concerns, some large Mexican exporting
companies such as Vitro, Grupo IRSA, and CEMEX (as well as Mexican
subsidiaries of
multinationals such as AT&T, Ciba Geigy, and Sanyo) are considering
preparations for
ISO 14001 certification in 1996. Interview with Leonardo Cárdenas,
Mexico's
representative to the ISO 14000, July 1995 plenary session in
Oslo, Norway (Sept. 29,
1995) (on file with author).
. To harmonize differing product-related and technical requirements
within the 15
member countries, the European Union's Commission has increasingly
relied on
standards bodies (especially the Comité Européen
de Normalisation or CEN) to adopt
"voluntary" harmonized technical and other standards,
compliance with which is
"presumed" to be compliance with the "essential
requirements" of European Union
Directives and Regulations. See Turner T. Smith, Understanding
European
Environmental Regulation 27 (1993).
. In May, 1992, President Salinas reorganized Mexico's environmental
agency,
then part of the Secretariat for Urban Development and Ecology
(Spanish acronym
SEDUE) and created two new environmental agencies, the National
Ecology Institute
(Spanish acronym INE), responsible for environmental studies and
environmental
regulatory standards and the office of the Attorney General for
Environmental Protection
(Spanish acronym PROFEPA), responsible for enforcement. Both environmental
agencies were placed in the Secretariat for Social Development
(Spanish acronym
SEDESOL). In December 1994, President Zedillo established a new
cabinet-level
Secretariat for the Environment, Natural Resources, and Fisheries
(Spanish acronym
SMARNAP) combining INE, PROFEPA, the National Water Commission
and the
Fisheries Bureau. Decreto que reforma disposiciónes de
la Ley Orgánica de la
Administración Pública Federal, 495 D.O. 2, Dec.
28, 1994.
. Secretaría de Desarrollo Social, Procuraduría
Federal de Protección al Ambiente,
Términos de Referencia Para la Realización de Auditorías
Ambientales 1 (Dec. 1993)
[hereinafter Términos] (on file with the National Law Center
for Inter-American Free
Trade, Tucson, Arizona).
. Id.
. Id. § 2.3.8.
. Id. § 4.
. If a "serious" specific violation of an environmental,
health, or safety regulation
is identified during the audit, it is brought to the attention
of the audit supervisor
selected by the Environmental Attorney General. At that point,
the Attorney General has
discretion to bring a formal enforcement proceeding (procedimiento
administrativo de la
verificación) against the company for the specific "serious"
regulatory violation. Any
non-serious regulatory violations noted continue to be protected
by the "safe harbor" of
the environmental audit contract. Interview with Biol. Patricia
Celis Salgado, Delegate
of the Environmental Attorney General to the State of Sonora,
in Hermosillo, Sonora
(June 10, 1995) (on file with author).
. Id.
. From the Fall of 1992 through August 1995, 603 facilities operated
by 31
different Mexican parastatal enterprises have participated in
the voluntary environmental
audit program. PROFEPA, La Auditoría Ambiental y Las Políticas
de Cumplimiento
Voluntario en Norteamérica, paper presented at the U.S.
EPA-PROFEPA Seminar on
Environmental Enforcement, Ciudad Juarez, Chih., Mexico, Sept.
7-8, 1995 [hereinafter
PROFEPA]. Of these, 325 audits have been completed, 133 are in
process, and 145 are
in the planning stage. Id.
. Id. Industrial facilities operated by Cemex, Peñoles,
General Motors, Ford,
Nissan Mexicana, and some private sector manufacturing plants
in the textile, food,
chemical, and tannery industries are participating in voluntary,
supervised environmental
audits. Id. To promote voluntary environmental audits at maquiladora
plants in Mexico,
on May 18, 1995, U.S. EPA Assistant Administrator for Enforcement
and Compliance
Assurance, Steven A. Herman, wrote a letter to the CEOs of about
40 U.S. companies
with maquiladora operations in Mexico, bringing to their attention
the new Mexican
voluntary environmental audit program and inviting their participation.
Letter from
Steven A. Herman, U.S. EPA Assistant Administrator for Enforcement
and Compliance
Assurance, to CEOs of U.S. companies with maquiladora operations
in Mexico (May 18,
1995) [hereinafter Letter to CEOs] (on file with the National
Law Center for Inter-
American Free Trade, Tucson, Arizona).
. Letter to CEOs, supra note 34.
. The vast majority of industrial facilities in Mexico are operated
by small and
medium companies that are generally unaware of applicable environmental
regulatory
requirements and lack resources for treatment and abatement control
equipment
necessary to meet regulatory standards. For example, a recent
survey of 116 industrial
and service companies in Mexico conducted by an independent research
institute, El
Colegio de Mexico, showed that over 50% of the facilities were
unaware of penalties for
hazardous waste violations, gave low priority to environmental
problems, and had few
contacts with authorities. About 40% of the surveyed facilities
discharged untreated
wastewater. Industrial Service Firms Lack Awareness of Environmental
Standards,
Survey Finds, Int'l Envt. Rep. 729 (Sept. 20, 1995).
. Medium-sized industry in Mexico is generally resistant to formal
environmental
enforcement proceedings instituted by the Environmental Attorney
General. Medium-
sized companies, particularly in the Northern states, tend to
react and fight. Cárdenas,
supra note 24.
. Greg M. Block, One Step Away From Environmental Citizen Suits
in Mexico, 23
Envtl. L. Rep. 10347 (June 1993).
. Environmental Side Agreement, supra note 3, art. 1(g).
. Id. art. 14.1(a)-(f). Subsection (d), for example, allows the
Secretariat to reject
the submission if it finds that it "appears to be aimed at
. . . harassing industry." Id. art.
14.1(d).
. Id. art. 14.3 (a). It seems unlikely that the NACEC would question
a country's
response indicating that the matter is the subject of a pending
judicial or administrative
proceeding, even if it appears to be a subterfuge.
. Final Act Embodying the Results of the Uruguay Round of Multilateral
Trade
Negotiations, Apr. 15, 1994, reprinted in H.R. Doc. No. 316, 103d
Cong., 2d Sess. 1326
(1994) (establishing the World Trade Organization) and the related
Agreement on
Technical Barriers to Trade, Apr. 15, 1994, reprinted in H.R.
Doc. No. 316, 103d Cong.,
2d Sess. 1427 (1994).
. NAFTA, supra note 1, art. 904. For example, the California Safe
Drinking
Water and Toxic Enforcement Act of 1986 [hereinafter Prop. 65],
establishes a hazard
warning label requirement for products containing any chemical
substance (even trace
amounts) on a regulatory list of substances deemed by the State
of California to be
carcinogenic and/or teratogenic. Cal. Health & Saf. Code §
25249.5 (Deering 1986).
Prop. 65 has forced some companies selling products in California
to change their
production processes to eliminate certain substances that were
detectable on their
products in order to avoid having to use a negative product label.
Id. See also Daniel C.
Esty, Greening the GATT: Trade, Environment and the Future 134
(July 1994). The
distinction between product-related standards and process or production
method
standards (PPMs) is hazy and unsettled. It largely turns on the
verifiability of the
product characteristic or attribute. See Steve Charnovitz, The
Regulation of
Environmental Standards By International Trade Agreements, Int'l
Env't Daily (BNA)
(Sept. 15, 1993).
. Earth Island Institute v. Mosbacher, 929 F.2d 1449 (9th Cir.
1991); see also
Robert Housman & Durwood Zaelke, The Collision of the Environment
and Trade: The
GATT Tuna/Dolphin Decision, 22 Envtl. L. Rep. 10268 (April 1992).
. Environmental Side Agreement, supra note 3, arts. 3, 10.3(b).
See also NAFTA,
supra note 1, arts. 906, 913.
. Environmental Side Agreement, supra note 3, art. 3.
. Id. art. 10.3(b).
. NAFTA, Article 913 establishes a Committee on Standards-Related
Measures to
study increasing the compatibility of each country's standards-related
measures in a
series of specific areas including packaging and labeling, chemical
hazard classification
and communication, good laboratory practices, "criteria for
assessment of potential
environmental hazards of goods," and chemical substance testing.
NAFTA, supra note 1,
art. 913.
. Id. art. 905.
. Id. art. 905.2.