A Dangerous Climate for Free Trade: NAFTA, USMCA, and what they mean for People and the Planet
Caitlin
Vinton
October 28, 2021

An outcome of negotiations started under President George H. W. Bush and continued under President Clinton, the North American Free Trade Agreement (NAFTA) was signed by the US, Canada, and Mexico in 1994. Its goal was to eliminate all tariff and non-tariff trade and investment barriers between the three nations, primarily in the agricultural, manufacturing, and service sectors. Before the agreement, Mexican tariffs were as high as 30 percent or higher, there were no shared industrial production or safety standards, limits existed on financial investments in the other countries, there were concerns over intellectual property rights, and limits on agricultural imports. With its implementation, the US-Mexico-Canada trade alliance became the largest free market in the world, with combined economies adding up to $6 trillion at the time the agreement was signed. Labor unions and environmental advocates mounted strong opposition to the agreement, fearing US firms would take advantage of significantly lower wages in Mexico, or laxer environmental standards in both Mexico and Canada. 

imagen_principal
From left to right: Canadian, Mexican, and United States flags. 

And they were right to do so. The three countries heralded NAFTA as a job creator, asserted it would lift wages in Mexico and lead to higher environmental protections, but none of those promises have materialized. What has become increasingly clear in the intervening decades is that NAFTA and its effects are inherently corporate-led and neoliberal, which has created a multitude of environmental and human welfare concerns across the three countries. NAFTA is at least partially responsible for a million outsourced jobs in the first ten years alone (particularly in manufacturing), along with an explosion in the trade deficit, and a race to the bottom in terms of undermining wage and environmental standards across the three countries.

What has become increasingly clear in the intervening decades is that NAFTA and its effects are inherently corporate-led and neoliberal, which has created a multitude of environmental and human welfare concerns across the three countries.

Last July, the United States-Mexico-Canada Agreement (USMCA)—cheekily referred to as NAFTA 2.0 by critics who see it as little improvement over the original 1994 agreement—was adopted under the Trump administration as a replacement to NAFTA. There are some improved environmental protections and workers rights in the new agreement, such as allowing inspectors into facilities in Mexico to investigate labor violations as well as funding to address pollution and overfishing, the same overarching concerns remain. Other significant improvements include removing the ability of corporations to use foreign governments at taxpayer expense and a locking in of higher drug prices. All is not rosy, however—the agreement keeps in place limits on buy-local and buy-green government procurement as well as requirements to import food that does not meet US standards for safety.

But a glaring omission is the fact that the USMCA does not even attempt to tackle the existential threat of climate change through changes in trade. Some of the omission appears to be structural. Lori Wallach, Director of Public Citizen’s Global Trade Watch teased out this difference in an interview on National Public Radio:

“There's a real difference between what you do to fix a really bad agreement that's causing ongoing damage. Over a million jobs have been government-certified as lost to NAFTA, with more being outsourced to Mexico every week, because real wages, they now are 40 percent lower than manufacturing in China. So, what you do to stop that flow of job outsourcing or a tax on environmental policies is different than what you would do from scratch to write a good agreement. So, stopping a bad agreement's ongoing damage is different than a real good agreement that you put climate standards [in] and you fix all the things that didn't get fixed in NAFTA.”

Despite some victories for environmental and labor enforcement, “the new NAFTA” fails to reconsider trade deals in the context of a rapidly changing climate. Not only that, but USMCA is a monumental victory for seed monoliths such as Monsanto and DuPont that are now able to prevent the exchange of seeds and expand both seed gene editing and monoculture crop production in the three nations. This, in turn, spreads the use of chemical-intensive profit-driven agriculture and increases our global dependence on chemical production. Agricultural activities, including the use of pesticides, account for approximately 30 percent of greenhouse gas emissions globally.

Before, it was NAFTA, but now USMCA is crucial to the advancement of transnational business interests, as seen with the growing success of the polluter-industrial complex (PIC): a term encompassing the major petroleum, manufacturing, and agriculture industries that stand to profit the most from lax environmental, labor, health, and safety regulations. Investments made in PIC corporations by the US, Mexico, and Canada have increased dramatically since the easing of trade and investment barriers under NAFTA, and are expected to increase under USMCA.

Black Ship on Body of Water Screenshot
Image of operational fossil fuel power plant, releasing greenhouse gasses into the atmosphere and thus worsening climate change.

But movement is afoot for an international trade deal. There are growing calls from activists and even governmental organizations for fairer and more sustainable trade agreements. In 2019, The United Nations Conference on Trade and Development (UNCTAD) proposed a Global Green New Deal (GND) as necessary to create a new regime of international trade that is more just, fair, and sustainable. The proposed Global GND would: (1) create a global environmental protection fund; (2) push green and climate finance, including job creation for clean industrialization, especially in the Global South; and (3) support green policies for developing countries by restructuring national debts.

It is an intriguing—but flawed—idea. The proposal is predicated on the desire for a re-engagement of friendly trade relations after the ravages of President Trump, but the UNCTAD’s report offers little indication that the US would be ready to commit to more just and sustainable trade rules or be willing to pay into the climate debt it owes other countries, namely those in the Global South. Its ambitious and rapid transition away from fossil fuels is only a viable strategy for many countries located in the Global North, and contradicts the international principle of common but differentiated responsibilities. Others have raised concerns that it further embeds capitalist and imperialist market dynamics since it is based so heavily off the original US New Deal, including the pursuit of growth and development projects in the Global South. Nevertheless, the proposal has given the global climate justice movement much to ponder—including: what would a truly just, equitable and sustainable global trade deal look like?

Its ambitious and rapid transition away from fossil fuels is only a viable strategy for many countries located in the Global North, and contradicts the international principle of common but differentiated responsibilities.
Free stock photo of activist, banner, blue
Image of a hand-made sign from a climate justice protest signaling that we have only one world.

Soon we will be releasing our landmark report on North American free trade and its climate justice implications. The report not only analyzes the impact of NAFTA on our climate, but also explores whether the USMCA is actually the improvement that was promised or if it is merely “NAFTA 2.0” as many claim. This report qualitatively evaluates policy briefs and think-pieces on the impact of NAFTA and the potentialities of USMCA on climate change from leading experts in the region, and analyzes the impact of increasing air and water toxicity and chemical agriculture on societal development through a climate justice lens. Expanding more on the agreements’ policies, their effects, and potential solutions, this accessible but comprehensive review is for anyone wanting to learn more about these historic agreements, their promise and failure, and how they are used by big business to stop climate justice. 

We are not interested in creating a planet to serve corporate and neoliberal interests. We hope our forthcoming report is a useful primer on what “free trade” really implies, and what we can do about it. Stay tuned!

Interested in getting a copy of the report? Let us know by emailing: comms@climatejusticecenter.org.

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