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PRI's Environmental News Magazine

CAFTA

Air Date: Week of July 8, 2005

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As Congress nears a key vote on liberalizing trade with Central America and the Dominican Republic, opinions are split on how the proposed Central American Free Trade Agreement would affect the environment. Some contend lax environmental enforcement in the region would harm the ecologically sensitive area. Other say increased economic growth will encourage greater stewardship. Host Steve Curwood talks with economist Kevin Gallagher about the environmental lessons learned from the North American Free Agreement with Mexico and Canada.

Transcript

CURWOOD: From the Jennifer and Ted Stanley Studios in Somerville, Massachusetts, this is Living on Earth. I’m Steve Curwood. The US Congress is nearing a key vote on the Central American Free Trade Agreement. CAFTA, as it’s called, would be perhaps the first free trade agreement involving the US that directly incorporates provisions aimed at protecting the environment. The North American Free Trade Agreement or NAFTA, had such environmental provisions added on as side agreements. NAFTA lowered trade barriers among the US, Canada and Mexico; CAFTA seeks to do the same among the U.S., the Dominican Republic, and the five Central American nations of Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. John Murphy is with the US Chamber of Commerce.

MURPHY: We see CAFTA as being the most environmentally forward leaning trade agreement ever.

CURWOOD: Mr. Murphy notes that CAFTA allows citizens to monitor environmental quality and calls for action if environmental problems arise as a result of the agreement.

MURPHY: CATFA is actually going to create new tools for civil society to point out failings and also new resources to help see those laws implemented. What we see is a combination of new resources and commitments and citizen participation that combined will be a real shot in the arm for the environmental movement in the region.

CURWOOD: But some worry that it’s the governments, not the citizens of Central America, that are unprepared to be environmental watchdogs under CAFTA. Boston University economist Kevin Gallagher has studied the effects of NAFTA on the Mexican environment, and he says Mexico was caught off guard by the changes ushered in by the pact because it lacked strong institutions for environmental protection. Kevin Gallagher joins us now on the phone from Guadalajara, Mexico. Professor, how exactly could a free trade agreement harm the environment in Central America?

GALLAGHER: Liberalizing trade with the United States, Central American countries are putting their eggs in the manufacturing basket. What they’re really hoping to do is create large scale, many worker assembly plants, mainly in the apparel and textiles industries, that will sell textiles and apparel into the US market. That’s going to mean a lot of folks moving from the countryside into cities. The cities aren’t equipped to be able to deal with the massive influx in population growth that they will be experiencing. This is exactly what happened under NAFTA in Mexico. You have all sorts of new folks moving into the manufacturing centers, you need water sanitization services, you need sewage, you need roads to get people around, but also to buttress the air pollution that could occur, so you get a real degraded makeshift what we call sprawl around the central areas.

CURWOOD: So you have, you have studied NAFTA and Mexico, what lessons can we expect to take from that experience to bring to a Central American Free Trade Agreement?

GALLAGHER: Here in Mexico, just about every environmental medium has worsened since about 1985. If you look at levels of soil erosion, municipal solid waste, urban air pollution, urban water pollution, they’ve all grown faster than the economy itself and population growth in Mexico. According to the Mexican government’s own estimates, that environmental degradation has cost the Mexican government about 10 percent of its GDP each year or about 45 billion dollars each year in a country where half of its hundred million people live in poverty, less than two dollars a day. That’s not money that you want to let slip through the cracks.

CURWOOD: So it sounds to me like you don’t think the Central American Free Trade Agreement would be a good deal for Central American countries in terms of the environment.

GALLAGHER: No, absolutely not because I don’t think the Central American governments have the right policies in place to handle the major transformation that will occur in their economy. Nor do I think that the CAFTA environmental provisions are enough to fill the gap.

CURWOOD: Now proponents of free trade say look, free trade agreements can actually help the environment, what are the positive elements for environmental protection and stewardship that you see coming?

GALLAGHER: There absolutely are some positive points, but the key thing to remember is that they don’t come automatically. You need to have the right kind of institutional structures in place to be able to foster the market to be able to work better toward the environment.

CURWOOD: Now what about the argument that increased economic development makes these countries richer and therefore they’re better able to take care of their environment?

GALLAGHER: I don’t agree with the argument, and neither does the vast majority of the peer-reviewed economic literature evidence on the issue. What they’re evoking, it’s something called the Environmental Coos Nets Curve. It’s an academic, statistical analysis that was done in the early 1990s and there’s been numerous studies since then, but its central point was that as countries liberalize trade, they will grow and in the initial stages of such growth, there will be increased environmental degradation, but then you reach a sort of a plateau where incomes get high enough where the environment starts to improve on a per capita basis. What the proponents of the trade agreements, without any environmental components, use that literature to say is, ‘hey grow now, worry about the environment later,’ that the environment will automatically take care of itself. It’s been found not to be true. Mexico, the turning point when things are supposed to get better is supposed to be around 5,000 dollars GDP per capita. Mexico hit 5,000 dollars GDP per capita in 1985, but as I said, almost all of its pollution has been increasing faster than GDP and faster than population growth since that period.

CURWOOD: So how does one, from your perspective, how would you strengthen the Central American Free Trade Agreement to protect the environment and agriculture?

GALLAGHER: Central American countries have to in their own efforts have to recognize the need to having environmental policies in place and have infrastructure and institutions in place to be able to anticipate and be ready to manage the problems that are going to occur from a trade agreement.

CURWOOD: Kevin Gallagher is a professor of international relations at Boston University and author of the new book, “Free Trade and the Environment: Mexico, NAFTA, and Beyond,” published by Stanford University Press. Thanks for taking this time with me today Kevin.

GALLAGHER: Really appreciate it. Have a great day.

CURWOOD: In response to concerns over enforcement of environmental and labor laws under CAFTA, the White House recently pledged $120 million over three years to monitor and enforce those standards in the region. CAFTA has already passed the US Senate, but the outcome of the House of Representatives vote expected later this month is much less certain, with strong opposition based on concerns about labor and sugar production as well as environmental protection.

 

Links

Tufts working group on Development and the Environment in the Americas

Kevin Gallagher’s articles

Kevin Gallagher’s book

U.S. Trade Representative Office CAFTA briefing book

 

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