Environmental Ethics, Environmental Law, and Trade

1. Environmental Ethics, Environmental Law, and Trade

2. Objectives • Show how law is sometimes used to embody ethical principles, particularly in environmental law • Show how how trade policy can undercut the ethical principles embodied in domestic law. • Relate these ideas to issues in the news

3. Ethics and the Law • Law reflects the ethical judgments of a society. • Ethics serves as a basis for laws, changes in law reflect changing ethical views. • Environmental law embodies shared ethical values.

4. Ethical Principles in Environmental Law • The Polluter Pays Principle • The Precautionary Principle

5. The Polluter Pays Principle • Don’t make messes. • If you make a mess, clean it up. • Pollution is an externality—a cost not borne by the parties to a transaction. Goal—internalize the costs of pollution. • The polluter pays principle is an internalization strategy embodied in U.S. law. • Superfund, CERCLA, RCRA, USTA

6. The Precautionary Principle • Take precautionary measures to anticipate, prevent or minimize environmental harm. Rather than await certainty, regulators should anticipate potential environmental harm and act to prevent it. • International treaties, some signed by the U.S., expressly adopt the precautionary principle. • Rio Declaration, Cartagena Protocol (SPS treaty), Kyoto Protocol

7. Trade Policy, Domestic Law, and Environmental Protection • Trade policies and trade agreements (NAFTA, WTO, FTAA) can undercut domestic environmental protection laws.

8. NAFTA Provisions • NAFTA protects the property rights of foreign investors: • No direct or indirect expropriation without compensation • Indirect expropriation is sometimes called “Regulatory Taking” • NAFTA allows a foreign citizen or corporation to sue a government for improper expropriation.

9. Protecting Property Rights • Governments MUST protect rights to private property against unjust takings: • The Fifth Amendment states: • No person shall be . . . deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use without just compensation. • The expropriation clauses build this requirement into trade agreements

10. Kinds of Takings • Property can be taken directly—as in imminent domain—for public uses. • Property can be taken indirectly—its value greatly reduced or eliminated—by government regulations that impose costs or limit profits. • “Regulatory takings” cases haven’t worked well in U.S. courts. • Exception: Lucas v. South Carolina Coastal Comm. • “Regulatory takings” theory limits government too much.

11. Environmental Law and Expropriation • Environmental laws tend either to impose direct costs on, or to limit the profitability of, some activity. • Foreign corporations claim that domestic environmental laws indirect expropriations for which they are entitled compensation from the government (taxpayers).

12. NAFTA cases undercutting environmental law • Ethyl Corp v. Canada • Methanex Corporation v. United States • S.D. Meyers Corporation v. Canada

13. Ethyl Corp. v. Canada • Ethyl makes a gasoline additive Methylcyclopentadienyl Manganese Tricarbonyl (MMT) to reduce emissions • MMT is banned in several states as a health risk. • Canada banned MMT as a health risk. • Ethyl sues Canada under Chapter 11 for illegal expropriation for LOST PROFITS! • Ethyl WINS.

14. Methanex Corp. V. U.S. • Methanex is a Canadian corporation that makes methyl tertiary-butyl ether (MTBE) an oxygenate gasoline additive. • MTBE was banned by California because of its perceived threat to humans and the water supply. • Gov. Davis found "on balance, there is significant risk to the environment from using MTBE in gasoline in California." • Methanex claims that the science supporting the ban is inadequate, despite evidence that MTBE causes cancers in some lab animals.

15. Methanex, continued • Methanex sued the U.S. for $970 million, claiming that California’s environmental regulation: • The MTBE ban illegally prefers a U.S. product (Ethanol) • Constitutes an illegal expropriation of profit • This case constitutes "a clear threat to California state sovereignty and democratic governance.“

16. S.D. Meyers • S.D. Meyers deals in treating toxic wastes, specializing in PCB’s. S.D. Meyers processes contaminated transformers, some imported from Canada. • Acting under the Basel Convention on Transboundary Shipment of Hazardous Waste, Canada bans the export of PCB contaminated transformers.

17. Meyers, continued • Meyers sues Canada for having expropriated its profits by banning exports (thus giving the profits to Canadian corporations). • Remember, international treaty law bans the transboundary shipment of toxic waste. • S.D. Meyers WINS.

18. A Few More Outrageous Cases Under NAFTA Chapter 11 • Sun Belt Water, Inc. v. Canada • Pope and Talbot v. Canada • Metalclad Corporation v. Mexico

19. Sun Belt Water, Inc. • Fortune Magazine says “water will be to the 21st century what oil was to the 20th.” • 20% of the world’s fresh water is in Canada • SUN BELT undertakes commercial and humanitarian projects dealing with water. • Sun Belt serves markets in the U.S. Southwest (Oakland, San Francisco, San Rafael, Santa Cruz) • Sun Belt wanted to import Canadian water from BC to sell in the U.S.

20. Sun Belt, Continued • Sun Belt formed a partnership with Snowcap, a Canadian water company • Sun Belt won a contract to supply water to Santa Barbara (beating a Canadian firm, WCW) • B.C. citing the Water Protection Act, denied Sun Belt/Snowcap the needed export licenses. • Sun Belt’s $400 million NAFTA suit is pending. • Sun Belt's CEO Jack Lindsay says, "Because of NAFTA, we are now stakeholders in the national water policy in Canada.“

21. Pope and Talbot • Pope & Talbot is a small, U.S. based lumber firm operating in Canada. • Timber imports and exports have been the subject of controversy between the U.S. and Canada for years. • 1996—U.S./Canada Softwood Lumber Agreement (SLA) set export quotas, levies and production taxes.

22. Pope & Talbot, cont. • Pope & Talbot was adversely affected by the SLA (which the U.S. negotiated) • Pope & Talbot sued Canada, and won, claiming that Canada had breached NAFTA duties on national treatment and minimum standards of treatment. • A U.S. firm successfully sued Canada because of a treaty other U.S. firms had lobbied the U.S. gov’t to force on Canada.

23. Metalclad v. Mexico • Metalclad Corp is a U.S. based waste disposal company. • Metalclad constructed and began operating a waste disposal facility in Guadalcazar in the state of San Luis Potosí. • Metalclad did not have full local approval for the plant, but claimed it had assurances from the Mexican federal government. • The plant leaked, was located on an alluvial stream, and contaminated local groundwater.

24. Metalclad, continued • The governor of San Lois Potosi declared a 600,000 acre environmental protection zone and ordered the plant closed as an environmental hazard. • Metalclad sued for $90 million for lost costs, expropriated profits, and an order that it be allowed to reopen the plant. • Metalclad won 19.7 million in damages and rhe right to reopen the plant.

25. Technical Trade Barriers and the WTO • The WTO promotes free trade • Prohibits formal trade barriers—quotas, import limits, import taxes, price supports • The EU Caribbean bananas case • Prohibits “technical barriers to trade” as disguised quotas or tariffs • Some workplace health and safety laws, consumer protection laws and environmental regulations have been found to be technical trade barriers

26. The Turtle and Beef Hormones Cases • 2 of the most famous (infamous) cases to go before the WTO. • Each case raises questions about domestic sovereignty—the right of the people of a nation to make their own laws. • These cases are at the heart of the protests in Seattle at the WTO ministerial conference in 2000 and the IMF/World Bank Protests in Washington and Montreal in 2001. • In 2002, the WTO met in Doha, Qatar.

27. The Turtle Case • Congress passed a law stating that all shrimp sold in the U.S. had to be caught in turtle safe nets. • Caribbean shrimpers sought U.S. help in meeting the deadline set in the law. • Asian shrimpers did not comply with the law. • The EPA extended the deadline for full compliance. • A court ordered the EPA to enforce the law fully and the EPS banned the sale Asian shrimp not caught in turtle safe nets.

28. Turtle case, continued • Asian shrimpers sued in the WTO DRB arguing that the U.S.’s environmental law was a technical trade barrier, a disguised tariff, and not really about protecting turtles. • That ALL domestic U.S. shrimpers, and ALL imports were subject to the same rules didn’t matter. • The WTO ruled against the U.S., forcing either a dropping of the requirement or facing retaliatory tariffs.

29. The Beef Hormones Case • The Montreal codicil to the UN’s treaty on Sanitary and Phytosanitary Measures (SPS) explicitly adopts the precautionary principle as a basis for making food safety decisions. (article 57) • The EU banned administering substances having thyrostatic, estrogenic, androgenic or gestagenic action to farm animals AND it banned the sale of meat from animals to which such substances had been administered as a precautionary health measure.

30. Beef Hormones, cont. • These rules applied to EU beef producers and to beef importers. • U.S. and Canadian beef producers, who use growth hormones to fatten cattle, sued under WTO rules. • As in the turtle case, the producers argued that these were TBT’s and not real safety measures. • The U.S. and Canadian beef producers won. • What happened to domestic sovereignty?

31. The FTAA • The FTAA, the Free Trade Area of the Americas, would extend NAFTA all over North and South America (except Cuba). • It would extend NAFTA to include services. • “Services” is a huge category of economic activity including extractive industries, mining, shipping, construction, and waste processing and management. • Water rights and the privatization of water resources would be included.

32. How does all this relate to my life or to issues in the news today? • Trade protests (the Battle in Seattle, the riots in Montreal in 2001, attempts to protest the WTO ministerial in Doha, Qatar) turn on these issues. • Domestic sovereignty, our right to make our own laws and to embody our ethical convictions in law, is at risk.