Enforcing Environmental Rules in Trade Shows Politicization’s Benefit

October 24, 2017

Last week, the Trump administration launched an unprecedented action to enforce the environmental rules in a trade agreement between the United States and Peru.

According to the press release:

“United States Trade Representative Robert Lighthizer today directed the United States Customs and Border Protection (CBP) to block future timber imports from a Peruvian exporter based on illegally harvested timber found in its supply chain. This enforcement action is being taken by the Interagency Committee on Trade in Timber Products from Peru (Timber Committee) for the first time under the United States — Peru Trade Promotion Agreement’s (PTPA) Annex on Forest Sector Governance (Forest Annex).

“Last year, the Timber Committee requested that Peru verify that a specific timber shipment from the company Inversiones Oroza complied with all applicable Peruvian laws and regulations. The request was made following public reports that Oroza was engaging in illegal logging activities. The verification process conducted by Peru revealed that significant portions of the Oroza shipment were not compliant with Peru’s law, regulations, and other measures on harvest and trade of timber products. The timber verification provision is a unique monitoring tool included in the PTPA to ensure Peruvian forestry laws are enforced throughout the supply chain.

“This unprecedented enforcement action demonstrates President Trump’s strong commitment to enforcing our trade agreements and ensuring that trade is fair to the American people,” said Ambassador Lighthizer. “Illegal logging destroys the environment and undermines U.S. timber companies and American workers who are following the rules. We will continue to closely monitor Peru’s compliance with its obligations under our trade agreement.”

Before the internet devolves into jeers about protectionism or cheers about the greening of trade law, a few points:

First, this decision should not be seen through the lens of the debate on Trumpism. Last week’s action is the outcome of a deliberation that began in 2016, by a committee of bureaucrats set up by Obama, with roots in legislation signed by George W. Bush, with nearly half of Democrats supporting (a rare feat). In June 2015, the Environmental Investigation Agency, a progressive NGO whose support of the Peru timber deal helped carry it through Congress in 2007 (but which got skittish about implementation early on) asked USTR to take action. In February 2016, Ambassador Mike Froman, trying to get support for the Trans-Pacific Partnership (TPP), asked Peru to look into an allegation of rule breaking. Then, in August 2016, five officials on the Committee put out their first ever monitoring report, highlighting the problem further. Right after the election last November, it appeared that some progress was being made, but environmental experts had ongoing concerns that 90 percent of Peru’s timber was still being illegally harvested. So here we are.

Second, while observers may bemoan the supposed “politicization” of trade enforcement during the Trump administration, there is no evidence that this is worse than prior administrations. The Bush and Obama administrations regularly sought political credit for being tough with trade enforcement, and the U.S. government goes through cycles of dramatically increasing such actions.

Moreover, politicization can sometimes be good. Froman got the ball rolling because he wanted TPP, and now Lighthizer is finishing the job because he wants NAFTA 2.0 (a redo of the North American Free Trade Agreement).

Politics should not be a dirty word. But many seem to think it is.

The U.S. recently proposed adding a sunset clause to NAFTA, where countries would review and recommit to the act every five years. This is leading to lots of teeth gnashing and concerns that it would harm “certainty” for business.

Three points about this:

First, time limits are not unprecedented in international agreements. The Organisation for Economic Co-operation and Development (OECD) has found that the majority of investment pacts have some type of temporal validity, requiring or allowing regular review.

Second, democracy is uncertain. If business isn’t pricing in political volatility to its location decisions, that is their failing.

Finally, regular deliberation is valuable in and of itself. Scholars have argued that sunset clauses on sensitive pieces of legislation ensure that the public holds policymakers accountable. Few who have observed trade policy for any length of time would argue that it suffers from excess legitimacy.

The Rub: Legitimacy Does Not Equal Efficacy

Even if today’s timber move is good legitimacy politics, it does not mean the policy will be effective. China and other countries offer significant markets for timber, so the shipments the U.S. might block could find other buyers. This argues for a coordinated solution with other buyers of timber. The ultimate efficacy of today’s action will be seen in the follow up.