Institutional capacity to constrain suboptimal welfare outcomes from trade-restricting environmental, health and safety regulation under NAFTA

by Soloway, Julie A.

There has been a dramatic shifi in the focus of trade policy concerns fiom the barriers that lie at the border to the barriers which exist within the border. NAFTA has been largely successfûl in reducing both the Ievels of tanffs within North Arnerica and the scale of other border measures such as quotas. This has revealed a new and more subtle category of measures which restrict trade - the numerous cornmonplace regulations which governments enact to protect the health and safety of their citizens and the environment in which they live. This effort to protect citizens fiom the hazards of everyday life has become a virtual minefield for trade policy makers. as such differences can ofien be manipulated or exploited to protect domestic industry fiom international competition. This thesis evaluates the capacity of the NAFTA des and institutions to correct the suboptimai welfare outcomes that result fiom trade-restricting environmental regulation. It does so firstly by reviewing twenty-five North Amencan trade disputes and irritants in order identie the nature of and extent to which trade-restricting environmental. health and safety regulation results in sub-opthai global and domestic welfare outcomes. Second. it evaluates whether NAFTA's institutional structure has been effective in alleviating or correcting the sub-optimal domestic and global welfare outcomes arising fiom such disputes. This is done with a view to identieing specific deficiencies in the institutionai regime and prescribing more effective institutional arrangements to deal with these problems- The centrai argument of this thesis is that NAFTA has not been effective in alleviating sub-optimal welfare outcomes and that there are, in fact, senous shortcomings in the current institutional structure of NAFTA. This thesis explores the institutionai changes that are required in order to facilitate optimal outcomes- Given that there is little N AFTA jurisprudence, it reviews the jurisprudence of the World Trade Organization. It finds that the substantive rules and jurisprudence which separate bona jide regdation from protectionist regdation have been relatively effective. Yet in order to give effect to the tracte and investrnent liberalization commitments found in NAFTA, this thesis argues for an expanded right of access for private parties in the dispute seniement provisions. This thesis also argues for a more concerted effort on the part of the NAFTA - governments to pursue, where possible. harmonization and mutual recognition strategies as a means to avoid disputes.