US groups warn on trade agreement

November 26, 2003

US groups warn on trade agreement

Defenders of Wildlife, Friends of the Earth (U.S), National Environment Trust, National Wildlife Federation, Natural Resources Defence Council & Sierra Club

Australian Federal Parliament
C/o The Hon. Mark Vaile
Federal Minister for Trade
Parliament House
Canberra, ACT 2600

By Fax: 61 2 6273 4128

Dear Members of Parliament,

Re Australia- U.S Free Trade Agreement

As negotiations concerning the Australia-U.S Free Trade Agreement are fast approaching their conclusion, we are writing to convey our concerns regarding the environmental and social implications of the FTA.

We represent some of the USA¹s largest environmental NGOs with a combined membership base of several million Americans. We support the goal of building a global economy that protects the environment, while raising the living standards of all people through out the world. Regrettably, as set out below, the Australia-U.S Free Trade Agreement (AUSFTA) may undermine environmental protection initiatives within Australian and U.S jurisdictions.

Investment Chapter

We are particularly concerned by the potential for AUSFTA to include an investment chapter based on chapter 11 of the North American Free Trade Agreement (NAFTA). Since the commencement of NAFTA, foreign investors have utilized the investor-state dispute settlement mechanism contained in chapter 11 to challenge the environmental laws and social policies of the U.S, Canadian and Mexican Governments. These cases have involved claims for as much as a billion dollars in compensation. Within North America, this has become a major issue in undermining public confidence in the desirability of trade and investment liberalization.

An investment chapter based on NAFTA could also provide foreign investors with greater legal rights than those currently enjoyed by U.S and Australian investors under their respective domestic legal systems. This will occur as a result of the protection granted to foreign investors against government expropriations without the payment of compensation. Under NAFTA, an extremely wide definition of expropriation has been adopted which requires compensation to be paid to foreign investors when government actions "significantly interfere" with the use of property. This is in addition to the more conventional notion of expropriation which involves the taking of property.

In our view, an expropriation clause of this nature would be contrary to long standing legal principles enshrined in U.S and Australian law which have permitted our respective governments to regulate the use of land for environmental protection purposes without a legal requirement to pay compensation.

Finally, an investment chapter based on NAFTA will incorporate a dispute settlement process into AUSFTA that will enable foreign investors to choose to have their disputes heard before international Tribunals that are devoid of many of the judicial safeguards of domestic Australian and U.S Courts. For example, the Tribunal¹s procedural rules permit the parties to the dispute to choose the Tribunal judges-with huge potential for bias, the pleadings and hearings are often not publicly accessible and there is no mechanism for appeal.

We encourage the Australian Parliament to closely scrutinize the investment chapter of AUSFTA to ensure that it does not incorporate the negative aspects of NAFTA as outlined above. In order to do this, we recommend that the investment chapter include an environmental exception clause drafted to ensure that environmental laws are not vulnerable to inappropriate challenges. Other safeguards would include restricting the right to initiate investment disputes to the Australian and U.S Governments, ensuring that the FTA provides "no greater rights" to foreign investors and requiring investment disputes to be heard in the Australian or U.S domestic Courts.

Land Clearing

We are also concerned about the potential for AUSFTA to increase land clearing in Australia. We understand from scientific studies, including those conducted by the Australian Government, that the biggest threat to Australia¹s globally significant biodiversity is land clearing. Land clearing also causes dryland salinity, a form of desertification, and also contributes a large percentage of Australia¹s greenhouse gas emissions.

Given that most land clearing in Australia occurs for the conversion of land to pasture, it is evident that land clearing remains closely linked to the Australian beef industry. Already the U.S. is Australia¹s biggest export market for beef, around half of which comes from the State of Queensland where the largest proportion of land clearing in Australia takes place. Should the FTA increase Australian beef exports to the U.S., it is highly likely Australia¹s land clearing will escalate to satisfy the beef industry¹s increased demand for pasture land.

We were pleased to hear of the ?in principle agreement¹ between the Australian Government and the Queensland State Government earlier this year to end clearing old growth woodlands in Queensland. However, six months has passed since this time and negotiations appear to have stalled. This concerns us greatly.

Accordingly, we urge the Australian Parliament to ensure that the clearing of old growth native vegetation, particularly in Queensland, is brought to an end before AUSFTA exacerbates Australia¹s land clearing problems any further.

Environmental Review

In March of this year, the U.S Government commenced an environmental review of AUSFTA as is required under U.S law. The Australian Government should commence a similar environmental review process, modelled on the U.S process, but involving broader public input including through formal public hearings.

As outlined above, AUSFTA has the potential to result in some unintended environmental impacts, particularly arising from increased agricultural production.
We therefore encourage the Australian Parliament to ensure a full environmental review of AUSFTA is undertaken before the agreement is ratified. This review will compliment the review currently underway in the U.S and ensure that both governments can take appropriate action to ensure that AUSFTA does not liberalize trade between the U.S and Australia to the detriment of the environment.


Stas Burgiel, PH.D David Waskow
International Policy Analyst Trade Policy Coordinator
Defenders of Wildlife Friends of the Earth (U.S)

Bill Frymoyer Jake Caldwell
Director of Public Policy Program Manager,
National Environmental Trust Trade and Environment
National Wildlife Federation

Susan Casey- Lefkowitz Dan Seligman
Senior Attorney Director
Natural Resources Defence Council Responsible Trade Program
Sierra Club