US environment groups urge AUSFTA rejection

August 5, 2004

US environment groups urge AUSFTA rejection

Center for International Environmental Law
Defenders of Wildlife
Friends of the Earth
Sierra Club
Pacific Environment

The United States Free Trade Agreement (AUSFTA) threatens to undermine environmental protections both within and the . Our organizations representing millions of Americans are therefore opposed to the passage of the AUSFTA in its current form. Our concerns regarding specific areas of the agreement are described below.

Environment Chapter

The environment chapter of the AUSFTA includes provisions that are generally vague and unenforceable. Moreover, we are troubled by the inclusion of the provisions in Article 19.4 of the agreement, which appear to encourage the Parties to use voluntary measures, as opposed to regulatory instruments, to achieve and maintain high levels of environmental protection. While we believe that voluntary measures can serve a valuable purpose, in most cases they are not an adequate substitute for publicly adopted regulatory standards.

We also are deeply concerned that the environment chapter does not include a citizen submission process that would allow citizens to address failures by either government to protect the environment. An effective and strong citizen submission process, with clearly enforceable outcomes, should be included in order to ensure that the environment is adequately protected and that the AUSFTA leads to sustainable development rather than to socially and environmentally harmful economic activities.

Investor Rights

The AUSFTA does not include an “investor suit” mechanism that permits foreign investors to directly challenge environmental laws and regulations before international tribunals. We welcome the exclusion of such a mechanism. However, the AUSFTA still explicitly leaves the door open to direct suits by multinational investors before ad-hoc international tribunals. Article 11.16.1 of the agreement permits the executives of the two governments to establish an ad-hoc investor suit process in particular cases, without any approval or oversight by either the U.S. Congress or the Australian parliament. By allowing foreign investors to bypass domestic legal processes, investment suits permitted under this procedure would undermine democratic governance concerning public interest policies.

Moreover, we continue to have significant concerns about the substantive rights provided to foreign investors in the AUSFTA. The agreement provides multinational businesses rights that are similar to those in NAFTA and other agreements. Under NAFTA, both and have already lost cases involving environmental protections, and the faces challenges to public health and environmental standards. These cases have included challenges to policies concerning toxic gasoline additives, hazardous waste treatment, transboundary transport of hazardous waste, open-pit mining mitigation measures, and others.

We believe that the rights in these agreements are too broad and grant privileges to multinational investors that go significantly beyond the rights provided under either Australian or domestic law. The result is that environmental laws and regulations that affect foreign investors will be inappropriately subject to challenge. For example, the AUSFTA includes language requiring that foreign investors be compensated if laws or regulations “indirectly expropriate” their investment interests. The agreement lacks adequate limitations on this provision, making it contrary to long-standing legal principles in Australian and law that have permitted environmental regulation concerning land use and other policies without a legal requirement to pay compensation.

Trade in Services

Finally, we are also deeply concerned by the provisions in the “trade in services” chapter of the AUSFTA. These rules could impinge on the ability of state, local and federal governments to adopt and enforce environmental standards in environmentally sensitive sectors that are classified as “services” in trade law – including such sectors as oil and gas extraction, transport and storage operations; mining activities; tourism and hotel construction; water supply; forestry activities; and others.

For these sectors, the AUSFTA goes beyond World Trade Organization rules by requiring that governments must endeavor to ensure that domestic regulations are not more burdensome than necessary to ensure the quality of the service. In other words, the agreement requires policymakers to choose the regulatory alternative that is least restrictive of service operations, regardless of issues of cost, efficacy, or democratic preference. For example, restrictions on coastal development could be required to be carried out in the manner that is least restrictive of services operations carried out by foreign hotel operators. The AUSFTA also prohibits the use of a number of kinds of quantitative restrictions on service operations, which could include forbidding environmental restrictions on the number of offshore oil wells, mining operations, hotels, and other service operations.

These services provisions, for example, are troubling in light of the recent, highly controversial efforts by the Australian company BHP Billiton to establish a liquid natural gas (LNG) terminal off the coast. The services chapter could impede regulatory measures to address the environmental risks posed by the terminals.

For all of the reasons outlined above, we believe the Australia-United States Free Trade Agreement will undermine efforts to protect the environment and should not be approved.