Rethinking Hazardous Waste under NAFTA

Given Obama’s campaign pledge to renegotiate the North American Free Trade Agreement (NAFTA) to incorporate environmental precepts, one issue that must be addressed is the agreement’s contribution to Mexico’s hazardous waste problem.

In response to domestic demands, the United States, Mexico, and Canada signed the parallel North American Agreement on Environmental Cooperation (NAAEC) and established the Commission for Environmental Cooperation (CEC). In addition to promoting collaboration between NAFTA parties on environmental issues, one specific goal of NAFTA’s environmental side agreement was to enhance Mexico’s ability to mitigate the negative environmental effects associated with increased economic activity driven by liberalization. However, the past 15 years have shown the agreement’s provisions related to hazardous waste regulation to be insufficient.

Over 90% of hazardous waste trade done by NAFTA countries is between NAFTA parties. According to the EPA, about 50% of U.S. hazardous waste exports (by volume) go to Mexico, which makes the United States Mexico’s largest hazardous waste trade partner. For this reason, NAFTA’s role in Mexico’s hazardous waste situation cannot be overlooked. Not only is no mention whatsoever of hazardous waste made in NAAEC, but the NAFTA agreement cedes this issue to Annex III of the Agreement on Cooperation for the Protection and Improvement of the Environment in the Border Area (known as the La Paz Agreement, enacted in 1984). This means that the NAFTA "regime" for hazardous waste management is based on the situation over 20 years ago.

Any effort to renegotiate the role of the environment in NAFTA must include a review of generation, transport, disposal, and management of hazardous wastes. Until then, Mexico will continue to face significant challenges to ensuring the "environmentally sound and efficient management" (ESM) of the hazardous waste it generates domestically, the hazardous waste produced by the maquiladora sector, and wastes imported from the United States.

Mexico’s Hazardous Waste Problem

Marion Lloyd, writing for EcoAméricas in 2008, reports NAFTA’s legacy to be "thousands—if not millions—of tons of untreated hazardous waste." Hazardous waste is accumulating in Mexico that is either treated improperly or dumped illegally.

As reported by the Texas Center for Policy Studies in a 2004 report, only about 10% of Mexico’s hazardous waste receives proper treatment. The result is millions of tons of unaccounted for or illegally dumped hazardous waste. In 2003, Simeon Tegel writing for EcoAméricas reported that 50-80% of Mexico’s hazardous industrial waste is dumped illegally.

These numbers are leading to a hazardous waste crisis, given the increasing amount of hazardous waste needing treatment in Mexico. The increase stems from the combination of increased domestic production, insufficient repatriation shipments by maquiladora plants along the U.S.-Mexico border, and increased hazardous waste imports from the United States.

A greater level of domestic hazardous waste generation is the primary source of accumulating waste needing proper treatment. Post-NAFTA years have seen an increase in Mexico’s industrial activity, driven by the country’s "comparative advantage" in manufacturing due to cheap labor. The growth of the industrial sector leads to a subsequent increase in hazardous waste generation.

In 1990, the Mexican government reported generating 4.75 million tons of hazardous waste a year; in 1999, five years after NAFTA entered into effect, that number had nearly doubled to an estimated 8 million tons. Due to a lack of up-to-date data, Mexico’s domestic generation of hazardous waste today is not known. The estimate of 8 million tons per year is over 10 years old and although it is still used for official purposes, the real number could be as high as 20 million tons. The lack of information and transparency in hazardous waste generation is one of the major difficulties in dealing with the problem.

A second indicator of Mexico’s hazardous waste problem is repatriation trends seen in the maquiladora industry. Pursuant to domestic law in Mexico, foreign-owned manufacturers are exempt from paying customs duties on imports used for processing, and pay tax only on the value-added of the final exported product. That agreement stipulates that any hazardous waste generated from production processes that use duty-free imports must be repatriated back to the maquiladora’s country of origin or (pursuant to recent domestic law in Mexico) recycled domestically at approved facilities.

Even in the absence of accurate data and complete reporting, it is clear that foreign companies are not fully complying with the repatriation rule. Lloyd reports that in 2007, less than one-fifth of hazardous wastes generated by U.S.-owned maquiladoras was sent back to the United States. As the vast majority of maquiladoras are U.S.-owned, this represents a grave problem, especially in the context of post-NAFTA years, in which the number of maquiladora plants has risen significantly. In 1990 there were 1,704 maquiladoras and in 2004 this number had increased to 2,825.

Increased imports of hazardous waste from the United States have also played a role in Mexico’s accumulating levels of improperly treated or illegally dumped hazardous waste. Pursuant to domestic law in Mexico, hazardous waste imports are only permitted for recycling or recovery purposes. While this provision allows U.S. exports to enter the country, the problem is how these wastes are handled once they arrive, a concern recently expressed by the Environmental Protection Agency (EPA) and the CEC Enforcement Working Group (EWG) during the 2008 meeting of the National Advisory Committee to the U.S. Representative to the CEC: "EPA and EWG are concerned that hazardous waste that should be crossing the border for proper disposal often does not reach the desired destination."

The improper disposal of hazardous waste shipped to Mexico is especially troubling given trends of increasing export shipments reflected in U.S. EPA data. In 2002 the United States reported exporting 130,000 tons to Mexico and by 2006 EPA data reported this number to have increased to 161,026 tons. However U.S. data only reflects wastes defined as hazardous under the U.S. Resource Conservation and Recovery Act (RCRA). As Mexico’s definition of hazardous waste includes waste streams not covered under RCRA, discrepancies exist as to the actual volume of hazardous waste shipped from the United States to Mexico. For example, in 2002 Mexican data reported the total volume of hazardous waste received from the United States to be 325,000 tons, a difference of 195,000 tons when compared with EPA data. It is also important to note that neither U.S. nor Mexican data incorporates illegal shipments going to Mexico. Officials on both sides of the border admit this exists but say they are unable to calculate the frequency or volume.

Mexico does not have sufficient disposal infrastructure to handle domestically generated hazardous waste as well as the waste left by maquiladoras and that imported from the United States. The country only has one official operating hazardous waste disposal facility, privately owned by Residuos Industriales Mutiquim and located in the state of Nuevo León, which estimates its annual waste management capacity to be around 600,000-800,000 tons a year—though Mexico’s Instituto Nacional de Ecología (INE) reports it to be 1,200,000 tons a year.

NAFTA’s Contribution to the Pile-Up of Hazardous Waste

In post-NAFTA years, regional integration and increased trans-boundary trade and investment has led to significant changes in Mexico’s hazardous waste situation. Specifically, the country has seen a greater scale of industrial activity, a shift toward specialization in hazardous waste-producing industries, and an increase in hazardous waste imports from the United States. By giving authority on hazardous waste regulation to Annex III of La Paz, NAFTA’s impact has not been adequate to ensure environmentally sound management or to mitigate the environmental reality of trade-driven economic growth.

Others, like Sanford Gaines writing for the journal International Environmental Agreements: Politics, Law, and Economics,also cite the "chilling effect" NAFTA may have had on the creation of new environmental regulations. For example, perceptions of Chapter 11 and the concern that environmental regulations will be interpreted as "tantamount" to expropriation may have prevented innovation in Mexico’s domestic mitigation regime or the creation of tighter regulations. This already happened in the 2000 Metalclad case, in which a NAFTA arbitration panel awarded Metalclad, a U.S. hazardous waste company, over $16 million in damages when the company was denied local permits to reopen a hazardous waste landfill.

From a legal perspective, it is clear that by ceding authority to La Paz, which in turn cedes to domestic legislation, NAFTA is unable to harmonize trans-boundary regulation or enforcement activity. Annex III of La Paz does not effectively harmonize differing domestic definitions of which wastes are considered hazardous, nor does it assert a specific definition of illegal trade or mandate an explicit prior informed consent (PIC) procedure that incorporates ESM. As a result, many of the compliance monitoring and enforcement activities necessary to regulate the maquiladora sector and to ensure ESM of imported wastes fall primarily on Mexican authorities.

For example, as a party to the Basel Convention, Mexico should not consent to any hazardous waste shipment for which it cannot guarantee ESM. However, if Mexico does consent to an export from the United States, the EPA cannot prevent the U.S. exporter from shipping (or force re-importation) even if the exporting company has not ensured ESM and knows the shipment will be illegally dumped. Under La Paz, re-importation is only mandated for illegal shipments (which it fails to specify). If Mexico consents to receive the shipment, the shipment is not illegal.

NAFTA and La Paz’s provisions on technology transfer and capacity building have not been sufficient to address Mexico’s struggle with data capturing or the successful siting of treatment, storage, and disposal facilities. As stated above, the country only has one legal disposal facility and this inadequate disposal infrastructure is a main cause of improper treatment and illegal dumping.

Finally, despite NAFTA, NAAEC, and La Paz’s tenets of cross-border coordination and cooperation, there is no official documentation or recognition that Mexico’s hazardous waste problem exists. Government and non-government officials on both sides of the border are willing to individually admit trans-boundary hazardous waste regulation poses a significant problem, but there has been no official effort to agree upon and document the extent of Mexico’s limited mitigation capacity or NAFTA’s contribution to it.

Recommendations for Hazardous Waste Regulation under NAFTA

At the policy level, there are a number of steps that can be taken to remedy this situation and ensure NAFTA promotes effective trans-boundary hazardous waste regulation. President Obama’s campaign pledge to rethink the role of the environment in NAFTA provides a great platform to begin a discussion on improving trans-boundary regulation of hazardous waste and in turn improving the situation in Mexico.

Incorporation of More Stringent Legal Provisions into NAFTA

At the tri-national level, there are a number of ways the NAFTA trade aggrement can be made more effective in terms of hazardous waste regulation—for all three parties, not just Mexico. The Basel Convention on the Control of Trans-boundary Movements of Hazardous Wastes and Their Disposal can serve as a model for how to do so. As the highly controversial Ban Amendment will likely prevent, or at the very least continue to delay U.S. ratification, incorporating the Convention’s legal strengths into NAFTA will make NAFTA’s regime more comprehensive and alleviate some of the regulation burden Mexico currently faces.

To begin with, NAFTA parties need an agreed upon understanding of what constitutes a hazardous waste. While the Basel Convention sets forth technical annexes to categorize different wastes, perhaps the most efficient way to do this between NAFTA countries would be to negotiate an interpretive note on the common definition of hazardous waste. Having a uniform definition of which wastes need to be regulated will greatly improve data collection and trans-boundary regulation. For example, under a common definition of hazardous waste, waste streams like E-waste and lead acid batteries would be regulated, two wastes that under NAFTA’s current legal framework are excluded from La Paz’s prior informed consent (PIC) procedure due to U.S. domestic law.

The Basel Convention has a number of general obligations that, if incorporated into NAFTA, would greatly improve the agreement’s impact. First, NAFTA should mandate the responsibility of hazardous waste exporters to ensure the environmentally sound and efficient management (ESM) of any trans-boundary hazardous waste shipments. Under this provision, the EPA will have the legal authority to hold U.S. exporters responsible for hazardous waste shipped to Mexico even after the shipment has left the United States, as well as the ability to withhold authorization for any shipments that have not been ensured proper disposal, despite Mexico’s consent. By giving the EPA more legal authority to regulate U.S. exporters, some of the administrative burden associated with enforcement on the Mexican side of the border will be relieved. The Basel Convention also mandates that exporters re-import any completed hazardous waste shipments that have not been ensured ESM. If NAFTA were to incorporate this provision, the EPA would also have the ability to hold U.S. exporters responsible for hazardous waste shipped to Mexico even after the shipment has been completed.

Finally, just as done in the Basel Convention, it would also be beneficial for NAFTA parties to agree to minimize the generation and trans-boundary movement of hazardous wastes. This last point is important as investing in waste-minimizing technologies and reducing the amount of hazardous waste generated is the best option of all for the environment.

Updating Annex III of La Paz under NAFTA’s Legal Umbrella

After incorporating the above general obligations at a tri-national level, the next step to addressing Mexico’s hazardous waste problem is to assess the specific relationship between Mexico and the United States as established in Annex III of La Paz. NAFTA should continue to defer the details of trans-boundary regulation to La Paz only if Annex III is revisited and updated to better reflect the hazardous waste concerns of today.

The first step in doing so will be for binational representatives to officially agree upon and document the state of Mexico’s hazardous waste problem. Perhaps the best way to do so would be through the creation of a working group with representatives from both governmental and non-governmental agencies. After officially documenting the state of Mexico’s hazardous waste problem, this working group can then discuss the most appropriate policy path to take in order to update Annex III of La Paz.

In particular, parties should consider if the Annex should make specific provisions for waste streams of particular binational concern (such as used lead acid batteries). Parties would also need to address ways to improve maquiladora repatriation. For example, Annex III of La Paz should be updated to incorporate a legal mechanism allowing U.S. border officials to take enforcement actions on parent companies of maquiladoras that do not comply with repatriation requirements.

Finally, Annex III’s provisions relating to maquiladora repatriation should also be revised to accommodate the shifting composition of maquiladora origin. As reported by Kathryn Kopinak, "Between 1996 and 2000, 70% of all private investment in Baja California was of Asian origin, and only 15% came from the United States … the increase in Asian origin maquiladora investment in the last half of the 90s has profoundly changed which maquiladora centers host the greatest generators of hazardous waste." As an OECD country Mexico has agreed to not send hazardous waste shipments to non-OECD countries, such as China. As Annex III of La Paz regulates the maquiladora sector of the 1980s, updating the agreement will need to incorporate of this potential bottleneck for hazardous wastes from Chinese origin maquiladoras.

The CEC and Hazardous Waste

The Commission for Environmental Cooperation (CEC), NAFTA’s organization to address environmental concerns, is an integral part of the solution to improving Mexico’s hazardous waste situation, specifically with regard to capacity building.

The importance of having accurate, up-to-date, and accessible data cannot be overstated. For this reason, the CEC’s current plan to develop an electronic notification system for hazardous waste shipments and enhance harmonization between NAFTA parties’ data must remain funded and implemented within the next year. Having an electronic, uniform data collection and transfer system would benefit almost every aspect of hazardous waste regulation, doing everything from improving data quality to enhancing tri-national communication and the dissemination of regulation information.

The CEC should also have a more proactive role in domestic capacity building in Mexico. For example, the organization could prove helpful by collaborating with institutions like the Border Environment Cooperation Commission (BECC) to the siting of treatment, storage, and disposal (TSD) facilities. The fact that Mexico has only one official TSD facility is a key part of the country’s limited mitigation ability. Public opposition responsible for preventing TSD facility construction needs be taken seriously and local communities must be involved and consulted before construction permits are given. Organizations like the CEC and the BECC might be beneficial in collaborating with Mexico to ensure local concerns are respected and the siting process is transparent.

NAFTA, Mexico, and Hazardous Waste

Much must be done under NAFTA to improve the agreement’s role in Mexico’s hazardous waste regulation. While this is not meant to overlook the positive impact the agreement has had or the responsibility of the Mexican government to increase domestic implementation and enforcement, improving hazardous waste regulation at a tri-national level is essential. Changing the regulatory atmosphere to ensure NAFTA incorporates sufficient provisions to mitigate the negative environmental impact of trade-led growth is the first step to addressing Mexico’s hazardous waste problem. President Obama’s campaign pledge to rethink the role of the environment in NAFTA represents the policy space and motivation that exists to do so.

End Notes

  1. Marion Lloyd, "Mexico’s Hazardous Waste Keeps Piling Up," EcoAméricas (June 2008).
  2. Simeon Tegel, "No Let-up for Mexico’s Toxic-waste Woe," EcoAméricas (July 2003).
  3. Talli Nauman, "Where to Put Hazardous Industrial Wastes?" EcoAméricas (September 1999).
  4. Simeon Tegel.
  5. Marion Lloyd.
  6. Texas Center for Policy Studies (TCPS), "The Generation and Management of Hazardous Wastes and Trans-boundary Hazardous Waste Shipments between Mexico, Canada, and the United States since NAFTA: A 2004 Update," (2004); Eric J. Romero and Kevin W. Cruthirds, "Understanding Employee Turnover Patterns in Mexican Maquiladoras," Journal of Centrum Cathedra (March 2009).
  7. National Advisory Committee, "National Advisory Committee to the U.S. Representative to the Commission for the Environmental Cooperation: Response to EPA’s Request on Import Safety and the CEC," (April 17, 2008).
  8. Texas Center for Policy Studies (TCPS).
  9. Texas Center for Policy Studies (TCPS).
  10. Red Mexicana de Acción Frente al Libre Comercio and TCPS, "Hazardous Waste Management in the United States-Mexico Border States: More Questions than Answers," (2000).
  11. Sanford Gaines, "Environmental Policy Implications of Investor-State Arbitration under NAFTA Chapter 11," Journal of International Environmental Agreements: Politics, Law, and Economics (2007).
  12. Marion Lloyd.