Australia - United States Free Trade

Australia-United States Free Trade Agreement - Guide to the Agreement

19. Environment

1.    Purpose and structure

The environment Chapter sets out a number of provisions designed to ensure that neither Party fails to enforce its own environment laws in a way that affects trade between the Parties.   The Chapter also provides for environmental cooperation, including through the signing of a Joint Statement on Environmental Cooperation, and by seeking means to enhance the mutual supportiveness of multilateral environmental agreements and international trade agreements to which Australia and the United States are both parties, in particular in the negotiations in the WTO regarding multilateral environmental agreements.

The Chapter consists of nine articles dealing with Levels of Protection, Application and Enforcement of Environmental Laws, Procedural Guarantees and Public Awareness, Measures to Enhance Environmental Performance, Institutional Arrangements, Environmental Cooperation, Environmental Consultations, Relationship to Environmental Agreements, and Definitions.

2.    Why an Environment Chapter?

The underlying rationale for the Environment Chapter is reflected in the text of Article 19.2.2: 'The Parties recognise that it is inappropriate to encourage trade or investment by weakening or reducing the protections afforded in their respective environmental laws'

3.    Core obligations (Article 19.2)

The core obligation for each of the Parties is contained in Article 19.2.1(a), which provides that 'neither Party shall fail to effectively enforce its environmental laws, through a sustained or recurring course of action or inaction, in a manner affecting trade between the Parties'   This is the only obligation subject to dispute settlement (see Section 6).  

Under the Agreement only the government of each Party can bring such an action.

4.    Environmental standards (Article 19.1)

The Chapter recognises the right of each Party to establish its own levels of domestic environmental protection and priorities, and to adapt or modify accordingly its environmental laws and policies (Article 19.1).

Each Party undertakes to ensure that its laws encourage high levels of environmental protection, and to strive to improve those protections.   The Parties recognise that 'each Party retains the right to exercise discretion with respect to investigatory, prosecutorial, regulatory, and compliance matters and to make decisions regarding the allocation of resources to enforcement with respect to other environmental matters determined to have higher priority' (Article 19.2.1(b)).

5.    Environmental laws (Article 19.9)

Environmental laws are defined, under Article 19.9, as any statutes or regulations of a Party, or provision thereof, the primary purpose of which is the protection of the environment, or the prevention of a danger to human, animal, or plant life or health (but not worker safety), through:

(a) the prevention, abatement, or control of the release, discharge, or emission of pollutants or environmental contaminants;

(b) the control of environmentally hazardous or toxic chemicals, substances, materials, and wastes, and the dissemination of information related thereto; or

(c) the protection or conservation of wild flora or fauna, including endangered species, their habitat, and specially protected natural areas.  

6.    States and Territories (Article 19.9)

For the United States, laws are defined as statutes or regulations of the Congress enforceable by action of the federal government.    This provision reflects the fact that, in the United States, the federal government exercises primary authority with respect to environmental laws, and can enforce these laws at the state as well as federal level.   US States are not, therefore, specifically included in the definition of US laws.  

The situation is different in Australia as the Commonwealth Government is not able to enforce State laws.   A definition of Australia that included only Federal Government laws would not therefore cover state laws in a manner comparable to the undertaking made by the United States.    While there is no definition of Australia in this Chapter, as the Party to the Agreement as a whole, Australia includes state and territory laws.  

The Federal Government would be responsible for a failure to enforce effectively either State or Federal laws.   Should the United States raise a concern about failure of an Australian State to enforce effectively its own laws in accordance with Article 19.2.1(a), the Commonwealth government would consult with that State government.

7.    Dispute Settlement (Consultations) (Article 19.7)

The dispute settlement (consultations) provisions of the Environment Chapter (Article 19.7) mirror the general dispute settlement provisions of the Agreement (see Chapter 21).  

Under the provisions of Article 19.7 a Party may raise with the other Party any matter arising under the Chapter (Article 19.7.1); Parties are encouraged to resolve the matter (Article 19.7.2); but if they cannot do so at that stage, they can establish a subcommittee (see section 12) to help (Article 19.3).   Only if the matter relates to Article 19.2.1(a) (failure to effectively enforce the Party's laws) may a Party initiate the general dispute settlement provisions of the Agreement (Articles 19.7.4 and 19.7.5).  

A feature of the dispute settlement procedures applying to the environment and labour Chapters is that panelists chosen to determine the dispute are required to have expertise or experience in the relevant matter under dispute.

8.    Penalties

The penalties for a failure to comply with Article 19.2.1(a) (effective enforcement of laws) are to be found in the dispute settlement Chapter (Article 21.12).   Penalties take the form of a fine of up to US$15 million p.a. (adjusted for inflation) to be paid by the Party complained against into a fund, to be spent at the direction of the Parties on appropriate environmental initiatives in the territory of that Party (Article 21.12.4).  

9.    Multilateral Trade and Environment Agreements (Article 19.8)

The Parties recognise the important role that multilateral environmental agreements play in protecting the environment globally and domestically and will continue to seek means to enhance the mutual supportiveness of multilateral environmental agreements and international trade agreements to which they are both parties, in particular in the negotiations in the WTO regarding multilateral environmental agreements (Article 19.9).

10.   Environment Cooperation (Article 19.6)

Australia and the United States have agreed to negotiate a US-Australia Joint Statement on Environmental Cooperation, to explore ways to support ongoing bilateral, regional and multilateral environmental activities (Article 19.6.1).    There is also agreement to share information with each other and the public, as appropriate, on the environmental effects of trade agreements (Article 19.6.2) and take account, as appropriate, of public comments on co-operative activities being undertaken by the two Parties (Article 19.6.3).

11.   Procedural Guarantees and Public Awareness (Article 19.3)

In the interests of transparency and procedural fairness, each Party shall ensure that persons with a legally recognized interest under its law in a particular matter have appropriate access to judicial, quasi-judicial, or administrative proceedings for the enforcement of the Party's environmental laws.   Each Party will:

12.   Measures to enhance environmental performance (Article 19.4)

As appropriate, and in accordance with its law, each Party will encourage the development of mechanisms such as flexible, voluntary and market-based mechanisms that encourage the protection of natural resources and the environment (Article 19.4).

13.   Institutional Arrangements (Article 19.5)

The Joint Committee established to supervise the implementation of the Agreement (see Article 21.1.1) will discuss matters related to the operation of the Environment Chapter and the pursuit of the environmental objectives of the Agreement.   The Joint Committee may establish a subcommittee on environmental affairs to discuss matters related to the operation of the Chapter.   Meetings of that subcommittee would normally include a public session (Article 19.5.1).  

Each Party will provide an opportunity for its public to advise on the implementation of the Chapter (Article 19.5.1).    All formal decisions of the Parties concerning the operation of the Chapter will be made public, unless the Joint Committee decides otherwise (Article 19.5.1).  

14.   Environmental Review of the FTA

Under the Institutional Arrangements (Chapter 21) the Joint Committee will, at its first meeting, consider reviews by each Party of the environmental effects of the Agreement and afford the public an opportunity to provide views on those effects (Article 21.1.7).  

The Australian Government will be preparing an environmental assessment of the Agreement in the context of an overall analysis of the Agreement.   The US Government has already prepared a draft review (December 2003) available on the USTR website

March 6, 2004

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