News and Analysis • Volume 1 • Number 1 • October 2007
US calls on Peru to improve forest management under revised trade deal
Last May, Congressional Democratic leaders broke new ground for combating illegal logging in bilateral US trade agreements when they reached a compromise deal on US trade policy with the White House.
The deal they struck set out specific requirements relating to the environment, as well as to labour and intellectual property, for pending US trade deals with Colombia, Panama, Peru and South Korea. In the case of Peru, however, the Democrats demanded an extra set of environmental requirements; specifically, they asked that the FTA require Lima to better manage the country’s forest resources, especially its stocks of broad-leaf mahogany, one of the world’s most commercially valuable timber species. Prior to the May deal, environmental groups had expressed concern that an agreement to lower trade barriers between the two countries might encourage the illegal export of mahogany from Peru to the US.
The so-called ‘forest annex’ of the Peru FTA requires the Peruvian government to enact a number of specific provisions to combat both illegal logging and illegal wildlife trade. Under one of the mandatory measures, Peru must track the harvesting, transport, processing and export of tree species that are protected under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). Moreover, the Andean nation is obliged to fully investigate violations of the agreement’s law and regulations.
Calling attention to a contentious issue that has caught the public eye in the past, the Democrats demanded that Peru step up its efforts to combat illegal trade in mahogany. The forest annex gives Lima 18 months to comply with its current obligations under the endangered species convention; to craft, adopt and fund a strategic plan of action on broad-leaf mahogany; and to set an annual export quota for the species. Peru is the world’s largest exporter of the precious wood; the US is the largest importer.
More than demanding reforms, however, the revised trade deal sets forth explicit terms of enforcement, including a groundbreaking provision that makes all of the environmental requirements, including those in the forest annex, subject to the dispute settlement terms that govern the rest of the agreement. This requirement marks a true step forward in environmental enforcement, as past agreements have made the dispute settlement process available only when a signatory country has failed to enforce its domestic environmental laws. Other enforcement provisions allow the US to detain questionable shipments at the border and permit the Peruvian government to take action against traders who fail to comply with the agreement’s provisions.
The true impact of the new provisions is in many ways limited by Peru’s capacity to implement them, however. The new terms will likely require Lima to make significant changes to its domestic legislation, including its penal code. To facilitate this process, the US has promised to help fund Lima’s efforts to strengthen its forest governance capacity, as it has done under previous Environmental Cooperation Agreements. In the past, similar promises have not always been backed up with adequate funding; thus, both the actual level of support and the ultimate effectiveness of the aid delivered remain to be seen.
When the trade compromise was reached in May, many observers concluded that the passage of the Peru FTA, as well as the trade deal with Panama, was virtually guaranteed. Although some Democrats expressed reservations about the deal over the summer, Senate Finance Committee Chair Max Baucus, Democrat of Montana, recently indicated that the pact has wide support in Congress and that lawmakers should put the matter to vote this fall, perhaps as early as October. “I expect it to pass without too much difficulty,” Baucus told reporters in September. “We’re going to move expeditiously.”
For its part, Peru has indicated its willingness to follow through on the trade deal in its amended form. On 28 June, the Peruvian legislature approved the new FTA text with 70 votes in favour, 38 against and one abstention.
From a US perspective, the very specific requirements of the new trade compromise mark a bold step forward by the legislative branch in the negotiation of international trade deals. Some observers have questioned whether the intimate intervention of Congress into the specifics of pending US trade deals will effectively nullify the President’s fast-track trade promotion authority, which is meant to minimise, if not outright eliminate, non-Executive meddling in trade negotiations. That question is especially relevant given that the recent compromise is meant to serve as a template for future US bilateral trade deals.
Paige McClanahan is a graduate student at Duke University.