LEGISLATION: NAFTA Reveals Progress, Troubles After One Year

The North American Free Trade Agreement (NAFTA) celebrated its first birthday on January 1, 1995. Despite predictions of wholesale unemployment and environmental disaster, the economic partnership between the United States, Canada and Mexico seems to have produced confident investments and expanded business transactions among participating countries.

Reduced tariffs have boosted trade. U.S. exports to Mexico rose 16 percent from January to June 1994 while Mexican exports to the United States jumped 21 percent. Meanwhile, U.S. firms are reportedly doing more than Mexican businesses to protect and expand jobs for their workers.

Unfortunately, not all of NAFTA is running smoothly. For example, Mexico's political instability worries some U.S. companies. And new customs regulations are daunting even for seasoned exporters. Accusations of "dumping" (selling goods at artificially low prices) fly back and forth between the three partner countries and even the new Congress won't make it easier to pass more free-trade agreements.

Whatever effect NAFTA may eventually have on the environment, the first year's report card makes one thing clear: U.S. environmental firms will likely be cleaning up.

To win approval of NAFTA, the Clinton Administration was forced to make a side agreement on the environment. The deal will force plants and shops in Mexico, particularly ones near the U.S. border, to clean up their operations. The U.S. and Mexican governments have promised up to $3 billion in loan guarantees for particular projects and the first wave of these loans will be made later this year. Getting a jump on things, some localities and firms in Mexico are already underway in designing cleanup projects - with plenty of help from technically sophisticated U.S. environmental consultants.

Shortly after NAFTA was ratified, the U.S. Environmental Protection Agency (EPA) sent one of its employees to Mexico City to serve as an environmental attache who could help make NAFTA's environmental goals a reality. Last August, however, the official left EPA and opened a Mexico City office for a San Diego firm that provides environmental services.

To show its commitment, Woodward-Clyde Consultants has opened a Mexico City office to conduct air quality evaluations. This work, as well as other Woodward-Clyde services, may qualify for financial help from the North American Development Bank, which was created to fund NAFTA projects.

The development bank will work with the Border Environmental Cooperation Commission, which will decide the fate of all environmental projects, particularly improvements to water quality and sanitation. Congress initially budgeted $56 million for the development bank and Mexico has agreed to contribute the same amount. Additional funds from both governments are likely, said a U.S. Treasury official.

CH2M Hill, which has been doing business in Mexico for many years, has joined forces with Mexico's largest environmental services firm, Grupo Profesional Planeacion y Proyectos S.A., to build sewage treatment plants. The company also has set up a Mexico City office. "We decided that Mexico was going to be an attractive market in the long run," Kelly Johnson, who helps develop new business for the company, told The Wall Street Journal. Johnson credited NAFTA for creating an upturn in the local market for industrial pollution control equipment, municipal sewage treatment and solid waste management.

The environmental concerns generated by the pre-1994 NAFTA debate inspired a number of non-profit groups to increase their efforts to change or eliminate any activity that may damage the environment on both sides of the U.S.-Mexican border. For example, newly vigilant grass-roots environmental organizations in Mexico are protesting to Mexican officials proposed U.S. disposal facilities for radioactive wastes along the border. In turn, the Mexican government has expressed concerns to U.S. officials about these waste sites.

The pursuit of business south of the border is sizable but not yet massive. Many of the institutions and procedures for environmental improvement are not yet established. For example, the Development Bank's board of the directors met for the first time in June and did not do much more than elect a chairperson.

Some environmental consulting firms are wary of sudden ventures into Mexico where, as these companies see it, social and political instability is a fact of life.