Environmental Regulations and Corporate Strategy: A NAFTA Perspective

By Alan Rugman; John Kirton et al. | Go to book overview

4
Corporate Strategy and Environmental Regulation: Baptist--Bootlegger Coalitions

This chapter extends the analysis of environmental regulatory protectionism from corporate strategy to the operation of the 'baptist-bootlegger' coalitions, and how such coalitions offer an initial indication that the government has enacted a trade- restricting environmental regulation for the protection of industry interests rather than environmental interests. Here a list of criteria are presented that illustrate a means by which to distinguish between the more benign situation of when an environmental regulation affects the relative costs of producers (as all such regulations do) and those environmental regulations that develop into cross-border issues. The institutional challenge is thus to use and develop the NAFTA institutions in such a way as to enable governments to distinguish between legitimate and inappropriate trade-restricting environmental regulations.

Here ten cases are explored, starting as far back as 1982 and going to the present. This provides a historical perspective of the problem of trade-environment disputes and highlights the new institutional opportunities of the NAFTA era. The cases of UHT milk, Ontario beer cans, the fuel additive MMT, and the disposal of hazardous PCBs are revisited to highlight the dynamics of 'baptist-bootlegger' coalition formation and operation, and supplemented by four additional fisheries cases between Canada and the United States, softwood lumber, and California newspaper content requirements.

These cases reveal that the degree to which the affected parties actually use the institutional structure of the international trade regime as a means by which to offset negative impacts varies widely. Some of the early fisheries cases demonstrate the willingness of parties to lobby their governments to establish panels under the GATT and eventually the FTA after it came into force. Here firms and their governments rely on a legal strategy--using the specific provisions of trade agreements which prohibit violations of national treatment and the imposition of quantitative restrictions, save for certain exceptions. The interpretation of these seemingly fine legal points help to define how effectively the regime operates in practice. The softwood lumber case illustrates the more rare case of 'environmental subsidies' where NAFTA's Chapter 19 panel, which deals with issues relating to subsidies and countervailing duties only and not environmental questions, was used. In this case, a number of other political strategies were used in tandem on both sides of the border.

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