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United States Requests Consultations Regarding Peru's Environmental Obligations Under Bilateral Trade Agreement

Published online by Cambridge University Press:  09 April 2019

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On January 4, 2019, the United States requested consultations with Peru with respect to its forest governance obligations under the 2007 United States – Peru Trade Promotion Agreement (PTPA). The PTPA has an environmental chapter with robust terms that were included largely at the insistence of members of Congress, reflecting concerns that a free trade agreement with Peru could increase the country's export of illegally logged wood to the United States. The request for consultations focused on Peru's decision to relocate its Agency for the Supervision of Forest Resources and Wildlife (OSINFOR) to within Peru's Ministry of Environment—a change that, in the view of the United States, “appears to conflict” with a PTPA obligation that “‘OSINFOR shall be an independent and separate agency.’”

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Type
Settlement of Disputes
Information
American Journal of International Law , Volume 113 , Issue 2 , April 2019 , pp. 400 - 404
Copyright
Copyright © 2019 by The American Society of International Law 

On January 4, 2019, the United States requested consultations with Peru with respect to its forest governance obligations under the 2007 United States – Peru Trade Promotion Agreement (PTPA).Footnote 1 The PTPA has an environmental chapter with robust terms that were included largely at the insistence of members of Congress, reflecting concerns that a free trade agreement with Peru could increase the country's export of illegally logged wood to the United States.Footnote 2 The request for consultations focused on Peru's decision to relocate its Agency for the Supervision of Forest Resources and Wildlife (OSINFOR) to within Peru's Ministry of Environment—a change that, in the view of the United States, “appears to conflict” with a PTPA obligation that “‘OSINFOR shall be an independent and separate agency.’”Footnote 3

The PTPA was initially signed in April 2006. In its original form, however, it was unable to obtain the requisite approval from Congress because of concerns that, among other things, its labor and environmental provisions were inadequate.Footnote 4 On May 10, 2007, members of Congress reached an understanding with the George W. Bush administration with respect to the content of the PTPA and future trade agreements.Footnote 5 Known as the May 10 Agreement, this understanding specified with respect to environmental protection that certain multilateral environmental agreements, including the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), would be incorporated into these trade agreements and that “all of our [free trade agreement] environmental obligations will be enforced on the same basis as the commercial provisions of our agreements—same remedies, procedures, and sanctions.”Footnote 6 With respect to the PTPA in particular, the May 10 Agreement provided that “we have agreed to work with the Government of Peru on comprehensive steps to address illegal logging, including of endangered mahogany, and to restrict imports of products that are harvested and traded in violation of CITES.”Footnote 7 The United States then renegotiated the PTPA with Peru so that it incorporated the terms of the May 10 Agreement. The Peru legislature approved this revised PTPA in June 2007, and Congress approved it in December 2007.Footnote 8

The PTPA's Environment Chapter and the accompanying “Annex on Forest Sector Governance” (Forest Annex) detail these “groundbreaking” obligations.Footnote 9 The Environment Chapter commits Peru and the United States to honoring their responsibilities under CITES and certain other multilateral environmental agreements and enforcing their environmental laws implementing these agreements.Footnote 10 The Forest Annex is specifically aimed at reducing trade associated with illegal logging.Footnote 11 Notably, it allows the United States to investigate Peru's logging practices through a verification system and to block shipments harvested in violation of CITES.Footnote 12

CITES includes protections for species that are not yet approaching extinction but “may become so unless trade in specimens of such species is subject to strict regulation.”Footnote 13 To do so, CITES requires export verification permits for shipments of species or specimens included in its three appendices.Footnote 14 These permits must specify among other things that “the specimen was not obtained in contravention of the laws of that State for the protection of fauna and flora.”Footnote 15 Appendix II of CITES specifically protects big leaf mahogany, a type of Peruvian timber mainly imported by the United States.Footnote 16

The PTPA entered into force in February 2009.Footnote 17 In the lead-up to its entry into force and in the months that followed, Peru began taking measures to comply with its responsibilities, such as increasing penalties for environmental crimes, dispatching prosecutors to enforce forest sector crimes, and creating a Ministry of Environment to oversee environmental duties.Footnote 18 Peru also adopted legislation that increased the budget, functions, and independence of OSINFOR,Footnote 19 a government agency tasked with supervising the “verification of all timber concessions and permits.”Footnote 20 Nonetheless, concerns about illegal logging and Peru's compliance persisted over time and continued to be raised by the Office of the U.S. Trade Representative (USTR).Footnote 21 In 2016, for example, then-U.S. Trade Representative Michael Froman invoked the timber verification provision, asking Peru to ensure that a particular shipment from a Peruvian exporter, Inversiones La Oroza SRL (Oroza), complied with Peru's laws and other regulations.Footnote 22 The government of Peru proceeded to conduct the “first-ever verification,”Footnote 23 which found that “significant portions” of the wood were illegally harvested.Footnote 24 In the aftermath of this action, protesters in Peru burned a coffin displaying the name of OSINFOR’s leader, Rolando Navarro, who was subsequently fired and forced to seek asylum in the United States.Footnote 25 In 2017, USTR conducted the first enforcement action under the Forest Annex by blocking any future timber shipments from Oroza for up to a period of three years.Footnote 26

On January 4, 2019, the United States made its first-ever request for consultations under the environmental chapter of the PTPA.Footnote 27 In a press release, USTR explained:

Through these environment consultations, the United States and Peru will discuss and attempt to resolve concerns regarding a recent Peruvian action to move the Agency for the Supervision of Forest Resources and Wildlife (OSINFOR) from its position as a separate and independent agency to a subordinate position within Peru's Ministry of Environment … .Footnote 28

USTR considers that Peru's relocation of the agency conflicts with a provision in the Forest Annex that provides: “OSINFOR shall be an independent and separate agency and its mandate shall include supervision of verification of all timber concessions and permits.”Footnote 29 U.S. Trade Representative Robert Lighthizer explained:

By taking this unprecedented step, the Trump Administration is making clear that it takes monitoring and enforcement of U.S. trade agreements seriously, including obligations to strengthen forest sector governance … . Since its creation in 2008, OSINFOR has played a critical role in Peru detecting and combatting illegal logging, and we are gravely concerned that its independence is threatened. I urge Peru to abide by its obligations and restore OSINFOR’s separateness and independence, as called for in the PTPA.Footnote 30

On January 5, 2019, Peru's Foreign Trade and Tourism Minister, Edgar Vasquez, told Bloomberg Law that, despite the change, “[OSINFOR] continues as an independent and separate agency, adhering to the commitments accepted in the PTPA.”Footnote 31

For any matters arising under the Environment Chapter, including the Forest Annex, the PTPA allows parties to request consultations through the mechanism set forth in that chapter.Footnote 32 The request needs to contain “specific and sufficient” information that would enable the receiving party to respond.Footnote 33 Upon its delivery, the parties must “make every attempt to arrive at a “mutually satisfactory resolution.”Footnote 34 Parties that are unsuccessful at this stage may ask the Environmental Affairs Council, a bilateral committee of senior officials with environmental duties,Footnote 35 to convene in an effort to resolve the issue.Footnote 36 If the matter remains unsettled within sixty days of the initial request for consultations, the parties may then utilize the procedures contained within the PTPA's Dispute Settlement Chapter.Footnote 37 The Dispute Settlement Chapter allows the parties to proceed through consultations, a meeting of the U.S.-Peru Free Trade Commission, and lastly arbitration.Footnote 38

The Trump administration's decision to pursue consultations with Peru comes not long after the signing of the renegotiated North American Free Trade Agreement between the United States, Mexico, and Canada, now known in the United States as the United States-Mexico-Canada Agreement (USMCA). This agreement will be submitted in due course to Congress for approval and implementation.Footnote 39 New reports have suggested that, in confronting Peru, the Trump administration is also sending a broader signal that it is serious about enforcing the environmental provisions in trade agreements—a signal that in turn might aid in smoothing the approval of the USMCA in Congress.Footnote 40

References

1 Office of the U.S. Trade Rep. Press Release, USTR Requests First-Ever Environment Consultations Under the U.S.-Peru Trade Promotion Agreement (PTPA) (Jan. 4, 2019), at https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/january/ustr-requests-first-ever [https://perma.cc/EKJ9-Y5WJ] [hereinafter Environment Consultations Request].

2 M. Angeles Villarreal, Cong. Research Serv., RL34108, U.S.-Peru Economic Relations and the U.S.-Peru Trade Promotion Agreement 17 (2007).

3 Environment Consultations Request, supra note 1 (quoting from the PTPA).

4 Id. In terms of process, the PTPA was negotiated pursuant to the Bipartisan Trade Promotion Authority Act of 2002, 116 Stat. 933, which ensured that it would receive an up-or-down vote from Congress once it and its implementing legislation were submitted for approval. See Villarreal, supra note 2, at 1–2.

5 Office of the U.S. Trade Representative, Bipartisan Agreement on Trade Policy (May 2007), available at https://ustr.gov/sites/default/files/uploads/factsheets/2007/asset_upload_file127_11319.pdf [hereinafter May 10 Agreement]; see also H. Rep. 110-421 (Nov. 5, 2007) (describing the “historic” May 10 Agreement).

6 May 10 Agreement, supra note 5, at 2–3.

7 Id. at 3. For a broader discussion of the ways in which trade agreements incorporate regulatory requirements, see generally Mertenskotter, Paul & Stewart, Richard B., Remote Control: Treaty Requirements for Regulatory Procedures, 104 Cornell L. Rev. 165 (2018)Google Scholar. See also id. at 216–18 (discussing the PTPA's environmental provisions).

8 Villarreal, supra note 2, at 2; United States-Peru Trade Promotion Agreement Implementation Act, Pub. L. No. 110-138, 121 Stat. 1455 (2007).

9 Office of the U.S. Trade Rep., Peru Trade Promotion Agreement, at https://ustr.gov/trade-agreements/free-trade-agreements/peru-tpa [https://perma.cc/D2HC-6WJC] [hereinafter USTR Overview of PTPA].

10 Trade Promotion Agreement, Peru-U.S., Arts. 18.2, 18.3, Annex 18.2 [hereinafter PTPA], available at https://ustr.gov/trade-agreements/free-trade-agreements/peru-tpa/final-text. Both the United States and Peru are parties to CITES. List of Contracting Parties, Convention on International Trade in Endangered Species of Wild Fauna and Flora, at https://cites.org/eng/disc/parties/chronolo.php.

11 PTPA, supra note 10, at Annex 18.3.4.

12 Id. at Annex 18.3.4, §§ 6–7, 13(a).

13 Convention on International Trade in Endangered Species of Wild Fauna and Flora, Art. II, Mar. 3, 1973, 27 UST 1087, 993 UNTS 243.

14 Id. Arts. III, § 2; IV, § 2; V, § 2.

15 Id. Arts. III, § 2(b); IV, § 2(b); V, § 2(a).

16 Pervaze A. Sheikh, Cong. Research Serv., RL 33932, Illegal Logging Background and Issues 8 (2008).

17 USTR Overview of PTPA, supra note 9.

18 Office of the U.S. Trade Rep. Press Release, Statement by Ambassador Ron Kirk on the Annex on Forest Sector Governance of the United States-Peru Trade Promotion Agreement (PTPA) (July 30, 2010), at https://ustr.gov/about-us/policy-offices/press-office/press-releases/2010/july/statement-ambassador-ron-kirk-annex-forest-sector-gov [https://perma.cc/6JCE-7QSC] [hereinafter Ron Kirk on the Forest Annex].

19 See Finer, Matt, Jenkins, Clinton N., Blue Sky, Melissa A. & Pine, Justin, Logging Concessions Enable Illegal Logging Crisis in Peruvian Amazon, 4 Sci. Rep. 1, 2 (2014)Google ScholarPubMed (noting that “[i]n 2008, OSINFOR did gain greater independence when it was placed within the Presidency of the Council of Ministers”); see also Julia M. Urrunaga, Andrea Johnson, Inés Dhaynee Orbegozo & Fiona Mulligan, The Laundering Machine: How Fraud and Corruption in Peru's Concession System Are Destroying the Future of Its Forests, Envtl. Investigation Agency 21 (2012) (noting that OSINFOR was previously “financed by revenues from timber harvesting, a structure that created perverse incentives and institutional pressures for an entity charged with monitoring logging activities”).

20 PTPA, supra note 10, at Annex 18.3.4, § 3(h)(iii).

21 E.g., Ron Kirk on the Forest Annex, supra note 18.

22 Letter from Michael B.G. Froman, U.S. Trade Rep., to Magali Silva Velarde-Alvarez, Minister of Trade and Tourism, Republic of Peru (Feb. 26, 2016), available at https://ustr.gov/sites/default/files/Request-Letter-to-Peru-02262016.pdf [https://perma.cc/9YMC-2U9E].

23 Office of the U.S. Trade Rep. Press Release, U.S. Timber Committee Reacts to Peru's Timber Verification (Aug. 17, 2016), at https://ustr.gov/about-us/policy-offices/press-office/press-releases/2016/august/us-timber-committee-reacts-peru-timber-verification [https://perma.cc/HBA4-NMDL].

24 Interagency Comm. on Trade in Timber Products from Peru Press Release, Statement Regarding July 2016 Timber Verification Report from Peru, at 3 (Aug. 17, 2016), available at https://ustr.gov/sites/default/files/Timber-Committee-Report-8172016.pdf [https://perma.cc/SQW2-K5P5].

25 Frank Bajak, AP Investigation Shows Peru Backsliding on Illegal Logging, Assoc. Press (Apr. 19, 2017), at https://apnews.com/8f4d73bdc605446c9c64bc2aedf7aa31.

26 Office of the U.S. Trade Rep. Press Release, USTR Announces Unprecedented Action to Block Illegal Timber Imports from Peru (Oct. 19, 2017), at https://ustr.gov/about-us/policy-offices/press-office/press-releases/2017/october/ustr-announces-unprecedented-action [https://perma.cc/U3Z6-UQPX]. The United States has blocked timber shipments from Oroza “for three years or until the [Interagency Committee on Trade in Timber Products from Peru] determines that Oroza has complied with all applicable laws, regulations, and other measures of Peru governing the harvest of and trade in timber products, whichever is shorter.” Id.

27 Environment Consultations Request, supra note 1.

28 Id.

29 PTPA, supra note 10, at Annex 18.3.4, § 3(h)(iii); see also Environment Consultations Request, supra note 1 (citing this provision).

30 Environment Consultations Request, supra note 1; see also Letter from House Comm. on Ways and Means to Robert Lighthizer, U.S. Trade Rep. (Dec. 19, 2018), available at https://democrats-waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/12.19.18%20USTR%20Peru%20letter.pdf [https://perma.cc/V4KF-Q7MG] (objecting to Peru's decision to move OSINFOR into another government ministry and describing the decision as “a flagrant attack on the heart of the Forest[] Annex that cannot go unchallenged”).

31 Lucien O. Chauvin, Forestry Agency to Maintain Independence, Peru Tells U.S., Bloomberg Law (Jan. 7, 2019), at https://www.bloomberglaw.com/document/X7L0SB0G000000?bna_news_filter=international-trade&jcsearch=BNA%25200000016829c9d327a7fcfdfd8ab10000#jcite.

32 PTPA, supra note 10, Art. 18.12(1).

33 Id. Art. 18.12(2).

34 Id. Art. 18.12(3).

35 Id. Art. 18.12(4) n.8; see also id. Art. 18.6.

36 Id. Art. 18.12(4).

37 Id. Art. 18.12(6)–(7).

38 Id. Art. 21.4(6).

39 For discussion of this agreement and the process it will undergo in pursuit of congressional approval, see Jean Galbraith, Contemporary Practice of the United States, 113 AJIL 131, 150 (2019).

40 Glenn Thrush & Alan Rappeport, U.S. Accuses Peru of Violating Agreement to Protect Rain Forest, N.Y. Times (Jan. 4, 2019), at https://www.nytimes.com/2019/01/04/us/politics/peru-rain-forest-protection-violations-trump-administration.html.