INSTITUTIONAL CAPABILITIES FOR RESOLVING BILATERAL RESOURCE USE CONFLICTS: A BIOREGIONALIST CRITIQUE

Presented at the Fifth CIRL Conference on Natural Resources Law, University of Ottawa. Growing Demands on a Shrinking Heritage: Managing Resource Use Conflicts, May 9‑11, 1991

David McRobert** Waste Reduction Office, Ministry of the Environment, 101 Bloor St. W., Suite 20, Toronto, Ontario 

Paul Muldoon, Director of Programs, Pollution Probe, 12 Madison Avenue, Toronto, Ontario

**  The views expressed in this paper are those of the author and not those of the Waste Reduction Office of the Ministry of the Environment.

TABLE OF CONTENTS

1.  Introduction

1.1  An Outline of the Paper

1.2  The Policy Context: The Inherent Conflict Between Liberalization of Trade and Bioregionalism

2.  The Evolving Nature of Transboundary Environmental Problems and Resource Use Conflicts: Two Case Studies

2.1  James Bay II:  The Failure of an Incrementalist Approach to Environmental Assessment and Energy Planning

2.2  Refillable Quotas: Environmental Protection as a Barrier to International Beverage Trade

3.   Are Current Bilateral Transboundary Dispute Resolution Mechanisms Adequate?

3.1  The Ad Hoc Approach: Overloading Crisis Management

3.2  The International Joint Commission: Still in Search of a Mandate after 80 years

3.3  Dispute Resolution Provisions in the FTA: An Inadequate Response

4.  Toward a New Policy and Institutional Framework:  Suggestions for Reform

4.1 Incorporating Environmental Mandates into Existing Institutions

4.2  A Call for a New Appellate Tribunal

5.  Conclusions

Transboundary environmental relations are going to be one of, if not the, major bilateral concern(s) in Canada-U.S. relations during the remaining decades of this century.  It behooves citizens of both nations to see that they do not get out of control. [1]

1. Introduction

      Conflicts between Canada and the United States over resources and the environmental and social consequences of certain resource dispositions [2] have a long history.  In fact, it is probably fair to say that these disputes have always had some bearing on, and perhaps even have defined, the relationship between the two countries. 

      By the late 1960s, certain resource use conflicts had gained a fairly high profile in Canada, but did not attain as high a profile in the United States.  The rise in profile can be attributed in part to concerns about Canadian sovereignty posed by certain well-publicized incidents. [3]   Further, resource use and allocation issues gained greater priority on the Canadian public policy agenda due to a revival in nationalism and political pressure on provincial and federal governments to assert more control over development of certain valuable resources like minerals, oil and gas reserves, and forestry products which were seen to be controlled by foreign interests.[4]

      In the 1970s, bilateral resource use and allocation conflicts between the U.S. and Canada have maintained a fairly high profile in Canada, with growing importance south of the border as well.  Indeed, controversies over access to resources like fisheries and  water and debates over the marketing of certain resources like farm products and semi-manufactured forestry goods became commonplace.  As the 1980s drew to a close, it would not be inaccurate to suggest that a new epoch in transboundary resource conflicts had arisen in the wake of these passionate debates. [5]

      While no one single factor can explain the emergence of this new epoch of transboundary relations, there are several trends which are readily identifiable.  Traditional problems, first identified and described much earlier in this century, such as transboundary air and water pollution in the Great Lakes Region, remain largely unaddressed.  Second, the continuing pressure by the U.S. to purchase "cheap" Canadian energy and water supplies, and of Canadian government's eagerness to consider marketing fresh water in the U.S., [6] has spawned outrage and prompted strong opposition from large segments of the public in both nations, and prompted some critics to voice serious concerns about a loss of sovereignty over water exports. [7]   Arguably, perceptions about the intense scarcity of certain resources in the two countries (such as electricity) and the relative abundance of other resources (such as freshwater in Canada) help explain this pattern of relations.  However, new categories of issues that are more pervasive, complex and indeed, interconnected are emerging in this new epoch.  No doubt, the conclusion of the Canada-U.S. Free Trade Agreement (FTA) on January 2, 1988 and its eventual implementation by both nations in 1989, symbolized the entrance to the new epoch in the bilateral relationship. [8]

      Numerous books, articles, papers and other comments have been written on the success of the U.S. and Canadian governments and their respective national and bilateral institutions in addressing and resolving certain resource use conflicts. [9]

      The purpose of this paper is to examine the adequacy of current institutional arrangements to prevent, address or resolve resource use conflicts in this new epoch of transboundary resource issues.  Having reviewed the adequacy of the institutional framework, the paper will make some proposals with respect to how to enhance the institutional framework to cope with the new bilateral challenges.

1.1  An Outline of the Paper

      The paper is divided into three main sections.  Following this introduction, the first section of the paper reviews two disputes which are now complicating U.S.-Canadian binational relations and, are argued to be typical of this new epoch of transboundary resource use conflicts.  These issues are: 1) the conflict between proponents and opponents of the James Bay II hydro-electric project; and 2) the environmental and trade implications of refillable quotas for beverages.  

      The second section reviews three approaches to bilateral dispute resolution and analyzes their adequacy.  The third section then provides some suggestions for institutional reform, and proposes the establishment of a new bilateral appellate tribunal.  Finally, the paper summarizes the discussion and offer some concluding comments related to a proposed tri-lateral North American Free Trade Agreement (NAFTA) between Canada, the U.S. and Mexico.

1.2 The Policy Context: The Inherent Conflict Between Trade Liberalization and Bioregionalism

            Before turning to the case studies, it is important to set out two important assumptions in this paper: a) that there is an inherent policy conflict between the long-term goal of environmental protection and extensive trade liberalization; and b) that this policy conflict is the underlying reason why existing institutional frameworks are becoming increasingly strained, if not frustrated, to address transboundary environmental and resource use conflicts adequately.  Indeed, it is argued here that one of the reasons why transboundary environmental conflicts have increased in the past few decades is that trade has expanded between nations, and that this trade has not been regulated so as to prevent certain environmental impacts and promote the goal of resource conservation.  While free trade is widely accepted as doctrine by most economists, the principles on which it is premised, such as comparative advantage, are flawed and do not take into account ecological realities that there are finite resource and environmental limits of the planet. [10]

      With this perspective in mind, it should not be surprising that increasing trade liberalization, and the implementation of the FTA, have not been enthusiastically supported by most environmentalists. [11]  Environmentalists who oppose the FTA argue that the trend toward liberalization of trade has demonstrated the divergent nature of two policy options. 

      The first option, free trade or trade liberalization, is premised on the prospect of increased trade in certain resources and commodities between nations.  Thus, the FTA was referred to by the federal government as "a commercial accord" between two large trading partners rather than "an environmental agreement" in public debates in 1988.  On this basis, the federal government asserted that "[t]he environment was not, therefore, a subject for negotiations nor are environmental matters included in the text of the agreement." [12]

      Critics contend that this approach to economic and social development is destined to create policy conflicts. On one hand, there are those seeking to export resources and commodities to foreign markets by the removal of most, if not all, trade barriers.  On the other hand, there are those who are opposed to trade in certain resources like fresh water (because of its integral role in local or regional ecosystems), energy (because of the need to promote conservation, reduce pollution associated with energy consumption, and secure supplies for future generations) or wildlife (because of the need to protect wildlife populations).  Finally, there are other critics who are opposed to most kinds of trade in resources

      Other concerns about the environmental implications of free trade are highlighted by the following criticisms of the FTA.  Criticisms of the FTA are that it will:

* erode the already weak capacities of existing institutions to resolve certain types of disputes;

* further reinforce certain structural relationships between the U.S. and Canada, and will encourage more exports of primary, unprocessed resources like minerals, trees, and fish from Canada to the U.S.;

and,

* result in a tendency for harmonization provisions intended to promote trade to reduce standards to a new, and lower, common denominator. [13]

      The second approach, one that is sometimes referred to as bioregionalism, is premised on the view that environmental problems almost always arise because of improper local environmental practices or consumptive lifestyles, even though the implications of those practices may be complex, and even global in nature.  This recognition has prompted many environmentalists to adopt the slogan "think globally, act locally" and promotes the view that problems which originate in a local environment must be solved locally. [14] 

      In contrast to the free trade approach to economic development, the bioregional approach stresses local production for local consumption. [15]    It also does not separate economic, ewnvironmental and political matters.  Indeed, bioregionalism represents a convergence in thinking about ecology, politics, economics and social justice. [16]   It is based on a notion that political and ecological borders are not the same.  Species migrate over political borders, and contaminants do not respect national, regional or local boundaries in tracing their paths.  More often local or regional boundaries such as mountain ranges or rivers define ecologically-relevant borders; thus, for the purposes of governance geographical features such as valleys and watersheds should be important cornerstones of good environmental and economic development planning.

       Bioregionalists argue that there are numerous hidden costs associated with expanded international trade in many commodities, including excess consumption of energy resources for transportation of goods, and inappropriate patterns of economic development and land use in less developed countries (LDCs). [17]  While certain kinds of trade can spur research and development and can aid the spread of environmentally-sound technology, historical patterns tend to suggest that the environmental benefits of trade in technology have been far outweighed by the negative costs associated with this activity.  Compelling arguments have been made that extending first world development patterns to the LDCs have tended to result in a cycle of debt-accumulation and environmentally-destructive land use activities in the LDCs. [18]

      A more fundamental problem with international trade is posed by Daly and Cobb in the following passage:

Given the acceptance of the goal of sustainable development, there still remains the question of the level of community at which to seek this goal.  International trade allows one country to draw on the ecological carrying capacity of another and thus may be unsustainable in isolation, even though sustainable as part of a larger trading bloc.  The trade issue raises ... the question of the complementarity versus substitutibility of natural and humanly created capital. [19]

Daly and Cobb go on to make a compelling argument that sustainable development is a process best carried out at the level of a small community.  While they recognize the need for the nation-state as a political entity which supports the coordination of policies between communities, and something that has cultural, historical, and social significance (a position which the authors also support), they show that much more emphasis must be placed on environmental protection and the conservation of resources in establishing international and national economic development strategies.

      From this perspective, freer trade between regions and continents of the world can be viewed in environmentally negative terms.  While free trade is premised on a "bigger and better" mentality, bioregionalism stress the limits of growth based upon an ecological ethic.  While free trade pushes towards expansion of trade in resources, with little focus on the environmental consequences of such action,  bioregionalism supports self-sustaining economic systems which do not depend on massive infusions of imported energy and resources.

      Just how this policy conflict between free trade and bioregionalism is played out in practice is reflected in the two case studies described below.  The analysis also shows that because of the inability of existing dispute resolution mechanisms and institutions to handle these policy conflicts, it may be necessary to develop new institutions or reform existing mechanisms.

2.  The Evolving Nature of Transboundary Environmental Problems and International Resource Use Conflicts: Two Case Studies

      In this section, two case studies of international resource use conflicts, in the context of the bilateral U.S.-Canada relationship, are outlined.  Both case studies provide important insights about the capacity of the current institutional frameworks and dispute resolution mechanisms to resolve international resource use conflicts and environmental problems.

      2.1 James Bay II:  The Failure of an Incrementalist

           Approach to Environmental Assessment

      The James Bay II hydroelectric development project is perhaps one of the most controversial and bitter disputes concerning resource use and conflict in Canada today.  It is not an bilateral dispute per se since the conflict is primarily between those who support the project (such as the Quebec government, Hydro Quebec, labour unions in the province, and the provincial business community) and those who oppose the project (such as the Cree Indians of Northern Quebec, numerous Canadian and American environmental non-government organizations (ENGOs), and human rights advocates).  The binational aspect to the dispute is that the undertaking is justified on the basis of lucrative U.S. export markets for Quebec's electricity.  In a way, while U.S. demand for electricity is the driving force behind the project, sharp reductions in this demand could also provide the greatest impetus to scale down or cancel the project.

      James Bay II is the second phase of a massive hydroelectric project in northern Quebec which was begun in early 1970s. [20]   On the scale of mega-projects in Canada, James Bay II is in a class of its own.  When complete, the project will flood at least 7,000 square kilometres of land.  At least 16 dams, 10 reservoirs and 70 dikes will be constructed.  Up to eight rivers could be diverted.  Thousands of trees will be cut down to prepare the areas before flooding.   Recent estimates place the cost of the project in the range of tens of billions of dollars.  The project will increase the hydroelectric generation capacity of the James Bay dams to over 25,000 megawatts from its current capacity of 10,000 megawatts.

      Most of the power that is generated at James Bay II is already slated for distribution to U.S. markets in the state of Vermont and New York.  In the past two years, Hydro Quebec has signed export contracts worth more than $25 billion with New York State. [21]  The deal, which is for the purchase of 1000 megawatts of electricity year-round starting in 1995, renews a commitment for an additional 800 megawatts for six months of each year.  A tentative deal between Hydro Quebec and Vermont worth more than $8 billion has also been negotiated.

      While the physical size and costs of the undertaking, so too its environmental and social consequences.  For example, according to some scientists, the project will:

* undermine the subsistence fishing, hunting and trapping activities that are fundamental to the lifestyle of many of the native people who live in the area.

* destroy natural habitats of terrestrial species such as moose and caribou and migratory waterfowl such as geese through massive flooding of the area.  Fisheries will also be severely altered by the project, as will be beluga whales that live the local bays and estuaries. 

* release mercury pollution into rivers and reservoirs, further exacerbating current mercury problems caused by James Bay I. [22]

* ruin or despoil wilderness areas and forests for roads and transmission lines.  The Cree Indians living in the area estimate that over the past twenty years, wilderness spaces have been destroyed at a rate nearly ten times that in British Columbia and nearly twice that of Ontario.

* produce numerous global impacts. Some scientists have provided compelling evidence that vast quantities of methane gas, one the most powerful greenhouse gases contributing to global warming, will be released as vegetation trapped in the flooded reservoirs decays.

      In view of these potential impacts, it would seem imperative to conduct an environmental review of the James Bay II project before construction is begun.  Numerous aboriginal and environmental groups in Canada and the U.S. have asked that a single hearing be undertaken because this would allow for aboriginal groups and third party intervenors to participate in a review of the project and its infrastructure in its entirety before any licences for construction are granted.  They have also demanded that all construction on James Bay II be stopped until such a single review of the project, including infrastructure such as roads and airports to service the project, deems the project to be environmentally sound.

      Three issues now cloud the debate over the project.  These are:

      A. Demand for a Single Hearing:  These demands for a single hearing have not met with much enthusiasm from the Quebec government. [23]  The Quebec Minister of Energy, Lise Bacon, contends that the environmental assessment of the project should be divided into two parts:  one for the project's infrastructure such as access roads, an airport and work camps, and another for the project's dams, dikes and reservoirs.  It has been estimated that at least $755 million will be spent on building 575 kilometres of roads and three airports associated with the Great Whale project, the first phase of James Bay II.  In November of 1990, the Federal Environmental Assessment Review Office (FEARO) accepted this two stage environmental assessement process.

      Federal environmental minister, Jean Charest, announced in July 1991 that FEARO would hold hearings on James Bay II starting in the fall of 1991.  However, it is likely that construction of the project's infrastructure will be commenced before the report of a panel under the federal Environmental Assessment and Review Process (EARP) is presented to the federal government. [24]

      B. Federal-Provincial Division of Powers: Quebec government continues to reject the proposition that the federal government has jurisdiction on environmental issues such as those raised by James Bay II.

      C. Future Electricity Demand:  Another issue is whether there is even the need for the project.  It is estimated that electricity conservation measures using available technology could reduce energy demand in the U.S. by over 75 percent over the next twenty years.

      In order to fight the project the Cree Indians have launched several court challenges in the Canadian courts. Beginning in 1990, the Cree challenged a ruling made by the National Energy Board (NEB) in 1990 which approved the sales contracts between Hydro Quebec and New York and Vermont before a full environmental assessment was conducted. [25]  Thus far, they have had some success with this challenge, [26] and have managed to convince a federal court judge to overturn the NEB regulatory decision to approve the project without a full federal environmental assessment under the James Bay and Northern Quebec Agreement (1975).   However, it is unclear if their argument can ultimately succeed at the Supreme Court of Canada given the usually restrictive mandates of the courts in reviewing tribunal decisions, and the narrow mandates of the regulatory tribunals whose actions they have challenged.

      Probably the most important development in the conflict over James Bay II has been the growth of public interest in the U.S. about the environmental and social consequences of the massive energy project. [27]   For more than two years, the Cree and U.S. public interest groups have been putting pressure on local power authorities in several states not to purchase electricity from Hydro Quebec.

      One of the first jurisdictions to respond to this pressure was the State of Maine.  In the early fall of 1990, the State cancelled a $4 billion export contract with Hydro Quebec. In late August of 1990, a coalition of groups including the Sierra Club and the Cree Indians of Northern Quebec filed a writ in New York Supreme Court seeking a stiff review of James Bay II before the contracts are allowed.  The New York Power Authority filed a response contending that the state government could not act unilaterally on a matter of international trade.  They also contended that New York's environmental assessment laws did not apply, and that Canadian laws were sufficiently strong to make sure the project was fully assessed. [28]  Partially because of the publicity attracted by the Supreme Court challenge, New York City Council adopted a motion calling on the state power authority to reduce purchases from the province in the fall of 1990.  With public pressure still mounting, [29]   New York Mayor David Dinkins wrote a letter to the New York Power Authority in August of 1991 asking it to reconsider the deal and urging that an extension on the withdrawal deadline be sought. [30]  It is thought that the public pressure and the Dinkins' letter may have been key factor in the recent announcement that Hydro Quebec intends to delay the James Bay II project. [31]

      Activists in other U.S. states have also used other techniques to put pressure on the Quebec and Canadian governments.  In March 1991, a referendum was held in Vermont asking residents whether or not they were willing to buy power from Quebec if the lands of Cree Indians had to be flooded and vast wildreness areas destroyed.  While environmentalists narrowly lost the Vermont referendum, they did demonstrate a remarkable degree of concern exists about the James Bay II project in that state. 

      Pressure has also been growing in several U.S. and Canadian jurisdictions to implement a new approach to analyzing energy demand based on energy conservation.  For example, the Public Service Board of Vermont issued an order in April 1990 which established that "least-cost demand" option should be the guiding principle behind all energy decisions in the state.  This option would require the Board to take into account environmental damage as well as energy conservation when hydroelectric power purchases are contemplated.  It is expected that these kinds of institutional reforms will reduce demand for hydroelectric power substantially in the next decade.  Similar kinds of reforms are being urged in Ontario. [32]

      Despite all of these activities, it is likely that this project will be undertaken without the blessing of a full review which would take into account its long term implications for the environment.

      In sum, this international resource use conflict is rooted in the policies of the federal and Quebec governments, which have been promoting electricity exports without fully reckoning with the social and environmental impacts associated with such large dam projects.  The key failure identified by this example is that existing institutions in both nations appear incapable of examing the broad context in which sound energy planning and management must take place. 

2.2  Refillable Quotas: Environmental Protection as a

Barrier to International Beverage Trade

      A future conflict is almost certain to develop under the General Agreement on Tariffs and Trade (GATT), the FTA or a future NAFTA because of the expressed intention of some governments in North America and other industrialized nations to implement or maintain systems of deposits and quotas requiring refillable containers for domestic beer, wine, wine coolers, and soft drinks sold in their jurisdictions.  These systems, while enhancing environmental protection goals, conflict with one of the key goals of liberalized trade -- to encourage expansion of efficient producers into foreign markets -- because they often either require producers and distributors to transport their empty containers back to the point of origin for refilling or may necessitate the establishment of depots and bottling plants for local refilling.

This case study illustrates most clearly the policy conflict between free trade and bioregionalism.

      The backdrop to this environmental and resource use conflict is the garbage crisis in North America.  Pressure for regulations to reuse materials and reduce and recycle waste is growing in most parts of North America. [33]

  Meanwhile, recent estimates suggest that Canadians produce about one tonne per person each year of solid waste and that more than 85 percent of this waste generated is landfilled, 10 percent is incinerated and approximately 5 percent is recycled. [34]

      A great deal of this solid waste is packaging waste which does not add a great deal to the quality of life experienced by most urban-industrial people. [35]  In order to reduce packaging waste produced in North America, environmentalists have advocated a shift back to refillable beverage containers.  Studies of waste composition suggest that up to 4 to 8 percent of the domestic solid waste by volume being landfilled in developed nations is used beverage containers for beer, milk, soft drinks, mineral water, fruit drinks, wine and spirits .[36]  To a great extent, advocacy for refillables has been prompted by the recognition that: 1) recycling rates for used beverage containers are often low even where voluntary and mandatory curbside collection programs are in place; [37] and 2) reuse of bottles and other products is an important principle to incorporate into solid waste laws and policies.  Pressure to increase refilling rates for these containers has grown enormously to both conserve landfill and encourage people to make lifestyles changes to protect the environment.

      While a debate persists as to the relative merits and efficiency of reusing refillable beverage containers versus recycling them, there are several lifecycle studies which show that reusing bottles which are collected and refilled in a decentralized manner produces enormous benefits for the environment. [38] The exact level of environmental benefits from refillables is tied to "trippage rates" for the specific container, [39] the weight and design of the empty container, and the distance from bottlers to markets.  Plastic refillable containers now being used in Europe for soft drinks offer additional benefits such as lightness and increased safety and durability, and have produced massive energy savings there as well.  In any case, when the used containers are collected, refilled and washed close to where the product is marketed, this creates local jobs and ensures that spin-off benefits are largely retained by the community consuming the beverage product rather than exported to adjacent or foreign jurisdictions.

      To establish and maintain refillable systems for distribution of beverage containers, deposit/refund system are almost always used to ensure the containers are returned for reuse.  Deposit/refund systems have proven very effective in diverting used containers from landfill sites and incinerators.  Where deposit/refund systems are employed

with depots, and well promoted, container redemption rates can reach up to 95 percent. [40]  Deposits also have a proven track-record on reducing litter, and they are supported by numerous people, including naturalists, cottagers and others who dislike seeing beverage container litter in rural or wilderness areas.

      Despite all these advantages, small and large retailers of beverages in many developed nations dislike deposit/refund systems because they create more work for employees handling the bottles or cans, [41] the cans and bottles are unsightly and dirty, the glass bottles sometimes break, and deposits systems are awkward to maintain.

      In the past twenty years, use of refillable containers has declined considerably in North America for most beverages.  Part of this decline is attributable to: a growth of consumer interest in convenience; concerns about product safety because glass containers break; opposition of grocers to use of refillables for soft drink, as well as other corporate goals.[42]

-- to increase market share.  This has been true of the soft drink industry's push for one-way containers;

-- to reduce labour costs associated with refilling operations and transportation of bottles;

-- to squeeze out local bottlers in small communities and centralize bottling operations in major urban centres; and

-- to externalize the environmental and social costs associated with beverage container disposal and/or recycling onto society as a whole.

      To force bottlers and other beverage producers to reuse beverage containers, many governments have enacted and enforced quotas to require a certain percentage of beverage product be sold in refillable containers.  Some have gone so far as to ban the sale of non-refillable containers such as cans, tetra briks and PET plastic bottles for certain beverages.  Some advocates of refillables have proposed a further step to standardized bottles to simplify collection and reuse operations for refillables. 

      Most popular of these measures with governments are refillable quotas.  In the past two years, there has been a resurgence of interest in the use of quotas to promote the use of refillable beverage containers [43] which will no doubt pose this issue in stark terms to trade tribunals.  For example, the German government has established ambitious targets for refillable container use. [44]   No doubt these targets will raise concerns on the part of those who want to market their beverage products into Germany from outside the country.  Nevertheless, the German government defends these targets

because they will contribute to energy conservation, and reduce the threat of global warming. 

      The issue of refillable quotas has also been gaining attention in Canada as well.   During the 1990 election campaign in Ontario, a plan by the then-Liberal government to scrap a refillable quota of 40 percent for the soft drink industry became an intense political issue.  In the heat of the election campaign, Bob Rae, leader of the New Democratic Party (NDP), promised to implement a fully refillable systems for the domestic beer, wine, wine coolers and the soft drink industries to reduce the amount of beverage container waste going to Ontario landfills.

      Since the election of the NDP as the government of Ontario, their passion for refillables seems to have cooled somewhat, partially because of growing pressure from industry.  The soft drink industry demanded has threatened to commence a legal challenge on enforcement of the current quota on the grounds that the province does not require bottlers and distributors of other beverages to sell their product in refillable containers and, consequently, this could violate the FTA and even certain sections of the Charter of Rights and Freedoms. [45]  If successful, a challenge under the FTA or the Charter could undermine Ontario's current regulatory regime.  Meanwhile, the Ontario distilleries warned the Ontario government in late April that they will probably move their operations to the U.S. if the provincial government requires them to use refillable containers.  They were able to do this, to a large degree, because the FTA allows them to produce and bottle their product in U.S. even though it is marketed in Canada.

      Pressure to break down inter-provincial and bilateral barriers to trade in beer is also growing. [46]  If the barriers to trade in beer are partially removed, or completely broken down, then it would be much more difficult to ensure refillables are used for beer in Canada because American companies, who are seeking entry into the Canadian market, use non-refillable cans extensively because this container is cheaper to produce and transport over longer distances.

      Finally, it should be noted that the New Brunswick government has implemented a system of deposits which favours refillables.[47]  Under the legislation, all containers are returned for deposit.  However, about half of the deposit is forfeited to a fund in support of container recycling when a non-refillable container is returned to a depot or store.  It could be argued that the New Brunswick system violates the FTA to the extent that it promotes refillables and discriminates against American imports, which are all non-refillable.

      These proposed measures raise important trade issues and it has been argued that such requirements, if ever implemented, would be construed by tribunals as non-tarriff barriers to trade. 

      The only international case on refillables quotas and bans on non-refillable containers was decided by the European Court of Justice in September 1988. [48]            Re: Disposable Cans -- Commission of the European Communities v. Denmark, Case No. 320/86, European Court of Justice, September 20, 1988.  Reported in [1989] C.M.L.R. 619.  For an analysis and critique of this decision, P. Kromarek, "Environmental Protection and the Free Movement of Goods: The Danish Bottle Case" (1990), 2(1) Journal of Environmental Law 89.

  In that case, the Danish government was challenging Directive 85/339 which had been issued by the European Economic Commission (EEC) in 1985.  This Directive is intended to encourage the goal of recycling of beverage containers in the European Community (EC) but it did not specify that Member States of the EC were to employ refillable systems and deposit/refund systems in order to achieve this goal.

      Prior to the issuing of the E.C. Directive, Denmark had banned the sale of metal cans and other non-refillable containers for soft-drinks and beer in Denmark and severely restricted the sale of non-refillable containers by setting an annual limit on sales and requiring that the containers be returned to the retailer from which they had been purchased to obtain the refund. [49]  However, they allowed Danish companies to export non-returnable, non-refillable containers to other markets in Europe.  In part, these ban and quota measures were intended as an environmental measure to maximize container reuse and substantially reduce beverage container litter.  However, the ban was also embraced by the Danish brewing industry with enthusiasm because the extra costs associated with transportation of empty bottles back to other nations made it uneconomic for German breweries to export bottled beer to Denmark. 

      After several years of operation, Denmark's ban was challenged by the EEC under Article 30 of the Treaty of Rome in 1986.  Under the Treaty provision, any non-tarriff barrier to trade must balance protection of the environment and freedom to market a product in the European community.

      The decision examined numerous precedents dealing with the extent to which a Member State in the EEC can develop laws and regulations in order to accomplish certain environmental goals.  Since protection of the environment had been held to be one of the essential objectives of the European Community, the Court recognized that it might well circumscribe the application of Article 30 in the Treaty of Rome.  At the same time, the Court held that the proposed initiatives intended to protect the environment must not "go beyond the inevitable restrictions which are justified by the pursuit of the objective of environmental protection." [50]

      In applying this generalized test, the Court upheld the use of deposit/refund systems for beverage containers in Denmark.  In fact, they recognized that deposit/refund systems are an essential measure to ensure that the EEC Directive is implemented and can be justified as a legitimate restriction on the movement of goods.  At the same time,

the Court ruled that the refillable quota restricting the sale of beverages in non-approved, non-refillable glass bottles was not a legitimate restriction. [51]

1) a deposit/refund system, while far from the ideal system, would still divert substantial waste from landfills;

2) the producers of the beverages sold in non-approved containers could set up a system for recycling and disposal of the collected containers; and

3) the non-approved sales only constituted a small portion of the overall quantity of beverages consumed in Denmark.  

      There are several interesting points about this case.  First, as may be anticipated, the German brewers were not deterred by the requirement to establish refillable systems in Denmark.  In fact, even before the case was brought to the Court they had established efficient systems for operating with refillable bottles.

      Second, the ban on use of metal cans for beer and pop sold in Denmark was not struck down by the European Court of Justice.  What happened in fact was that the EEC amended its complaint so that the challenge to these provisions in the law was deleted from the original complaint. [52]

      In the result, the key message of this case is that Member States of the EEC do have a degree of lattitude in shaping environmental protection laws but these laws will be struck down if they are construed by the European Court as an unjustifiable barrier to trade in goods and services.  Since the level of environmental protection that is justifiable and the kinds of measures that will be rescinded on trade grounds was not really clarfied by this decision, this issue will be explored further by the EEC in the future.

      The case has been received with mixed reviews.  Some European environmentalists contend that the case upheld important facets of the Danish law and do not think the result is a problem.  In contrast, one Canadian environmentalist lambasted the Court. [53]

It is difficult to imagine a situation in which an environmental regulation could be on a stronger footing.  Yet despite the absence of any demonstrable impediment to trade, the European Court of Justice had no reservation about finding Denmark's container legislation inconsistent with the principle of freer trade.  By characterizing national environmental laws as non-tariff barriers to trade, opponents of strong regulation have a potent new weapon with which to assail these important initiatives.

For further discussion, see S. Shrybman, "International Trade and the Environment: An Environmental Assessment of the Present GATT Negotiations", Alternatives, Vol. 17(2), pp. 20-29.

      In sum, refillables quotas pose important issues about the trade-offs between environmental protection and free trade.  This case suggests that the goals of waste reduction and increased freedom in the marketplace, including freedom to concentrate and centralize operations, will not be easily reconciled.   While it can be argued that a deposit/refund system for all beverage containers probably can be rationalized as an appropriate environmental measure within the context of current trade agreements, refillable quotas and product bans for non-refillable containers will probably be subject to challenge, and it is likely that they would be struck down under current international trade laws if they appeared to restrict trade between nations.

      The problem with the European Court decision is that it appears to reject the principle of local principle for local comsumption.  Meanwhile, economies of scale are driving corporations towards non-refillable, single use containers that are often disposed of in scarce landfill space, cause increased pollution and waste energy.  The diversity of laws in adjacent jurisdictions in Europe and North America also poses problems and mitigates against development of more stringent refillable quotas.  Finally, there are no institutional means to put pressure on corporations and governments in North America to consider the issue of refillables quotas in the context of a bioregional approach to trade and economic development.  If this issue is to addressed in a systematic way, then a new approach to resolving this kind of international resource conflict must be established.

3.  Are Current Transboundary Dispute Resolution Mechanisms Adequate?

      The two case studies discussed above represent two types of transboundary resource issues which are likely to become more commonplace in North America in the next decade.   It is argued here that such issues are symptomatic of the expanding scope and complexity of bilateral and trilateral relations on the continent during the past thirty years.  Some commentators have argued that, despite this expansion in the scope and complexity of bilateral and trilateral relations, institutional development has remained stymied. [54]  With respect to environmental matters, transboundary accords, agreements, memos of understandings, and other such instruments have proliferated in recent years.  However, it could be argued that these new agreements and instruments have not strengthened current bilateral relations or improved dispute resolution mechanisms.  In fact, it appears that some binational institutions are being weakened by incrementalism and devolution of authority to other bodies or sub-national authorities.

      What then are the mechanisms available to resolve disputes like James Bay II and the conflict over refillable quotas as described above?  Are these existing mechanisms sufficient to ensure appropriate and effective allocation of resources and effective settlement of disputes about those resources?

      Both issues are discussed below.  Three types of approaches to dispute resolution are examined and discussed including: 1) the "ad hoc" approach; 2) a more structured binational approach, as provided by the International Joint Commission; and 3) the dispute resolution mechanism relied on in the FTA.  It is argued that current institutional mechanisms are not sufficient, and as a result, gaps in institutional mandates are causing inappropriate resource allocations and exacerbating certain environmental conflicts.

3.1  The Ad Hoc Approach: Overload of Crisis Management

      The machinery that exists to deal with bilateral conflicts is in many respects as complex and varied as the relationship itself.   While a comprehensive review of these institutions cannot be provided here, [55]

 it is important to note that well-developed diplomatic networks continue to manage the bulk of Canada-U.S. relations with particular regard to the negotiation and bargaining of settlement of bilational conflicts.  In addition, a great many common institutional linkages exist between the two nations.  These institutional networks that have evolved over the course of Canada-U.S. relations vary greatly in their nature, powers, and functions.  Some of the joint institutions range from essentially consultative ones which provide only for casual or incidental co-ordination of policies to others which are purely technical and adminstrative in nature (such as the International Boundary Commission).

      Two commentators have characterized this incremental or "ad hoc" approach to dispute resolution in this way:

In the past the two nations have handled environmental problems by reaching temporary accomodations; they have not agreed on rules of behavior.  Their environmental relationship is thus founded on a series of ad hoc arrangements, in contrast with a a problem-solving approach based upon commonly shared principles and guiding rules.  This ad hoc approach is the key problem in the environmental relationship. [56]

      To put it simply, the "ad hoc" approach is not working, and appears to be overburdened, because of the nature and diversity of disputes now on the public policy agenda.  Issues such as transboundary movement of hazardous and solid waste, transboundary air pollution, fisheries allocation and quotas, and potential water diversion projects (which could affect numerous rivers and lakes) are complicated and cannot be adequately handled using the "ad hoc" approach.

      Continuing reliance on the ad hoc approach was demonstrated in the negotiation of the Acid Rain Accord signed by Canada and the United States in 1990 and released in February 1991.  While the specific provisions of the Accord should reduce acid rain emissions in both nations, the process employed to develop the Accord was secretive and unsatisfactory.  For this reason, it should not be surprising that the Accord does not provide for independent reviews of progress towards goal-achievement and does not provide for public consultation prior to preparation of government reports on compliance with the Accord. [57]

3.2  The International Joint Commission: Still in Search

     of a Mandate after 80 years

      Perhaps the best known, and most analyzed, bilateral Canada-U.S. dispute settlement body is the International Joint Commission (IJC).  In recent times, the Commission has gained considerable profile owing from its work in the Great Lakes region, although its mandate extends "along the common frontier."

      In fact, it is fair to say that almost any discussion of institutional reform leads to reform of the IJC. [58]  Perhaps when examining its mandate, it is easy to understand the tendency for such discussion.

      The IJC was established under the Boundary Waters Treaty of 1909.  The Treaty vests the Commission with a number of different capacities or roles.  Its most important roles include its quasi-judicial, investigative and arbitral roles.

      In its quasi-judicial role, [59] the Commission is empowered to investigate and pass judgment on all cases involving the use, obstruction or diversion of boundary and transboundary water when the result is to alter the flow of boundary waters or to "raise" the natural level of transboundary waters.

      Pursuant to article of IX, the IJC has jurisdiction to examine and report on "...any questions or matters of differences arising ... involving the rights, obligations, or interest of either.. along the common frontier."  As long as the matter pertains to the "common frontier," there are no limitations on the Commission's power to investigate questions of fact or law involved in any dispute or problem.  Rather than make decisions, under this power the Commission can only apply its investigative machinery to the issue posed and provide governments with a report that may serve as a basis for policy reform. 

      Under Article X of the Treaty, the IJC is empowered to arbitrate "any question or matter of difference" in Canada-U.S. relations arising along the common frontier or not.  However, such jurisdiction will rest only with the "advice and consent of the Governor-in-Council."  Once jurisdiction is established, a majority of the IJC is given the authority to render a binding decision on any matter so referred.

      Perhaps the most interesting aspect of the Commission's arbitral power is that it has never been exercised.  It has been suggested that the requirement of U.S. Senate approval, especially "in light of the political history of the exercise of the 'advise and consent` powers of the Senate," would set a significant precedent, and this may be why the Commission has never been vested with this arbitral jurisdiction. [60]

      Despite this broad mandate, most commentators doubt there

will ever be sufficient political will to give the IJC the power to exercise its arbitral powers or to expand its role.  In fact, current trends suggest that the IJC is being marginalized and its importance is being reduced because of diminished resource allocations to it, the re-organization of some of its boards, and a decrease in work delegated to it by both national governments.  In view of this pattern of marginalization, some commentators believe that the IJC will be lucky to maintain its present stature.

      It seems ironic that this is the case.  In fact, it could be argued that, if the IJC's role was expanded in such a way that it could undertake bioregional assessments of activities along the U.S.-Canada border, and along the Atlantic, Pacific and Arctic Ocean border regions and in the Great Lakes Basin in particular, then it would be able to play a very important role in fostering more appropriate environmental practices in both nations.

3.3  Dispute Resolution Provisions in the FTA: An Inadequate Response

      Under the FTA, a panel may be established to resolve conflicts that arise under the Agreement when a matter is referred by either the U.S. or Candian governments.  While few cases have been decided to date, it is argued here that the ability of these panels to deal with transboundary resource use conflicts and environmental problems is seriously limited.

      The first decision made by a panel under the FTA shows why the institutional framework illustrates this thesis.  In this case, it was found that the Canadian requirement that all salmon and herring caught in British Columbia waters be landed in Canada for conservation and fisheries management purposes was an unfair trade restriction (disguised as a conservation measure). [61]  While a compromise was eventually reached between the governments involved in this dispute, it is unclear whether the goal of species conservation is protected by it. [62]  The fact that the precedent favours trade over environmental objectives can be seen as a rationale for apparently conflicting policy objectives.   As Saunders has noted in commenting on this decision,  "...it is unlikely that GATT or other trade-related institutions will be significant forums for initiating measures aimed at the environmental consequences of trade." [63]

      In sum, it is argued that existing dispute resolution mechanisms are problematic for two main reasons.  First, the "ad hoc" approach that now characterizes bilateral institutions creates a number of gaps and limits to the effective resolution of binational resource conflicts.  Secondly, the institutions created to deal with trade disputes do not have a sufficient mandate to protect the environment.

4.  Toward a New Policy and Institutional Framework:  Suggestions for Reform

      If the trends in international resource use conflicts identified above are not addressed in a more systematic manner, then environmental problems seem likely to continue to grow, and conflicts may escalate.  In order to address this situation, and ensure that long-term environmental impacts of current development patterns are taken into account by existing institutions, it is argued that the ad hoc approach to dispute resolution must give way to a new approach.  This new approach must, at the very least, provide a means to accomodate or resolve the policy conflict between the bioregionalist perspective for governance and the trend toward trade liberalization.

      In this section, two options are explored. The first option deals with improving existing mechanisms by incorporating an environmental mandate in those institutions.  The second option is to establish a new institution.

      4.1  Incorporating or Expanding Environmental Mandates in

             Existing Institutions

      It could be argued that the problem of FTA panels to date is not a lack of bilateral and multi-lateral institutions. Instead, it is the inability of panels established under the FTA, either owing to a lack of desire or a perceived lack of mandate, to effectively deal with transboundary environmental relations.  Certainly an argument could be made that it would be inappropriate for a tribunal to resolve environmental and resource disputes under the FTA because it would lack authority and mandate to deal comprehensively with trade-related environmental issues.  Meanwhile, the capacity of some existing domestic tribunals, such as the NEB, to resolve disputes has been substantially eroded by the FTA. [64]

      The failures of other institutions and dispute resolution mechanisms are more difficult to understand.  In part, a lack of political desire on the part of national governments may have contributed to these failures.  However, the lack of clear renewed environmental mandate has probably played a more important role in many cases.  For example, one of the interesting trends evident in the work of the IJC is that, even though bilateral problems have been increasing, the number of references going to the IJC compared to two decades ago is actually decreasing.  Areas where work should have been delegated to the IJC include toxic chemicals, air pollution, and spills. 

      Whatever the source of deficiencies in existing dispute resolution mechanisms, it is important that the problem is remedied as quickly as possible, especially in view of the "new epoch" of environmental concerns described in the first section of this paper.

      One approach would be to supplement the mandate of all institutions to include an environmental mandate and thus, perhaps enlarge the scope of their adjudication.  For some institutions, such as the panels under the FTA, this may require some delicate negotiations since the mandate may indeed conflict with the goals and of objectives of the Agreement itself.  For other tribunals, especially those which have sme experience with environmental matters, the task may be less onerous. In terms of the IJC, for example, the challenge might be to simply make explicit that it be able to begin treating the Great Lakes Basin as a bioregion.

      The weakness of this approach, of course, is that it assumes that bilateral or multilateral institutions cover a broad range of transboundary environmental issues.  As the case studies suggest, some of the multi-faceted issues that are likely to arise in certain conflicts will not be easily delegated to a single tribunal or institution.

      The approach also further assumes that existing institutions can in fact be broadened without affecting their effectiveness to carry out their primary mandate, which in some cases, may be contradictory to the goal of environmental protection.

4.2  A Call for a New Appellate Tribunal

      Enhancing existing institutions so that they must take bioregional concerns into account in making decisions is one way of addressing bilateral environmental and resource use conflicts.  Another approach would be to create a new appellate tribunal to cope with the multiplicity of environmental issues that might require expert adjudication. [65]  This institution could review decisions made under the FTA, a future NAFTA, or even under the GATT to ensure that environmental factors have been considered appropriately by panels or tribunals under trade agreements.  What the basis, nature, and substance of this new appellate tribunal is would have to be carefully studied.   However, based on this analysis, it is proposed, on a preliminary basis, the following mandate for a tribunal adjudicating disputes arising on North American continent:

* it would able to adjudicate any dispute pertaining to an environmental or natural resources use, unless another institution (including a court or tribunal in Canada, Mexico or the United States) was already dealing with it;

* it would be accessible to all aggrieved parties, including affected public and private interest groups in any affected nations, and would seek to ensure an efficient and timely response to a matter raised;

* each country would make adequate financial resources available to its environmental groups to launch actions;

      * its decisions would be binding on the parties; and

* the tribunal would also have investigatory and reporting powers similar to those now posessed by the IJC.

      In a way this institutional response to resovling very fundamental policy conflicts is a fairly incomplete response.  However, at least the concerns of the public can be raised in an organized forum that has a mandate to deal with such concerns.  At least there will be some public confidence that someone is "minding the environmental store."

      It would seem appropriate that the kind of institutional reforms proposed be undertaken immediately in the context of the free trade negotiations.

5.  Conclusions

      In the long term, the most practical way to resolve growing international resource use conflicts is to establish a new appellate body where those concerned can raise their concerns in a systematic manner.  There are disadvantages to this approach, including the risk that this tribunal could be undermined by the appointment of insensitive panel members to the tribunal.  However, there are numerous advantages, and there would be an opportunity to raise interconnected issues such as energy use and resource conservation.

      In the short term, integration of broader environmental protection goals into the mandates of existing tribunals and regulatory bodies such as the NEB, the IJC, and the various panels established under the FTA or the NAFTA would provide a preliminary basis for actions by environmentalists.  Accomplishing this integration will be complex, and enormous pressure will need to be brought to bear on the U.S., Canadian and the Mexican governments as part of the trilateral discussions now underway to ensure that the integration is started in the next few years.

ENDNOTES

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