Green crime in the new North American tariff war

Brian Mulroney is described as Canada’s greenest prime minister. His government, which ran from 1984 to 1993, created the national “Green Plan” that introduced all sorts of programs to protect the environment. It wrote the first Canadian Environmental Protection Act, among other conservation laws, and hosted the conference that negotiated the Montréal Protocol on Ozone-Depleting Substances, which to this day is one of the most successful environmental agreements ever. But this isn’t about that.

You see, Brian Mulroney was a heavy smoker. That is, until he became prime minister - and to his credit, he quit. Over the rest of his time in office, the government raised tobacco taxes. Lots. Doubling or tripling or quadrupling the cost of a pack of smokes. Whether intentional or not, he took the country with him as he kicked the habit.

What ensued was a spectacular increase in lawlessness. ?Tobacco companies, losing market share, figured out a way to export their products to the United States duty free – meaning really cheap. Once across the border, the cigarettes were smuggled back into Canada on an industrial scale (Canadian smokers prefer Canadian cigarettes.). The federal government and provincial governments were losing billions of dollars annually in tax revenue. Organized crime jumped at the opportunity to make some low-risk cash.

To counter this, in early 1994 the government created what it called the Anti-Smuggling Initiative. Hundreds of customs officers were dispatched to trails and small roads that crossed the world’s longest undefended border to maintain a watch. At the same time, taxes were cut by about half. A younger me spent three months’ worth of nights camped out on winter roads just north of the border watching for nasty smugglers entering Canada from the snakes' den of illicit activity known locally as Vermont. In the end, I didn’t see any. Not one. I didn’t see any because – the taxes were dropped. There was no incentive for criminals to smuggle cigarettes anymore.

Tariffs are a border tax on goods that, when sufficiently high, create an incentive to for people and businesses to break the law in order to make money. And that is what this is about.

It was not unexpected, but it seemed to come as a surprise nonetheless – the incoming United States administration announced on February 1 that it was making good on its threat to impose 25% import duties on all goods coming from its two neighbours and largest trading partners – Canada and Mexico. The two targeted border countries in turn are replying with escalating retaliatory tariffs of their own on about one-third of US-origin merchandise. (Expect responses to the responses, we are told, from the Americans.) The last time something like this happened was almost a century ago when the US implemented the Smoot-Hawley tariff - which incidentally helped trigger the Great Depression. We can only speculate on how this will change the current landscape, but I digress. ?

I am not an economist, nor am I a political pundit. My lane is that of a specialist on environmental crime, particularly transnational.

Bottom line: the impact of this new tariff war on green crime resulting in environmental damage in all three countries will become a real and present danger the longer it goes on. Steep tariffs create an incentive to violate the law.

The North American continent has a small number of countries (three) that generally get along well and play nice with one another.

This has facilitated environmental cooperation for over a century. For example, the United States has treaties with both Mexico and Canada protecting migratory birds – these are in fact some of the oldest conservation agreements in existence in the world. During trade liberalization in the 1980s and 1990s, ensuring a similar level of environmental protection was written into trade agreements such as the North American Free Trade Agreement (NAFTA) and its successor, the 2019 Canada – United States – Mexico Agreement (feel free to rearrange the signatories’ names based on which one you live in).

The idea is that in order to ensure a level playing field, businesses must not benefit from the lower operating costs associated with weak environmental regulations and poor enforcement. The bar was raised for all. To that end, the agreement creating the North American Commission for Environmental Cooperation was signed in 1993, and the resulting work it has done has been phenomenal to the three countries’ benefit.

I hope the countries, and the provinces, states and municipalities, keep these environmental safeguards in place despite the economic rhetoric being tossed around. But even with them remaining, the sudden imposition of high tariffs – an increase of 25% ad valorem where none existed before - has the potential to increase environmental crime as businesses in all countries seek to remain competitive (and maybe even afloat).?

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There are two areas where I am keeping an eye on.

Some environmental crime, by its very nature, was illegal before and will still be afterwards. For example, the smuggling of certain prohibited wildlife won’t suddenly stop - nor do I see it getting worse just because there are tariffs. Since duties are an economic measure that increase the value of legal or regulated goods, it goes that for prohibited things, tariffs will not influence the price.

For example, the United States has the largest number of transportation links on the continent. So, some contraband such as endangered reptiles will still transit through the US on a disproportional basis while being smuggled onwards to Canada. Smugglers will likely continue to attempt to ship maw, or swim bladders, from the highly endangered totoaba fish from Mexico through US airports and onward to markets in China.

At the same time, the US has some wildlife trade restrictions that are stricter than those of the Convention on the International Trade in Endangered Species of Wild Fauna and Flora (CITES) such as around marine mammals. In the past, those species, which could be compliantly imported into Canada with the right international permits, would then be smuggled on to the United States’ market. Tariffs won’t touch that. Same thing with regards to the cross-border smuggling of ozone-depleting substances for vintage cars’ air conditioners – new border taxes won’t impact it because it is already prohibited.

What will likely change is crime related to legal or regulated goods. Billions of dollars (pesos) of legal fisheries and wood products cross all three countries’ borders every year. They contribute to food and economic security all around. However, slapping a tariff increases the price substantially for the importer. So, watch for undervaluation, where the true cost of something is hidden to try to pay less duty at the border.

There may also be increased attempts to evade controls by misdescribing the goods as something known to be lesser value, such as declaring high value king crab from the US state of Alaska as lower value groundfish. Or high-end snake leathers from Mexico that only a specialist can identify are described in paperwork as a less valuable species. If goods are smuggled, particularly live species, when not intercepted during border checks they carry the risk of being invasive or carrying pathogens - in all three countries.

In other words, increasing tariffs necessarily creates the need to increase surveillance to create a disincentive to smuggling. And that costs money.

Another area at risk is industry cutting corners to lower its costs so that its products remain competitive in spite of tariffs.

When negotiating the NAFTA, the US and Canada wanted to ensure Mexican labour safety and environmental standards were comparable to their own – and with collaboration, goals were achieved.

But even with a level playing field, money remains a great motivator – to cheat. An example is the Canadian oil sands operator which cut its environmental surveillance team to save money in 2008 – resulting in the deaths of 1600 waterfowl on effluent settling ponds because bird-scaring devices were not deployed as was normally done prior to the arrival of the spring migration.

Another example goes to ?the first Trump administration, where international protections against the normally-illegal destruction of bird nests while conducting a legal activity, for example painting a bridge, were unilaterally re-interpreted in a way that allowed the action. This lowered costs for businesses and resulted in bird nests (and their fledgling inhabitants) getting a fresh coat of (harmful) paint.

If this were to happen again, would the other countries lower their interpretations of what treaties say, so as to not deny their businesses an advantage their competitor has assumed? Don't bet against it. If yes, it is the birds that lose - and all of us, through the ecosystem services our feathered friends provide. ?

Where I don’t see a change coming is in cooperation among enforcement officials in stopping violators. I co-chaired the North American Wildlife Enforcement Group with my federal counterparts in the US and Mexico for ten years. Every environmental law officer I met over that time in all three countries, without exception, was deeply committed to reducing crime, conserving the environment, and helping their colleagues on the other sides of borders do the same.

To maintain this may be challenging if things like funding for transborder operations, joint training and collaborative international planning fall victims to the accountant’s eraser. Which is easy to do when government finances are tight, which they will be in a tariff fight.

To do this requires that governments see environmental protection and green crime fighting as a mutually beneficial issue, something that transcends the policy objectives of a trade war.

Because once all is said and done and the dust has settled, the environment will still be there and we – and our economies – will still be dependent on it.

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