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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

November 2014: 

Free Trade Agreements: 

Office of the U.S. Trade Representative Should Continue to Improve Its 
Monitoring of Environmental Commitments: 

GAO-15-161: 

GAO Highlights: 

Highlights of GAO-15-161, a report to congressional requesters. 

Why GAO Did This Study: 

The United States has signed free trade agreements that lower barriers 
to trade with 20 countries, including 5 Central American countries and 
the Dominican Republic. Reflecting Congress’s interest in balancing 
commercial interests with environmental protection, the United States 
and FTA partners have agreed to strengthen environmental protection. 
In 2009, GAO recommended improved FTA monitoring. GAO was asked for an 
update. 

This report examines, among other things: (1) steps selected partners 
have taken, with U.S. assistance, to implement FTA environmental 
commitments; (2) resources to assist partners in implementing 
environmental commitments; and (3) U.S. agency monitoring of 
cooperation activities and partner compliance with their FTA 
environmental commitments. 

GAO reviewed FTA environmental provisions and cooperation agreements; 
analyzed U.S. funding data for cooperation activities from fiscal 
years 2003 through 2013; and evaluated documentary and testimonial 
evidence. GAO visited Guatemala and El Salvador, two of six CAFTA-DR 
countries, and Peru and Chile, and met with U.S., host government, 
private sector, and NGO officials. GAO selected these countries 
because they reflect a range of per capita income, U.S. assistance, 
environmental progress, and challenges. 

What GAO Found: 

The four free trade agreement (FTA) partners that GAO selected for 
this review all passed environmental laws and established institutions 
to improve environmental protection, in line with their FTA 
commitments to strive to improve their laws on and levels of 
environmental protection. For example, Chile created enforcement 
agencies and modernized its system for evaluating the environmental 
impact of projects; El Salvador launched a National Environmental 
Strategy; and Guatemala created a unit to verify compliance with 
natural resource protections. According to U.S., Peruvian, and 
nongovernmental organization (NGO) officials, U.S. assistance has 
helped Peru improve management and monitoring of its forest resources. 
However, each FTA partner continues to face challenges in capacity and 
enforcement of environmental protection. 

Figure: Peruvian Officials Conduct Timber Inspection: 

[Refer to PDF for image: 2 photographs] 

Source: GAO. GAO-15-161. 

[End of figure] 

U.S. resources for cooperation activities have declined since 2009 
because of shifting priorities. Peru and countries in the Dominican 
Republic–Central America–United States Free Trade Agreement (CAFTA-DR 
) received 90 percent of the roughly $151 million of total funding for 
FTA cooperation activities from fiscal years 2004 through 2013. CAFTA-
DR countries received over $87 million from fiscal years 2004 through 
2013, and Peru received nearly $49 million from fiscal years 2009 
through 2013. However, in fiscal year 2013, U.S. funding for 
environmental cooperation activities to CAFTA-DR countries was 18 
percent of its 2009 level, and funding for Peru FTA activities was 41 
percent of its 2009 level. 

The Department of State has improved monitoring of environmental 
cooperation activities since 2009, and the Office of the U.S. Trade 
Representative (USTR) developed a plan for monitoring partner 
compliance with FTA environmental commitments. However, USTR’s 
monitoring lacks timeframes and performance indicators to measure 
partner progress in meeting FTA environmental commitments. In 
addition, the U.S.-Peru bilateral action plan addresses specific 
challenges in Peru’s forestry sector and identifies actions for Peru 
to take, but does not include timeframes and indicators. Lack of 
timeframes and performance indicators precludes stakeholders and the 
public from having a clear understanding of the extent to which Peru 
is meeting its commitments since agreeing to the terms of the 
bilateral action plan. 

What GAO Recommends: 

GAO recommends that USTR establish timeframes and indicators to assess 
the extent to which Peru is meeting commitments in the bilateral 
action plan and establish timeframes and indicators to implement its 
plan for enhanced monitoring across all FTA partner countries. 

View GAO-15-161. For more information, contact Kimberly Gianopoulos at 
(202) 512-8612 or Gianopoulosk@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Partners Have Taken Steps to Improve Environmental Protection, with 
U.S. Assistance, but Continue to Face Challenges: 

Partners Are Establishing Secretariats to Process Submissions 
Regarding Environmental Issues: 

U.S. Resources for Cooperation Activities Have Declined Since Fiscal 
Year 2009: 

State and USTR Improved Monitoring, but USTR's Process Lacks Key 
Elements: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Department of Agriculture's U.S. Forest 
Service: 

Appendix III: GAO Contacts and Staff Acknowledgments: 

Table: 

Table 1: Status of Dominican Republic-Central America-United States 
Free Trade Agreement (CAFTA-DR) Secretariat Submissions Received from 
2007 to 2014: 

Figures: 

Figure 1: Per Capita Gross Domestic Product (GDP) for the United 
States and Free Trade Agreement Partner Countries, 2012: 

Figure 2: Dairy Production Facility, San Salvador: 

Figure 3: Water Quality Reference Laboratory, San Salvador: 

Figure 4: Wildlife Rescue Center, Petén, Guatemala: 

Figure 5: Pucallpa Checkpoint, Ucayali, Peru: 

Figure 6: Numbers of People Attending Outreach Campaign Events and 
Numbers of Submissions Received, 2007 to 2013: 

Figure 7: U.S. Funding for Cooperation Activities for Free Trade 
Agreement (FTA) Partner Countries for Fiscal Years 2004 through 2013: 

Abbreviations: 

CAFTA-DR: Dominican Republic-Central America -United States Free Trade 
Agreement: 

CITES: Convention on International Trade in Endangered Species of Wild 
Fauna and Flora: 

EPA: Environmental Protection Agency: 

FTA: free trade agreement: 

GDP: gross domestic product: 

NAFTA: North American Free Trade Agreement: 

NGO: nongovernmental organization: 

NOAA: National Oceanic and Atmospheric Administration: 

OSINFOR: Organismo de Supervision de los Recursos Forestales y de 
Fauna Silvestre: 

USAID: United States Agency for International Development: 

USFS: Department of Agriculture's United States Forest Service: 

USTR: Office of the United States Trade Representative: 

[End of section] 

United States Government Accountability Office: 
GAO:
441 G St. N.W. 
Washington, DC 20548: 

November 06, 2014: 

The Honorable George Miller: 
Ranking Member: 
Committee on Education and the Workforce: 
House of Representatives: 

The Honorable Sander M. Levin: 
Ranking Member: 
Committee on Ways and Means: 
House of Representatives: 

Free trade agreements (FTA) phase out barriers to trade in goods with 
particular countries or groups of countries and contain other 
commitments to open access for services and investment, and have 
become an important component of U.S. trade policy. By 2014, the 
United States had signed free trade agreements with 20 countries, 
including 5 Central American countries and the Dominical Republic as 
part of a regional arrangement known as the Dominican Republic-Central 
America-United States Free Trade Agreement (CAFTA-DR). These 20 
countries are as diverse as Australia, Chile, Colombia, Honduras, 
Korea, Morocco, Oman, Panama, and Peru. The United States is also in 
negotiations on a proposed regional Asia-Pacific trade agreement, 
known as the Trans-Pacific Partnership, and a free trade agreement 
with the European Union known as the Transatlantic Trade and 
Investment Partnership. 

Congress expressed an interest in balancing U.S. commercial interests 
with other goals, including environmental protection, when it gave the 
President trade promotion authority in 2002.[Footnote 1] In addition, 
the May 10, 2007 Bipartisan Agreement on trade policy between 
congressional leadership and the administration committed the United 
States to negotiate for strengthened environmental provisions in FTAs, 
among other things. For example, the May 10, 2007 agreement called for 
FTA environmental obligations to be enforced with the same remedies, 
procedures, and sanctions as FTA commercial obligations. In addition, 
the agreement recognized a previous U.S. commitment to work with Peru 
on comprehensive steps to address illegal logging and to restrict 
imports of products that are harvested and traded in violation of the 
Convention on International Trade in Endangered Species of Wild Fauna 
and Flora (CITES). Certain FTAs also create a process that allows 
members of the public to formally raise concerns if they believe that 
a party is not effectively enforcing its environmental laws. This is 
known as a "public submissions" process. 

In 2009, we issued a report on four of the first FTAs concluded under 
2002 trade promotion authority and made recommendations to improve how 
U.S. agencies monitor implementation of those FTAs.[Footnote 2] We 
recommended that the Department of State (State) work with other 
agencies to develop a more structured approach to manage and monitor 
the implementation of environmental projects and that the Office of 
the United States Trade Representative (USTR), in cooperation with 
other agencies, prepare updated plans to implement, enforce, monitor, 
and report on compliance with and progress under the FTAs' 
environmental provisions. In 2012, we found that State and USTR were 
making progress to address our recommendations.[Footnote 3] Additional 
information on monitoring partner progress and compliance with FTA 
environmental provisions is discussed later in this report. 

You asked us to provide an update on agency and partner actions, 
including the current status of partners' implementation of FTA 
environmental commitments, and to review U.S. monitoring and 
enforcement efforts. This review of FTA environmental provisions 
examines (1) steps selected partners have taken, with U.S. assistance, 
to implement FTA environmental commitments; (2) selected partner 
mechanisms to process public environmental submissions; (3) U.S. 
resources to assist partners in implementing environmental 
commitments; and (4) U.S. agency monitoring of cooperation activities 
and partner compliance with their FTA environmental commitments. 

To address these objectives, we reviewed text and associated annexes 
of the environmental chapters of 11 FTAs that went into effect (that 
is, entered into force) from 2003 through 2013; the May 10, 2007 
Bipartisan Agreement; and reports and other FTA documents such as 
environmental cooperation agreements, work programs, and FTA 
implementing legislation. 

We met with officials from State and USTR who are, respectively, 
responsible for implementing and monitoring partner cooperation 
projects and enforcing compliance with FTA commitments. We also met 
with officials from other U.S. agencies involved in carrying out 
environmental cooperation activities with FTA countries, including the 
United States Agency for International Development (USAID), the 
Department of the Interior (Interior), the Department of Agriculture's 
U.S. Forest Service, the Environmental Protection Agency (EPA), the 
Department of Commerce's National Oceanic and Atmospheric 
Administration (NOAA), and the Department of Justice (Justice). We 
also made site visits to El Salvador, Guatemala, Peru, and Chile, 
where we met with U.S. and host government officials and 
representatives of the private and public sectors, to obtain firsthand 
perspectives and current information on partner efforts, the nature 
and impact of cooperation activities, and ongoing challenges. We 
selected countries for site visits and associated FTAs on which to 
focus based on several factors, for example FTAs that entered into 
force before the May 10 2007 Bipartisan Agreement (CAFTA-DR, which 
includes El Salvador and Guatemala) and after (Peru), and to follow up 
on a country that had been one of the four covered in our 2009 report 
(Chile). These countries also reflect a range of income, U.S. 
assistance, environmental progress, and challenges. We also met with 
officials at the CAFTA-DR Secretariat for Environmental Matters, which 
is responsible, on behalf of CAFTA-DR signatories, for receipt, 
evaluation, and reporting on environmental submissions. In Geneva, 
Switzerland, we met with officials, including the Secretary General of 
CITES, since protection of certain CITES-listed species is 
specifically referenced in the Peru FTA, as well as with officials 
from the United Nations Environment Program and the World Trade 
Organization. We also discussed monitoring of CAFTA-DR partner 
progress with officials from the Organization of American States, in 
Washington, D.C. To obtain information on U.S. resources to help FTA 
partners improve environmental protection and meet FTA commitments and 
to assess U.S. agency monitoring, we interviewed USTR, State, and 
USAID officials, and obtained and reviewed data and documents. See 
appendix I for further details of our scope and methodology. 

We conducted this performance audit from August 2013 to November 2014 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

FTAs--which phase out barriers to trade in goods with particular 
countries or groups of countries and contain rules designed to improve 
access to foreign markets for U.S. goods, services, and investment--
remain a major component of U.S. trade policy. Collectively, according 
to USTR, FTAs with 20 countries accounted for about 40 percent of U.S. 
trade in goods in 2013. Eleven of these 20 FTAs were negotiated under 
trade promotion authority in the Trade Act of 2002, went into effect 
from 2003 through 2013, and involved 16 partner countries.[Footnote 4] 

The 20 FTAs involve partners ranging from high income countries such 
as Australia, Bahrain, Singapore, Chile, Korea, Oman, and Canada to 
lower middle income countries such as Morocco, El Salvador, Guatemala, 
Honduras, and Nicaragua. Colombia, Costa Rica, the Dominican Republic, 
Jordan, Mexico, Panama, and Peru are upper middle income countries. 
The two CAFTA-DR countries (El Salvador and Guatemala) and the two 
countries with bilateral FTAs (Peru and Chile) that we visited reflect 
a range of national per capita incomes. See figure 1. 

Figure 1: Per Capita Gross Domestic Product (GDP) for the United 
States and Free Trade Agreement Partner Countries, 2012: 

[Refer to PDF for image: vertical bar graph] 

US GDP - Per Capita = 51,748. 

Country: Australia; 
Bilateral Agreements: $67,442. 

Country: Singapore; 
Bilateral Agreements: $52,052. 

Country: Canada; 
NAFTA: $51,206. 

Country: Israel; 
Bilateral Agreements: $32,567. 

Country: Oman; 
Bilateral Agreements: $23,570. 

Country: Bahrain; 
Bilateral Agreements: $23,040. 

Country: Korea, Republic of; 
May 10 Partners: $22,590. 

Country: Chile; 
Bilateral Agreements: $15,452. 

Country: Mexico; 
NAFTA: $9,749. 

Country: Panama; 
May 10 Partners: $9,534. 

Country: Costa Rica; 
CAFTA-DR: $9,386. 

Country: Colombia; 
May 10 Partners: $7,748. 

Country: Peru; 
May 10 Partners: $6,796. 

Country: Dominican Republic; 
CAFTA-DR: $5,746. 

Country: Jordan; 
Bilateral Agreements: $4,909. 

Country: El Salvador; 
CAFTA-DR: $3,790. 

Country: Guatemala; 
CAFTA-DR: $3,331. 

Country: Morocco; 
Bilateral Agreements: $2,902. 

Country: Honduras; 
CAFTA-DR: $2,323. 

Country: Nicaragua; 
CAFTA-DR: $1,754. 

Source: Organization for Economic Cooperation and Development. 
GAO-15-161. 

[End of figure] 

Chile, El Salvador, Guatemala, and Peru also face a range of 
environmental challenges. 

* Chile--According to Chilean officials, the country's environmental 
challenges (described later in this report) relate to natural resource 
and extractive industries, including mining, fishing, forestry, and 
agriculture. For example, Chile's agriculture and mining sectors are 
water-intensive, placing strains on its water supply. Chile is a top 
producer and exporter of fish, and mitigating the fishing sector's 
water pollution and impact on ecosystems is a challenge.[Footnote 5] 
The United States and Chile have been working together under the 
framework of the FTA as well as a June 2003 environmental cooperation 
agreement and related work program to assist Chile in addressing its 
environmental challenges and FTA commitments. 

* El Salvador and Guatemala--countries under CAFTA-DR. According to 
Salvadoran and Guatemalan officials, environmental challenges facing 
one or both of these countries include preservation of biodiversity 
and threats to endangered species, water and air pollution, 
deforestation, and degradation of marine resources. To assist these 
countries in addressing their environmental challenges and FTA 
commitments, the United States and these countries have been working 
together under the framework of the FTA as well as a February 2005 
environmental cooperation agreement and related work programs. 

* Peru--Peru has about 13 percent of the world's tropical forests. 
These forestry resources include forestry concessions used for 
logging, natural protected areas, and reservations for indigenous 
communities.[Footnote 6] 

* Peru's myriad environmental challenges include deforestation and 
water contamination from small mining operations. Because of concerns 
related to illegal logging, the FTA included an annex on forest sector 
governance. To address Peru's environmental challenges and FTA 
commitments, the United States and Peru have been working together 
under the framework of the FTA as well as a July 2006 environmental 
cooperation agreement and related program. 

Recent FTAs Contain Environmental Provisions in Environmental Chapters: 

The 11 agreements negotiated under trade promotion authority include 
environmental chapters as part of the agreements. [Footnote 7] The 
environmental chapters contain several provisions that call for 
strengthened environmental protection and allow for increased public 
participation in the implementation of environmental provisions. For 
example, the 11 FTAs include provisions for formal opportunities and 
mechanisms for public participation in government environmental 
decision making. Four of the 11 FTAs additionally provide for 
submissions to a secretariat by persons or organizations of an FTA 
partner country asserting that the FTA partner country is failing to 
effectively enforce its environmental laws; the secretariat is to 
consider these claims and may develop a report, known as a "factual 
record," about them. CAFTA-DR, which entered into force in 2006, was 
the first to include such a mechanism, and the Peru FTA also includes 
one. The three FTAs that were the focus of our review (Chile FTA, 
CAFTA-DR, and Peru FTA) contain provisions regarding partner 
countries' levels of protection and strengthening of their 
environmental laws. For example, these three FTAs commit each partner 
country to ensure that its laws provide for high levels of 
environmental protection and to strive to continue to improve those 
laws or levels of protection; to strive to ensure that it does not 
waive or otherwise derogate from such laws in a manner that weakens or 
reduces the protections afforded in those laws as an encouragement for 
trade with another party; and to ensure that judicial, quasi-judicial, 
or administrative proceedings are available under its laws to sanction 
or remedy violations of its environmental laws. Finally, each of the 
three FTAs commits the parties "to not fail to effectively enforce its 
own environmental laws, through a sustained or recurring course of 
action, in a manner affecting trade between the parties." This 
provision is enforceable, meaning a party that fails to comply is 
subject to dispute settlement, under the respective FTA. 

The Peru FTA, which entered into force following the May 10, 2007 
Bipartisan Agreement, also includes commitments that each party shall 
adopt, maintain, and implement laws, regulations, and other measures 
to fulfill certain obligations under seven listed multilateral 
environmental agreements, and that the parties will not fail to 
enforce their laws, regulations, and other measures to fulfill those 
multilateral environmental agreement obligations. Unique among FTAs, 
it also contains an annex on forest sector governance with detailed 
requirements pertaining to improved forest management and protection 
of CITES-listed endangered species, including big-leaf mahogany and 
Spanish cedar. 

According to USTR officials, an Environmental Affairs Council, 
involving both trade and international environment ministries of the 
FTA parties (State and USTR in the United States), is charged with 
overseeing the FTA environmental chapter. Each of the 11 FTAs includes 
an article on environmental cooperation that provides for, among other 
things, negotiation of a separate agreement on environmental 
cooperation among the parties to the FTA. State has the lead in 
negotiating and administering these agreements, which have typically 
been concluded about a year after the FTAs enter into effect; 
implementation is overseen by an Environmental Cooperation Commission. 
[Footnote 8] Environmental cooperation is programmed through agreed-
upon work plans covering specified periods, and involves such 
activities as professional exchanges, workshops, and in-country 
projects aimed at improving laws, institutions, and practices that may 
involve U.S. funding. 

State Is Responsible for Overseeing Cooperation Activities and USTR 
for Monitoring Compliance with FTA Commitments: 

State is primarily responsible for overseeing implementation of 
environmental cooperation activities, while USTR is responsible for 
the negotiation and administration of trade agreements and has lead 
responsibility for monitoring and enforcing compliance with FTA 
commitments. State supports cooperation activities that enable FTA 
countries to develop capacity to meet their FTA environmental 
commitments.[Footnote 9] Other U.S. agencies with technical expertise 
in specific areas carry out cooperation activities. According to USTR 
officials, they rely on a network of other agencies to support their 
monitoring and enforcement functions. Accurate monitoring is necessary 
to track the extent to which partners are complying with FTA 
commitments and ensure that resources are targeted to areas where they 
can be most effective, according to U.S. officials. 

Partners Have Taken Steps to Improve Environmental Protection, with 
U.S. Assistance, but Continue to Face Challenges: 

According to officials in Chile, Peru, El Salvador, and Guatemala, 
their countries passed or made changes to their environmental laws and 
established or strengthened environmental institutions since signing 
their respective FTAs. U.S. agencies worked with these partners under 
environmental cooperation agreements to help them build capacity to 
meet FTA environmental commitments. However, these countries continue 
to face challenges, including limited technical capacity and 
inadequate resources for enforcing environmental protection. 

FTA Countries Have Passed Environmental Laws and Established or 
Strengthened Environmental Institutions: 

Chile: 

According to State, Chile has taken steps to strengthen environmental 
standards since signing the FTA and improved enforcement of its 
environmental laws. In addition, according to Chilean officials, the 
country continues to take steps to increase transparency of government 
information on the environment and has made progress in increasing 
public participation in government environmental decision making. 
According to U.S. and Chilean officials, much of the progress was the 
result of a new environmental law, approved in 2010 that they said 
reformed the country's environmental framework by establishing new 
agencies.[Footnote 10] For example: 

* Environment Ministry--along with the president, is responsible for 
designing and implementing environmental policies, plans, and programs. 

* Environmental Superintendency--responsible for enforcing 
environmental laws and regulations, including assessing fines and 
sanctions for violations. 

* Environmental Evaluation Service--responsible for managing and 
modernizing Chile's environmental impact assessments for both public 
and private sector projects to ensure compliance with applicable 
environmental standards. 

* Environmental tribunals--responsible for judicial review of 
Environmental Superintendency decisions and settling environmental 
challenges or resolution of environmental damage claims, and hearing 
other environmental cases. 

CAFTA-DR: El Salvador and Guatemala: 

According to Salvadoran officials, a key step in El Salvador's meeting 
its CAFTA-DR environmental commitments was the 2012 reform of its 1998 
Environmental Law. The law established the Ministry of Environment and 
Natural Resources, with the authority to protect the environment and 
conserve, restore, and promote the use of natural resources. The 
ministry is responsible for implementing the environmental law as well 
as the Natural Protected Areas and Wildlife Conservation laws. 
According to Salvadoran officials, the 2012 reform allowed for the 
creation of environmental tribunals and establishment of the tribunals 
as legal authorities responsible for determining the civil liability 
for acts against the environment. According to State officials, 
another important step was taken in 2013, when the ministry launched 
its National Environment Policy and Strategy to address sanitation, 
biodiversity, climate change, and water resources. In addition, 
according to a Salvadoran official, the establishment of an 
environmental "hotline" in 2011 increased the opportunity for public 
participation in oversight. 

According to a Guatemalan official, Guatemala's legal reforms 
established a Ministry of Environment and Natural Resources in 2000. 
The ministry is responsible for formulating and implementing 
environmental policies and approves and oversees compliance with 
environmental impact assessments. Guatemala joined the CITES 
convention in 1980. According to a Guatemalan Environment Ministry 
official, its 2013 climate change legislation was another important 
step in meeting the CAFTA-DR environmental commitments.[Footnote 11] 
Environmental regulations are included in other sector-specific laws 
and regulations, including the Forest, Hydrocarbons, and General 
Fishing and Aquaculture laws, according to a ministry official. 
According to this official, other key steps include the ministry's 
creation in 2011 of the Environmental Auditing Unit and the setting up 
of the environmental hotline for persons to make environmental 
submissions. 

Although we focused on El Salvador and Guatemala for our site visits, 
CAFTA-DR officials we met with in Washington, D.C., provided examples 
of steps their countries have taken to improve environmental 
protection. For example, according to these officials, Honduras 
improved waste water treatment; the Dominican Republic created 
programs for issuing environmental permits; and Costa Rica increased 
its use of renewable energy. 

Peru: 

U.S., Peruvian, and NGO officials credit the FTA with helping the 
country take steps to improve environmental protection. Peruvian 
officials cited actions that include establishing the Environment 
Ministry, with an investigative arm, to verify compliance with 
environmental legislation and oversee the process of obtaining 
environmental impact assessments; establishing an independent forestry 
oversight body to conduct audits of forestry concessions and take 
administrative enforcement actions, assess monetary fines, and cancel 
concessions for noncompliance; and enacting a new Forestry and 
Wildlife Law in 2011. According to State officials, Peru also 
undertook a public consultations process to collect input from all 
interested stakeholders, including indigenous communities, on draft 
implementing regulations for the new law. In addition, according to 
USTR, Peru did the following: 

* adopted laws and administrative procedures for managing and 
supervising the issuance of export permits for big-leaf mahogany and 
Spanish cedar, two endangered CITES-listed timber species; 

* strengthened the Organismo de Supervision de los Recursos Forestales 
y de Fauna Silvestre (OSINFOR), an independent forestry oversight body 
that conducts post-harvest audits to limit illegal logging;[Footnote 
12] 

* amended the criminal code to include substantial penalties for 
illegal activities related to the environment, such as illegal logging 
and wildlife trafficking; 

* developed and began implementing a national anti-corruption plan for 
forestry and wildlife. 

According to U.S., Peruvian, and NGO officials, the FTA helped 
motivate Peru to establish its National Forest Service and increase 
staff and capacity of OSINFOR. For example, according to Peruvian 
officials, post-harvest verifications of concessions increased from 49 
in 2009 to 1,255 in 2013. According to the Ministry of Culture, which 
is responsible for addressing issues that affect indigenous people, 
since entry into force of the FTA and enactment of the new 
environmental laws, Peru has taken steps to increase consultation with 
indigenous groups during the drafting of regulations to help them 
benefit from resources located on their traditional lands.[Footnote 
13] Despite these steps, according to U.S. officials, full 
implementation of the new environmental law and sustainable actions 
for environment protection will require finalization and 
implementation of regulations, and setting up viable mechanisms to 
assure the law is implemented. 

U.S. Assistance Helped Partners Build Capacity to Meet FTA Commitments: 

Chile: 

The overall objective of U.S. environmental cooperation with Chile was 
to establish a framework for cooperation to promote the conservation 
and protection of the environment, the prevention of pollution and 
degradation of natural resources and ecosystems, and the rational use 
of natural resources in support of sustainable development. According 
to U.S. and Chilean officials, Chile benefited from cooperation 
activities, including exchange programs with EPA, Interior, the Park 
Service and NOAA.[Footnote 14] For example, in 2010, Chilean officials 
traveled to the United States to observe how EPA addresses 
environmental disasters. According to officials from the Ministry of 
Environment, assistance provided by Interior and EPA in the areas of 
biodiversity, oversight of protected areas, conservation of endangered 
species, and implementation of multilateral environmental agreements 
has been valuable. Chile continues to receive help in meeting FTA 
commitments. For example, a World Wildlife Fund official described the 
fund's work with the Chilean government, under a grant from State, to 
help Chile implement its 2013 fishing and aquaculture law, which aims 
to protect vulnerable marine ecosystems and bring Chile's practices in 
line with international standards. 

Chilean officials stated that EPA and Interior helped them establish 
the new Risk Assessment Unit at the Ministry of Environment, focusing 
on hazardous chemicals and pesticides and their impact on 
biodiversity. As part of this effort, EPA and Interior hosted Chilean 
officials in the United States to share best environmental practices 
for mining, strengthen processes for mine closure, and improve risk 
assessment and evaluation through workshops and a study tour, 
according to EPA officials. EPA also provided assistance for managing 
risk assessment related to working and closed mines. According to 
Chilean Ministry of Environment officials, in 2014, the Risk 
Assessment Unit plans to complete a map of contaminated areas and 
implement the National Environment Risk Assessment Plan that it 
developed in 2012, with assistance from EPA. 

Since 2004, the government of Chile has worked in partnership with 
NOAA to develop a cooperation program on marine protected areas that 
includes training. Since 2009, NOAA's National Ocean Service has 
worked with the National Park Service to establish an interagency 
cooperation program on marine and terrestrial protected areas with the 
government of Chile.[Footnote 15] Representatives of Chile's Forest 
Service we met with in Santiago indicated their agency has had a very 
good relationships with several national parks, with Interior's 
National Park Service, and the U.S. Forest Service under "sister park-
to-park memorandums of understanding." For example, there is a 5-year 
agreement with Yosemite National Park and an arrangement with Redwood 
National Park in California that have enabled Chilean Forest Service 
officials to make several U.S. visits to observe how to manage 
wildfires. According to Chilean Environment Ministry officials, in 
2009, NOAA, with the support of the National Park Service, organized a 
Chilean delegation visit to Glacier Bay National Park and Preserve, 
and 2 years later, the United States and Chile developed the first 
bilateral marine-related sister park agreement. 

CAFTA-DR: El Salvador and Guatemala: 

According to State, the CAFTA-DR parties identified the following four 
thematic areas for environmental cooperation: (1) institutional 
strengthening; (2) biodiversity and conservation; (3) market-based 
conservation; and (4) private sector performance. 

Government and NGO officials we met with in El Salvador and Guatemala 
confirmed cooperation activities with U.S. agencies have helped these 
countries improve their capacity to meet CAFTA-DR environmental 
commitments. In addition, according to U.S. officials, State and USAID 
have supported the operations of the CAFTA-DR Secretariat for 
Environmental Matters. USAID and other agencies, including Interior, 
EPA, Justice, and NOAA, supported capacity building activities to help 
strengthen institutions to improve environmental protection.[Footnote 
16] For example, according to USAID officials, USAID supported the 
Central American Commission on Environment and Development by 
providing equipment and software to strengthen information and 
management systems in El Salvador. To support biodiversity and natural 
resource conservation, Interior helped El Salvador draft and adopt new 
legislation to achieve CITES category 1 status, indicating that El 
Salvador's legislation fully implements the CITES agreement, according 
to Interior officials. These officials stated that Interior supported 
the creation of the Central American Wildlife Enforcement Network, of 
which El Salvador and Guatemala are participants. The network brings 
together government officials across relevant agencies to combat the 
illegal wildlife trade at national and regional levels. The wide range 
of activities Interior worked on for the network included arranging 
technical advice by the U.S. Fish and Wildlife Service and supporting 
countries in developing studies to update scientific information. 
According to USAID officials, to improve private sector environmental 
performance and cleaner production, USAID and the Central American 
Commission on Environment and Development completed cleaner production 
assessments in the pig, poultry, and dairy sectors to identify areas 
for savings by implementation of improved production practices. At one 
dairy production facility that we visited, USAID and its partner, the 
World Environment Center, provided assistance that helped decrease the 
cost of production by reducing inputs. World Environment Center 
consultants pointed out several instances in which the company was 
wasting raw materials, energy, and other inputs such as water, and 
helped the firm streamline operations, according to an official at the 
facility. (See figure 2.) 

Figure 2: Dairy Production Facility, San Salvador: 

[Refer to PDF for image: photograph] 

Source: GAO. GAO-15-161. 

[End of figure] 

According to the Salvadoran Minister of Environment, EPA provided 
expertise in areas where El Salvador could not have addressed issues 
alone; for example, by providing assistance for setting standards for 
lead contamination and equipment, and advice to help set up a national 
water quality reference laboratory. (See figure 3.) 

Figure 3: Water Quality Reference Laboratory, San Salvador: 

[Refer to PDF for image: photograph] 

Source: GAO. GAO-15-161. 

[End of figure] 

EPA and Justice participated in discussions with Salvadoran officials 
in 2008 regarding El Salvador's efforts to establish environmental 
tribunals and conducted a workshop on environmental adjudication for 
judges from El Salvador in 2009. The Minister of Environment credited 
assistance from EPA and Justice with helping the National Police and 
Attorney General establish environmental units to address violations 
of environmental laws and regulations. This assistance included 
attorneys from Justice and EPA giving presentations and providing 
training in El Salvador, Guatemala, and Costa Rica, according to 
Justice officials. 

According to U.S. and Guatemalan officials, environmental cooperation 
activities in Guatemala have helped strengthen Guatemalan institutions 
and capacity to meet environmental standards and enforce its 
environmental laws. According to U.S. and Guatemalan officials, USAID-
supported activities helped the Guatemalan government draft a cleaner 
production policy and encouraged market-based conservation.[Footnote 
17] For example, a related State-sponsored program also supported a 
number of training activities and has helped introduce cleaner 
production into the curriculum in universities in the CAFTA-DR 
countries. At the Guatemalan Cleaner Production Center, an official 
told us that the project was instrumental in expanding their work with 
the Ministry of Environment and Natural Resources and private 
enterprises, and that it had a major impact in both strengthening 
institutions and helping small-and medium-sized enterprises 
participate in the cleaner production program that decreased 
electricity and water use.[Footnote 18] According to this official, 
U.S. support helped the center and the Ministry of Environment and 
Natural Resources decrease the cost of production by reducing the 
waste of raw materials, energy, water, and other inputs and helped the 
ministry achieve the following key steps: 

* Issuing a National Cleaner Production Policy in 2010--In 2011, 
Guatemala established a National Cleaner Production Committee to 
implement the policy. 

* Conducting environmental diagnostics by sector--The center is 
partnering with industry associations to help companies implement 
recommended improvements. 

* Working in rural Guatemala--The center provided training to 
familiarize 10 small-and medium-sized restaurants and hotels in the 
Panajachel region with legal requirements for environmental protection 
and helped them implement cleaner technology. 

According to a ministry official, EPA assistance helped Guatemala set 
up a reference laboratory for testing waste water by providing 
training, books, manuals, and equipment that enable them to analyze 
chemical, physical, and microbiological samples. According to this 
official, the waste water reference laboratory is recognized as one of 
the best in the region. 

According to Guatemalan officials, assistance from Justice and EPA 
helped improve the capacity of judges and adjudicators to address 
environmental issues. For example, Justice and EPA officials spoke at 
two workshops for Guatemalan judges on environmental adjudication that 
addressed subjects including principles of environmental law; 
regulations; permits; health and ambient based standards; public 
participation in environmental decision making; case management by 
judges. According to these officials, workshops also addressed civil 
and criminal penalties. 

Under a State-funded cooperative agreement (grant), the Humane Society 
International conducted a number of outreach and public awareness 
projects centered on biodiversity and endangered species conservation 
in Guatemala and other CAFTA-DR partner countries, according to State 
officials. For example, the Humane Society International awarded 
grants to two NGOs in Guatemala for public outreach campaigns that 
have reached 195,000 people, including students and farmers. According 
to a Humane Society International official, getting people from the 
public and private sectors to recognize the importance of 
environmental protection and compliance is challenging, but many, 
including regional government officials, are beginning to value 
environmental preservation. We visited a wildlife rescue center run by 
a Humane Society International grant recipient. The grant was used to 
help maintain the center for endangered species, including 
construction of a quarantine center for birds and mammals. (See figure 
4.) 

Figure 4: Wildlife Rescue Center, Petén, Guatemala: 

[Refer to PDF for image: 3 photographs] 

Source: GAO. GAO-15-161. 

[End of figure] 

We also visited a USAID-supported community forestry enterprise 
sawmill, run by a timber industry consortium representing a group of 
companies that have logging concessions in the protected area. USAID 
funding to the Rainforest Alliance helped the group improve 
certification of logging for timber production, according to an 
executive at the sawmill. 

Peru: 

The objective of the U.S. environmental cooperation agreement with 
Peru was to establish a framework for enhancing bilateral and regional 
environmental cooperation between the parties to protect, improve, and 
preserve the environment, including the conservation and sustainable 
use of their natural resources. According to USTR officials, the focus 
of cooperation activities was on commitments included in the FTA 
forest sector annex and improvement of forest sector governance. Key 
themes and objectives outlined in the work program include: 

* institutional and policy strengthening for effective implementation 
and enforcement of environmental laws; 

* transparency and public participation in environmental decision 
making and enforcement; 

* community and market-based activities; and: 

* improved environmental performance in the productive sector. 

To support these objectives and help Peru build capacity to combat 
trade associated with illegal logging, enhance forest governance, and 
promote legal trade in timber products, U.S. agencies supported a 
variety of cooperation activities. For example, according to 
officials, Interior provided assistance to help develop the 
institutional framework for effective management of indigenous 
territories, as well as sustainable forest, fisheries, and wildlife 
management. A USAID project helped Peru develop regulations for 
implementing its new forestry and wildlife law and enhance public 
participation in environmental decision making. In addition, a 
representative from an organization representing indigenous 
communities said that USAID helped his group recognize the threat that 
subsistence farming by poor indigenous people poses to the forest and 
identify options that are less damaging. The U.S. Forest Service is 
also helping Peru build technical capacity for forest management and 
monitoring, and improve institutional capacity for forest 
administration, according to its officials. Forest Service officials 
said a key activity to help Peru increase effective implementation and 
enforcement of its environmental laws and multilateral commitments was 
a project to develop a prototype for an information and control system 
for forest and wildlife resources. The system tracks timber that 
originates from the Amazon forest in Peru by creating electronic 
records of harvested timber that allows officials to monitor the flow 
of the timber, including CITES-listed species. Forest Service 
officials also said the prototype is designed to replace a paper-based 
system, which is subject to fraud and falsification of documents, and 
allow operators to limit opportunities for illegally harvested timber 
to enter the chain of custody. The U.S. Forest Service has also helped 
Peru provide training and outreach to civil society--particularly 
indigenous communities--in order to solicit comments on the draft 
regulations and enhance public participation in environmental decision 
making. In addition, the U.S. Forest Service helped Peru implement an 
online portal to gather public comment on the regulations, and 
provided training to Peru on management and analysis of public 
comment. Finally, the U.S. Forest Service supported Peru in developing 
the methodology, management, dissemination, and legal framework for 
field-based forest inventory data as well as remote sensing data for 
improved coordination and management of the Amazon forest, according 
to officials. (See figure 5.) 

Figure 5: Pucallpa Checkpoint, Ucayali, Peru: 

[Refer to PDF for image: 2 photographs] 

Source: GAO. GAO-15-161. 

[End of figure] 

Partners Continue to Face Environmental Challenges, Including Limited 
Technical Capacity and Resources for Enforcement of Environmental Laws: 

Chile: 

Chile continues to face environmental challenges, including water 
contamination due to mining and fish farming, according to U.S. 
officials. In addition, threats to biodiversity and marine 
biodiversity are ongoing concerns, according to U.S. and Chilean 
officials. Officials also identified the challenge of the government's 
limited technical capacity and resources in the regions to conduct 
investigations and enforce environmental laws and standards. In 
January 2013, the United States and Chile approved a work program that 
established priorities for cooperation activities. These priorities 
include strengthening implementation and enforcement of environmental 
laws and encouraging development of sound environmental practices, 
according to State. 

CAFTA-DR: El Salvador and Guatemala: 

El Salvador and Guatemala continue to face environmental challenges, 
including water pollution, deforestation, threats to endangered 
species, and limited capacity and resources to enforce environmental 
laws, according to U.S. officials. 

According to Salvadoran officials, water quality remains a concern in 
El Salvador, where only 5 percent of surface water meets water quality 
standards. Other challenges include toxic waste from abandoned 
industrial facilities, destruction of forests and habitat for 
endangered species, air pollution, urban sprawl, solid waste 
pollution, coastal pollution, and depletion of marine resources, 
according to officials. U.S. officials cited limited resources and 
technical capacity at the Ministry of Environment and Natural 
Resources to enforce environmental laws and regulations as an ongoing 
challenge. Similarly, Guatemala faces challenges including water 
pollution, deforestation, and illicit trade of endangered species, 
according to Guatemalan officials. According to an official from the 
Environment Ministry, of key concern are water contamination and 
degradation of the country's watersheds and the impact of climate 
change. Guatemalan officials stated that limited capacity and 
resources continue to challenge Guatemala's ability to enforce 
environmental laws. Guatemalan officials also cited the high turnover 
in ministries and agencies responsible for environmental protection as 
a challenge. 

Peru: 

Peru continues to face environmental challenges, including illegal 
activities on protected lands, illegal logging and mining, and limited 
resources and enforcement capacity, according to U.S. officials. 
Deforestation for agricultural production, including production of 
palm oil and illegal cultivation of coca, was also cited by an 
industry group and NGOs as a growing threat. They said that while the 
focus of the implementation of the FTA forest sector annex is on 
illegal logging of CITES-listed species, deforestation and 
transformation of the forest into agriculture production, including 
for illegal production of coca and expanded production of palm oil and 
coffee cultivation, is a significant threat to conservation of forest 
resources. Timber officials said that small-scale gold mining in the 
forest is also contributing to deforestation in the Peruvian Amazon 
forest. In addition, according to NGO officials, lack of resources and 
low wages for government officials limit environmental enforcement. An 
NGO official also noted that cuts in funding for OSINFOR, the agency 
responsible for auditing forest concessions, has led to a drop in 
inspections and limits training opportunities for regional staff and 
restricts its ability to enforce sanctions. According to this 
official, decentralization of authority to regional governments 
presents strains on resources for environmental protection, because 
funds have not been allocated to support delegation of functions from 
the central government to the regions. In addition, NGO officials 
noted the lack of coordination between the Ministries of Environment 
and Agriculture. For example, according to an NGO official, the 
Ministry of Agriculture is allowing the expansion of deforestation for 
agricultural production, while the Ministry of Environment's mission 
is to protect the forest from clear-cutting, which removes all trees 
from a given tract of forest, threatening the area's ecological 
integrity. 

Partners Are Establishing Secretariats to Process Submissions 
Regarding Environmental Issues: 

Representatives from the United States and other CAFTA-DR countries 
have established a Secretariat for Environmental Matters. The United 
States is also working with Peru, Panama, and Colombia to establish 
similar institutions. The secretariat provides a means for members of 
the public to submit allegations that the country is failing to 
enforce its environmental laws and, by investigating and publishing 
the findings, can bring pressure on the FTA countries to increase 
enforcement. 

CAFTA-DR Secretariat for Environmental Matters Is Functioning: 

According to CAFTA-DR Secretariat officials, the Secretariat for 
Environmental Matters began operating in 2007, and is staffed by three 
attorneys and other experts.[Footnote 19] The secretariat provided 
data showing that it received submissions, conducted investigations 
regarding those submissions, and published the results in the form of 
factual records.[Footnote 20] 

CAFTA-DR partners agreed on official procedures for the secretariat's 
work that, among other things, provide that the secretariat may 
consider the submission if it meets certain criteria, including: 

* be written in English or Spanish, 

* clearly identify the person making the submission, 

* appear to be aimed at promoting enforcement rather than at 
"harassing" industry, 

* be filed by a person of a CAFTA-DR partner country. 

Once the secretariat determines that the submission meets certain 
specified criteria, it determines whether the submission merits 
requesting a response from the government in question. If so, the 
government has 45 days to respond, unless there are exceptional 
circumstances. In its response, the government in question must inform 
the secretariat whether, among other things, the issue is the subject 
of a pending judicial or administrative proceeding. In general, 
secretariat officials compare the response from the government with 
the assertions in the submission, and decide whether to look further 
into the matter, according to secretariat officials. The secretariat 
can determine that the submission warrants a factual record and inform 
the Environmental Affairs Council of its determination.[Footnote 21] 
The secretariat then prepares the factual record if the council, by a 
vote, instructs it to do so. Only one party's vote is required, and so 
far all votes to proceed with a factual record have come from the 
United States, according to secretariat and State officials. To date, 
according to USTR officials, all final factual records have been made 
public. 

The secretariat has received 29 submissions since its inception. Of 
these, 24 were either suspended or withdrawn. This includes 
submissions that were suspended because (1) the parties voted not to 
proceed with the secretariat's recommendation to draft a factual 
record or (2) there were pending judicial or administrative procedures 
to address the concerns of the submission, according to secretariat 
officials. To date, the secretariat has recommended that 5 submissions 
proceed to factual records. Ultimately, the secretariat prepared and 
published three factual records. (See table 1.)[Footnote 22] 

Table 1: Status of Dominican Republic-Central America-United States 
Free Trade Agreement (CAFTA-DR) Secretariat Submissions Received from 
2007 to 2014: 

Suspended and/or withdrawn submissions: 24; 
Active submissions: 2; 
Published factual records: 3; 
Total submissions: 29. 

Source: CAFTA-DR Secretariat for Environmental Matters. GAO-15-161. 

Note: The secretariat recommended 5 of 29 submissions for the 
preparation of draft factual records; however, the council has voted 
for the publication of 3 of 29 submissions. 

[End of table] 

According to USTR officials, the Environmental Affairs Council 
considers the final factual record in light of the environmental 
chapter and the associated Environmental Cooperation Agreement and, as 
appropriate, may make recommendations to the Environmental Cooperation 
Commission related to matters addressed in the factual record (such as 
recommending that environmental cooperation projects be designed and 
funded) to enhance the party's mechanisms for monitoring its 
environmental enforcement. During the April 2014 CAFTA-DR 
Environmental Affairs Council meeting, for example, the council 
discussed a factual record about environmental licensing in Honduras, 
noted areas for expanded environmental cooperation, and heard from 
Honduras about actions it is taking to improve enforcement. 

Some CAFTA-DR governments have addressed some environmental concerns 
as a result of submissions and factual records publication, according 
to U.S., host government, secretariat, and NGO officials. For example, 
the Dominican Republic responded to a factual record regarding sea 
turtles and addressed the issue by instituting seizures and fines 
that, according to the secretariat, NGO, and government 
representatives, resulted in a significant reduction in the sale of 
products made from sea turtles as well as the number of places that 
trade them. 

The Number of Submissions to the CAFTA-DR Secretariat Increased 
Following Its Public Participation Outreach Campaign: 

The number of submissions to the CAFTA-DR Secretariat increased 
following an outreach campaign to increase public awareness, according 
to secretariat officials. The secretariat translated into multiple 
indigenous languages literature and other information about the FTA, 
functions of the secretariat, and criteria for drafting and turning in 
submissions, according to secretariat documents. The secretariat has 
conducted 39 of 77 planned outreach efforts in El Salvador and 
Guatemala thus far, but officials stated that they will be focusing 
their efforts in additional CAFTA-DR countries. 

According to secretariat data, the number of submissions the 
secretariat received in 1 year peaked at 10 in 2010, when it conducted 
its most extensive outreach efforts. Prior to 2010, the secretariat 
received a total of 4 submissions and, from 2010 on, received an 
average of 6 per year. Similarly, the number of people that the 
secretariat reported to have attended outreach events totaled roughly 
2,500 from 2007 through 2013, and peaked at almost 700 in 2010. (See 
figure 6.) 

Figure 6: Numbers of People Attending Outreach Campaign Events and 
Numbers of Submissions Received, 2007 to 2013: 

[Refer to PDF for image: combined vertical bar and line graph] 

Year: 2007; 
Number of attendants at outreach campaigns: 0; 
Number of submissions: 1. 

Year: 2008; 
Number of attendants at outreach campaigns: 0; 
Number of submissions: 2. 

Year: 2009; 
Number of attendants at outreach campaigns: 410; 
Number of submissions: 1. 

Year: 2010; 
Number of attendants at outreach campaigns: 668; 
Number of submissions: 10. 

Year: 2011; 
Number of attendants at outreach campaigns: 422; 
Number of submissions: 8. 

Year: 2012; 
Number of attendants at outreach campaigns: 422; 
Number of submissions: 2. 

Year: 2013; 
Number of attendants at outreach campaigns: 501; 
Number of submissions: 5. 

Source: CAFTA-DR Secretariat. GAO-15-161. 

[End of figure] 

The CAFTA-DR Secretariat created a strategy that was specific to the 
country for the citizen outreach campaigns, according to officials. 
For example, the secretariat engaged human rights organizations and 
NGOs in El Salvador and Guatemala to assist with outreach campaigns, 
according to officials. According to secretariat officials, while the 
secretariat has raised awareness through its outreach, it cannot 
provide direct assistance to persons drafting submissions, in order to 
preserve independence and avoid giving the appearance of supporting a 
particular submission. 

Negotiations to Establish the Peru Secretariat Have Taken Longer than 
Anticipated: 

The United States, Peru, and the Organization of American States 
continued to negotiate the establishment of the Peru Secretariat for 
Submissions on Environmental Matters as of July 2014, more than 5 
years after the FTA entered into force. The FTA commits the United 
States and Peru to establish a secretariat to receive submissions 
about a party's effective enforcement of environmental laws. In 2010, 
the Environmental Cooperation Commission agreed to an Environment 
Cooperation Work Program for 2011-2014, which listed establishing a 
secretariat to receive submissions on environmental matters as an 
objective.[Footnote 23] 

According to USTR and State officials, the negotiations have included 
a number of complex issues, such as the structure of the secretariat's 
substantive functions and financial issues arising from the 
secretariat's operations. As of June 2014, USTR and State officials 
informed us that the United States and Peru had concluded negotiations 
on a bilateral Secretariat Agreement and on three Environmental 
Affairs Council decisions pertaining to issues such as staffing. USTR 
also indicated that the United States, Peru, and the Organization of 
American States agreed to the final terms of an agreement. According 
to USTR and State officials, final documents are all expected to be 
signed by the parties and approved by the council before the end of 
2014. 

In the absence of an operational Secretariat for Submissions on 
Environmental Enforcement Matters, the United States and Peru 
established an interim procedure to receive environmental submissions 
from the public, consistent with the FTA. According to these 
procedures, both governments shall provide written responses to 
submissions addressed to them, and shall make such submissions and 
responses publicly available in a "timely and accessible manner." In 
June and July 2013, USTR received submissions--in the form of two 
letters--from an environmental organization based in Lima expressing 
concerns over palm oil cultivation in Peru to the detriment of Peru's 
forests and wildlife. 

On July 31, 2013, in its response to the organization, USTR indicated 
that United States officials had been in touch with their governmental 
counterparts in Peru and would consider raising the matter with Peru 
at the Environmental Affairs Council. USTR also referred the 
representative from the environmental organization to a June 2013 
joint communiqué that highlighted the interim procedure for 
submissions, and recommended that the environmental organization 
engage with the Peru Ministry of Trade. The organization sent updates 
to the June and July letters, and USTR officials told us that they met 
with representatives from the environmental organization on two 
occasions after providing the July response, in November 2013 and 
March 2014. 

U.S. Resources for Cooperation Activities Have Declined Since Fiscal 
Year 2009: 

U.S. funding resources for FTA-related cooperation activities have 
declined since fiscal year 2009, because of a decline in CAFTA-DR 
funding and shifting budget priorities. In fiscal year 2013, funding 
for cooperation activities to countries under CAFTA-DR was 18 percent 
of its fiscal year 2009 level, while funding under the Peru FTA was 41 
percent of its fiscal year 2009 level. In general, funding levels for 
cooperation activities have varied for partner countries under FTAs 
for fiscal years 2004 through 2013. For example, cooperation 
activities in Peru and CAFTA-DR partner countries received over 90 
percent of the almost $151 million of funding for cooperation 
activities from fiscal years 2004 through 2013. More specifically, 
countries under CAFTA-DR received over $87 million in funding for 
cooperation activities from fiscal years 2004 through 2013, and Peru 
received nearly $49 million from fiscal years 2009 through 
2013.[Footnote 24] Cooperation activities in Chile received over $4 
million in funding since fiscal year 2009, as well. Funding for 
environmental cooperation to other FTA countries--including Morocco, 
Oman, Panama, and Jordan--totaled almost $10 million from fiscal years 
2004 through 2013. (See figure 7.) 

Figure 7: U.S. Funding for Cooperation Activities for Free Trade 
Agreement (FTA) Partner Countries for Fiscal Years 2004 through 2013: 

[Refer to PDF for image: stacked vertical bar graph] 

U.S. dollars in millions: 

Fiscal year: 2004; 
CAFTA-DR: $0.6 million. 

Fiscal year: 2005; 
CAFTA-DR: $1 million. 

Fiscal year: 2006; 
CAFTA-DR: $18.5 million. 

Fiscal year: 2007; 
CAFTA-DR: $19.6 million. 

Fiscal year: 2008; 
CAFTA-DR: $14.8 million; 
Peru: $3 million. 

Fiscal year: 2009; 
CAFTA-DR: $10 million; 
Peru: $14.7 million; 
Chile: $1 million; 
Remaining FTAs: $1.5 million. 

Fiscal year: 2010; 
CAFTA-DR: $12.5 million; 
Peru: $9 million; 
Chile: $1.5 million; 
Remaining FTAs: $2.8 million. 

Fiscal year: 2011; 
CAFTA-DR: $5.5 million; 
Peru: $12.6 million; 
Chile: $0.8 million; 
Remaining FTAs: $2.4 million. 

Fiscal year: 2012; 
CAFTA-DR: $2.9 million; 
Peru: $6.6 million; 
Chile: $0.7 million; 
Remaining FTAs: $1.8 million. 

Fiscal year: 2013; 
CAFTA-DR: $1.8 million; 
Peru: $2.5 million; 
Chile: $0.4 million; 
Remaining FTAs: $1.1 million. 

Source: Department of State. GAO-15-161. 

Note: "Other FTA countries" are Morocco, Oman, Panama, and Jordan. 

[End of figure] 

State and USAID provide funds for cooperation activities, spelled out 
in the environmental cooperation agreement work plans between the 
United States and an FTA country in order to achieve specific long-
term goals. For example, the CAFTA-DR environmental cooperation 
program has structured cooperation activities under the following five 
objectives: (1) institutional strengthening for effective 
implementation and enforcement of environmental laws; (2) multilateral 
environmental agreements, biodiversity, and conservation; (3) market-
based conservation; (4) improved private sector environmental 
performance; and (5) implementation of specific CAFTA-DR commitments. 
For CAFTA-DR, State and USAID provided the largest share of funding 
(45 percent) for strengthening environment-related legal institutions. 
For the Peru FTA, USAID provided nearly all of the $49 million funding 
to support forest conservation activities, of which 51 percent was 
used to implement activities through a contractor and 49 percent 
through the U.S. Forest Service.[Footnote 25] For the Chile FTA, State 
provided the largest portion of funding (35 percent) for development 
of environmental practices and technologies. 

State and USTR Improved Monitoring, but USTR's Process Lacks Key 
Elements: 

Since 2009, State has improved its management and monitoring of U.S.-
funded FTA cooperation activities, by working with the Organization of 
American States and a private firm that specializes in monitoring and 
evaluation. According to USTR officials, a focus of its efforts to 
monitor compliance and implementation of environmental commitments has 
been on the Peru FTA and its Annex for Forest Sector Governance. In 
terms of the remaining 19 FTA partners, USTR has taken initial steps 
to improve monitoring FTA partner country compliance with 
environmental commitments--such as developing a monitoring plan. 
However, its monitoring plan lacks key elements, such as indicators 
and time frames, to effectively track progress and partner countries' 
compliance with their FTA commitments. Internal control standards 
require establishing and reviewing performance measures and indicators 
and conducting ongoing monitoring to assess the quality of performance 
over time. 

State Improved Monitoring of United States-Funded FTA Cooperation 
Activities: 

Since our 2009 report, State has improved its monitoring and reporting 
of the results from environmental cooperation activities. In 2009, we 
found that State lacked mechanisms that would allow it to assess the 
effectiveness or efficiency of cooperation activities, among other 
things. Since then, State has funded contracts with the Organization 
of American States and a private firm to improve monitoring and 
evaluation, and reporting of cooperation activities in CAFTA-DR 
countries, and bilateral FTA partner countries such as Chile, Morocco, 
and Oman, according to State officials. USAID manages and funds 
cooperative efforts related to improving Peru's forest sector 
governance and therefore is responsible for monitoring activities in 
the Peru Forest Sector Initiative, according to State and USAID 
officials. State officials told us that USAID program managers in Peru 
provide them with quarterly reports.[Footnote 26] 

Since 2009, the Organization of American States has published four 
reports on monitoring and evaluation of cooperation activities in 
CAFTA-DR countries. Implementing agencies that provide assistance to 
the FTA countries, such as Interior, provide data and information on 
the results of the cooperation activities, according to Organization 
of American States officials. These officials then analyze the 
information and publish a public report, on behalf of State, on the 
extent to which the cooperation activities are achieving the broader 
objectives of the environmental cooperation agreement. Organization of 
American States officials added that, initially, implementing agencies 
did not align their performance indicators with the objectives of the 
environmental cooperation agreement. As a result, sometimes the 
activities did not reflect the needs of the partner country, and it 
was difficult to measure progress that resulted from the activities. 
According to Organization of American States officials, they conducted 
workshops for officials in the implementing agencies on developing 
indicators that focused on results of the cooperation activities. In 
addition, these officials assisted implementing agencies by providing 
them with the performance management framework that the Organization 
of American States created to guide the efforts of the implementing 
agencies, which reduced the amount of duplicative activities 
implementing agencies conducted with partner countries in the region, 
according to Organization of American State officials. In addition, 
Organization of American State officials developed a reporting 
template and distributed the template to implementing agencies to 
streamline data collection from the implementing agencies. This 
addressed a problem identified in the Organization of American States' 
first evaluation report of cooperation activities--that aggregating 
information to assess the extent to which cooperation activities 
achieved results was difficult because of the lack of a standardized 
reporting format. In addition, Organization of American States 
officials worked with officials from the partner countries to get them 
to agree on broad environmental principles and priorities and have 
them develop a vision of what environmental improvements they wanted 
to achieve. Next, the Organization of American States officials linked 
specific projects to those broad goals of the partner countries and 
the environmental cooperation agreement, according to Organization of 
American States officials. 

Similarly, since 2010, State has contracted with a private sector firm 
to monitor and evaluate cooperation activities in Chile, Morocco, and 
Oman. According to a representative of the firm, these efforts 
included: 

* Developing indicators that measured the results of the cooperation 
activities, rather than measuring the amount and types of activities 
conducted. 

* Conducting workshops with officials from implementing agencies to 
assist them with developing indicators suited to measuring the impact 
of their activities. In these workshops, representatives from the 
private sector firm also provided training to officials from 
implementing agencies on ways to harmonize indicators to streamline 
the reporting. This included developing harmonized indicators based on 
State's standard foreign assistance indicators, known as F-
indicators.[Footnote 27] For State and some implementing agencies, 
using the F-indicators as a basis to develop additional indicators for 
measuring outcomes of the cooperation activities was important, 
because State and other agencies are required to report on them 
separately. 

* Assisting implementing agencies with developing a reporting 
template, using the harmonized indicators, to streamline the data 
collection process. According to implementing agencies, the reporting 
template has simplified processes, giving them a more defined scope 
when developing cooperation activities, and has enabled them to report 
with targeted, specific indicators and outcomes. 

In addition, State has created formal and informal mechanisms to share 
information with stakeholders involved with conducting cooperation 
activities and officials in the partner countries. For example, State 
established a website to provide information to stakeholders involved 
in implementing cooperation activities in CAFTA-DR countries. In 
addition, State has instituted quarterly conference calls between 
agencies managing projects in the region to support coordination and 
avoid duplication of efforts. 

USTR Has Pledged More Robust Enforcement and Uses Bilateral Meetings 
with FTA Partner Countries as a Mechanism for Monitoring 
Implementation: 

USTR has pledged to vigorously monitor and enforce trade agreements, 
and included specific goals related to implementation of FTAs and FTA 
environmental provisions in its recent strategic and performance 
plans. USTR's 2014-17 Strategic Plan states that USTR will establish 
and lead a robust interagency program for monitoring implementation of 
FTA labor and environment obligations across all FTA partners. It also 
states that USTR will promptly analyze issues identified through 
monitoring and develop appropriate strategies to resolve them. In 
addition, its 2015 Performance Budget sets a performance goal to 
monitor implementation of each of the FTAs to ensure full compliance 
with all FTA and related commitments. 

The Government Performance and Results Act Modernization Act of 2010 
sets several requirements for performance plans, including that they 
provide a basis for comparing results.[Footnote 28] For example, 
performance plans should include a basis for comparing actual program 
results with the established performance goals and a description of 
how the goals are to be achieved, including defined milestones. 
[Footnote 29] 

USTR uses bilateral meetings of the Environmental Affairs Councils as 
one mechanism for monitoring implementation of FTA commitments with 
FTA partner countries, according to USTR officials.[Footnote 30] They 
further stated that most FTAs in our review require the United States 
and FTA partner countries to establish a council composed of senior 
officials of the United States and partner countries, and convene them 
annually unless the United States or the FTA partner country agree on 
an alternative date. The councils have generally convened every 10 to 
14 months for all agreements. In some instances, officials from USTR 
meet with officials from FTA partner countries several times within a 
year, according to USTR officials. For example, USTR officials told us 
that they have met--either through the council, or informally--with 
cabinet-level officials from CAFTA-DR countries to discuss 
implementation and environmental challenges, and to coordinate 
activities by country, or regionally. Most FTAs in our review also 
require that the councils host a public session, unless the United 
States and the FTA partner agree otherwise. USTR officials stated that 
the public sessions provide an opportunity for citizens and groups to 
introduce environmental issues to USTR and the FTA partner country, 
and raise implementation issues; these issues can become part of 
ongoing discussions or future council meetings. 

Much of USTR's Monitoring Efforts Have Focused on the Peru FTA and Its 
Annex for Forest Sector Governance: 

USTR officials told us that they have focused much of their efforts to 
improve FTA monitoring and enforcement since our 2009 report on Peru 
because of the extensive environmental commitments contained in the 
Peru FTA and the forest sector annex, and associated work underway to 
enable Peru's compliance. The officials stated that their efforts were 
in response to inputs from U.S. environmental stakeholders about what 
is important, as well as resource limitations.[Footnote 31] USTR 
developed several mechanisms for monitoring compliance with, and 
implementation of, commitments in the environmental chapter and Annex 
for Forest Sector Governance of the Peru FTA. For example, the 
Subcommittee on Forest Sector Governance was established under the 
annex to facilitate cooperation for activities specified in the annex 
and provide a forum for the United States and Peru to share views and 
information on any matter arising under the annex. For example, the 
forest sector annex includes specific commitments, such as the 
development of a system that will track and verify the chain of 
custody for wood harvested in Peru´s forests, and the supervision and 
issuance of permits for timber species covered by CITES. The 
subcommittee has met on several occasions. 

USTR formally reviews the progress that Peru and the United States 
have made in ensuring effective implementation of, and compliance 
with, commitments in the environmental chapter of the Peru FTA in the 
Environmental Affairs Council, according to USTR.[Footnote 32] The 
environmental chapter established the Environmental Affairs Council, 
and states that it should convene at least yearly, unless otherwise 
determined by the United States and Peru. 

Officials in Peru created a matrix that tracks the status of 
implementation of commitments from the environmental chapter and the 
annex, and shares this information with the public and with USTR. 
According to USTR officials, they use information from this matrix to 
help them oversee how Peru is addressing issues outlined in the forest 
sector annex of the FTA. In addition, according to these officials, 
USTR coordinates with State, USAID, and U.S. Forest Service staff in 
Peru to corroborate the information contained in the matrix. 
Stakeholders in the environmental and forestry sectors can access the 
matrix to verify the validity of the information published by the 
Peruvian government. Stakeholders, including environmental groups, 
with which GAO met in Peru said that they had taken such opportunities 
to seek clarification, request more robust steps, and encourage 
progress. Nevertheless, an NGO official told us that the timetable for 
action is not precisely defined and that progress is not meeting 
officials' expectations. Additional information on the lack of time 
frames is further discussed later in this report. 

Environmental Group Petitioned the Timber Committee to Request Peru to 
Audit Timber Exporters: 

Following the entry into force of the FTA, the President established 
the Interagency Committee on Trade in Timber Products from Peru 
(Timber Committee). The Timber Committee has authority to oversee 
operation of the agreement's forest sector annex, including requests 
to the government of Peru to conduct audits of particular exports and 
producers in Peru and verifications of particular export shipments to 
determine compliance with Peruvian law, according to U.S. agencies. 
The Timber Committee is chaired by USTR and composed of senior 
officials from the Departments of State, Justice, Interior, and 
Agriculture. Representatives from the Department of Homeland Security 
and USAID serve as observers. 

In April 2012, an environmental group petitioned USTR to exercise its 
authority under the Peru FTA Annex on Forest Sector Governance to 
request Peru to conduct an audit or verification of certain timber 
shipments, producers, and exporters of big-leaf mahogany and Spanish 
cedar that it considered to have been illegally harvested and exported 
to the United States. The environmental group also released an 
investigative report alleging the systematic export of timber from 
Peru to the United States it claimed was illegally harvested, 
transported, and traded.[Footnote 33] 

According to USTR, the Timber Committee investigated the allegations, 
but declined to exercise its authority under provisions in the forest 
sector annex to request the government of Peru to conduct audits and 
verifications of certain exporters, citing a significant decline in 
reported exports of these species and actions taken by the government 
of Peru in response to the investigation, among other things. However, 
in order to address challenges highlighted by the review and 
contribute to ongoing reform efforts undertaken by Peru, the committee 
decided to take the following actions: 

* seek agreement with Peru on specific actions it will undertake to 
address challenges Peru faces regarding management of big-leaf 
mahogany and Spanish cedar; 

* target U.S. capacity-building resources to assist Peru to carry out 
such actions; and: 

* regularly monitor Peru's progress. 

Bilateral Plan Developed to Address Concerns of the Petition, but It 
Lacks Performance Indicators and Time Frames for Achieving Objectives: 

In January 2013, less than 1 month after the Timber Committee issued 
its decision, USTR staff traveled to Peru and reached agreement on a 
bilateral plan to address specific challenges in Peru's forestry 
sector. The bilateral plan covers areas addressed in the forest sector 
annex, but with greater specificity, reflecting challenges identified 
by the Timber Committee in its review of the petition. For example, 
the bilateral plan includes details not included in the forest sector 
annex, such as expanding Internet connectivity of transportation check 
points to improve systems to track and verify the chain of custody of 
timber products. According to the plan, the targeted set of actions 
includes: 

* strengthening physical inspections of big-leaf mahogany and Spanish 
cedar contained in harvesting plans prior to their approval, in 
accordance with Peru's forest and wildlife laws and regulations; 

* strengthening accurate harvest plan development and implementation 
by improving capacity of forest sector stakeholders, such as forest 
engineers, and native communities, among other stakeholders; 

* ensuring timely criminal and administrative proceedings to sanction 
any party who violates Peru's forestry and wildlife laws; 

* improving systems to track and verify the chain of custody of timber 
exports of big-leaf mahogany and Spanish cedar; and: 

* strengthening the implementation of Peru's National Anti-Corruption 
Forest and Wildlife Sector Plan. 

Federal internal controls standards call for ongoing monitoring. This 
includes establishing performance indicators and time frames to track 
performance over time.[Footnote 34] Although the bilateral plan 
identifies a targeted set of actions for Peru to undertake to address 
challenges in its forestry sector, the lack of performance indicators 
and time frames for completing action precludes USTR from having a 
clear understanding of the extent to which Peru is meeting its 
commitments in the bilateral plan. For example, USTR was unable to 
provide us data on the extent to which Peru has improved the 
verification of the chain of custody of timber exports. Moreover, an 
NGO official stated that the stakeholders and the public do not know 
the extent to which Peru is meeting its commitments because there are 
no time frames or performance indicators included in the plan. 

USTR Has Taken Steps to Improve Monitoring FTA Partner Country 
Compliance with Environmental Commitments, but Its Process Lacks Key 
Elements: 

USTR has taken some important steps to strengthen monitoring. In 2012, 
USTR established a subcommittee for monitoring partner countries' 
compliance with, and implementation of, their FTA commitments. 
[Footnote 35] In our 2009 report, we said that USTR lacked plans to 
enforce, monitor, and report on progress under the FTAs, and 
recommended that USTR take steps to improve its plans. In April 2013, 
the subcommittee developed a plan for monitoring partner countries' 
compliance with commitments across all agreements, according to USTR. 
More specifically, the goal of the plan is to assist the monitoring 
subcommittee in identifying any positive or negative developments, and 
to develop strategies to address any concerns, according to USTR. The 
monitoring plan consists of four elements: (1) gathering facts from 
relevant and reliable sources, (2) assessing and evaluating the 
information obtained, (3) identifying and prioritizing issues, and (4) 
developing a strategy for addressing priority issues. 

USTR began implementing the first element of its monitoring plan--
gathering facts from relevant and reliable sources--in 2013, after it 
requested that U.S. embassies in partner countries provide 
information, in reporting cables, on the major environmental 
developments that have occurred in those countries in the past 5 
years. USTR officials stated that the subcommittee meetings, held in 
December 2013 and April 2014, featured an initial assessment of 
information collected from all FTA partners in the reporting cables 
prepared in response to USTR's request (step 2). USTR indicated that 
it has begun to identify issues (step 3) and in some cases begun to 
take steps to address concerns (step 4), such as by gathering 
additional information, engaging in discussions with FTA partners, 
raising issues in meetings of institutional bodies, or working on 
targeted capacity building. 

According to USTR officials, they are executing their monitoring plan 
on a partner-by-partner basis. For example, USTR indicated that based 
on information learned through fact gathering, it has raised several 
issues in recent Environmental Affairs Council meetings with Colombia, 
Panama, and the CAFTA-DR partner countries, as well as technical 
discussions with Peru. Further, it is working to develop an updated 
environmental cooperation work plan with Oman. 

Although USTR's plan for monitoring FTA environmental chapter 
implementation calls for processes, such as developing strategies and 
solutions on a partner-by-partner basis, as previously discussed, 
federal internal control standards call for monitoring that includes 
establishing indicators and time frames to track performance over time 
and ensure that the priorities identified as a result of its 
monitoring processes are promptly resolved.[Footnote 36] USTR's 
monitoring process is missing these key elements. USTR officials told 
us that FTA-related environmental issues do not lend themselves to 
monitoring in the form of identifying performance indicators or 
designating a specific completion date for measuring progress. 
However, as noted above, the Government Performance and Results Act 
Modernization Act of 2010 requires agencies to provide a means for 
assessing performance. Although the matrix Peru has developed is 
useful for tracking the status of steps Peru is supposed to take under 
its FTA environmental chapter and forest sector annex, use of the 
matrix does not preclude the internal control criteria requiring 
performance indicators and time frames. Establishing performance 
indicators and time frames would improve USTR's ability to monitor 
progress and ensure that each partner country is meeting its FTA 
environmental commitments. 

Conclusions: 

Chile, El Salvador, Guatemala and Peru continue to face environmental 
challenges, including limited technical capacity and enforcement 
resources. Chile has taken significant steps to meet its FTA 
obligations since 2009, while concerns remain about Peru's capacity to 
enforce protection of endangered timber species and address emerging 
deforestation threats to the Amazon. Given the decline in funding for 
environmental cooperation activities in recent years, it is 
particularly important that State and other U.S. agencies target 
resources in ways that will most effectively assist partner countries 
in addressing continued and emerging environmental challenges. USTR 
has taken several steps to improve monitoring since we issued our 2009 
report, but its plan for monitoring all 20 FTA partner countries' 
compliance, and the U.S.-Peru bilateral plan to address specific 
challenges in Peru's forestry sector, lack time frames and performance 
indicators to assess progress. Notably, USTR is unable to determine 
the impact of the verification system in Peru and assure stakeholders 
and the public that Peru is meeting its commitments in the bilateral 
action plan. The lack of time frames and indicators also limits USTR's 
ability to provide accurate information on the extent to which all FTA 
partners are meeting their environmental commitments. In addition, 
information on the status of each FTA partner's progress in meeting 
its environmental commitments will enable USTR to provide guidance on 
where State and other implementing agencies should best target 
resources. Improved monitoring would help ensure that expanded trade 
does not come at the expense of environmental protection. 

Recommendations for Executive Action: 

To enhance its ability to monitor partner compliance with FTA 
environmental commitments and provide timely and useful information to 
help target assistance where it is most needed, USTR should: 

* establish time frames and develop performance indicators to assess 
the extent to which Peru's actions are meeting the commitments of the 
U.S.-Peru bilateral action plan to address specific challenges in 
Peru's forestry sector, and: 

* work with its interagency monitoring subcommittee to establish time 
frames and performance indicators to implement its plan for enhanced 
monitoring of implementation of FTA environmental commitments across 
all FTA partner countries. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to State and USTR, as well as 
USAID, Interior, the Department of Agriculture's U.S. Forest Service, 
EPA, the Department of Commerce's NOAA, and Justice for review and 
comment. We received technical comments from State, USTR, Interior, 
Justice, and NOAA, which we incorporated, as appropriate. The 
Department of Agriculture's U.S. Forest Service provided written 
comments which we have reprinted in appendix II. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies of this report 
to the appropriate congressional committees, the Secretary of State, 
the U.S. Trade Representative, and other interested parties. In 
addition, the report will be available at no charge on the GAO website 
at [hyperlink, http://www.gao.gov]. 

If you or your staff has any questions about this report, please 
contact Kimberly M. Gianopoulos at (202) 512-8612 or 
GianopoulosK@gao.gov. Contact points for our Offices of Congressional 
Relations and Public Affairs may be found on the last page of this 
report. GAO staff who made major contributions to this report are 
listed in appendix III. 

Signed by: 

Kimberly M. Gianopoulos: 
Acting Director, International Affairs and Trade: 

[End of section] 

Appendix I: Scope and Methodology: 

To examine steps selected partner countries have taken with U.S. 
assistance to implement free trade agreement (FTA) environmental 
commitments, we analyzed the structure and provisions of the 
environmental chapters of the 11 FTAs that entered into force from 
2003 through 2013 to identify the range of their provisions and the 
procedures, if any, for the receipt and consideration of public 
environmental submissions under those FTAs. We also examined in detail 
the environmental chapters in the Chile FTA, Dominican Republic-
Central America-United States Free Trade Agreement (CAFTA-DR), and 
Peru Trade Promotion Agreement to identify similarities and 
differences among their key environmental provisions.[Footnote 37] We 
interviewed officials from the Office of the United States Trade 
Representative (USTR), Department of State (State), and United States 
Agency for International Development (USAID) in Washington, D.C., and 
State, USAID, and host government and nongovernmental organization 
(NGO) officials in two CAFTA-DR countries, El Salvador and Guatemala, 
as well as in Chile and Peru. To discuss illustrative examples of 
assistance provided by U.S. agencies to help partners meet FTA 
environmental commitments, we interviewed officials from State, USTR, 
the Interior Department (Interior), the Environmental Protection 
agency (EPA), the Department of Justice (Justice), the National 
Oceanic and Atmospheric Administration (NOAA), and the U.S. Forest 
Service prior to making field visits to El Salvador, Guatemala, Chile, 
and Peru, where we interviewed State, USAID, and U.S. Forest Service 
staff and host government, NGO, and private sector officials. 

In addition, in the four countries we visited a number of project 
sites. For example, in El Salvador we visited the wastewater reference 
laboratory that EPA helped set up, as well as several private firms 
that participated in cleaner production activities, including a 
boutique hotel, a producer of dairy products; and a dairy and pig 
farm. Among the project sites we visited in Guatemala were the Cleaner 
Production Center, the ARCAS Wildlife Rescue Center, and a sawmill in 
the Petén region. In Chile, we met with World Wildlife Fund officials 
and a group of olive oil producers participating in a clean production 
program. Finally, we visited a number of project sites in the Ucayali 
province in Peru. For example, we visited a site where logs are 
transported from the Amazon region down the river to sawmills for 
processing. We witnessed a demonstration of USAID's and U.S. Forest 
Service's prototype of an electronic tracking system. In addition, we 
met with regional government officials and officials implementing the 
USAID/Peru-Bosque project to enhance public participation by helping 
local groups and indigenous people comment on draft regulations for 
the new Forestry and Wildlife Law. 

To examine selected partner mechanisms to process public environmental 
submissions, we reviewed the environmental chapters of FTAs, which 
entered into force from 2003 through 2013, to determine which 
agreements required the establishment of an independent body, such as 
a secretariat, to receive and respond to citizen submissions. We 
interviewed officials at State, USTR, and USAID. In addition, we 
interviewed officials at the CAFTA-DR Secretariat for Environmental 
Matters in Guatemala City, Guatemala; and analyzed data obtained from 
the CAFTA-DR Secretariat to determine the number of citizen 
submissions it had received, and the number of factual records 
published since the establishment of the CAFTA-DR Secretariat. To 
determine the status of negotiations for establishing the Peru 
Secretariat for Environmental Matters, we interviewed officials from 
USTR, State, and the Organization of American States; and submitted 
questions to officials in the government of Peru. 

To examine U.S. resources to assist partners in implementing 
environmental commitments, we collected budget data on funding of FTA 
environmental activities from State and USAID. To show trends in total 
funding for environmental activities by FTA, we aggregated funding for 
each FTA across agencies and plotted total funding over the years in 
which the FTA was in effect. We depicted total resources for each FTA 
by adding available funding data across both agencies and years in 
which the FTA was active. We also used FTA-level budget data to show 
the allocation of funding across programs. We asked USTR officials for 
estimates of staff resources dedicated to FTA implementation and 
monitoring. We assessed the reliability of the data by (1) performing 
electronic testing for errors in accuracy and completeness and (2) 
interviewing agency officials knowledgeable about the data sources. We 
determined that the data were sufficiently reliable for illustrating 
trends in FTA-related environmental assistance across agencies. 

To examine how State monitors FTA environmental cooperation activities 
and USTR monitors partner compliance with FTA environmental 
commitments, we interviewed officials at State and USTR and 
implementing agencies, including EPA, Justice, Interior, USAID, the 
U.S. Forest Service and NOAA. In addition, we interviewed officials 
from the Organization of American States and Le Groupe-conseil Baastel 
(Baastel), a private firm, which have assisted State with collecting, 
analyzing, and reporting the results of nine partner countries under 
four agreements. Furthermore, we reviewed documentation, such as data 
collection templates, monitoring reports, and performance management 
plans from State, the Organization of American States, Baastel, and 
supporting U.S. agencies, such as EPA and USAID. We interviewed 
officials at USTR, and reviewed documentation, such as its plan to 
monitor compliance and implementation. Furthermore, we reviewed cables 
detailing the status of the environment in partner countries over the 
past 5 years. USTR requested this information--through State--from 
U.S. embassies in partner countries, to collect information as part of 
its plan to monitor progress under the provisions. We interviewed 
officials at USTR to identify mechanisms that it uses--such as the 
Interagency Timber Committee--to monitor compliance and implementation 
of provisions in the environmental chapter of the Peru Trade Promotion 
Agreement, and its Annex on Forest Sector Governance. Also, we 
reviewed documentation, such as the environmental chapter of the Peru 
Trade Promotion Agreement, and its Annex on Forest Sector Governance, 
the matrix detailing the status of implementing provisions provided to 
USTR and the public by the government of Peru, and the Joint 
Communiqué of the Meetings of the Governments of the United States and 
Peru Regarding Forest Sector Governance. 

We conducted this performance audit from May 2013 to November 2014 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Comments from the Department of Agriculture's U.S. Forest 
Service: 

United States Department of Agriculture: 
Forest Service: 
Washington Office: 
1400 Independence Avenue, SW: 
Washington, DC 20250: 

File Code: 1420: 
Date: September 8. 2014: 

Ms. Kimberly M. Gianopoulos: 
Acting Director, International Affairs and Trade: 
U.S. Government Accountability Office: 
441 G. Street NW: 
Washington, DC 20548: 

Dear Ms. Gianopoulos: 

The Forest Service (FS) appreciates the opportunity to respond to the 
U.S. Government Accountability Office (GAO) draft report, GAO-14-717, 
"Free Trade Agreements (FTA): Office of the U.S. Trade Representative 
Should Continue to Improve Its Monitoring of Environmental 
Commitments." This draft does not contain recommendations for USDA. 
The agency has reviewed the draft report and generally agrees with the 
recommendations. 

Thank you again for the opportunity to review your draft report. If 
you have any questions, please contact Thelma Strong, Chief Financial 
Officer, at 202-205-0429 or tstrong@fs.fed.us. 

Sincerely, 

Signed by: 

Thomas L. Tidwell: 
Chief: 

[End of section] 

Appendix III: GAO Contacts and Staff Acknowledgments: 

GAO Contact: 

Kimberly M. Gianopoulos (202) 512-8612 or GianopoulosK@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Kim Frankena, (Assistant 
Director), Tom Zingale (Analyst-in-Charge), Kyerion Printup and John 
O'trakoun made key contributions to this report. Sada Aksartova, Juan 
P. Avila, Karen Deans, David Dornisch, Ernie Jackson, and Oziel 
Trevino provided additional assistance. 

[End of section] 

Footnotes: 

[1] Bipartisan Trade Promotion Authority Act of 2002, 19 U.S.C.A. §§ 
3801-13, 

[2] GAO, International Trade: Four Free Trade Agreements GAO Reviewed 
Have Resulted in Commercial Benefits, but Challenges on Labor and 
Environment Remain, [hyperlink, 
http://www.gao.gov/products/GAO-09-439] (Washington, D.C., July 10, 
2009). 

[3] For further information on the steps agencies had taken by that 
point, see [hyperlink, http://www.gao.gov/products/GAO-09-439]. 

[4] These 11 FTAs include Chile, Singapore, Australia, Morocco, 
Bahrain, CAFTA-DR countries (El Salvador, Guatemala, Honduras, 
Nicaragua, the Dominican Republic, and Costa Rica), Oman, Peru, Korea, 
Colombia, and Panama. 

[5] For further information on Chile's and Peru's environmental 
challenges see USTR, Interim Environmental Review, Trans-Pacific 
Partnership Agreement (August 2013), accessed August 28, 2014, 
[hyperlink, http://www.ustr.gov/trade-topics/environment/environmental-
reviews]. 

[6] According to the Society of American Foresters, The Dictionary of 
Forestry, a forestry concession is "a contract, license, or permit 
granted to a firm or a person to extract and market timber (timber 
concession) or other produce commercially from a defined area of the 
forest within a given period--note a timber concession may specify the 
number, type, and size of tree that may be harvested." Accessed August 
28, 2014, [hyperlink, 
http://dictionaryofforestry.org/dict/term/forest_concession]. 


[7] According to USTR, the provisions in FTAs provide for an FTA's 
entry into force through an exchange of formal diplomatic notes among 
the parties. In the United States, the President must first determine 
that the trading partner has come into compliance with obligations 
that will take effect when the agreement enters into force. 

[8] The environmental cooperation agreement establishes an 
Environmental Cooperation Commission, which State chairs. Under the 
agreement, the commission is responsible for developing a work program. 


[9] State's Bureau of Oceans and International Environmental and 
Scientific Affairs has the lead responsibility for FTA-related 
cooperation activities. 

[10] According to State officials, Chile passed a key environmental 
law (Law 19.300) in 1994; in 2010 it passed a law (Law 20.417) that 
reformed the 1994 general environmental regulatory law and created the 
Environment Ministry, Environmental Evaluation Service, and 
Environmental Superintendency; it also passed Law 20.600 that 
established the environmental tribunals in 2012. 

[11] According to U.S. officials, recognizing the country's 
vulnerability to climate change, Guatemala passed Law-Initiative No. 
4139: Framework Law to Regulate the Reduction of Vulnerability, 
Obligatory Adaptation, Facing Climate Change and the Mitigation of 
Green House Gases Effects in Guatemala in 2013. 

[12] OSINFOR includes seven regional offices. It was created by law in 
2008 to verify concessions to strengthen the regulation of the forest 
sector, according to Peruvian officials. 

[13] According to Peruvian officials, following entry into force of 
the FTA, indigenous people blocked a highway near Bagua for 2 months, 
demanding the repeal of decrees passed by the government that opened 
up native territories in the Amazon forest to oil, mining, and logging 
companies. The decrees were eventually repealed, according to these 
officials. 

[14] According to Interior officials, its assistance to date has 
focused on mining regulation and oversight, biodiversity, protected 
area management, and improved CITES implementation. 

[15] According to NOAA officials, in January 2013, NOAA, the National 
Park Service, the Chilean Ministry of Environment, the National Forest 
Corporation, and the Under-secretariat for Fisheries and Aquaculture 
entered into an interagency memorandum of understanding that provides 
a framework for cooperation on marine and terrestrial protected areas. 
This agreement was possible due to the work that NOAA and the National 
Park Service developed with Chile with funding from State under the 
FTA environmental cooperation agreement, according to U.S. and Chilean 
officials. 

[16] According to NOAA, with State and USAID funding, the National 
Marine Fisheries Service supported projects, including use of turtle 
excluder devices; development and implementation of fisheries observer 
programs; and fisheries law enforcement, including establishment of a 
Fisheries Monitoring and Control Network for countries in the region. 

[17] Clean production requires updating practices to reduce water and 
energy consumption, as well as waste. 

[18] The Guatemala Cleaner Production Center is one of 14 national 
centers operating throughout Central and Latin America. Since 2008, it 
has been working closely with the Ministry of Environment and Natural 
Resources and USAID on CAFTA-DR environmental improvement projects. 
The center functions as a specialist on technical issues as well as a 
mediator between industry and government in implementing cleaner 
production requirements. 

[19] The CAFTA-DR environmental chapter established the environmental 
submissions mechanism, which allows persons of CAFTA-DR countries to 
file submissions claiming that a party to the agreement is failing to 
effectively enforce its environmental laws. 

[20] A factual record is a report based on the facts of the 
investigation, which is publicly available after publication. 

[21] The Environmental Affairs Council consists of representatives 
from each FTA country and is charged with overseeing the operation of 
the CAFTA-DR environmental chapter. 

[22] One active submission is pending a party response, according to 
secretariat officials. 

[23] The United States and Peru established an Environmental 
Cooperation Commission, pursuant to the Environmental Cooperation 
Agreement signed on July 26, 2006. The commission is responsible for 
defining a work program that establishes specific goals and objectives 
and areas for cooperation that reflect national priorities for each 
party, among other responsibilities, which included establishing a 
secretariat as far back as 2010. 

[24] According to USAID, total FTA funding for Peru was about $59 
million through fiscal year 2013, of which, according to our analysis, 
about $49 million was provided for FTA environmental activities. 

[25] State provided $600,000 for environmental cooperation through 
Development Assistance funds. 

[26] According to State officials, USAID issues quarterly reports for 
the USAID/U.S. Forest Service Peru Forest Sector Initiative. In 
addition to the quarterly reports, officials at State conduct regular 
conference calls with USAID and U.S. embassy officials on the status 
of cooperation activities in Peru, according to State and U.S. embassy 
officials in Lima. 

[27] State and USAID, drawing on technical expertise within both 
agencies and from within the development and security communities, 
have jointly developed standard indicators to measure what is being 
accomplished with foreign assistance. 

[28] For the GPRA Modernization Act, see P.L. 11-352. For performance 
plan requirements, see 31 U.S.C. § 1115(b). For further information 
see: [hyperlink, 
http://www.gao.gov/key_issues/managing_for_results_in_government/issue_s
ummary]. 

[29] For milestones, see31 U.S.C. § 1115(b)(5(B) and 1115(b) (7). For 
further information see: [hyperlink, 
http://www.gao.gov/key_issues/managing_for_results_in_government/issue_s
ummary]. 

[30] Some FTAs provide for establishment of a body under a different 
name; such bodies function in the same manner as an Environmental 
Affairs Council. 

[31] According to USTR officials, USTR's Environment and Natural 
Resources Office had six full-time staff as of 2013, consisting of 
five professional staff and one administrative assistant. USTR does 
not precisely track hours dedicated to monitoring and implementing FTA 
environmental commitments; however agency officials provided estimates 
of staffing resources dedicated to FTA environmental activities. 

[32] It is important to note that where an FTA establishes an 
environmental affairs council, the council meets annually to review 
implementation of the chapter. These meetings are co-chaired by USTR 
and State on the U.S. side and relevant officials of the FTA partner 
government. 

[33] For more information on the specifics of this case, see 
Environmental Investigation Agency, The Laundering Machine 
(Washington, D.C.: 2012). 

[34] See GAO, Internal Control: Standards for Internal Control in the 
Federal Government, [hyperlink, 
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C.: 
Nov. 1, 1999). 

[35] The Subcommittee on Monitoring of Implementation of and 
Compliance with FTA Environment Chapter Obligations is a subcommittee 
to the Trade Policy Staff Committee. 

[36] See [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[37] Our analysis was not intended to be interpretive of the 
environmental provisions' legal texts or to demonstrate or provide 
evidence regarding the effectiveness of those provisions. 

[End of section] 

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