pls answer question 2 and 3

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In Practice 3.1 Fraud and Deficiencies in Ethics and CSR Environmental Degradation: The result of Corruption and One example of the difficult nature of multination negotiation over environmental problems is the situation that has been observed along the Mexico-U.S. border. As a result of incentives created through multilateral trade agreements, it is econom- ically advantageous for American companies to assemble products in the border region of Mexico. The result of the increased manufacturing activity in Mexico has been the production of significant volumes of hazardous waste. This waste was sup- posed to be returned to the United States for safe disposal, however, this has not been what has evolved over time. Hazardous waste has not been adequately stored and has leaked into the ground- water, affecting both Mexicans and Americans. The reasons for this are numerous. First, although Mexico does have stringent environmental regulation, the implemen- tation and monitoring of the adherence to these regulations is, at best, lax. Fines for noncompliance are often significantly less than the costs of adhering to the regula- tions. The economic benefit these American factories provide the people of Mexico makes it undesirable for the Mexican government to come down hard on Americans who have violated the regulations. To lose investment in these regions would risk putting a great number of Mexican workers into poverty. Second, the legal system in Mexico does not hold the offending parties responsible for their actions. Individual lawsuits brought against companies for environmental damage are rare, and class- action lawsuits are virtually nonexistent. Mexican companies contract with trucking services to dispose of hazardous waste but are not held liable if those contractors dump the hazardous material inappropriately. Given the costs involved with appro- priate disposal, it is only reasonable for these contractors to disregard regulations and use illegal dumping locations. The problem of American-owned Mexican factories polluting the environment would, at first glance, appear to be solely within Mexican control. However, the United States is also impacted in a number of ways. First, its companies are responsible for much of the pollution problem. So long as it is cheaper to produce in Mexico because it is less costly than adhering to U.S. environmental standards, the U.S. companies will continue to contribute to the problem. Second, and most pressing, is that the health of U.S. residents has been placed in jeopardy as a result of the Mexican pol- lution seeping into the groundwater that eventually flows into U.S. soil. The incidence of birth defects in Texas has increased drastically in the past few decades, and this increase has been attributed to the pollution produced in the Mexican border regions. The Chilpancinco settlement in Tijuana sits in the shadow of Otay Mesa, on top of which sprawl dozens of the city's maquiladora factories on the California Mexico border. Many of them are owned by U.S. corporations, including a now closed battery recycling plant. A white chemical crust rims the clods of dirt in the field outside the plant, and pools of strange, yellow water dot the barren landscape. (Continued) (Continued) Lead and heavy metal deposits have been measured in the soil on the mesa at concentrations 40,000 times over safe levels. In this unincorporated settlement just one of several clusters of this rare birth defect, called anencephaly, on the border. 1994 or colonia, 6 babies were reported born without brains in 1993, and 13 in Contrary to what was often portrayed in the public press, solutions to the pol. lution problem in the border region were neither obvious nor easy to implement Many economists argued that it was misplaced for a developing country like Mexico to implement U.S. and Canadian-level environment standards. In fact, the chief economist for the World Bank, Lawrence Summers, had written an internal memo (subsequently leaked to the press) stating that "the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable According to this view, environmental consciousness, along with greater enforce. ment of environmental laws, should and surely would-Follow Mexico's long march out of poverty toward economic prosperity. To environmental groups, such arguments were misconceived and ignored both the very real costs of the pollu- tion hazards for those living in the region, as well as the long-term costs of a badly degraded natural environment. Based on U.S. legislation, Mexican environmental laws and regulations were rel- atively strict. Where Mexico and the United States diverged in terms of environ mental legislation was mostly in areas that were only secondarily related to the environment, such as so-called "right to know laws and provisions for civil liabil ity. For example, companies in Mexico were not required to make public the nature of their manufacturing activities to interest groups or the general public. Even when individuals or groups were able to collect evidence of damages caused to them by a polluting company, the Mexican legal system did not provide an adequate oppor- tunity to seek restitution. Multimillion-dollar class-action settlements were nonex- istent in Mexico. Most of the criticism surrounding Mexico's environmental record was aimed at the country's ability to enforce the legislation already in place. Fears of lax enforce- ment were, in fact, central to the so-called "pollution haven hypothesis"-the notion that free trade would precipitate a race to the bottom in environmental stan- dards as countries competed for foreign investment. The controversy over the environmental impact of NAFTA (North American Free Trade Agreement) led the Clinton administration to negotiate a parallel side agree ment pertaining to the environment. The agreement established several bodies designed to deal with environmental issues and to investigate "persistent patterns of failure to effectively enforce (a country's) environmental law." Despite claims that NAFTA was the "greatest trade agreement in history," its envi ronmental provisions had been criticized on several accounts. First, environmental ists complained that the dispute resolution process was secretive, exclusive, and lacked provisions for enforcement. No apparent means existed for public comment on environmental matters presented before NAFTA panels. A second complaint was with the burden of proof provisions, which required the challenging party to estab- lish that the sanitary (health) or phytosanitary (plant health) measure in question is inconsistent with or in violation of NAFTA. In addition, no specific trade sanc- tions were provided as a means to combat noncompliance with the provisions of either NAFTA or the side agreement on the environment. Moreover, the sanctions specified under NAFTA were considered to be unenforceable and too complex to be of much use. SOURCE: Frost, Campbell, and Eaton (1997). Critical Thinking Questions 1. What are the ethical and CSR obligations of an MNE investing in the U.S.-Mexico border region? Do these obligations extend to supervision of companies that transport their hazardous wastes? 2. How can a head office monitor the environmental impacts of its subsidiary and supply chain in Tijuana? How can a head office enforce its environmental standards? 3. Are new international agreements and international enforcement mechanisms necessary in order to deal effectively with such social issues? cor and Suggested Readings