In this paper various natural resource and environmental issues that could occur or be further aggravated by the proposed Agreement are highlighted. These include water quantity and quality, air quality, coastal resources, wildlife, land use, and hazardous materials. The majority of these resources are of the transnational common pool resource type. Current or potential transnational environmental externalities will be difficult to resolve. International initiatives are needed to coordinate border development goals in order to deal more effectively with these environmental externalities. Hence, one of the most crucial steps towards an environmentally sustainable development of the U.S.-Mexico border region is to insure that the U.S.-Mexico Free Trade Agreement (FTA) will address these issues. The U.S.-Mexico FTA provides the opportunity to shift from a basically reparative to a more anticipatory and preventive natural resource and environmental strategy.