When you run npm run build on a create-react-app project, the NODE_ENV variable will always be production.
You also won’t be able to use the --watch since Netlify doesn’t support running a server (which your webpack.config.js implies). You’ll probably want a third build script instead, where it builds your project without any minifications, etc.
That said, there is an issue around this exact question on the create-react-app repo here: https://github.com/facebook/create-react-app/issues/790