NAFTA for the Americas
Q&A on the FTAA (Free Trade Agreement of
Multinational Monitor magazine, April 2001
What is the Free Trade Agreement of the Americas (FTAA) ?
The FTAA is a proposed free trade agreement between the economies
of 34 countries in the Western Hemisphere, stretching from Canada
to Chile. It is effectively an effort to expand NAFTA, the North
American Free Trade Agreement, to include all of North, Central
and South America and the Caribbean (except for Cuba). It is an
agreement that seeks to knock down barriers to increased trade
and investment flows. According to U.S. proposals, at least, it
would eliminate tariffs between FTAA countries within 10 years.
It would also eliminate regulatory barriers that many see as protecting
important worker, consumer, environmental and national interests.
Negotiations over the FTAA are now underway, with a scheduled
completion date of 2005, though a completion date as early as
2003 is possible. The negotiating text remains secret, so it is
not possible to know exactly what is included in the agreement.
But it is clear the agreement will be modeled on NAFTA; and the
United States has released a summary of its negotiating objectives
for the agreement, which gives a good idea of what it is seeking
to achieve in the negotiations.
Who is advocating the FTAA and outlining its content?
The United States is the country pushing most aggressively
for adoption of an FTAA. The United States began the process at
a 1994 Summit of the Americas in Miami, following Congressional
passage of the NAFTA implementing legislation. The process gained
momentum with the Santiago Summit in 199S.
The business community, in the United States and elsewhere
throughout the Americas, is the social force driving the agenda
Although the negotiations have remained highly secretive,
corporate interests have had a structured role in the process.
Business meetings, organized through Americas Business Forum,
immediately precede the FTAA negotiating meetings of trade ministers.
These meetings are usually hosted by the government hosting the
FTAA Trade Ministerial. The business proposals generated at the
meetings then serve as the template for the FTAA negotiators.
How does the FTAA relate to other trade groupings?
The FTAA would take place in the context of the World Trade
Organization (WTO) rules, which permits countries to enter regional
trade agreements that encourage greater liberalization of trade
rules. All WTO countries must meet their WTO obligations toward
all WTO member nations, irrespective of whether they take on additional
obligations to particular countries in regional agreements. All
of the FTAA negotiating countries are members of the WTO.
Existing important regional groupings in the Western Hemisphere
include NAFTA, the Caricom grouping of Caribbean nations and Mercosur,
made up of Brazil, Argentina, Uruguay and Paraguay. While the
United States, Canada and Mexico would remain part of NAFTA, to
the extent that the FTAA includes NAFTA provisions but extends
them to the whole hemisphere, NAFTA would become less important.
Caricom and Mercosur would also probably be effectively subsumed
by an FTAA. The difference is that Caricom and Mercosur are important
efforts to promote regional trade and integration among developing
countries, and are not modeled on NAFTA. Mercosur and Caricom's
potential to evolve as alternative approaches to economic integration
would almost surely be lost with an FTAA.
Brazil in particular is worried about losing regional influence
to the United States as a result of the FTAA, and it has urged
a go-slow approach to FTAA negotiations. One U.S. gambit in response
has been to propose a free trade agreement with Chile-the message
to Brazil is to get on the hemispheric trade agreement train or
be left at the station.
If the negotiating countries are already members of the WTO,
why does it matter if they join another trading agreement?
The FTAA is likely to contain a number of provisions that
are not included in the WTO, and which push a deregulatory agenda
even beyond that embodied in the WTO. The FTAA is likely to contain
important new provisions in the area of investments, intellectual
property, services and agriculture, to take a few examples, that
are more favorable to corporate interests than those in the WTO.
There is another reason to be concerned, even if the FTAA
provisions were identical to those in the WTO. The dual obligations
of the FTAA and WTO would mean that even if WTO terms in a particular
area were reformed to become more worker-, consumer- or environment-friendly,
countries would still be locked into the onerous terms of the
FTAA. The overlapping obligations will make the challenge of reforming
international trade rules much more difficult.
What might the investment provision of an FTAA look like?
The United States is seeking inclusion of NAFTA-style investment
protections in the FTAA. These include the central provisions
* foreign investors must be afforded the same treatment as
domestic investors (known as "national treatment");
* foreign investors must be compensated for "expropriations"-the
United States says in its summary negotiating position that it
has not offered a position on the definition of expropriation,
but the NAFTA process effectively defines it to include even diminution
of investments due to certain environmental regulations; and
* foreign investors should be given standing to sue to enforce
their claims against governments - even though investors have
no reciprocal obligations.
The U.S. position also calls for a ban on "performance
requirements." These include mandatory requirements to incorporate
specified levels of local content, purchase domestically produced
goods or transfer technology to the country housing the investment.
The United States also proposes a ban on capital controls
-limits on the ability to transfer money and financial assets
into and out of a country.
The U.S. summary position "proposes that investors have
the right to transfer funds into and out of the FTAA host country
without delay using a market rate of exchange. This covers all
transfers related to an investment, including interest, proceeds
from liquidation, repatriated profits and infusions of additional
financial resources after the initial investment has been made."
Many believe capital controls are essential to prevent financial
crises-like those that in recent years have rocked Thailand, South
Korea, Indonesia, Russia, Brazil, Argentina, Turkey and other
nations-from devastating poor countries. Capital controls can
prevent crises, they believe, by preventing foreign investors,
especially financial speculators, from pulling out of a country
Might FTAA intellectual property interfere with efforts to
promote affordable access to essential medicines?
Yes. In a trade agreement recently concluded with Jordan,
the United States restricted the basis for compulsory licensing-by
which a government can instruct a patent holder to license the
right to use its patent to a company, government agency, or other
party. Compulsory licensing lowers prices to consumers by creating
competition in the market for the patented good. Under WTO rules,
compulsory licensing is part of the basic schema of the intellectual
property system, not a limited "exception." TRIPS permits
compulsory licensing generally, so long as certain procedural
conditions are met. The U.S.-Jordan Free Trade Agreement severely
limits the ability of the United States and Jordan to use compulsory
licensing for non-public use.
Specific provisions included in the U.S. negotiating position
summary might also limit countries' ability to promote accessibility
to essential medicines. Rules on establishing new
mandatory protections for the safety and efficacy ("registration")
data that drug companies submit to gain approval to market a drug
might block generics from entering the market, even if they received
a compulsory license. A U.S. proposal to give drug companies longer-term
monopolies would enable them to price gouge over longer periods.
Could the FTAA force the ranting of patents on life forms?
Yes. While the WTO agreement on intellectual property permits
countries to exclude plants and animals from life forms, the U.S.
intellectual property summary proposal would permit no such exception.
What is at stake in the services negotiations?
The United States is proposing a services agreement that goes
considerably beyond the terms of the existing services agreement
in the WTO. The agreement, according to the U.S. negotiating objectives,
"should cover, in principle, all service sectors and service
suppliers," with countries permitted to opt out of coverage
for services they designate. This is in contrast to the WTO approach,
where many services are not covered unless a country specifically
opts-in to coverage. The United States specifies that the FTAA
services agreement should cover local and state, as well as federal,
governments. The United States also proposes that all aspects
of energy production, transmission and supply should be covered.
The rules of a services agreement are likely to be similar
to those covering the trade in goods: equal treatment for foreign
service suppliers as for domestic suppliers. What alarms many
critics about this position is the special public nature of many
services, including education, healthcare and water supply [see
"Serving up the Commons"]. Many believe a services agreement
could be used to promote privatization of basic public services.
To alleviate such concerns, the U.S. summary position states
that "The United States excludes services supplied 'in the
exercise of governmental authority'-which we define as any service
which is supplied neither on a commercial basis, nor in competition
with one or more service suppliers -from the services chapter
of the FTAA Agreement. In conjunction with this, the United States
has made clear that in areas related to social services-including
education and healthcare services-the United States is not seeking
nor would we agree to use the FTAA negotiations to promote privatization
of such public services."
But Ruth Caplan of the Alliance for Democracy says such language
is just lip service. "If the United States is serious about
protecting public health and education [and drinking water supplies]
from corporate intrusions," she writes, "it should propose
excluding them entirely from the FTAA." The United States
has proposed such a "carve out" for air transportation.
The U.S. Ianguage seeking to alleviate concerns that an FTAA
agreement will permit countries only to adopt services regulations
that are the "least trade restrictive" also falls short
of satisfying critics. The U.S. negotiating summary says only
that the "United States believes that the issue of domestic
regulation is important and will be giving further consideration
to what provisions on domestic regulation might be appropriate.
How might the FTAA affect the environment?
The United States says the FTAA "should support, and
not undermine, a country's ability to maintain and enforce its
environmental laws, while ensuring against trade protectionist
abuse" and "the United States will also seek to ensure
that countries can continue to set the levels of environmental
protection they deem appropriate, even when such levels of protection
are higher than those provided by international standards."
The U.S. negotiating summary even suggests that the United States
hopes to "identify and pursue 'win-win' opportunities in
the FTAA to eliminate or reduce environmentally harmful subsidies,
tariffs, and other barriers to trade. The United States is working
with other countries and interested parties to identify other
possible areas where trade liberalization can directly contribute
to both economic growth and environmental protection."
Environmentalists are not impressed. The U.S. summary position
"provides almost nothing in the way of detail or policy proposals
that would seriously address environmental concerns," notes
David Waskow of Friends of the Earth.
There is no serious enforcement mechanism proposed for any
potential environmental standards that might formally be incorporated
into the FTAA.
Of particular concern is the investment section, where the
United States proposes only a limited environmental exception.
Environmentalists fear the corporations will be able to invoke
investment provisions to challenge environmental regulations,
as has been the case under NAFTA. "Companies owned by any
western hemisphere trading partner with investments in the United
States could sue the United States over new pollution control
laws, discouraging efforts to protect our environment," notes
the Sierra Club. It goes almost without saying that the risk would
be significantly greater for Latin American countries, facing
similar challenges to environmental rules from U.S.-based companies.
The services negotiations also concerns environmentalists.
The proposal summary "does not indicate that the United States
has given any consideration to the potential environmental impact
of market access commitments in services sectors, including such
sectors as transport, energy, tourism, water and so-called environmental
services (primarily sewage and refuse disposal)," according
Environmentalists also believe that the FTAA will follow the
WTO model of requiring countries to pursue the "least trade
restrictive" means of pursuing environmental goals, irrespective
of cost and political feasibility, and require countries to adopt
international standards on food safety and environmental protection,
even where such standards may be below domestic levels. The U.S.
summary position specifically says that it wants to entrench the
WTO regime on food safety within the FTAA.
How might the FTAA affect a sector like energy?
Energy is not a specific negotiating sector of the FTAA, but
it would be encapsulated in the services provisions, if the U.S.
negotiating position determines the final outcome, and there may
even be an early energy agreement coming out of the FTAA process.
Energy is a particularly sensitive area because many governments
in the Americas continue to play a role in electricity generation
and delivery, and especially because of the oil resources of many
Latin American countries.
NAFTA and the preceding U.S.-Canada Free Trade Agreement,
writes Maude Barlow of the Council of Canadians, "created
an anti-environment, anti-conservation, deregulated continental
energy policy based on short-term, high-cost, high-profit exports
[that are] controlled by transnational energy corporations with
little interest in rising prices or the environmental consequences
of their actions." She warns, "If this deregulated energy
regime gets extended to the hemisphere, it will have devastating
consequences in the fight to reduce the overuse of climate-warming
fossil fuels in the countries of the Americas."
Barlow recounts an alarming tale of how the U.S.-Canada agreement
and NAFTA led to the dismantling of Canada's national energy policy
and loss of national sovereignty and control over vital energy
"In Canada," she writes, "to comply with these
NAFTA provisions, the National Energy Board was stripped of its
powers and the 'vital-supply safeguard' that had required Canada
to maintain a 25-year surplus of natural gas was dismantled. No
government agency or law now exists to ensure that Canadians have
adequate supplies of our own energy in the future. (The United
States, however, declared that its 25-year reserve was necessary
for national security purposes, and maintained it.)"
"Export applicants, Canadian or American, were no longer
required to file an export impact assessment and the all-Canadian
gas distribution system was abandoned, setting off a frantic round
of North-South pipeline construction." "North-South"
means from Canada to the United States, as opposed to "East-West"
pipelines within and across Canada.
"Most important," Barlow writes, "the trade
agreements imposed a system of 'proportional sharing' whereby
Canadian energy supplies to the U.S. are guaranteed in perpetuity.
In an astonishing surrender of sovereignty, the Government of
Canada agreed that it no longer has the right to 'refuse to issue
a license or revoke or change a license for the exportation to
the United States of energy goods,' even for environmental or
conservation practices. This led to a spectacular increase in
the sale of natural gas to U.S. markets; since 1986, exports have
more than quadrupled to over 8.5 billion cubic feet a day. About
55 percent of total Canadian gas production is exported to the
United States where U.S. distribution companies, supplying a much
larger population, have been able to sign long-term contracts
at rock-bottom prices. Canadian consumers are left to compete
for their own energy resources against an economy 10 times bigger
with rapidly dwindling reserves and accelerating demand. The story
in oil is the same. Canada now produces 2.3 million barrels a
day and ships 1.3 million of those barrels to the United States."
What is happening in Quebec City in April?
From April 20-22, the heads of state of the 34 FTAA negotiating
partners will gather in Quebec City for the Third Summit of the
According to the Summit of the Americas' web site, "At
the Quebec City Summit, leaders will address common hemispheric
issues and challenges that have been identified as a result of
this three-year process. These include improved access to education,
poverty alleviation, strengthening human rights and democracy
and economic integration. The consideration of these themes and
the resulting Quebec City Political Declaration and Plan of Action
will help determine the region's priorities and goals for the
upcoming years. "
The real action, though, will involve the FTAA. The Quebec
City Summit of the Americas will follow on the heels of a Trade
Ministerial negotiating meeting in Buenos Aires, Argentina, held
earlier in April.
The heads of state and government officials gathering for
the Summit of the Americas are expected to be greeted by massive
protests in the spirit of the demonstrations that have disrupted
recent meetings of the World Trade Organization, International
Monetary Fund and World Bank in Seattle, Washington, D.C. and
How can I find out more about the FTAA and protest plans?
For more detailed analyses of FTAA proposals, consult the Alliance
for Responsible Trade <www.art-us.org>, Maude Barlow's analysis
of the FTAA for the Council of Canadians, <www.canadians.org/left.html>,
and a Green Paper from Action for Community and Ecology in the
Regions of Central America (ACERCA), <www.acerca.org/ftaa/index.htm>.
And check out the additional resources listed on our resources
For information on the Quebec City protests, see www.quebec2001.net
(the Anti-FTAA convergence) and www.peoplessummit.org (the People's
Summit of the Americas).
In addition to protests planned for Quebec City, a wide range
of organizations are planning FTAA-related demonstrations around
the United States, on or around April 20. For information on these
events, consult the a20.org calendar, <www.a20.org/calendar.cfm>
and the Jobs with Justice grid of local FTAA actions, <www.jwj.org>.
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