Toward a More Corporate Union of the Americas?

by Katherine Sciacchitano, Dollars and Sense

www.alternet.org, February 11, 2008

Which is closer to your vision of North America?

Vision A: Three interdependent countries with vibrant social movements, respect for labor rights, and environmentally sustainable economies anchored in provision of social needs and respect for cultural autonomy?

Or Vision B: An unequal alliance dominated by the United States, complete with pumped up oil and gas production, increasing militarization, corporate transnational planning groups, and guest worker programs to ensure cheap, vulnerable labor?

If your answer is Vision A, there's good news and bad news. The good news is that this past August at a summit of the leaders of the United States, Canada, and Mexico in Montebello, Quebec, labor, environmental and globalization activists braved riot police and tear gas to demand democratic input into North American decision-making. The bad news is that the summit was about the Security and Prosperity Partnership of North America (SPP) -- the real-world name of Vision B.

While left activists and researchers in Canada and Mexico have been spreading the word about the SPP for several years, so far in the United States the SPP, which was officially launched in March 2005, has mainly caught the attention of the right wing, which sees it as a stealth plan to impose a European Union-style government on the continent.

The SPP is not a North American version of the European Union. But it is a stealth plan -- one aimed at bypassing the kind of international solidarity that halted the Free Trade Agreement of the Americas and the Multilateral Agreement on Investment. The European Union emerged after years of public debate and a treaty ratified by member states. By contrast, the SPP is not a treaty and will never be submitted to the U.S., Mexican, or Canadian legislatures. Instead it attempts to reshape the North American political economy by direct use of executive authority. And while the European Union maintains an explicit role for government in addressing inequality within and between countries, the SPP's foundation is an unequal alliance where the United States retains the political and economic trump cards.

Designed to shore up the United States' weakening position as a global hegemon, the SPP's primary goals are to link economic integration of the three countries to U.S. security needs; deepen U.S. access to oil, gas, electricity, and water resources throughout the continent; and to provide a privileged -- and institutionalized -- role for transnational corporations in continental deregulation. The stakes for labor, the environment, and civil liberties in all three countries couldn't be higher. Yet because of the SPP's reliance on executive authority to push the agenda, many of the SPP's initiatives remain virtually invisible, even to many activists.

SPP Basics

The North American Free Trade Agreement (NAFTA), which went into effect in 1994, was designed to enhance the access of transnational capital from the United States to cheap Mexican labor and Canadian natural resources. The SPP deepens these relations and harnesses the so-called war on terror to an expanded U.S.-Mexican-Canadian trade agenda and a lopsided energy grab to secure U.S. access to dwindling continental oil and gas reserves.

As its name implies, the SPP has two basic parts: the Security Agenda and the Prosperity Agenda. Both are rooted in the United States' deteriorating global position, particularly its increased competition for access to global oil and gas reserves and worsening trade balance with China.

With the explicit aim of securing North America from "internal" as well as external threats, the Security Agenda coordinates intelligence activities among the three countries and streamlines the movement of "low risk" goods and people (especially so-called "NAFTA professionals") across borders. It also involves extensive military coordination, much of it focused on protecting energy and transportation infrastructure. (Consolidating a North American military structure no doubt also serves as an offensive hedge against Venezuela's attempt to shape an independent South American energy policy.)

The Prosperity Agenda continues the Security Agenda's focus on energy. World demand is growing as traditional sources from the Middle East, Russia, and South America are becoming less secure; and the resulting price increases and realignment of power threaten a redistribution of wealth and power in favor of the oil and gas producers, many of them in the Global South. The Prosperity Agenda aims first and foremost at consolidating U.S. control over North American energy supplies, first by expanding production in Canada and Mexico, and second by increasing U.S. access to that production by deregulating energy markets. In addition to expanding energy production, Prosperity Agenda activities include a tri-national framework for "minimizing" regulatory "barriers"; special committees on the auto and steel industries; removal of constraints on movement of capital and financial services; and expanded and streamlined cross-border transportation networks -- networks that will facilitate not only trade within the continent, but more outsourcing to Asia.

The official SPP website posts official documents, but ongoing discussions are shrouded within tightly controlled annual summits, ministerial level meetings, and working groups that exclude civil society participation. Corporations, however, have a privileged view of the road ahead and provide guidance and direction through a specially-created North American Competitiveness Council. U.S. members of the NACC include Wal-Mart, Merck, GE, UPS, FedEx, and Kansas City Southern. The U.S. Chamber of Commerce and the Council of the Americas -- whose website brags that its blue-chip members represent the majority of private U.S. investment in Latin America -- serve as the U.S. secretariat.

NACC advice is taken seriously. In February 2007, the NACC issued detailed recommendations for energy integration, streamlining regulatory processes, and the speedy resumption of trade after emergencies. Six months later at their August 2007 summit, the countries announced an energy cooperation agreement, an avian flu preparedness plan with emergency border-management procedures, and a regulatory cooperation framework. The regulatory framework -- complete with goals and action plan -- specifically incorporates NACC recommendations to increase reliance on voluntary standards and to analyze regulations for their cost to trade. Although the framework doesn't say exactly how principles would be applied to different industries, the NACC's 2007 report gives several telling examples, including regulations harmonizing "hours of service" for truck drivers that would expand permissible weekly driving hours, which safety advocates are already challenging in court. Canadian plans to "harmonize" pesticide use to U.S. levels -- an action that will raise exposure levels for most regulated pesticides -- also provide a glimpse at the kinds of regulatory changes we can expect from the SPP.

"Community" from the Top

In the United States, the best-known proponent of the SPP is Robert Pastor, director of the Center for North American Studies at American University. NAFTA broke new ground by linking Mexico (a developing economy) with the United States and Canada (two major industrialized nations) in a pact to increase trade and investment. Predictably, NAFTA increased rather than decreased inequality. But for Pastor, NAFTA's real problem was its failure to build continent-wide institutions to push integration even further. He sees the SPP as a means of building those institutions, and envisions it as a new model for global governance -- by and for elites -- that could be used to link other developed and developing countries.

Building a North American Community, a 2005 independent task force report of the Council on Foreign Relations on which Pastor served, reveals the breadth of SPP's ambitions. The report called for a security perimeter around the three countries by 2010, so that goods and people would be checked once on entry and then move freely -- while being tracked -- within the continent, greatly diminishing the costs of trade. There would be a common tariff for goods from outside North America. Currently, NAFTA rules of origin require checking goods to ensure they contain sufficient North American content to qualify for duty-free treatment under NAFTA. A common external tariff would save money by eliminating the need to check for North American content. It would also facilitate expanded supply chains and outsourcing.

"Full labor mobility" would be preceded by greatly expanded guest worker programs tying immigration status to employment. "Development" funds for Mexico would translate into transportation and energy infrastructure to help foreign investment push past the maquila zone on the border into central and southern Mexico where poverty is greatest and wages lowest.

Intelligence sharing and joint military exercises would increase "interoperability" and protect strategic energy and transportation infrastructure. Mexican reticence to accept U.S. troops on its soil -- the result of eight U.S. invasions since its independence -- would be overcome in small steps such as joint disaster coordination and plans for fighting organized crime.

Academic and political exchange programs and North American Studies centers would help build a North American identity. Policy areas not touched by NAFTA or never implemented would be revisited. As one SPP participant put it, during NAFTA negotiations, the Canadians wouldn't talk about exporting water, the Mexican's wouldn't talk about privatizing oil, and the United States wouldn't talk about immigration. Barriers to maximizing energy production and cross border trade in oil, gas, and electricity would be eliminated and pressure put on Mexico's state-owned energy company, Pemex, to dramatically open itself to private investment. Air, rail, and trucking companies would be given unlimited access to all three countries.

Meanwhile, a common regulatory scheme would make "harmonized" (read: lower) North American standards the default approach to new regulations, and countries would have to justify more stringent requirements. A seamless North American market would create economies of scale for the largest corporations. Delays and costs of checking goods for compliance at the borders would be minimized. A rule of "tested once" would eliminate "duplicative" reviews of product safety and -- according to the council -- substantially raise profits for biotechnology and pharmaceutical firms.

The Perils of Being Close

U.S. corporations and elites that dominate continental production chains clearly stand to gain the most from the SPP. But in fact, the SPP's earliest roots lie in proposals by Canadian businesses and think tanks for what Canadians call "deep integration." Essentially a strategy for bypassing U.S. protectionism, deep integration seeks to leverage Canada's geographic proximity for greater access to U.S. markets. The idea received a serious boost in the days after 9/11. The United States buys 80% of Canada's exports, and so when the United States closed its borders following the attacks, Canadian businesses lost millions of dollars every hour. Canadian elites promptly concluded -- correctly -- that the price of continued access to U.S. markets was deeper cooperation on security matters.

Canada, like Mexico, quickly signed a "smart-border" agreement and began conforming its security practices to the needs of the Bush administration's war on terror. In 2002 Canadian officials provided information that helped the U.S. deport a Canadian citizen, Maher Arar, to Syria, where he was tortured. The Canadian government has since apologized, and Arar, a software engineer whose wife stood as a candidate for the New Democratic Party in 2004, has signed on to a public demand that SPP provisions be submitted to Canadians for a vote.

But the SPP's dangers for Canadians go beyond threats to civil liberties. Like NAFTA and the Canadian U.S. Free Trade Agreement (CUFTA) before it, the SPP is a Trojan horse aimed at trapping Canadian workers into a downward spiral of global competition and neoliberal policies.

Both NAFTA and CUFTA were sold to Canadians on the grounds that increasing trade would boost employment and productivity; that would in turn solidify the economic base for Canadian social spending, including the deeply popular single-payer health insurance program. Instead, elites used the logic of competition to tighten first monetary and then fiscal policy -- much as Reagan did in the United States in the 1980s. As in the United States, recession followed. Canadian exports, particularly of raw materials, increased, but overall competitiveness came largely from pushing up unemployment and driving down wages. Meanwhile, budget politics were used to squeeze rather than support social spending. The resulting deterioration in services became the pretext for experiments in private health care provision that could jeopardize the entire single-payer system. In many cases, it is Canadian divisions of U.S. transnationals that are profiting.

Not surprisingly, Canadian activists began arguing for abrogating NAFTA and reversing cutbacks in health care funding and other public services. With its security trump card and stratagem of rule by executive order, the SPP helps sidestep popular opposition to belt-tightening and the more expansive deep integration agenda.

Deep Integration and Natural Resources

Energy provides the strategic example of how SPP and deep integration would merge the interests of Canadian and U.S. elites at the expense of ordinary Canadians.

The United States is the world's largest energy consumer, and by 2025 it will be importing one third of its supply. Canada is the largest supplier of crude oil and natural gas to the United States, and has been deregulating its energy sector since the 1980s to increase access to U.S. markets. Now that rising oil prices have increased the financial feasibility of oil production from the vast Alberta oil sands, total Canadian oil reserves are second only to Saudi Arabia's. Canadian oil concerns are more eager than ever to increase sales to the United States.

In a fully integrated, privatized North American energy market, U.S. users would buy the lion's share of energy resources; at the same time, demand would increase for Canadian production, and so would prices. Not surprisingly, fully integrating North American energy markets figures prominently in the hopes of both U.S. and Canadian elites.

But the same mechanism would make energy more expensive for Canadian consumers, who will be in direct competition with U.S. buyers. In addition, easily-tapped Canadian conventional reserves are dwindling rapidly. Raising oil production accelerates their depletion and risks Canadian energy and environmental security. The huge quantities of gas and water needed for production from the oil sands increase environmental risks even more, and also make economic feasibility dependent on continued high oil prices.

Finally, Canada is home to a quarter of the earth's fresh water. Although it is not mentioned in official SPP documents, Canadian activists believe that SPP includes discussions of bulk water exports to the United States, threatening Canadian water security just as the world enters a period of anticipated severe water shortages.

From NAFTA to the SPP

If Canada's path to the SPP can be described as a voluntary regression from developed welfare state to exporter of natural resources, Mexico's reveals the combination of coercion and repression running through the SPP and NAFTA.

Mexico bought into NAFTA and neoliberalism as a result of the 1980s debt crisis. U.S. banks made huge low-interest loans to developing countries and then ratcheted up interest rates. When Mexico defaulted, the United States and the International Monetary Fund renegotiated Mexico's loans and saddled Mexico with free-market reforms that opened the country to foreign investment. Wages and living standards plummeted. Mexico abandoned what remained of its development plans and turned to neoliberalism, free trade, and the promise of increased foreign direct investment to pay its bills.

Foreign investment never materialized on the level expected. Meanwhile, Mexico enthusiastically reduced agricultural tariffs under NAFTA even as the United States flooded it with subsidized corn. Two million small farmers were driven from their land, increasing unemployment and driving down wages. Today half of all Mexicans live in poverty, with 15 million in extreme poverty. Half of new labor-market entrants can't find employment in Mexico, and remittances from migrants to the United States outstrip foreign direct investment. The situation will become even more dire when all remaining agricultural tariffs under NAFTA expire later in 2008.

Any economic plan actually centered on the needs of the Mexican people would include renegotiating NAFTA's agricultural provisions. Instead, agriculture is off the table, and immigration has taken center stage. Rebuffed by the anti-immigrant backlash in the U.S., Mexico is turning to Canada for an expanded guest-worker program, and the two countries have set up an SPP working group to discuss labor mobility.

Meanwhile, SPP negotiators are discussing funds to address "uneven development." In practice this means connecting Central and Southeastern Mexico -- regions which have some of Mexico's highest poverty rates and lowest wages, but also some of its richest gas reserves -- to U.S. markets. The region is also the target of former president Vicente Fox's 2001 Plan Puebla Panama, an $8 billion infrastructure program aimed at integrating southern Mexico with the CAFTA countries. The overall vision: stepped-up development of energy and gas reserves, an even lower-wage workforce for maquila production than on the U.S. border, and transportation and energy networks needed to produce and carry finished goods to U.S. consumers.

Of course, appropriating land for highways and other projects requires massive dispossession of farmers and indigenous peoples. Since many of the peasants NAFTA has displaced have already crossed the border to the United States, stepped-up immigration control and labor repression are both in the offing. So far, the two countries appear poised to limit migration from the CAFTA countries into southern Mexico, regulate the flow of Mexican immigrants to the United States in the north, and seal a captive, repressed workforce in between.

Mexico's participation in the SPP's security perimeter will greatly stiffen security along its southern border, where several hundred thousand migrants annually try to cross into Mexico from Central America to get to the United States. And the United States has already tightened security along Mexico's northern border, where 500,000 cross annually.

Bush's $1.4 billion request to the U.S. Congress for a "Plan Mexico," which he hopes eventually to extend to Central America, is linked to this plan. Billed as a "new paradigm" for security cooperation and fighting drug crime, in reality it's another step toward a U.S.-led continental military and security structure. It won't position U.S. soldiers on Mexican ground, but it will deepen coordination and provide intelligence, training, and equipment to Mexican military and police. The resources are certain to be used to against Mexico's growing social movements. Mexico's anti-terrorism law has already made it easier to criminalize protest. In 2002, the People's Front for Defense of the Land managed to halt construction of an airport that was part of Plan Pueblo Panama, and the Front also participated in the Zapatista campaign to boycott the last presidential election. In April 2006 the group came to the aid of flower growers and vendors in a confrontation with police in nearby San Salvador Atenco. Thirty five hundred police beat 200 of the town's 300 inhabitants; arrested 150; sexually assaulted 30 women; and killed two youths. For his part in the resistance, the movement's leader was sentenced to 67 years in prison -- the first prosecution under Mexico's post-9/11 anti-terrorism law.

Mexico's Energy Matters Too

As with Canada, Mexican energy is where the largest stakes are being played. Mexico is currently the third largest supplier of oil to the United States, yet estimates are that Mexican oil and natural gas reserves could be exhausted in as little as ten years. The SPP's plan to step up Mexican oil production by completely privatizing gas production and increasing private investment in its oil sector will strip Mexico of crucial resources for development at a time when world oil prices make them most valuable.

The main barrier to the SPP's privatization strategy is the Mexican constitution, which guarantees the benefits of the energy sector to the Mexican people and places management of oil and gas in the hands of state-owned Pemex. Pemex is a symbol of national sovereignty, and Mexico refused to commit to privatizing Pemex during NAFTA negotiations. But legislation in the '90s chipped away at Pemex's jurisdiction while expanding the scope for private sector contracts. More importantly, Pemex was severely undermined during the 1980s debt crisis, when oil and gas revenues were chained to foreign debt repayment.

As a result, Pemex has been chronically starved for funds for exploration and development. The shortage is routinely used as an argument for privatization. The SPP has plans to release a report this year highlighting Pemex's purported inefficiencies and need for private capital. Sixty percent of Pemex's revenues go to supplying nearly 40% of Mexico's national budget; no private firm could survive under similar constraints. Ironically, the 1970s loans that led to the 1980s debt crisis were made so Mexico could develop newly discovered oil during a period of record prices. Those record prices were the result of the 1973 OPEC oil boycott. OPEC deposited the profits from those price hikes in U.S. banks, and those funds in turn became the capital U.S. banks used to lend to Mexico. Chaining Pemex's revenues to debt repayment in the 1980s meant Mexico was forced to increase output and add to what by then was a glut of world energy supplies -- thereby contributing to lower world prices and weakening its own revenues. In effect, Mexico went into debt slavery to help undermine OPEC and cheapen the cost of energy for U.S. corporations. SPP's agenda brings the cycle full circle, with the United States willing to accelerate exhaustion of Mexico's remaining reserves to bolster its own increasingly precarious international energy position.

Upping the Ante

The SPP ups the ante for activists. Until now, labor and progressives -- at least in the United States -- have tended to focus on specific targets such as trade agreements or demands for debt relief. And when we analyzed NAFTA, we analyzed it in class terms, not in geopolitical terms. But the SPP's goals are broader and deeper even than NAFTA's goals. They aim at nothing short of remaking the political and economic governance structure of North America.

The wishes of Canadian and Mexican elites notwithstanding, the SPP's primary purpose is to buoy U.S. capitalism's flagging international position, from its trade deficit to its energy deficit. U.S. security, energy and transportation needs are the touchstones, and the draft agreement aligns the policies of Canada and Mexico -- and appropriates natural resources -- to meet those needs. Economic integration is conditioned on military integration, which in turn aims at consolidating the U.S. position in the hemisphere.

While the United States maintains most of the economic leverage in the triad, most hot-button issues are in Mexico and Canada. For U.S. activists in particular, bringing these issues alive will first require a much deeper understanding of our neighbors, and an ability to link their issues to domestic U.S. concerns.

Chief among the dangers for ordinary people in all three countries are the environmental consequences. Increasing rates of fossil fuel extraction in North America may feed the U.S. energy habit, but the solution is short term. The contributions to global warming for North America and the world, however, will not be.

The SPP's bundling of security with economic concerns also fuels Bush's war on terror, the accelerating militarization of U.S. foreign policy, and continued U.S. leadership of neoliberal globalization. Canada's commitments of troops in Afghanistan, increased military spending, and willingness to find common ground with the United States on Latin America and the Caribbean are one product of the noxious mix. Another is Mexico's willingness to serve as a counter-weight to Venezuelan attempts to harness its oil wealth to alternative regional and global development strategies.

In terms of daily governance, the SPP privatizes the regulatory functions of government on an international scale not seen before in industrialized democracies. NAFTA and other WTO agreements limit the legislative and regulatory powers of member states by imposing global standards such as "market access" and "national treatment" on how countries treat foreign investors. These standards create "one way roads" to privatization once countries begin liberalizing a sector. Applied to Canadian experiments in private health care, they could end up forcing Canada first to open its doors to for-profit foreign providers and insurance companies, and then to pay them the same subsidies given to Canadian public and nonprofit operators. In the United States (where health insurance is already private), they could be used to prevent the United States from putting its own single-payer system in place.

By contrast, the SPP bypasses national authority to create formal, tri-national structures for corporate regulatory input prior to involvement by legislatures or citizens. Many SPP goals are thus hidden at their inception; even after they emerge, most will be buried in the daily workings of executive agencies who have been directed to give maximum attention to corporate needs and trade. In the United States, a short list of agencies already involved in the SPP includes the Department of Justice, the Department of State, the Federal Trade Commission, the Federal Communications Commission, the Departments of Agriculture and Energy, and the Department of Homeland Security.

Finally, the SPP is a frontal assault on labor and civil liberties. Plan Mexico should be seen as a threat to human rights throughout the continent. The North American labor movement desperately needs a democratic Mexico where independent organizing and labor rights can be exercised without threat of violence. Instead, the SPP will intensify exploitation of Mexican labor and deepen the low wage neoliberal model in both the United States and Canada, as well.

What It Will Take

Currently, Bush is politically weakened by the Iraq war, Mexico's president Felipe Calderón by his election scandal, and Canadian prime minister Stephen Harper by his lack of a parliamentary majority, raising the question of whether the SPP will survive the leaders' terms in office.

But even if it were stopped in its current form, much of the SPP would continue. A Framework for Regulatory Cooperation has been signed, complete with goals for action and annual work plans. The North American Energy Working Group -- now integrated into the SPP -- was actually established in 2001. Plan Mexico, once funded, will take on its own life, and the push to privatize Pemex will continue.

Opposition to Plan Pueblo Panama gives some indication of the depth and breadth of the activism that will be needed to be effective with the SPP's agenda. Calderón recently revived Plan Puebla Panama, with an added military component -- no doubt inspired by the SPP. Yet it was stalled for many years by protests against displacement of farmers and destruction of the environment, and a vibrant cross-border network of activists has grown up around it. The breadth of the Plan Puebla Panama led activists to conclude that opposing environmentally destructive infrastructure projects wasn't sufficient: what is necessary is a deeper understanding of the economic and political vision behind Plan Pueblo Panama, and development of an alternative analysis.

An effective response to the SPP agenda will require the same kind of expanded cross-border contacts and focused study of the North American and global political economies. This is the very work the left needs to do to begin creating economic and political alternatives that reflect its values.

The challenge is particularly difficult for activists in the United States. Unlike the left in countries where domestic agendas have been affected by U.S. actions for many years, most in the United States think of domestic issues as controlled by domestic politics. But as rising oil prices combine with a falling dollar, and U.S. economic autonomy begins to be more constrained, more people in the U.S. may understand the need for different allies.

U.S. activists need a democratic Mexico with strong labor rights and a Canadian welfare state that survives the ravages of neoliberal globalization. We need to build an environmental agenda based on conservation and renewable resources and an economic agenda based on diversity and human rights. We need a progressive voice that can drown out right wing cries that the problem of globalization is the loss of U.S. dominance and power. Most of all, we need an international, powerful, and organized response from the left, and popular forces to challenge the more deeply coordinated and increasingly militarized forces of international capital. Reasoned opposition is no longer enough.

This article is from the January/February 2008 issue of Dollars & Sense: The Magazine of Economic Justice.

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