Free Trade Area of the Americas
by Cathleen Sullivan
Alliance for Global Justice
Introduction
The Free Trade Area of the Americas (FTAA). Never heard of
it? Well that's not surprising as it has been negotiated in private
since the 1994 Summit of the Americas. Like the infamous North
American Free Trade Agreement (NAFTA), the FTAA is an international
free trade agreement that aims to eliminate the remaining barriers
to the free flow of money, goods and services across borders in
the Western hemisphere (excluding Cuba), to create one huge integrated
open market. This guide explains what that will entail, and uncovers
the transnational corporate agenda integral to this agreement
and its threat to the well-being of all forms of life throughout
the Americas.
The stated goals of the FTAA, according to the Organization
of American States (OAS) and the Inter-American Development Bank
(IDB), are to provide "free market access to goods and services
for the entire continent,"' to link less open and less developed
economies with more open and more developed economies in a spirit
of solidarity and commercial interdependence, promoting modernization,
efficiency and "more open, competitive and stronger democratic
societies in Latin America and the Caribbean." Sounds great
doesn't it? Free trade and free markets are put forth by economic
policy makers and promoted by the World Bank, International Monetary
Fund (IMF) and World Trade Organization (WTO) to be the catch-all
solution to poverty and inequality, and the key to increased prosperity
for all people. But what does all this really mean?
The FTAA will NOT be beneficial for the majority of the 755
million inhabitants of the 34 countries of the Americas and the
Caribbean, especially endangering women, sweatshop workers and
small farmers. The rules and policies of free trade are designed
to create a stable and profitable environment for corporations
and investors. They do not deal with the real and pressing problems
facing the Americas today and in fact exacerbate many of them.
By giving corporate investors greater rights and freedoms while
restricting individuals and governments, the FTAA will threaten
environmental, labor, human rights and food safety protections
and endangers democracy, sovereignty, indigenous culture, healthcare
and other basic services.
It is easy to hide behind complex jargon and fancy goals,
but we plan to demystify the terminology of the FTAA and get to
the bottom of what it will mean for you and me and the majority
of folks in the Americas who earn our incomes through work, not
wealth. Once we get past the propaganda put forth by proponents
of the FTAA to reveal the superficiality and hollowness of their
promises of prosperity for all, we hope that you will be convinced
to join us in the struggle against the FTAA and the continuing
injustice of corporate globalization.
What is the FTAA?
The idea for the FTAA emerged in 1994 and is targeted to take
effect by 2005. Progress on the negotiations will be discussed
and the doctrine of "free trade" reaffirmed by heads
of state and trade ministers at the Summit of the Americas in
Quebec City, Canada in April 2001. We cannot be sure what the
final text of the FTAA will include because the treaty is being
negotiated in secret. Activists are calling for release of the
text.
No non-governmental organization (NGO) has been allowed to
participate in the drafting of the text. However, we can be sure
that business interests are heard because the American Business
Forum holds parallel meetings when the FTAA negotiators meet and
they also meet directly with those FTAA negotiators. The interests
of civil society have been relegated to "making recommendations"
to the FTAA's "Joint Committee on Civil Society Participation."
In other words, there is no space for dialogue, only a one-way
input of information with no response from the committee, and
thus no real ability to influence the content of the agreement.
The FTAA is the most recent step on the path of corporate
globalization preceded by NAFTA and a series of free trade agreements
as well as the establishment of the World Trade Organization (WTO).
Another treaty, the Multilateral Agreement on Investment (MAI),
was defeated in 1998 by an international organizing effort.
The following descriptions are based on a summary of the U.S.
negotiating provisions and the FTAA Ministerial Declarations.
It is also based on our knowledge of the devastating consequences
that free trade policies have had on people and environments around
the world in recent history. The FTAA will only speed up the trend
towards an already extreme concentration of power and wealth in
the hands of an elite few.
What does the agreement include?
Barriers to Trade
The FTAA intends to gradually eliminate tariff and non-tariff
barriers that restrict or regulate the flow of trade between countries
to make all markets more "accessible" to foreign goods
and investment. This is the most basic free trade concept, in
that tariffs are a direct restriction on the flow of trade, but,
as you will see, tariffs are one of many equally important free
trade elements.
Normally, governments put tariffs, or taxes, on imported goods
making them more expensive. Among other reasons, this gives an
advantage to domestic industry, especially necessary for an emerging
industry not strong enough to compete in an international arena.
Tariffs, like any tax, also provide government income. This crucial
income, if not taken from wealthy multinational corporations,
can be made up through value-added and sales taxes which disproportionately
burden the poor.
Non-tariff barriers are any government policy that may affect
trade such as regulations that protect workers and the environment.
For example, requiring companies to provide maternity leave could
be a non-tariff barrier.
Under the FTAA, many such "barriers to trade" will
likely be subject to negotiation and eventual removal. The neo-liberal
rationale is that this leads to growth and increased efficiency
in the whole system through a competitive atmosphere. It "levels
the playing field" so that anyone can succeed if they make
the best and cheapest product. But what is a level playing field
between ants and elephants? This ignores international structural
power dynamics, the reality of small and large economies and the
benefits of small local business. Basic protections for individual
members of society, small local industry, and the environment
in every country of the Americas are endangered by making markets
"accessible" to profit-seeking corporations.
National Treatment
This was an element of NAFTA and the defeated MAI that increasingly
"levels the playing field." National treatment is the
requirement that corporations and foreign investors be treated
at least as well as domestic investors. In addition, the FTAA
is expected to impose a policy of "nondiscrimination"
forbidding governments from having policies that favor locally
produced goods and services. In other words, favoring local business
would be outlawed which would give wealthy multinational corporations
an unprecedented advantage in establishing monopolies in poorer
countries.
If we look past the single indicator of "efficiency,"
domestic industry and agriculture carry many advantages such as
providing a stable source of employment, creating and maintaining
domestic markets, and providing a product that is more suited
to local needs. For example, currently in Haiti, the domestic
rice industry has been almost completely wiped out by U.S. Agribusiness.
This "Miami Rice" can be produced more efficiently than
the more nutritious varieties of Haitian rice and thus have put
them out of business. It is a national tragedy that has devastated
the economy of many of the rice-growing parts of the country.
We each see this in our daily lives as the locally-owned coffee
shop is put out of business by Starbucks, or the family sandwich
shop undersold by Subway moving in next door. The FTAA would provide
more incentives for this to happen all over the hemisphere.
Broader Definition of Investment
Foreign investment has traditionally referred to the purchase
of stocks, bonds and national industries by foreign corporations.
The defeated Multilateral Agreement on Investment (MAI), which
many believe will be reborn in the FTAA, called for an expansion
of the definition of investment, and thus an expansion of what
will be available on the free market. Anything that can be given
a monetary value could be bought and sold internationally, like
a nation's forests, oil reserves, the administration of hospitals,
health care, energy or water provision.
Deregulation of Capital Controls
It may surprise you that 90% of the transactions that take
place around the world are speculative. In other words, they consist
of gambling on things like currencies, stock options, and commodity
futures (ie. the future prices of crops and precious metals).
These short term investments simply use money to make money. They
don't produce anything that we can eat, wear, or use. They don't
result in new investments in factories, homes, or schools.
When speculative investments are withdrawn too rapidly, financial
panic can ensue as happened in Southeast Asia in 1997. Some countries
such as Chile and Malaysia have tried to control this speculative
flow of money going in and out of their economies through regulations.
These "speed bumps" help protect a country from becoming
reliant on foreign money in their economy and then being devastated
if it is rapidly removed in a financial panic.
The WTO, the World Bank, the IMF, NAFTA and in the future
the FTAA, lessen the control that governments can have over this
flow, called the deregulation of capital controls . They say such
investment liberalization leads to the most efficient distribution
of investment and the highest returns and that it builds up economies.
However, speculators are often irrational. Their investments can
damage rather than help countries if the money can be withdrawn
rapidly.
Essentially, investors want the ability to move their money
around easily and rapidly to take advantage of money-making opportunities
around the world. However, this eliminates the crucial and fundamental
tools that governments use to stabilize their economies and thus
protect the well being of their people. The only people it benefits
are the investors themselves and it makes economies very vulnerable
on the world stage.
The Mexican "Peso Crisis" in 1994-5 is a classic
example of hordes of investors suddenly deciding to move money
out of short-term investments to more profitable ventures. Mexico
had been widely praised by the IMF for taking steps to make its
economy very attractive for short-term foreign investors, even
creating special bonds, Tesobonos, to enable people to invest
easily. However, U.S. interest rates went up which made it more
profitable to invest in the U.S., and a new Mexican president
came to power which created a bit of uncertainty. Panic ensued,
investors bailed out, and suddenly Mexico was devastated. Mexican
businesses went bankrupt, people lost their jobs, interest rates
skyrocketed, and people lost their homes.
In the Asian Financial Crisis, the IMF recommendation to all
the countries was to further liberalize their economies. Malaysia
took the controversial and much criticized approach of strengthening
capital controls, allowing less and less money to move out of
their economy. After a year, the IMF was forced to recognize that
Malaysia survived the crisis in much better shape because it had
refused the IMF's advice.
Privatization
Privatization is when the financing and operation of a public
company or government service is sold to a privately run firm.
The idea behind it is that state inefficiency is replaced by major
savings and improved quality. However, more often than not, unemployment
rises because the private companies lay off workers and labor
unions are abolished. In addition, prices go up so the poor are
denied access to products and services and accountability is lost.
Many believe there are certain things that are necessary for
human survival and integral to basic human rights which should
not be included in the private market sector such as access to
safe drinking water, health care and public education.
The FTAA will promote further privatization of health care,
education, food, energy, telecommunications, water, postal service
and other services through rules that favor the private sector.
Should these services be provided with the motive of profit maximization,
or with the provision of quality services in mind because people
need them?
For example, when control of schools or prisons is given over
to private corporations the incentive to sacrifice necessary things
like safety or inmate health care in order to increase profits
is strong. Furthermore, once privatized, these services are made
available to international investors who have no accountability
to the population they are serving, but are principally accountable
to their foreign stockholders.
Performance Requirements
The FTAA is expected to limit the ability of governments to
put conditions or performance requirements on foreign investments.
Historically, many countries have had laws restricting the percentage
of a business that can be owned by a foreign corporation or requiring
that some percentage of the profit be reinvested in the host country.
These laws often require the use of local materials or local labor,
or require a factory to stay put for a determined number of years.
These, along with environmental protections like regulating logging
or mining techniques, are all crucial to the development, protection
and stability of local communities. The elimination of performance
requirements would mean that multinational corporations would
have virtually no obligations to the local communities in which
they operate. The MAI would have banned performance requirements
outright and similar bans are in some WTO agreements, so its a
pretty sure bet that this will be part of the FTAA.
Investor-To-State-Dispute Resolution
This is designed to give special legal protections to corporations
that invest in another country. Under the WTO's Dispute Settlement
Body, disputes over trade are settled between governments. Investor-to-state
dispute resolution, a feature of NAFTA and the MAI, and a near
certainty for the FTAA, allows a corporation to sue a government
directly if they assert that a national, state or local law threatens
corporate profits or even the company's reputation. This essentially
allows corporations to challenge democratically enacted laws and
force governments to pay compensation, privileging profits over
government sovereignty. When Congress, a state legislature, or
a local governing body is considering a policy, especially one
regarding environmental or human rights' protections, should they
have to worry about whether some foreign company might sue them
for the financial implications of that law? This fundamentally
endangers a just law-making process and the well-being of the
people.
Regulatory Takings
Regulatory Takings has traditionally meant that a government
needs to compensate a company for a "taking" like a
forced relocation of a building in order to build a road for the
public good. The FTAA would expand the rules on regulatory takings
so that a corporation could demand compensation for any government
action that directly or indirectly limits the value of an investment
or decreases present or future profits. So legitimate, non-discriminatory
government laws and regulations on things like pollution, toxic
chemicals, land use? environment, and consumer protection can
be challenged by a corporation. This basically places the right
to investment over the protection of environmental and public
health and safety.
For example, if a government passes a law requiring strict
pollution controls, a multinational corporation that owns a polluting
factory can demand compensation if the clean-up cuts into its
profits. A government's ability and right to protect its citizens
is severely limited by transnational corporations' attempts to
get around democratically established domestic laws.
Intellectual Property Rights
The reasonable concept of protecting intellectual property
is intended to encourage and reward innovations and new ideas.
Before the WTO, governments were free to balance between patent
rights and the public good depending on the benefit to society
that an invention might have. For example, they might limit patent
protections to ensure that life-saving medicines and technologies
are made available and affordable to the general public, or to
enable response in the case of a public health emergency.
Under the FTAA, the ability to make these exceptions would
be removed. Patent protections would become grants of monopoly
for extended periods of time. This would allow large, multinational
drug companies to keep drug prices high by preventing the production
of cheaper generic equivalents by small pharmaceutical companies.
Impoverished people, those who may need the medicine most acutely,
would be denied the ability to purchase medicines while corporate
profits soar.
Also, while most people accept copyright and patent protections
for books, records, inventions, etc., corporations want to expand
those protections to include seeds that peasants have used for
generations, medicines that indigenous cultures have developed,
and even genes unique to particular populations. They want to
sell those "products" back to the same people who have
used them for centuries.
In the name of increased multinational corporate power and
profit, the FTAA would build on the WTO and NAFTA to further allow
long-term monopolies by corporations. The result: technological
dependence of third world countries, a loss of control over their
genetic resources, and limited access to medicines crucial to
their poor, ill populations!
Genetically Modified Organisms
The U.S. government is hoping to expand the market for genetically
modified organisms (GMOs) and other biotechnology. The FTAA is
likely to include provisions that require countries to remove
regulations or restrictions on the sale, importation or production
of GMOs. The questionable safety of these organisms is an important
issue in all nations, but the debate over genetically modified
crops takes on additional critical elements in the Global South.
A large percentage of the population in the Global South work
in agriculture and are mainly vulnerable, poor farmers on small
marginal farms. The widespread use of GMOs would force farmers
to use expensive, patented, genetically engineered seeds that
must be bought every year. This would replace subsistence farmers'
traditional ways of life the time-tested practice of saving some
seeds to plant the next season and the exchange of seeds with
other farmers to extend the process of natural ecological variation.
Local networks and survival systems that have existed and prospered
for centuries would give way to a devastating dependency on transnational
corporations. The world's food supply, and the livelihood of millions
would be in the hands of a few over-powerful corporations.
For example, Monsanto Co. an agriculture biotechnology giant
developed the "terminator technology," a crop seed that
becomes sterile at harvest time requiring farmers to repurchase
seeds every season. Thankfully confronted by a massive protest
campaign by civil society organizations, farmers, scientists and
governments, they have promised not to commercialize this particular
product, but the threat of using any seeds manufactured by corporations
takes the control of food supply out of the hands of the people.
Alternatives
The FTAA will affect every member of society and every corner
of the hemisphere, yet it is fundamentally undemocratic. Democracy
is about people, not profits. Numerous calls by non-governmental
organizations' (NGOs) for transparency and civil society participation
in the negotiations have been denied, whereas corporate interests
are well represented. Moreover, allowing corporations and international
trade bodies to annul food safety and labor laws, undermine human
rights, and destroy the environment is undemocratic and very dangerous.
Many of the labor and environmental laws that are undermined by
free trade agreements took decades of struggle to win.
Many people throughout the hemisphere are not convinced of
the merits of free trade and challenge the idea that it is the
only option.
International trade can play a useful role in prosperity and
global well-being, but it should not be seen as a goal in and
of itself or as the catchall solution to hemispheric problems.
Free trade in fact worsens conditions of poverty, inequality and
environmental degradation.
Opposition to the FTAA is wide spread and alternatives DO
exist. There are already thousands of people across the hemisphere
working to replace current corporate-led free trade with people-centered
fair trade. For example, the People's Summit of the Americas took
place in Santiago, Chile in 1998 and began a document, Alternatives
for the Americas. Building a People's Hemispheric Agreement, that
continues to be modified as people throughout the hemisphere input
new ideas. Leading this movement is the Hemispheric Social Alliance,
a broad-based network of civil society, environmental, and union
groups started in 1998 to create alternatives and unite people
in solidarity. (See below for more information sources on these
issues.)
We need a system that makes popular participation a priority,
ensures a democratic process, favors human, labor and environmental
concerns over economic ones, reigns in corporate power, has policies
that promote an equitable distribution of wealth and creates a
people-centered economic and political system. That will take
pressure and mobilization from all corners of the hemisphere.
Past successes should inspire us. The Multilateral Agreement on
Investment was defeated by a massive popular mobilization. We
hope you will join us in this struggle to defeat the FTAA.
Fast Track Authority
Under Fast Track, after a trade agreement is fully negotiated,
it is submitted for the first time to Congress. The House and
Senate are limited to 20 hours of floor debate and may not amend
the agreement. There is little time for NGOs to educate Congress
and the public on the negative effects that the trade agreement
will have on the environment, labor, agriculture, education, etc.
President Bush has already announced that Fast Track, which was
defeated in Congress by a united front of labor, environmental
and progressive groups in 1997, is a top priority for his administration.
Defeating new Fast Track authority is likely to be the opening
round in the battle to defeat the FTAA.
Trade policy like the FTAA has direct and broad effects on
citizens' lives. U.S. Iaws will have to be modified to ensure
that they are in compliance with the FTAA. Therefore, the full
range of U.S. interests needs to have input in the specific content
of the agreement. By preventing Congressional input, Fast Track
prevents our needs from being heard through our elected representatives.
Rewriting national laws undermines national sovereignty and
it is undemocratic to have international bodies of trade bureaucrats
and corporate representatives deciding the legality of environmental
and labor regulations. These regulations and modifications to
national laws invariably effect the poorest and most powerless
sectors of society, indigenous people, women and low-income people.
Fast Track, which is usually designated for 5 year increments,
if passed, will not only apply to the FTAA but to future trade
and investment agreements negotiated in the next five years.
***
North American Free Trade Agreement {NAFTA)
One of the immediate predecessors to the FTAA and a model
on which it is based is the North American Free Trade Agreement
(NAFTA). Its supporters have cited some signs of the success of
its policies. For example, in Mexico, exports grew, U.S. investments
in Mexican factories and other businesses grew, the number of
Mexicans employed in factories that produce goods for export grew,
prices of some foreign consumer goods lowered, all of which further
benefited an already wealthy Mexican elite and transnational corporations'
bank accounts. But let's take a look at the other side of the
story:
* "Increased economic development throughout Mexico,"
has expressed itself as Mexican workers who previously worked
in agriculture (40% before 1980) are forced into maquiladoras.
These foreign-owned assembly plants for export are located mainly
in the border regions. Maquiladoras are known for their brutal
labor conditions. This is due to very low labor standards-one
of the "incentives" for investment.
* Development of the environmental and health infrastructure
along the border has not adequately kept up with the surge in
industrial development, so pollution from industry and growing
population has increased drastically. This is because the Mexican
government offered substantial incentives for this foreign investment,
one of which is almost total exemption from taxes. So the Mexican
state doesn't have the resources to provide health care and enforce
environmental protections even if it had the will.
* In the border region, the occurrence of some diseases, including
hepatitis, is two or three times the national average, due to
lack of sewage treatment and safe drinking water.
* Where did these factories re-locate from, you ask? It's
estimated that 5-6 million U.S. jobs have been lost since NAFTA
came into effect as companies relocated to Mexico to take advantage
of the weaker labor standards and lower wages. Those U.S. workers
who found new jobs usually had less security and about 77% of
their previous wages. Factories that remain in the U.S. can use
the threat of moving to Mexico as a strategic tactic against union
organizing.
* The number of Mexicans living in "severe" poverty
has grown by four million since NAFTA began and the total number
of Mexican poor went from 47% to 51% of the population.
* Agribusiness has triumphed throughout Canada, Mexico and
the U.S. Meanwhile, the number of U.S. small farmers has fallen
9% and the percentage of farm households at or near the poverty
line has reached 93%. NAFTA has undermined the viability of U.S.
wheat, winter fruit, and vegetable and tomato producers.
* In Mexico, wages in manufacturing have fallen 9.5% and systematic
repression of workers trying to organize has been documented.
* Canada first entered a free trade agreement (FTA) with the
U.S. in 1988. Between 1989 and 1996, the income gap between the
top 10% and bottom 10% of families went from 50-to-1 to 314-to-1.
Due to pressures of FTA and NAFTA Canada has significantly decreased
its social programs as well.
* The Mexican economy has been tremendously destabilized,
causing the government to take extreme measures that for ordinary
Mexicans means high interest rates, bankruptcies of Mexican-owned
businesses, and from 1994-2000 a 39% plunge in purchasing power
for the bottom 80% of the population.
* Mexico's total debt was nearly $20 billion greater in 1998
than in 1994, the first year of NAFTA, forcing the government
to direct funds that otherwise would go to social programs into
debt payment.
***
Opposition to Neoliberal Policy Met by US. Militarism
from SOA Watch
The United States' main goal in the FTAA process is to secure
economic and political hegemony over the Western Hemisphere through
the FTAA. The Georgia-based School of the Americas (SOA), recently
renamed the Western Hemisphere Institute for Security Cooperation,
a combat training facility for Latin American soldiers has a crucial
role in this project. This school has also become known as the
'School of Assassins'.
Soldiers at the SOA are trained to protect the interests of
U.S. corporations and maintain the economic status quo for the
few rich and powerful in the U.S. and their cohorts in Latin America.
In official SOA publications "economic development along
free market principles" is identified as the "primary
foreign policy goal[s] of the U.S." in Latin America. The
SOA strategy is "to prepare military and police forces to
respond to current threats to the achievement of those goals."
For example, in Mexico, hours after NAFTA went into effect,
Indigenous communities rose up to say "No!" The Mexican
military moved in immediately with troops, helicopters, and artillery.
Today at least 18 of the high-level officers involved in the civilian-targeted
warfare are SOA graduates.
In Colombia, recent reports from Human Rights Watch and the
U.S. State Department link SOA-trained soldiers to numerous peasant
massacres and the assassinations of Labor leaders and striking
workers.
Last year the Bolivian government sold the public water system
of Cochabamba to a private corporation and the water rates immediately
doubled and at times tripled. As thousands peacefully took the
streets, Bolivian President and former military dictator, SOA
graduate Hugo Banzer sent out the armed forces to attack civilians.
Gen. Walter Cespedes Raallo, Military Governor of Cochabamba,
is an SOA grad as well. In 1998, while he was Commander of the
Joint Task Force in the Chapre coca region, the level of state
sponsored violence escalated. Fifteen farmers were killed and
others were brutally tortured. Cespedes was indicted for negligent
homicide in three of these deaths, but the case is slow to move
forward because of death threats against the prosecution and human
rights workers
It is no surprise that as state sponsored violence is used
to support economic injustice against the people in Latin America,
graduates of the 'School of Assassins' are consistently at the
forefront.
*
It is also important to note that the SOA is one of about
17 military facilities in the US. that provide training in low
intensity warfare for Latin American militaries. Thanks to the
excellent work of SOA Watch, the School of the Americas is the
most infamous, but it is only the tip of the iceberg.
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