NAFTA on Steroids:

The Free Trade Area of the Americas (FTAA)

Global Exchange newsletter, Spring 2001

During the last year and a half, street demonstrations in Seattle, Prague and Washington, DC unmasked the three main institutions driving corporate globalization-the World Trade Organization, the International Monetary Fund, and the World Bank. The protests shifted the public debate over corporate globalization and forced directors at these institutions and their corporate allies onto the defensive. But now the "free trade" lobby has another project up its sleeve-the FTAA, or Free Trade Area of the Americas.

From April 20 to 22, heads of state from 34 countries from throughout the Western Hemisphere will gather in Quebec City, Canada for the Summit of the Americas. The Free Trade Area of the Americas will be at the center of the summit's agenda. During the meeting the hemisphere's leaders are expected to approve the first draft of the FTAA, which trade negotiators hope to finish by 2003.

The heads of state shouldn't expect to conduct their closed-door negotiations in peace and quiet. Thousands of people are planning to be in Quebec City in April to express their opposition to the FTAA and to articulate their own fair trade vision. The protesters will demand that the failed "free trade" system be reversed, not expanded.

The FTAA presents a serious challenge to progressives opposed to the "free trade" status quo. The agreement combines some of the worst provisions of the North American Free Trade Agreement (NAFTA) and the WTO. The agreement, like its predecessors, puts the interests of investors above the need to protect the environment, human rights and working communities. And its implementation threatens to accelerate the race to the bottom in labor and environmental standards.

Pessimism is not in order, however. With at least two years to go before FTAA ratification, fair trade forces enjoy the space to tap into the public's skepticism about the free trade experiment and strengthen popular resistance to increased corporate power. Equally encouraging, environmentalists, human rights activists, trade unionists, farmers, indigenous peoples, and women's groups from around the Hemisphere have already developed an "Alternative Agreement for the Americas" that offers a vision of what environmentally sustainable and socially just commerce would look like. By pointing to the past failures of agreements such as NAFTA while at the same time insisting that a different future is possible, fair traders have a real chance of defeating the FTAA.

Discussions over a hemispheric free trade agreement began in December 1994 during the first Summit of the Americas, held in Miami. Talks advanced in 1998, when trade ministers met in Santiago, Chile. Since late 1999, negotiations have been taking place every few months, and the first working draft will be ready for Quebec City.

Despite repeated calls for open and democratic development of trade policy, the FTAA negotiations have been conducted in secret. Early in the negotiation process, non-governmental organizations demanded access to the talks and requested working groups on democratic governance, labor and human rights, consumer safety, and the environment. National trade negotiators rejected these requests and instead established a committee to represent civil society views. But this committee is little more than a suggestion box; it contains no mechanism to actually incorporate civil society concerns into the talks.

US trade officials have been unresponsive to demands to make the talks more transparent. In November 2000, more than 300 citizen groups sent a letter asking that a draft of the FTAA be made available to the public. In January, Members of Congress made a similar request. Finally, on January 17, the office of the US Trade Representative (USTR) released abbreviated summaries of its positions; but it has not released the complete draft. In comparison, the Canadian government made its positions public last December.

While NGOs-and even members of the US Congress, which has not set the goals for US participation-are locked out of the negotiations, corporations have been helping write the rules of the FTAA. More than 500 corporate representatives enjoy the security clearances needed to review FTAA documents.

Given this imbalance, it's not surprising that the US's positions protect corporate interests at the expense of human rights and the environment.

The FTAA is an expansion of NAFTA to all of the countries of the Caribbean, and Central and South America (except Cuba). In the debates over the passage of NAFTA, the free trade proponents promised that increased trade would create good-paying jobs and not harm the environment. The last seven years have proven otherwise:

* In the US, an estimated half million jobs have been lost since NAFTA's enactment as companies relocate to Mexico to take advantage of weaker labor standards and lower wages. US workers' new jobs provide, on average, only 77 percent of the wage of their earlier employment.

* In Mexico, wages in the manufacturing sector dropped 9.5 percent from 1994 to 1999. Approximately 28,000 small businesses in Mexico have shut down, and the number of Mexicans living in "severe poverty" (less than $2 a day) has grown by 4 million. In rural areas, thousands of farmers have been driven into bankruptcy by the flood of cheap, subsidized US corn.

* NAFTA has also contributed to union-busting. According to a Cornell University study of more than 600 organizing campaigns, US employers threatened plant closings in 62 percent of the cases.

* The explosion of maquiladoras along the US-Mexico border has created an environmental and public health nightmare. Every day 44 tons of hazardous waste are improperly dumped along the border. Due to a lack of sewage treatment in shantytowns, hepatitis in the border communities is two to three times Mexico's national average.

* Forests in southern Mexico have suffered. Since NAFTA, 15 US wood product companies have set up operations in Mexico, and logging has increased sharply. In the state of Guerrero, 40 percent of the forests have been lost in the past eight years.

NAFTA deserves to be repealed, not expanded. The NAFTA experience demonstrates that the race to the bottom is real: Corporations move their operations to countries where environmental regulations are lax or unenforced, and use their ability to move as a lever to lower standards here in the US. This dynamic will worsen under the FTAA as corporations pit poor workers in Mexico against even poorer workers in Haiti, Guatemala and Colombia.

While the FTAA is largely based on NAFTA, in some areas it goes even farther than its predecessor. Indeed, the FTAA is NAFTA on steroids.

The FTAA's most sweeping rollbacks of environmental, consumer and human rights protection appear under the agreement's provisions on investment. The FTAA investment rules are very similar to elements of the Multilateral Agreement on Investment (MAI), a kind of corporate bill of rights that activists defeated in 1998. If implemented, the FTAA's investment rules would elevate property rights above human rights.

Like NAFTA, the FTAA will include "investor-to-state" lawsuits. These give corporations the ability to sue governments over regulations that diminish a corporation's potential future profits. These lawsuits grant corporations-but not citizens or NGOs- powers formerly reserved only for nation-states. Such lawsuits represent the most direct assault by corporations on values such as environmental protection and human rights defense.

Already, under NAFTA, several investor-to-state lawsuits have resulted in reduced government powers to protect the public interest. In one case, Canada dropped its ban on the chemical MMT, a fuel additive linked to nervous system damage, after the US-based Ethyl Corporation used the NAFTA dispute tribunal to challenge the Canadian law. In another bad call, a NAFTA tribunal forced Mexico to pay $16.7 million to a US corporation after a state government in Mexico prevented the company from opening a hazardous waste disposal center. A case is currently pending under which the US may have to pay almost $1 billion to the Canadian corporation Methanex because of a California phase-out of the fuel additive MTBE, which is poisoning the state's ground water.

The FTAA's investment rules also prohibit countries from putting controls on capital flows. This prohibition ignores the recent experience of countries such as Malaysia and Taiwan that have used capital controls to insulate themselves from the devastation of financial crises. By banning capital controls, the FTAA weakens countries' ability to guide their own development.

Also devastating to countries' efforts to encourage equitable development are FTAA rules against "performance criteria." That is, the FTAA would prohibit countries from: requiring a certain level of domestic content in production; giving preferences to domestically produced goods; and requiring firms to transfer technology. The FTAA's ban against such time-tested development tools will make it even harder for less developed countries to use foreign investment to advance social goals.

The FTAA's intellectual property rights rules go even further than those of the WTO. Countries' ability to produce life-saving drugs will be constrained by new monopoly patent rules and limits on patent exemptions needed to make generic versions of expensive pharmaceuticals. The new intellectual property rights regulations will also make it harder for nations to refuse patents on plant varieties and animals, raising the specter of a wave of biopiracy affecting indigenous groups and delicate biospheres. FTAA rules may also encourage the privatization of important services. All service sectors- including education and health care- will be open to privatization unless countries deliberately seek a "reservation" for a particular area.

While the FTAA goes to great lengths to protect corporations, it does nothing whatsoever to defend the environment, labor rights or human rights. The agreement merely states that countries should "strive to ensure" that environmental and labor laws are not relaxed to attract investment. There is no enforcement mechanism for even this weak provision. Moreover, this loose request is virtually meaningless in countries where environmental and labor laws are already weak.

It's obvious who the winners and losers are under the FTAA. Corporations get the ability to challenge any government regulation that could affect their profits; investors dodge capital controls; the pharmaceutical industry and big agribusiness see their reach extended. Meanwhile, the needs of virtually every other sector of society are ignored. The environment loses. Workers lose. Governments lose.

Until recently, globalization has been driven by a business elite interested in creating new global relations as a way to increase profits. But another kind of globalization- grassroots globalization-is winning supporters around the world. The question confronting us is: What kind of globalization do we want-elite globalization or grassroots globalization?

The Alternatives for the America, a reverse image of the FTAA, shows what grassroots globalization would look like. Started during a "people's summit" that coincided with the 1998 trade meeting in Santiago, the Alternatives document represents an ongoing, collaborative process to establish viable alternatives to the FTAA. The alternative agreement places the interest of local communities at the center of international commerce.

As the Alternatives authors have noted, at this stage of the struggle it is not enough to oppose and to criticize- we must build a proposal of our own and fight for it. The debate over globalization, after all, isn't a competition between isolationism and internationalism. It's a contest of values-life values vs. money values, popular democracy vs. top-down policy making.

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