SUMMARY
The Free Trade Area of the Americas (FTAA), currently being negotiated by 34
countries of the Americas, is intended by its architects to be the most
far-reaching trade agreement in history. Although it is based on the model
of the North American Free Trade Agreement (NAFTA), it goes far beyond NAFTA
in its scope and power. The FTAA, as it now stands, would introduce into the
Western Hemisphere all the disciplines of the proposed services agreement of
the World Trade Organization (WTO) - the General Agreement on Trade in
Services (GATS) - with the powers of the failed Multilateral Agreement on
Investment (MAI), to create a new trade powerhouse with sweeping new
authority over every aspect of life in Canada and the Americas.
The GATS, now being negotiated in Geneva, is mandated to liberalize the
global trade in services, including all public programs, and gradually phase
out all government "barriers" to international competition in the services
sector. The Trade Negotiations Committee of the FTAA, led by Canada in the
crucial formative months when the first draft was written, is proposing a
similar, even expanded, services agreement in the hemispheric pact. It is
also proposing to retain, and perhaps expand, the "investor-state"
provisions of NAFTA, which give corporations unprecedented rights to pursue
their trade interests through legally binding trade tribunals.
Combining these two powers into one agreement will give unequalled new
rights to the transnational corporations of the hemisphere to compete for
and even challenge every publicly funded service of its governments,
including health care, education, social security, culture and environmental
protection.
As well, the proposed FTAA contains new provisions on competition policy,
government procurement, market access and dispute settlement that, together
with the inclusion of services and investment, could remove the ability of
all the governments of the Americas to create or maintain laws, standards
and regulations to protect the health, safety and well-being of their
citizens and the environment they share. Moreover, the FTAA negotiators
appear to have chosen to emulate the WTO rather than NAFTA in key areas of
standard-setting and dispute settlement, where the WTO rules are tougher.
Essentially, what the FTAA negotiators have done, urged on by the big
business community in every country, is to take the most ambitious elements
of every global trade and investment agreement - existing or proposed - and
put them all together in this openly ambitious hemispheric pact.
Once again, as in former trade agreements like NAFTA and the WTO, this free
trade agreement will contain no safeguards in the body of the text to
protect workers, human rights, social security or health and environmental
standards. Once again civil society and the majority of citizens who want a
different kind of trade agreement have been excluded from the negotiations
and will be shut out of the deliberations in Quebec City in April 2001.
However, the stakes for the peoples of the Americas have never been higher,
and it appears a confrontation is inevitable.
What Is the FTAA?
The Free Trade Area of the Americas is the name given to the process of
expanding the North American Free Trade Agreement (NAFTA) to all the other
countries of the Western Hemisphere except Cuba. With a population of 800
million and a combined GDP of $11 trillion (US), the FTAA would be the
largest free trade zone in the world. If reports coming from the Negotiating
Groups working on the key elements of the deal are correct, the FTAA will
become the most far-reaching free trade agreement in the world, with a scope
that will reach into every area of life for the citizens of the Americas.
The FTAA was launched by the leaders of 34 countries of North, Central and
South America and the Caribbean at the December 1994 Summit of the Americas
in Miami, Florida. At that meeting, then President Bill Clinton pledged to
fulfil former President George Bush's dream of a free-trade agreement
stretching from Anchorage to Tierra del Fuego, linking the economies of the
hemisphere as well as deepening social and political integration among the
countries based on the same free-market model as NAFTA.
However, little real progress was made until the next Summit of the
Americas, this one held in Santiago, Chile, in April 1998, at which time the
countries set up a Trade Negotiations Committee (TNC), consisting of the
vice ministers of trade from each country.
With support from a Tripartite Committee made up of the Inter-American
Development Bank, the Organization of American States and the UN Economic
Commission for Latin America and the Caribbean (ECLAC), nine Working Groups
were established to deal with the major areas of negotiations: services;
investment; government procurement; market access (covering tariffs,
non-tariff measures, customs procedures, rules of origin, standards and
technical barriers to trade); agriculture; intellectual property rights;
subsidies, anti-dumping and countervailing duties; competition policy; and
dispute settlement.
As well, three non-negotiating special committees were established to deal
with the issues of smaller economies, civil society and electronic commerce.
These committees and working groups have been meeting with increasing
frequency throughout 1999 and 2000 and the early part of 2001, regularly
bringing over 900 trade negotiators and mountains of material to Miami where
most of the meetings take place.
From the beginning, the big corporations and their associations and lobby
groups have been an integral part of the process. In the U.S., a variety of
corporate committees advise the American negotiators and, under the Trade
Advisory Committee system, over 500 corporate representatives have security
clearance and access to FTAA negotiating documents. At the November 1999
ministerial meeting in Toronto, the Ministers of Trade of the Americas
agreed to implement 20 "business facilitation measures" within the year in
order to speed up customs integration.
One of the tasks of the negotiators is to compare and consolidate the key
components of a variety of trade and investment agreements throughout the
area, including:
* NAFTA - a free trade and investment agreement between Canada, the
U.S. and Mexico
* MERCOSUR - a common market of the Southern Cone countries of Brazil,
Argentina, Paraguay and Uruguay
* the Andean Pact
* Caricom - the Caribbean Community
As well, a number of Bilateral Investment Treaties (BITS) have been signed
between individual countries, based on the "investor-state" model of NAFTA,
whereby corporations can directly sue governments for alleged property
rights violations without first involving their own governments.
There are some differences among these pacts and agreements; MERCOSUR's
goal, for example, is to become a common market, whereas NAFTA has not
attempted to establish common labour standards among its three members and
the U.S. clearly would not tolerate the free movement of labour from Mexico.
And MERCOSUR does contain some social provisions and programs for displaced
workers that are absent from NAFTA.
But the similarities between these treaties far outweigh the differences.
Both NAFTA and MERCOSUR include measures to deregulate foreign investment
and grant national treatment (non-discriminatory) rights to foreign
investors. Both prohibit "performance requirements" whereby foreign
investment must enhance the local economy and support local workers.
And both are based on a model of trade and investment liberalization that
locks in the Structural Adjustment Programs (SAPs) introduced earlier into
Latin America by the World Bank and the International Monetary Fund (IMF).
Under these programs, most developing countries were forced to
* abandon domestic industry in favour of transnational corporate
interests
* turn their best agricultural lands over to export crops to pay off
their national debt
* curtail public spending on social programs and abandon universal
health care, education and social security programs
* deregulate their electricity, transportation, energy and natural
resources sectors
* remove regulatory impediments to foreign investment
Tensions of leadership exist in the negotiations. Since 1995, the U.S.
Adminstration has been unsuccessful in obtaining renewal for its
"fast-track" legislation, which basically authorizes Congress to adopt free
trade agreements in full. This has given Brazil, the undisputed economic
leader in Latin America, the opportunity to challenge U.S. supremacy in the
negotiations and bid to lead the process of economic integration of the
Americas.
As well, the encroachment of the business community of the European Union
into Latin America, especially in banking, telecommunications, automobiles
and consumer products, has served as a catalyst for the United States to
reassert its leadership in the hemisphere. The EU has been intensifying its
presence in the region, negotiating individual free trade and investment
agreements with countries such as Chile, Mexico and Brazil. The U.S. is
counting on the successful completion of the FTAA to maintain the dominance
of its corporate sector in the region.
Further pressure has been placed on obtaining a successful FTAA in the light
of the defeat of the Multilateral Agreement on Investment (MAI) at the first
ministerial meeting of the WTO in 1996 and at the Organization for Economic
Cooperation and Development (OECD) in 1998, and the shut-down of the
"Millennium Round" meeting of the WTO in Seattle in December 1999. In fact,
WTO officials are finding it difficult to even secure a venue for a new
Ministerial meeting. As well, APEC - the Asia Pacific Economic Cooperation
Forum - is faltering and few have expectations that it will make the
hoped-for breakthrough to become a free trade and investment zone.
Many trade observers and pundits have identified the FTAA as the natural
heir of these failed projects and are fearful that another such failure
could put the whole concept of these massive free trade agreements on the
back burner for years. In fact, in a January 2000 statement, Associate
United States Trade Representative Peter Allegeier said that the FTAA has
taken on new importance after the fiasco in Seattle and may well aspire to
go further than the WTO, freed of the need to play the deals off against one
another.
The next ministerial-level Summit of the Americas is to be held in Quebec
City in April 2001. At this Summit, leaders will be presented with a heavily
bracketed first draft for a Free Trade Agreement of the Americas, out of
which they will start to fashion a full text. The agreement was originally
intended to be completed for implementation by 2005, but some countries,
including Chile and the United States, are pushing to move the ratification
date up to 2003, depending on how far negotiators get at the Quebec City
Summit meeting.
What's in the FTAA?
Essentially, the planned FTAA is an expansion of the existing NAFTA, both in
terms of including many new countries in the pact and in terms of extending
free trade's reach into new sectors, based on tough new WTO provisions. In a
statement that accompanied the original 1994 Miami Summit, the Ministers
made a series of recommendations in the form of a Declaration. In it, they
said that agreement had been reached on several key "Objectives and
Principles," including:
* economic integration of the hemisphere
* promotion of the integration of capital markets
* consistency with the World Trade Organization (WTO)
* elimination of barriers and non-tariff barriers to trade
* elimination of agricultural export subsidies
* elimination of barriers to foreign investment
* a legal framework to protect investors and their investments
* enhanced government procurement measures
* new negotiations on the inclusion of services
Since then, information about just what is contained in the FTAA working
documents has been sparse. However, from meetings with the United States
Trade Representative's office, members of Public Citizen's Global Trade
Watch report that the U.S. is intent on liberalizing services, including
health care, education, environmental services and water services. As well,
the FTAA will include provisions on investment similar to those in the
defeated Multilateral Agreement on Investment and Chapter 11 of NAFTA,
whereby corporations will be able to sue governments directly for lost
profit resulting from the passage of laws designed to protect health and
safety, working conditions or environmental standards.
The "Miami Group" - the U.S., Canada, Argentina and Chile - are also intent
on forcing all countries of the Americas to accept biotechnology and
genetically modified foods (GMOs), thereby promoting the interests of
biotech companies such as Cargill, Monsanto and Archer Daniels Midland over
the survival needs of small farmers, peasants and communities throughout
Latin America. Finally, reports Public Citizen, the U.S. is trying to expand
NAFTA's corporate protectionism rules on patents to the hemisphere, rules
that give a company with a patent in one country the monopoly marketing
rights to the item throughout the region, thereby robbing local people of
access to traditional medicines.
As well, reports from the negotiators themselves have inadvertently found
their way into the public domain. An October 7, 1999 confidential report
from the Negotiating Group on Services was recently leaked; it contains
detailed plans for the services provisions of the FTAA. Sherri M.
Stephenson, Deputy Director for Trade with the Organization of American
States, prepared a paper for a March, 2000 trade conference in Dallas,
Texas, in which she reported on the mandate and progress of the nine Working
Groups by sector. FTAA Web sites and Canadian government documents contain
important information as well.
Put together, these reports expose a plan to create the most far-reaching
trade agreement ever negotiated. The combination of a whole new services
agreement in the FTAA combined with the existing (and perhaps even extended)
NAFTA investment provisions represent a whole new threat to every aspect of
life for Canadians. This powerful combination will give transnational
corporations of the hemisphere important new rights, even in the supposedly
protected areas of health care, social security, education, environmental
protection services, water delivery, culture, natural resource protection
and all government services - federal, provincial and municipal.
Mandates of the Nine Negotiating Groups
1. Services
The mandate of the Negotiating Group on Services is massive: "To establish
disciplines to progressively liberalize trade in services, so as to permit
the achievement of a hemispheric free trade area under conditions of
certainty and transparency" and to develop a framework "incorporating
comprehensive rights and obligations in services." It is a new agreement and
meant to be compatible with the General Agreement on Trade in Services
(GATS) - the WTO services negotiations now in progress.
The General Agreement on Trade in Services was established in 1994, at the
conclusion of the "Uruguay Round" of the GATT and was one of the trade
agreements adopted for inclusion when the WTO was formed in 1995.
Negotiations were to begin five years later with the view of "progressively
raising the level of liberalization." These talks got under way as scheduled
in February 2000, chaired by Canada's Ambassador to the WTO (and former
International Trade Minister) Sergio Marchi. The common goal of Europe, the
U.S. and Canada is to reach a general agreement by December 2002.
It is called a "multilateral framework agreement," which means that its
broad commission was defined at its inception and then, through permanent
negotiations, new sectors and rules are to be added.
Essentially, the GATS is mandated to restrict government actions in regards
to services through a set of legally binding constraints backed up by
WTO-enforced trade sanctions. Its most fundamental purpose is to constrain
all levels of government in their delivery of services and to facilitate
access to government contracts by transnational corporations in a multitude
of areas, including health care, hospital care, home care, dental care,
child care, elder care, education (primary, secondary and post-secondary),
museums, libraries, law, social assistance, architecture, energy, water
services, environmental protection services, real estate, insurance,
tourism, postal services, transportation, publishing, broadcasting and many
others.
The FTAA negotiating services agreement is even more sweeping than the GATS.
As well as incorporating "comprehensive rights and obligations," it will
apply to "all measures [defined by Canada as 'laws, rules, and other
official regulatory acts'] affecting trade in services taken by governmental
authorities at all levels of government." As well, it is intended to apply
to "all measures affecting trade in services taken by non-governmental
institutions at all levels of government when acting under powers conferred
to them by government authorities."
The services agreement, says the Negotiating Group, should have "universal
coverage of all service sectors." Governments are granted the right to
"regulate" these services, but only in ways compatible with the "disciplines
established in the context of the FTAA agreement." The framework of the
services agreement has six elements of consensus.
These include:
* sectoral coverage ("universal coverage of all service sectors")
* most-favoured-nation treatment (access granted to
investors/corporations from any one FTAA country must be granted to
investors/corporations from all FTAA countries)
* national treatment (investors/corporations from all FTAA countries
must be treated the same as domestic and local service providers)
* market access ("additional disciplines to address measures that
restrict the ability of service providers to access markets")
* transparency (disciplines "making publicly available all relevant
measures which may include among others, new laws, regulations,
administrative guidelines, and international agreements adopted at all
levels of government that affect trade in services")
* denial of benefits ("FTAA members should be able to deny the
benefits of the services agreement to a service supplier that does not meet
such criteria." Criteria could include "ownership, control, residency, and
substantial business activities.")
This list represents sweeping new authorities of a trade agreement to
overrule government regulation and grants huge new powers to service
corporations under an expanded FTAA. For instance, if national treatment
rights in services are included in the FTAA, all public services at all
levels of government would have to be opened up for competition from foreign
for-profit service corporations. This agreement would disallow any
government or sub-national government from preferential funding to domestic
service providers in services as diverse as health care, child care,
education, municipal services, libraries, culture, and sewer and water
services.
The combination of this sweeping services agreement with the proposed
extension of the investment rules grants unprecedented new powers to the
FTAA and the private interests it promotes. For the first time in any
international trade agreement, transnational service corporations will gain
competitive rights to the full range of government service provisions and
will have the right to sue any government that resists for financial
compensation. That the real goal of this services/investment juggernaut is
to reduce or destroy the ability of the governments of the hemisphere to
provide publicly funded services (considered "monopolies" in the world of
international trade) is seen clearly in the words of OAS Deputy Trade
Director Stephenson:
"Since services do not face trade barriers in the form of border tariffs or
taxes, market access is restricted through national regulations. Thus the
liberalization of trade in services implies modifications of national laws
and regulations, which make these negotiations more difficult and more
sensitive for governments."
The FTAA Negotiating Group on Services has requested the organization of
national inventories of measures affecting (i.e., inhibiting) the free trade
in services.
2. Investment
The mandate of the Negotiating Group on Investment is to establish "a fair
and transparent legal framework to promote investment through the creation
of a stable and predictable environment that protects the investor, his
investment and related flows, without creating obstacles to investments from
outside the hemisphere." It builds on the investment chapter of NAFTA,
Chapter 11, which is, as legal trade expert Barry Appleton explains, "the
very heart and soul of NAFTA."
NAFTA was the first international trade agreement in the world to allow a
private interest, usually a corporation or an industry sector, to bypass its
own government and, although it is not a signatory to the agreement,
directly challenge the laws, policies and practices of another NAFTA
government if these laws, policies and practices impinge on the established
"rights" of the corporation in question. Chapter 11 gives the corporation
the right to sue for compensation for lost current and future profit from
government actions, no matter how legal these actions may be or for what
purpose they have been taken.
Chapter 11 was successfully used by Virginia-based Ethyl Corp. to force the
Canadian government to reverse its legislation banning the cross-border sale
of its product, MMT, an additive to gasoline that has been banned in many
countries and that Prime Minister Jean Chretien once called a "dangerous
neurotoxin." S.D. Myers, an American PCB waste-disposal company, also
successfully used a Chapter 11 threat to force Canada to reverse its ban on
PCB exports - a ban Canada undertook in compliance with the Basel Convention
banning the transborder movement of hazardous waste - and successfully sued
the Canadian government for $50 million (US) in damages for business it lost
while the short-lived ban was in place.
Sun Belt Water Inc. of Santa Barbara, California, is suing the Canadian
government for $14 billion because British Columbia banned the export of
bulk water in 1993, thereby closing any opportunities for the company to get
into the water-export business in that province.
The Negotiating Group on Investment has made substantial progress in
including in the FTAA the same or enhanced investor-state rights that exist
currently in NAFTA, including:
* basic definitions of investment and investor
* scope of application (very broad)
* national treatment (whereby no country can discriminate on behalf of
its domestic sector)
* most-favoured-nation treatment (whereby access to investors from one
FTAA country must be given to investors of all FTAA countries)
* expropriation and compensation for losses (whereby an "investor" or
corporation can claim financial compensation for lost business and profit
from the creation or implementation of regulation, including environmental
laws, from the government of another NAFTA signatory)
* key personnel (the ability of corporations to move their
professionals and technicians across borders outside of the normal
immigration process)
* performance requirements (limits on or the elimination of a
country's right to place performance requirements on foreign investment)
* dispute settlement (whereby a panel of appointed trade bureaucrats
can override government legislation or force the government in question to
pay compensation in order to maintain the legislation)
The inclusion of such sweeping investment provisions is a way of introducing
a form of the Multilateral Agreement on Investment, a proposed OECD
investment treaty that was abandoned in the face of massive civil society
resistance, into the FTAA. Combined with proposed strengthened provisions on
market access, agriculture and intellectual property rights and sweeping new
proposed provisions on services and government procurement, these investment
provisions will grant new powers to the corporations of the hemisphere. Such
powers will allow them to challenge all government regulations and
activities, and undermine the ability of all governments to provide social
security and health protection to their citizens.
3. Government Procurement
The mandate of the Negotiating Group on Government is very clear: "To expand
access to the government procurement markets of the FTAA countries" within a
new agreement. This will be done by achieving a "normative framework that
ensures openness and transparency of government procurement processes,"
ensuring "non-discrimination in government procurement" and "impartial and
fair review for the resolution of procurement complaints."
This FTAA mandate on government procurement appears to go further than that
of the FTAA's WTO counterpart, the WTO Agreement on Government Procurement,
whose aim is to prevent governments from fostering domestic economic
development when purchasing goods. Measures targeted by the WTO include
favouring local or national suppliers, setting domestic content standards or
imposing community investment rules. For now, the WTO does not enforce
market access or national treatment rules on the purchase of direct
government goods and services.
However, the FTAA Negotiating Group appears to go much further and open up
all government contracts, services and goods to competitive bidding from
other FTAA countries' corporations. The Negotiating Group has requested an
inventory of the relevant international classification systems and a
compilation of each government's procurement statistics.
4. Market Access
The mandate of the Negotiating Group on Market Access is to select a
methodology and timetable for the elimination of all remaining tariffs and
"non-tariff" barriers and agree upon the pace of tariff reduction. Tariffs
are border taxes; under both NAFTA and the WTO, they have largely been
eliminated in Canada and the Americas.
Non-tariff barriers are all the rules, policies and practices of
governments, other than tariffs, that can impact on trade. Non-tariff
barriers can potentially include everything governments do, including
delivering services and protecting the health and safety of their citizens.
Their inclusion in the mandate of this Negotiating Group expands the scope
of NAFTA market access provisions considerably.
These provisions are expanded in another important way. Under NAFTA, market
access is subject to national treatment. This means that imported goods
coming into a country from another NAFTA country must be treated "no less
favourably" than domestic goods. But national treatment in NAFTA did not
extend to government procurement or to domestic subsidies and was applied to
services only in a limited way. This protected most government programs from
national treatment challenge.
Under the proposed FTAA rules, however, it appears that services will be
covered more fully by the market access rules. As well, government
procurement restrictions that allow governments to protect local providers
will be more open to challenge from an expanded mandate of the government
procurement provisions. And the ability of foreign for-profit service
corporations to use the national treatment provision to challenge government
services monopolies will be greatly expanded under a proposed new agreement
on services.
Further, the Negotiating Group on Market Access has also been charged with
identifying and eliminating any unnecessary "technical barriers to trade" in
line with the WTO.
The WTO Technical Barriers to Trade (TBT) Agreement is an international
regime to harmonize environmental and other standards which effectively
creates a ceiling but no floor for such regulation. Under its rules, a
nation must be prepared to prove, if challenged, that its environmental and
safety standards are both "necessary" and the "least trade restrictive" way
to achieve the desired conservation goals, food safety or health standard.
This means that a country bears the burden of proving a negative - that no
other measure consistent with the WTO is reasonably available to protect
environmental concerns. The WTO TBT Agreement also sets out an onerous
procedural code for establishing new laws and regulations so arduous that it
is very difficult for any nation to meet.
While there are provisions in NAFTA on technical standards, they are not as
stringent as those found in the WTO TBT Agreement. NAFTA does require that
technical barriers not constitute "an unnecessary obstacle to trade."
However, NAFTA acknowledges the right of all parties to maintain standards
and regulatory measures that result in a higher level of protection than
would be achieved by measures based on international standards as long as
they apply these standards in a way that does not discriminate between
national and domestic goods. By choosing the stronger provisions of the WTO,
FTAA negotiators have introduced tougher restrictions on the governments of
the Americas and their right to regulate in the best interests of their
citizens.
5. Agriculture
The mandate of the Negotiating Group on Agriculture is to eliminate
agricultural export subsidies affecting trade in the hemisphere, based on
the WTO's Agreement on Agriculture (AOA); "discipline" other
trade-distorting agricultural practices; and ensure that "sanitary and
phytosanitary measures" are not used as a disguised restriction to trade,
using the WTO agreement as a model.
The FTAA's AOA agriculture provisions set rules on the trade in food and
restrict domestic agriculture policy, down to the level of support for
farmers, the ability to maintain emergency food stocks, set food safety
rules and ensure food supply.
The WTO Agreement on the Application of Sanitary and Phytosanitary Standards
(SPS) sets constraints on government policies relating to food safety and
animal and plant health, from pesticides and biological contaminants to food
inspection, product labelling and genetically engineered foods. As with
TBTs, the WTO SPS Agreement goes further than NAFTA.
The NAFTA provisions do not in themselves impose any specific standards;
they set out a general approach to ensure that SPS measures are used for
genuine scientific reasons, not as disguised barriers to trade. Member
countries are still allowed to take SPS measures to protect human, animal or
plant life and health at the level they consider "appropriate." While NAFTA
"encourages" the parties to harmonize their measures based on relevant
international standards, the WTO seeks to remove decisions regarding health,
food and safety from national governments and delegate them to international
standard-setting bodies such as the Codex Alimentarius, an elite club of
scientists located in Geneva, largely controlled by the big food and
agribusiness corporations.
The WTO SPS Agreement has been used to defeat the use of the "precautionary
principle," which it held not to be a justifiable basis upon which to
establish regulatory controls. (The precautionary principle allows
regulatory action when there is risk of harm, even if there remains
scientific uncertainty about the extent and nature of the potential impacts
of a product or practice.) By choosing the WTO SPS Agreement over the NAFTA
SPS provisions, the drafters of the FTAA are moving to totally remove the
right of individual governments of the Americas to set standards in the
crucial areas of health, food safety and the environment.
6. Intellectual Property Rights
The mandate of the Negotiating Group on Intellectual Property Rights is "to
reduce distortions in trade in the Hemisphere and promote and ensure
adequate and effective protection to intellectual property rights."
Intellectual property refers to types of intangible property such as patents
which generally grant their holders an exclusive power. Trade rules on
intellectual property extend this exclusive right, often held by
corporations, to the other signatory countries to the agreement. As of
January 1, 2000, all FTAA countries are now subject to the rules of the WTO
Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS).
This agreement sets enforceable global rules on patents, copyrights and
trademark. It has gone far beyond its initial scope of protecting original
inventions or cultural products and now permits the practice of patenting
plants and animal forms as well as seeds. It promotes the private rights of
corporations over local communities and their genetic heritage and
traditional medicines. It allows transnational pharmaceutical corporations
to keep drug prices high; recently TRIPS has been invoked to stop developing
countries from providing generic, cheaper drugs to AIDS patients in the
Third World.
The FTAA Negotiating Group on Intellectual Property has speculated that it
might go beyond the WTO TRIPS Agreement in certain unspecified areas.
Certainly, through the additional powers of Chapter 11, the investor-state
clause, intellectual property rights in the FTAA will have the additional
enforcement powers of cash fines and harsh penalties.
7. Subsidies, Anti-dumping and Countervailing Duties
The mandate of the Negotiating Group on Subsidies, Anti-dumping and
Countervailing Duties is to "examine ways to deepen existing disciplines
provided in the WTO Agreement on Subsidies and Countervailing Measures and .
. . to achieve a common understanding with a view to improving, where
possible, the rules and procedures regarding the operation and application
of trade remedy laws in order not to create unjustified barriers to trade in
the Hemisphere."
The WTO Agreement sets limits on what governments may and may not subsidize.
It has been strongly criticized by many developing countries as favouring
northern countries and large agribusiness concerns. As well, Article XXI of
the GATT exempts activities in the military sphere, including massive
government research and export subsidies, in order to protect governments'
"essential security interests." Because the security exemption shields the
war industry from WTO challenge, it spurs government spending on the
military and any industry related to national security. Since the majority
of global military spending is concentrated in the economies of a few
northern countries, the WTO security exemption gives these countries an
enormous competitive edge over other, smaller countries.
8. Competition Policy
The mandate of the Negotiating Group on Competition Policy is to "guarantee
that the benefits of the FTAA liberalization process not be undermined by
anti-competitive business practices." The Negotiating Group has agreed to
"advance toward the establishment of juridical and institutional coverage at
the national, sub-regional or regional level, that proscribes the carrying
out of anti-competitive business practices" and "to develop mechanisms that
facilitate and promote the development of competition policy and guarantee
the enforcement of regulations on free competition among and within the
countries of the Hemisphere."
Basically, the goal of competition policy, relatively new to trade
negotiations, is to reduce or eliminate practices that appear to protect
domestic monopolies. Canada is proposing that each country adopt measures
and "take appropriate action" to "proscribe anti-competitive business
conduct."
Ostensibly, the aim is to promote competition, but the result, particularly
for developing countries, is that they are often forced to break up their
existing monopolies, only to find that they have given foreign-based
transnational corporations golden opportunities to come in and pick off the
smaller domestic companies and establish a whole new monopoly protected by
WTO agreements such as the TRIPS and the Financial Services Agreement, both
of which protect global mega-mergers.
9. Dispute Settlement
The mandate of the Negotiating Group on Dispute Settlement is "to establish
a fair, transparent and effective mechanism for dispute settlement among
FTAA countries" and to "design ways to facilitate and promote the use of
arbitration and other alternative dispute settlement mechanisms, to solve
private trade controversies in the framework of the FTAA."
It is yet to be seen whether the FTAA dispute settlement mechanism will
mirror the NAFTA model or the WTO model. However, the Negotiating Group's
mandate includes "taking into account inter alia the WTO Understanding on
Rules and Procedures Governing the Settlement of Disputes." If this is the
case, then the FTAA dispute settlement system between governments is more
likely to resemble the more punitive system of the WTO than the NAFTA.
Under NAFTA, a country that loses a case before a dispute resolution panel
must either accept the ruling and offer "appropriate compensation" to the
other government or risk retaliation of "equivalent benefits." NAFTA does
not create a common set of trade laws for the member countries. NAFTA
dispute panels rule on the basis of the domestic trade laws of the importing
country.
The role of a WTO dispute panel, however, is to decide whether a country's
disputed practice or policy is a "barrier to trade," and to overturn the
offending practice or policy if it is deemed to be. Under the WTO Dispute
Settlement Body, a country, often acting on behalf of its own corporate
interests, can challenge the actual laws, policies and programs of another
country and strike down its domestic laws. A losing country has three
choices: change its law to conform to the WTO ruling; pay permanent cash
compensation to the winning country; or face harsh, permanent trade
sanctions from the winning country.
Dozens of nation-state health, food safety and environmental laws have been
struck down through this WTO process. Needless to say, the rulings affect
poor countries differently than wealthy ones. Sanctions against a country
that depends on one or two export crops for survival can be devastating. It
is little surprise that the majority of WTO challenges have come from
wealthy countries. In fact, the United States initiated almost half of the
117 WTO challenges launched between 1995 and 2000.
Of course, the recourse to private "investors" (i.e., corporations) in
NAFTA's Chapter 11 does not exist in the WTO. It would appear that the FTAA
negotiators will choose to retain the powers of private dispute settlements
contained in the investor-to-state provisions of NAFTA, while opting for the
more stringent conditions of the WTO to settle state-to-state disputes. This
would be in keeping with the other proposals for the FTAA; whichever
existing (or even proposed) model has the strongest "disciplines" is the
model of choice for the FTAA.
The three non-negotiating committees have also been meeting.
The Committee on Small Economies has "recognized the asymmetries" between
the different countries of the Americas and the need to come up with a plan
"in order to create the opportunities for the full participation of the
smaller economies and to increase their level of development." However, the
plan appears vague, consisting mostly of providing "a database of technical
assistance needs of smaller economies." Nowhere in this committee's mandate
is there an acknowledgement of the enormous disparity between the wealthy
and the poor of the hemisphere, both between and within countries.
The Committee on Civil Society acknowledges that "civil society has emerged
as a new actor in the trade dialogue." Although its mandate is "to receive
inputs from civil society, to analyze them and to present the range of views
to the FTAA Trade Ministers," the purpose of any dialogue is "to maintain
transparency in the negotiating process and to conduct the negotiations in
such a manner as to broaden public understanding and support for the FTAA."
It appears that the Committee's real role is not to listen, but to keep up
the appearance of real dialogue. In fact, says Stephenson, the benefit of
this Committee's work "may diffuse pressures related to issues of labour and
the environment."
The Joint Government-Private Sector Committee of Experts on Electronic
Commerce, on the other hand, is a very important committee whose subject has
all the hallmarks of an emerging sector. Electronic commerce has exploded in
recent years. United States E-commerce sales were close to $30 billion (US)
in 2000, up 75 percent in one year, and may account for one quarter of world
trade by 2005, the year the FTAA is to be ratified. The U.S. has identified
a goal of adopting worldwide rules for a global non-regulatory,
market-oriented E-commerce regime. Many billions of dollars every year could
be lost if taxes are removed from this kind of trade, leaving governments
with even more reduced funding bases for government programs.
The committee, heavily dominated by the most powerful corporate producers of
Internet hardware, software and communications equipment, such as Microsoft
and AT&T, has already carried out extensive analyses of E-commerce issues
and is exchanging views with other organizations such as the WTO and the
OECD. It has mandated several key studies on all aspects of trade and
E-commerce, and is clearly a growing powerhouse within the FTAA family.
Finally, the FTAA Trade Negotiations Committee has identified three areas
for "early harvest agreements" - on forestry, energy and fisheries - which
it hopes will be agreed upon at the April 2001 Ministerial Summit in Quebec
City. This means that, in these areas, agreement could be reached before the
2005 deadline for full FTAA ratification to remove tariffs from these
environmentally sensitive resources, with no opportunity for public input.
What Is Canada's Position on the FTAA?
Canada has taken a leading role in the FTAA process (as it has in the MAI,
the WTO and the GATS). The Canadian government has become an enthusiastic
champion of NAFTA and its expansion, and has been pursuing individual free
trade and investment agreements with Latin American countries like Chile, El
Salvador, Guatemala, Honduras and Nicaragua. Canada chaired the initial
18-month phase of the FTAA negotiations set up in Santiago in April 1998,
and is on record in its support of extending a model of deregulated trade
and privatization to Latin America.
At a March 1999 meeting of the Standing Committee on International Trade,
George Haynal, Assistant Deputy Minister, Americas, Department of Foreign
Affairs and Trade (DFAIT), said: "The hemisphere has gotten its act
together. It has some way to go, but our engagement is with an area that is
ready to engage us on our terms." Added Bob Anderson, Vice-President,
Americas, Canadian International Development Agency (CIDA): "Virtually all
of the countries have bought into the Washington Consensus in some form or
other. That Washington Consensus implies a whole series of sequenced
reforms. What we in CIDA have tried to do is identify those kinds of reforms
where Canada has some particular expertise, some comparative advantage."
DFAIT has been strongly criticized by civil society, labour, human rights
and other non-governmental organizations for its past lack of consultations
with any groups but business. For instance, when citizens groups in Canada
heard about the MAI in late 1996, they were told by DFAIT that no such
treaty existed. After they got a hold of a copy of the text in March of
1997, the groups acquired a list of government MAI consultations; it showed
that DFAIT had been meeting with the Canadian Chamber of Commerce and the
Canadian Council on International Issues - the international arm of the BCNI
- as early as 1993, four years before the government later admitted it was
even involved in such negotiations.
So on December 13, 2000, when DFAIT announced that it was releasing the
government's negotiating position on the FTAA, calling it an unprecedented
act of transparency, many groups were very pleased. At last, a meaningful
consultation could begin. However, so much is missing from this document
that, only months before the Quebec City meeting, it is impossible to gauge
Canada's position on the most contentious of the issues.
Four areas - investment, services, dispute settlement and intellectual
property rights - are missing altogether, and many questions remain in a
number of other key sectors.
Areas of Concern
* Investment
The Government of Canada says that it has made no submissions to the
Negotiating Group on Investment to date. This is hard to believe. Canada was
chairing the process during the period that the Negotiating Group on
Investment came up with its mandate and spelled out a very ambitious
position on investment (set out in detail above) that includes national
treatment, services and investor-state compensation provisions.
As well, in its introduction to its published negotiating position, DFAIT
states its clear support for an investment agreement in the FTAA: "In
recognizing that investment is the main engine for growth, Leaders further
committed themselves to creating strengthened mechanisms that promote and
protect the flow of productive investment in the Hemisphere." Then, in its
own draft Preamble, DFAIT calls for all governments to commit to
"establishing a fair and predictable framework for promoting and protecting
investment."
International Trade Minister Pierre Pettigrew has said that he will not sign
the FTAA if it contains the investor-state clause (Chapter 11) of NAFTA.
This appears to be in direct contradiction to the commitments that have been
made by his department's negotiators. There is an urgent need for the
government to clarify its exact position on investment immediately.
* Services
Similarly, DFAIT says it has made no submissions to the Negotiating Group on
Services either. Again, Canada was chairing the hemispheric Negotiating
Group that came up with the sweeping definitions of services, including
national treatment, universal coverage and extended market access.
It is clear from the introduction to Canada's position that the Canadian
government looks favourably on including services in the FTAA:
"Specifically, they (the Leaders) noted that the elimination of impediments
to market access for goods and services among our countries will foster
collective economic growth." In the draft Preamble, Canada calls for
"enhancing market access for trade in goods and services" and acknowledges
"the importance of regulatory reform to advancing trade liberalization."
Certainly, if Canada takes a position at the FTAA similar to its position at
the GATS, it will be promoting negotiations in which, as the government's
own WTO position paper states, "nothing is off the table, a priori,
including the politically sensitive areas of health and education."
To see what Canada is likely to support, we can look to the existing GATS
agreement as well as the proposed additions. The GATS currently covers all
service sectors and modes of supply as well as most government measures,
including laws, practices, regulations and guidelines - written and
unwritten. No government measure that affects trade in services, whatever
its aim, even for environmental or consumer protection, for universal
coverage or to enforce labour standards, is beyond the scope of the GATS.
Essentially, the agreement prohibits discrimination against a foreign
supplier in all covered areas notwithstanding the conditions under which
services are provided and regardless of the human rights or environmental
record of the provider. Parties have also agreed that some rules apply
"horizontally" or across the board, whether or not the area has already been
listed with the GATS. One "horizontal" rule is that all regulations in any
given sector, including social services, must be "Least Trade Restrictive"
and all member WTO countries must be prepared to include market mechanisms
wherever possible, even in social programs.
At present, public services provided by government are technically
applicable for exemptions. Hence, some countries have claimed exemptions for
their publicly funded social security programs. But under GATS article 1.3C,
for a service to be considered to be under government authority, it must be
provided "entirely free." That means that the sector in question must be
completely financed by government and have no commercial purpose. All
government services supplied on a commercial basis - even if it is
not-for-profit - are subject to GATS rules, as are government services
publicly supplied but in competition with commercial suppliers. Since hardly
any service sector in the world is entirely commercial-free, this exemption
is increasingly meaningless.
In the new round of negotiations, GATS officials will attempt to expand
access to domestic markets and governments will be under great pressure to
list more of their services and exempt fewer. The powerful northern
countries will be pressing for more binding market access provisions,
pressing developing countries for guaranteed, irreversible access to their
markets and eliminating many more policy options.
As well, GATS officials are seeking to place severe restraints on domestic
regulations, thereby limiting governments' ability to enact environmental,
health and other standards that hinder free trade. Article VI:4 calls for
the development of any "necessary disciplines" to ensure that "measures
relating to qualification requirements and procedures, technical standards
and licensing requirements do not constitute unnecessary barriers to trade."
This provision would also apply horizontally. Governments would be compelled
to demonstrate that regulations, standards and laws were "necessary" to
achieve a WTO-sanctioned objective, and that no less commercially
restrictive alternative was available.
Further, the new talks are aimed at developing new GATS rules and
restrictions, intended to further restrict the use of government subsidies,
such as those used in public works, municipal services and social programs.
A particularly threatening development is the demand for an expansion of the
"Commercial Presence" rules. Commercial Presence allows an "investor" of one
GATS country to establish a presence in any other GATS country and compete
not only for business against domestic suppliers but for public funds
against domestic publicly funded institutions and services.
All of this is taking place under Canada's leadership; Canada's WTO
Ambassador, Sergio Marchi, is chairing the WTO GATS negotiations. There is
no reason to believe that the Government of Canada would take a
substantively different position on services in the FTAA.
* Intellectual Property Rights and Dispute Settlement
Again, the absence of Canada's position on these two crucial areas from the
document is very disturbing. As with services and investment, Canada was in
the chair during the negotiations that led to the proposed mandate outlined
above. The notion that the Canadian government is not in full compliance
with the Negotiating Group on Intellectual Property Rights and the
Negotiating Group on Dispute Settlement is not credible.
* Technical Barriers to Trade
Canada is proposing a new and separate chapter on the subject of Technical
Barriers to Trade (TBTs) based on the TBT provisions of the WTO. (These are
the rules that state a nation must be prepared to prove, if challenged, that
its environmental and safety standards are both "necessary" and the "least
trade restrictive" way to achieve the desired conservation goals, food
safety or health standard.) These rules are of great concern to Canadian
environmentalists and groups concerned with food and animal safety, as they
have been used to strike down health and safety regulations around the
world.
DFAIT says there is a need for a "broader framework" of discussion and
commitment than exists in the proposed FTAA and recommends establishing a
new Committee on TBTs which would meet regularly and provide technical
assistance to the developing countries of the Americas in order to assist
them to deregulate "unjustified use of government regulatory powers that
have an undue (more restrictive than necessary) or discriminatory impact on
trade."
Canada's Preambular language expressing its hope of finding ways to "better
protect the environment" is negated by the strong anti-environmental
language of its position on TBTs.
* Agriculture
The Government of Canada is a hawk on the issue of agriculture. It is
calling for the total elimination of export subsidies for agricultural
products "as quickly as possible" and to prevent their re-introduction "in
any form." It is also calling for the "maximum possible reduction or
elimination of production and trade-distorting domestic support," even
though the elimination of farm subsidies has had a devastating impact on
Canadians farmers, and it wants to "accelerate the elimination of tariffs
for originating agricultural products." It is bullish on non-tariff measures
and regulations, calling for a zero-tolerance policy on restrictions on
imports.
DFAIT also strongly endorses the WTO Agreement on the Application of
Sanitary and Phytosanitary Measures (SPS) in the FTAA. (The WTO Agreement on
SPS sets constraints on government policies relating to food safety and
animal and plant health, from pesticides and biological contaminants to food
inspection, product labelling and genetically engineered foods.) Like TBTs,
these rules are seen by many as a way to reduce or eliminate government
regulations that protect human and animal health in favour of private
interests.
As with TBTs, the Government of Canada wants to "facilitate" day-to-day SPS
activities within the hemisphere and proposes the establishment of a
"Consultative Group on SPS" to provide a "regular forum for consultations,
problem-solving and institutional cooperation." The committee would look at
harmonization, risk assessment and transparency, among other things.
Canada's strong leadership on this form of deregulation, particularly in
light of the deteriorating environment of the countries of the hemisphere,
as well as the lowered standards resulting from giant corporate farms, is
great cause for concern.
* Government Procurement
The Government of Canada is also a hawk on the issue of government
procurement in the FTAA, calling for full transparency and the publication
of all laws, regulations, judicial decisions and administrative rulings to
do with government procurement. "Canada agrees that making public the rules
and administrative measures related to doing business with a government is
an important aspect of the Free Trade Agreement of the Americas."
But DFAIT goes further, calling for a prohibition of "any type" of offset.
Offsets, DFAIT explains, are "measures imposed or considered by an entity
prior to or in the course of its procurement process that encourage local
development or improve its balance of payments accounts by means of domestic
content, licensing of technology, investment, country-trade or similar
requirements." In other words, DFAIT supports the elimination of all the
ways in which governments ensure that foreign investment return some local
good to a community in return for the profit transnational corporations gain
from such access.
If Canada followed this formula proposed by DFAIT, all sorts of affirmative
action, community investment and local hiring programs would have to be
eliminated when dealing with foreign-based transnational corporations.
* Competition
Canada is calling for very strong language around competition policy in the
FTAA "to ensure that the benefits of the FTAA liberalization process are not
undermined by anti-competitive business practices." However, DFAIT is
strangely mute on the question of "official monopolies and state
enterprises." Its hawkish position on government procurement coupled with
its strong position on competition, as well as its apparent pro-services
bias, may put Canadian public institutions, such as the CBC, in jeopardy.
What Impact Will the FTAA Have on Canadians?
Social Security
The expanded powers proposed for the FTAA in combination with Chapter 11 of
NAFTA and the introduction of "universal coverage of all service sectors"
pose a grave threat to Canada's social programs. Universal health care,
public education, child care, pensions, social assistance and many other
social services are now delivered by governments on a not-for-profit basis.
Until the recent GATS negotiations, and now the FTAA negotiations, Canada
has always maintained that these social programs were a fundamental right of
citizenship for all Canadians, and have exempted them from trade agreements.
However, with these two agreements, the Canadian government is opening up
itself, and every other level of government, to trade-sanctioned threats by
transnational service corporations keen to break down the existing
government monopolies in the hemisphere.
Services is the fastest growing sector in international trade, and of all
services, health, education and water are shaping up to be the most
potentially lucrative of all. Global expenditures on water services now
exceed $1 trillion every year; on education, they exceed $2 trillion; and on
health care, expenditures exceed $3.5 trillion. In Canada, the service
sector accounts for 75 percent of all jobs.
These and other services have been targeted by predatory and powerful
entrepreneurial transnational corporations that are aiming at nothing less
than the complete dismantling of public services by subjecting them to the
rules of international competition and the discipline of the WTO and the
FTAA. (Already over 40 countries, including all of Europe, have listed
education with the GATS, opening up their public education sectors to
foreign-based corporate competition, and almost 100 countries have done the
same in health care.)
In the United States, health care has become a huge business, and giant
health care corporations are registered on the New York Stock Exchange. Rick
Scott, the president of Columbia, the world's largest for-profit hospital
corporation, says that health care is a business, no different from the
airline or ball-bearing industry, and he has vowed to destroy every public
hospital in North America, as they are not "good corporate citizens."
Investment houses like Merrill Lynch and The Lehman Brothers predict that
public education will be privatized in the hemisphere over the next decade
the way public health has been, and say there is an untold amount of profit
to be made when this happens.
If services are included in the FTAA, as they so clearly appear to be,
foreign for-profit health, education and other social service corporations
from anywhere in the hemisphere will have the right to establish a
"commercial presence" anywhere in Canada. They will have the right to
compete for public dollars with public institutions like hospitals, schools
and day care centres. Standards for health, education, child care and social
work professionals will be subject to FTAA rules and review to ensure they
are not an impediment to trade. Degree-granting authority will be given to
all hemispheric-based education corporations. Foreign-based telemedicine
services will become legal in Canada. And Canada won't be able to stop the
transborder competition of low-cost health and education professionals.
If any government at any level in Canada attempts to resist these
developments and tries to maintain these services in domestic control, every
service corporation of the hemisphere will have the legal right to sue for
financial compensation for lost revenues under the investor-state provisions
of the FTAA. This is not speculation; in areas covered by the current NAFTA,
there have now been many precedents of governments reversing decisions and
paying onerous compensation packages to private interests affected by public
policy.
As well, there is already a disturbing precedent in health care under the
existing investment provisions of NAFTA. A March 2000 legal opinion by
Canadian trade expert Steven Shrybman shows that when Alberta passed Bill
11, which permits for-profit corporations to compete with public hospitals
for public funding to provide health care "services," it gave
trade-sanctioned rights to U.S. for-profit foreign corporations to set up
shop not only in Alberta, but in any province in Canada and to sue for
compensation if denied this access.
"While in theory a government could retreat from contracting out health
services to private companies, that government would face the full force of
foreign investor compensation claims for not just present, but future
losses. The costs of compensation resulting from re-establishing a public
system would be prohibitive."
The reality is simple: once privatization is established in any public
sector, it would be almost impossible to reverse. With time, Canadian
governments would no longer be able to afford to publicly fund health care,
social security programs and education as they would have to be prepared to
give equal access to such funding to private contractors from the other FTAA
countries.
Canadians have already seen a steady erosion of their social security under
the new rules of economic globalization and trade agreements like NAFTA and
the WTO, as Canada's economy has merged into the American orbit and American
rules. Socially, Canada now looks more like the U.S. than in any time in its
history, with its huge gaps between haves and have-nots. In Canada, as in
the U.S., while great prosperity abounds in some quarters, great poverty is
growing in others.
In fact, Canada has experienced the highest rise in child poverty in the
industrialized world in the last decade - the same years in which the number
of millionaires has tripled and corporate salaries have grown at an average
of about 15 percent a year. In the very free trade years that corporate
salaries skyrocketed, workers' wages rose just 2 percent, less than the rate
of inflation.
The cuts to social programs and Employment Insurance (only one third of
unemployed workers now receive EI benefits they have paid for, compared to
almost 80 percent in 1989) have been so deep that Standard and Poor says
that the myth of a "kinder Canada" must be put to rest. For the first time
in 1999, says the New York-based ratings institute, Canada spent less on its
elderly and unemployed than did the United States.
With the proposed FTAA, the assault on social security will dramatically
escalate.
Environment
The FTAA draft, as it now stands, contains no safeguards for the
environment. The original mandate for the FTAA, drawn up at the first Summit
of the Americas in Miami in 1994, contained a promise to promote economic
integration of the hemisphere in such a way as "to guarantee sustainable
development while protecting the environment." A major Summit on Sustainable
Development was held in Bolivia in 1996 in order to ensure that the
principles of the 1992 Rio Earth Summit would be integral to the FTAA
process. Out of that meeting (at which civil society groups and
environmentalists were notably absent), came 65 initiatives know as the
"Santa Cruz Action Plan," and a new body, the OAS Inter-American Committee
on Sustainable Development.
However, the whole process was badly underfunded and had no clear mandate
for action; it has been widely regarded as a failure. As a consequence, the
whole goal of sustainable development was completely dropped from the FTAA's
new mandate at the Santiago Summit in 1998, and the tracks of trade and
environment were completely separated. With George W. Bush now in the White
House, it is even more certain that environmental concerns about the
hemispheric free trade deal will be set aside.
The Canadian government's recently published "position paper" on the FTAA
contains a reference to the environment in its proposed Preamble. It calls
for the FTAA to commit to "Better protecting the environment and promoting
sustainable development by adopting trade and environmental policies that
are mutually supportive." However, Preambular language in trade agreements
is non-binding and unenforceable, so any promise in this section of the
agreement is fairly meaningless. In any case, it is not possible to find
compatibility between a trade agreement that contains investor-state rights
for corporations and environmental stewardship.
Chapter 11
As briefly documented above (see Investment in "What's in the FTAA?"), and
well documented in a number of other sources, the investor-state provisions
of NAFTA have already had a very serious impact on government environmental
policy. Not only have a number of health and environmental regulations in
Canada, the United States and Mexico already been successfully challenged by
the corporations of the continent, Chapter 11 is used to create a "chill
effect," whereby governments are warned not to contemplate certain new
regulatory measures for fear of running afoul of the investment provisions
of NAFTA.
As legal trade expert Steven Shrybman explains: "The investor-state suit
provisions of NAFTA represent nothing short of a radical departure from both
the domestic and international legal norms in at least three fundamental
ways. First, by providing corporations with the right to directly enforce an
international treaty to which they are neither parties, nor under which they
have any obligations. Second, by extending international commercial
arbitration to claims that have nothing to do with commercial contracts and
everything to do with public policy and law. Third, by creating substantive
legal rights - concerning expropriation and national treatment that go far
beyond those available to Canadian citizens or businesses."
Any new regulations that are brought to Parliament or any provincial
legislature can be challenged by American corporations with interests in the
sector in question. In essence, governments have to be prepared to pay
dearly for the right to protect the ecological, human and animal health
concerns within their mandate. As trade lawyer Barry Appleton explains,
"They could be putting liquid plutonium in children's food; if you ban it
and the company making it is an American company, you have to pay
compensation."
To avoid this scenario, Canadian federal and provincial governments now have
to allow all prospective environmental and natural resource protection
regulations to be vetted by DFAIT. In an October 2000 exchange at a
Parliamentary Environment Committee meeting, Liberal MP Clifford Lincoln
asked senior DFAIT officials Nigel Bankes and Ken Macartney whether it was
true that International Trade Minister Pierre Pettigrew is fighting against
the inclusion of the precautionary principle in domestic environmental
legislation, such as the proposed new law to protect endangered species, so
as to ensure that Canada is in compliance with the WTO. The trade
bureaucrats confirmed that this was indeed so.
Environment ministers now have less power over their jurisdiction than their
trade counterparts. When the environment ministers of the three NAFTA
countries announced in December 1998 that they were going to allow the
Commission for Environmental Co-operation (CEC) - the NAFTA side deal that
has become a toothless "environmental watchdog" - to scrutinize these
Chapter 11 cases, they stepped way over the line drawn for them by DFAIT and
its sister agencies in Washington and Mexico City. Months later, the
environment ministers totally retracted the new powers, reigning in the
agency so far, in fact, that they stopped just short of dismantling it
altogether.
Given this track record, and the dropping of the goal of sustainable
development from the principles of the FTAA process, there is little reason
to believe that environmental concerns will fare much better in the
hemispheric trade pact.
Energy
While there is no separate FTAA Negotiating Group on energy or any mention
of the subject in the Canadian government's "position paper," there is a
consensus to come up with an "early harvest" agreement on energy at the
Quebec City Summit in April. In fact, it is highly likely that the FTAA will
mirror the controversial energy provisions that were integral to both the
Canada-U.S. Free Trade Agreement and NAFTA.
In these agreements, negotiators created an anti-environment,
anti-conservation, deregulated continental energy policy based on
short-term, high-cost, high-profit exports and controlled by transnational
energy corporations with little interest in rising prices or the
environmental consequences of their actions. 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.
In Canada, 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.
Export taxes on our energy supplies were banned, resulting in the loss of a
source of tax revenue for governments and giving American customers, who
don't have to pay the GST, a price advantage over Canadian consumers.
Most important, 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 licence
or revoke or change a licence 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 U.S. where American 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 of those barrels to the U.S.
The free trade agreements committed Canada to an energy policy driven by
massive, guaranteed exports to the U.S., corporate control of supplies and
an economic policy more dependent than ever on the exploitation of primary
resources. Because they exempted Canadian government subsidies for oil and
gas exploration from trade challenge, they ensured that Canadian public
funds would continue to pay for uncontrolled and environmentally destructive
fossil fuel exploration, a process that has already destroyed habitats in
the North and that threatens the sensitive spawning grounds off Cape Breton
and Newfoundland, all to the benefit of transnational corporations.
In the FTAA, these provisions will very likely extend to all the countries
of the Americas, who should be made aware of the resulting loss of
sovereignty over their energy supplies and their environmental
responsibility to husband those resources well.
Water
Similarly, it is unlikely that the United States would not extend the
provisions of NAFTA concerning water to the other countries of the
hemisphere under the FTAA. these provisions establish a continental water
market in the case of the commencement of commercial water exports; for the
countries of Latin America concerned about water privatization schemes, this
is an issue urgently needing attention.
Chapter 3 of NAFTA establishes obligations, including national treatment
rights, regarding market access for the trade in goods. It uses the General
Agreement on Tariffs and Trade (GATT) definition of a "good," which clearly
lists "waters, including natural or artificial waters and aerated waters" as
a good, and adds in an explanatory note that "ordinary natural water of all
kinds, other than sea water," is included.
When the NAFTA deal, and its predecessor, the Canada-U.S. Free Trade
Agreement, were being negotiated, opponents urged that water be clearly
exempted from them altogether. The governments said no, arguing that no
water was being traded commercially at that time in any of the NAFTA
countries; therefore, water in its "natural" state was safe. Critics argued
that any such protection was temporary at best and that the moment any
jurisdiction started selling its water for commercial purposes, key
provisions of NAFTA would become applicable, putting public control of water
in jeopardy.
There are three key provisions of NAFTA that place water at risk once it is
traded. The first is national treatment, whereby no country can discriminate
in favour of its own private sector in the commercial use of its water
resources. Once a permit is granted to a domestic company to export water,
the "investors" - i.e., corporations - of the other NAFTA countries have the
same "right of establishment" to the commercial use of this water as the
domestic companies. This applies to provinces as well; if British Columbia
allows the commercial export of bulk water, all provinces will have to allow
national treatment rights to the same foreign companies as well.
The second provision is Chapter 11, the investor-state clause. It applies to
water in two ways. First, if any NAFTA country, state or province tries to
allow only domestic companies to export water, corporations in the other
NAFTA countries would have the right to sue for financial compensation.
Second, if any NAFTA government introduced legislation to ban bulk water
exports, by that act water would automatically become a commercial "good";
foreign investors' Chapter 11 rights would be triggered by the very law that
excludes them, and they could demand financial compensation for lost
opportunities.
The third key provision is Article 315, "proportional sharing," the same
provision that has created a continental market for Canada's energy
supplies. Under Articles 315 and 309, no country can reduce or restrict the
export of a resource once the trade has been established. Nor can the
government place an export tax or charge more to the consumers of another
NAFTA country than they charge domestically. Canadian exports of water would
be guaranteed to the level they had acquired over the preceding 36 months;
the more water sent south, the more water required to be sent south. Even if
new evidence were found that massive movements of water were harmful to the
environment, these requirements would remain in place.
The proposed FTAA adds another threat to water sovereignty and conservation.
"Environmental Services" are included in the list of services now being
negotiated by the GATS. It is very likely that environmental services, which
include water services, will similarly be included in the FTAA. This means
that public water services could be challenged under the national treatment
provisions of the proposed agreement, forcing public services such as water
delivery and wastewater treatment to be privatized and contracted out to
transnational water corporations like Suez Lyonnaise des Eaux and Vivendi.
If any government attempts to maintain its water services in public hands,
these corporations would have enormous compensation rights under Chapter 11.
This loss of public control of water is a very serious one for Canada, and
of even greater urgency for the countries of Latin America, where water
privatization, strongly promoted by the World Bank, is spreading very
quickly.
Combined with the TBT and SPS agreements of the WTO and the plans for "early
harvest" agreements in forests and fisheries, the proposed FTAA appears to
be a disaster for ecological stewardship for the Americas.
Culture
No mention is made of culture or cultural exemptions in the mandates of any
of the Negotiating Groups. Canada does mention culture in the Preamble to
its position paper: "Recognizing that countries must maintain the ability to
preserve, develop and implement their cultural policies for the purpose of
strengthening cultural diversity, given the essential role that cultural
goods and services play in the identity and diversity of society and the
lives of individuals." Again, however, this Preambular language is largely
decorative. It is very likely that culture will either be fully included in
the hemispheric pact or there will be a cultural "exemption" similar to the
one that exists in NAFTA. And that is almost as bad as having culture fully
included.
The terms on culture were clearly set out in NAFTA Annex 2106. While one
article (2005:1) exempts the cultural industry from the agreement with the
exception of tariff elimination, divesture of an indirect acquisition, and
transmission rights, another (2005:2) puts culture right back in by giving
the U.S. the right to retaliate against Canada with measures "of equivalent
commercial effect" and to do so using sectors unrelated to culture. Yet
another (2011:2) permits the U.S. to circumvent the dispute settlement
procedure when it retaliates. Other sections of the agreement, particularly
dealing with investment, competition policy and monopolies also infringe on
the right of Canadians to protect cultural policy.
This means that the U.S. has the legal right to unilaterally decide if a
Canadian cultural measure is "inconsistent" with NAFTA, to retaliate against
Canada and to select the nature and severity of the retaliation. Canada has
no legal rights whatsoever. It cannot even request a panel to judge whether
U.S. accusations are justified and, if so, to ensure U.S. retaliation is
commensurate with the offence.
It appears from the mandate of the FTAA Negotiating Committees that an
additional risk to Canada's cultural programs will find its way into the
FTAA in the services chapter. If cultural services are included in the
definition of services, as they appear to be ("universal coverage of all
service sectors"), and the principles of national treatment and most
favoured nation apply to these cultural services, as they also appear to do,
then government subsidies to the arts and culture could not be allocated
exclusively to Canadian artists, publications, production companies and the
like.
There are really only three forms of cultural protections left in Canada in
the wake of WTO rulings: government subsidies, such as those given to the
CBC or to book publishers of Canadian titles; Canadian content quotas, such
as content regulations in radio and television; and investment policies,
such as investment controls limiting non-Canadian investment in
broadcasting, telecommunications and cable companies.
Under a regime that allowed the direct challenge of government programs, all
three could be deemed trade illegal. Just as in social programs, any
government support of a Canadian "service" - in this case, cultural services
- would have to be applied in a non-discriminatory manner; American and
other corporations of the hemisphere in the entertainment industry could
demand equal rights to compete and receive government funding. As with
social programs, any government that continued to favour the Canadian
cultural sector could be sued for compensation under Chapter 11 by
transnational industry corporations, from big-box retailers to movie
networks.
If the proposed FTAA is adopted unchanged, Canadian cultural diversity and
Canada's cultural industries will become a relic of a past time.
Agriculture and Food Security
Canada's farmers have already felt the full blast of global competition, as
the Canadian government has slashed farm subsidies and farm income support
far more and far faster than have its major trading partners. As a result,
1999 and 2000 were the worst years for Canadian farmers since 1926, the year
that the Canadian government began to keep such records.
By choosing the WTO agreements on agriculture (AOA) and standards (SPS and
TBT), the FTAA negotiators plan to give new powers through this pact to
curtail the traditional rights of Canada's farmers and to downgrade Canada's
food safety laws. Under WTO disciplines, farmers can no longer collectively
negotiate prices for products with both domestic and foreign buyers. And the
elimination of domestic agriculture price supports to protect farmers has
left them at the mercy of international prices.
Because the WTO prohibits import and export controls, only the big - big
farms, big countries, big corporations - can survive. As a result, the WTO's
Agreement on Agriculture has almost exclusively benefited large agribusiness
corporations around the world no matter what their country of origin.
Furthermore, the WTO AOA assault on non-tariff measures, such as
environmental standards and supply management programs, has been used to
downgrade safeguards to public health and protection for farmers. For
example, through the WTO, the U.S. has successfully challenged Japan's
health-related pesticide residue testing requirements for agricultural
imports. Countries can no longer maintain emergency food stocks in
anticipation of drought or crop failure; they must now buy what they need on
the open market. "Food self sufficiency" now means having enough money to
buy food, not the domestic ability to produce it.
The WTO SPS agreement has had a terrible impact on the right of the world's
citizens to safe food. Canada and the United States successfully used the
SPS agreement to strike down a European ban on North American beef
containing harmful, possibly cancer-causing hormones. The EU, deeply
sensitive to lingering concerns about mad-cow disease, implemented a ban on
the non-therapeutic use of hormones in its food industry, citing many
studies linking them to illness. The WTO panel demanded "scientific
certainty" that these hormones cause cancer or other adverse health affects,
thus eviscerating the precautionary principle as a basis for food safety
regulations.
The FTAA appears poised to promote a model of agriculture to the hemisphere
where food is not grown by farmers for domestic consumers, but by
corporations for global markets. The results will be far-reaching indeed.
What Impact Will the FTAA Have on the Countries of Latin America?
The countries of Central and South America and the Caribbean are being given
all sorts of promises about the FTAA: more liberalized trade and investment
will create the biggest trade powerhouse in history, thereby spreading
prosperity to the many millions of the region currently without work or
hope, they are told.
Latin Americans should examine these promises very carefully before jumping
into this pact.
The reality is that Latin America has been living under this FTAA model for
over a decade. It is based on the Structural Adjustment programs of the
World Bank and the IMF that Latin Americans know well. It was the
deregulation and privatization imperatives of structural adjustment that
forced most to dismantle their public infrastructures in the first place. In
order to be eligible for debt relief, many dozens of the countries of the
Americas were forced to abandon public social programs, allowing for-profit
foreign corporations to come in and sell their health and education
"products" to "consumers" who can afford them.
Now these countries are allowed to maintain the most basic of public
services only for the poor; but these services are so inadequate that the
corporations aren't interested in them, and many millions of people in the
hemisphere go without the most basic of education and health services. Not
surprisingly, Latin American countries are experiencing an invasion of U.S.
health care corporations, like Aetna International and American
International, who report a 20 percent growth in the region per year.
Under the FTAA, this process will accelerate, wiping out traditional
medicine, education and cultural diversity. In fact, worldwide economic and
cultural harmonization is the goal, says one top U.S. WTO official, who
adds, "Basically, it won't stop until foreigners finally start to think like
Americans, act like Americans and - most of all - shop like Americans."
The last decade of trade and investment liberalization has already caused
great suffering in Latin America. Interest rates on debt payments have
soared from 3 percent in 1980 to over 20 percent today. Latin America, as a
region, has the highest rate of inequitable income distribution in the
world. After swallowing its free market medicine, it now has a poverty rate
higher than it was in 1980 and the buying power of Latin American workers is
27 percent lower. Eighty-five percent of all job growth has been in the
precarious sector with no benefits or protections.
Mexico, eight years into NAFTA, now has record-high poverty rates of 70
percent; the average minimum wage lost more than three quarters of its
purchasing power in those years. Ninety million Latin Americans are now
indigent and 105 million have no access to health care whatsoever. Child
labour has grown dramatically; there are now at least 19 million children
working in terrible conditions. Massive environmental degradation has
resulted from the region's desperate rush to exploit its natural resources
and the use of pesticides and fertilizers has tripled since 1996; there are
now 80,000 chemical substances produced and used in the Americas.
The exploitation of Latin America's natural resources by Canadian and U.S.
corporations now taking place would dramatically increase under a
hemispheric pact. Transnational mining, energy, water, engineering, forestry
and fisheries corporations would have new access to the precious resource
base of every country and the investor-state right to challenge any
government that tried to limit their access to them. The ability of
governments to protect the ecology or set environmental standards regarding
the extraction of natural resources would be greatly reduced, as would the
right to ensure local jobs from any activity of foreign corporations.
Joining the FTAA under these circumstances would be "tantamount to suicide,"
says the coalition of trade unions of the Southern Cone countries. In
December 2000, the major unions of Argentina, Brazil, Paraguay and Uruguay
held the MERCOSUR Trade Union Summit where they called upon their
governments to submit the FTAA to national plebiscites, which they believe
would result in its defeat. The FTAA process is deepening the already
growing poverty of the region, the union leaders said, putting "limits on
national institutions that should decide the future of each country, while
pushing aside the mechanisms that allow society to ensure a democratic
administration of the state."
Conclusion
If the terms and recommendations of the FTAA Negotiating Groups are the
substantive basis for a hemisphere trade pact, the whole process is totally
unacceptable and the citizens of the Americas must work to defeat it
entirely. In spite of government protestations that they have negotiated
these new trade and investment rules in full collaboration with their
citizens, the proposed FTAA reflects none of the concerns voiced by civil
society and contains all of the provisions considered most egregious by
environmentalists, human rights and social justice groups, farmers,
indigenous peoples, artists, workers and many others. Every single social
program, environmental regulation and natural resource is at risk under the
proposed FTAA. As it appears to stand now, there is no possible
collaboration to make this trade pact acceptable.
That is not to say that the citizens of the Americas are opposed to rules
governing the trade and economic links between our countries. In the wake of
the failed MAI, Canadian civil society groups held a national inquiry called
Confronting Globalization and Reclaiming Democracy, in which hundreds of
groups participated. The results show clearly that, based on a different set
of fundamental assumptions, such as the United Nations Universal Declaration
on Human Rights and strong environmental rules, Canadian citizens would be
prepared to enter into a process to develop closer ties with other countries
in the Americas and around the world. However, it cannot start with the
assumptions and goals of this FTAA.
This process must begin by revisiting current international trade agreements
like the WTO and NAFTA; it is time for a new international trading system
based on the foundations of democracy, sustainability, diversity and
development, and much good work is being done on these alternatives. As a
beginning, Chapter 11 must be removed from NAFTA; water must be exempted;
the energy provisions rewritten with an emphasis on conservation; and
culture must be truly exempted.
Most important, the world of international trade can no longer be the
exclusive domain of sheltered elites, trade bureaucrats and corporate power
brokers. When they understand what is at stake in this hemispheric
negotiation, the peoples of the Americas will mobilize to defeat it. That is
the fate it deserves.
Maude Barlow is the Volunteer Chairperson of The Council of Canadians,
Canada's largest public advocacy group, and a Director with the
International Forum on Globalization. She is the best-selling author or
co-author of 12 books. Her new book, Global Showdown: How the New Activists
are Fighting Global Corporate Rule, co-authored with Tony Clarke, will be
published by Stoddart in February 2001.
SOURCES
Free Trade of the Americas, Canadian Government Release: Canada's Proposals
for the FTAA Agreement, Department of Foreign Affairs and International
Trade, December 13, 2000, Ottawa.
The State of the FTAA Negotiations at the Turn of the Millennium, Paper
prepared for the conference, "Trade and the Western Hemisphere," organized
by Southern Methodist University, Dallas, Texas, March 25, 2000, by Sherri
M. Stephenson, Deputy Director for Trade, Organization of American States.
Report to the Trade Negotiations Committee, Restricted Document by the FTAA
Negotiating Group on Services outlining its mandate, leaked in October 2000.
Services and Trade in the Western Hemisphere: Liberalization, Integration
and Reform, Collection edited by Sherri. M. Stephenson, Brookings Institute,
Washington, 2000.
Social Exclusion, Jobs, and Poverty in the Americas, Paper prepared for the
Americas Civil Society Forum, November 1999, Toronto, by the Hemispheric
Social Alliance and Common Frontiers-Canada.
Forgotten Promises and Forgotten Lessons: The OAS, the FTAA and
Environmental Protection, Paper prepared for the International Centre for
Democratic Development Workshop, Windsor, June 5, 2000, by Christine Elwell
of the Sierra Club of Canada.
Navigating NAFTA, A Concise User's Guide to the North American Free Trade
Agreement, Barry Appleton, Carswell, Toronto, 1994.
MAI, The Multilateral Agreement on Investment and the Threat to Canadian
Sovereignty, Tony Clarke and Maude Barlow, Stoddart, Toronto, 1997.
Whose Trade Organization? Corporate Globalization and the Erosion of
Democracy, Lori Wallach and Michelle Sforza, Public Citizen, Washington DC,
1999.
GATS: How the World Trade Organization's New "Services" Negotiations
Threaten Democracy, Scott Sinclair, The Canadian Centre for Policy
Alternatives, Ottawa, Ontario, 2000.
The World Trade Organization, A Citizens' Guide, Steven Shrybman, The
Canadian Centre for Policy Alternatives, Ottawa, Ontario, and James Lorimer
and Co. Ltd, Halifax, Nova Scotia, 1999.
Invisible Government, the World Trade Organization: Global Government for
the New Millennium? Debi Barker and Jerry Mander, International forum on
Globalization, San Francisco, 2000.
Also, with research on services from Ellen Gould, Vancouver; on E-commerce
from Sarah Anderson of the Institute for Policy Studies, Washington; and on
Latin America from Karen Hansen-Kuhn, of the Development Gap, Washington.
