Trade ministers from the Americas are meeting in Miami November 20-21 to discuss plans to complete—or drastically scale back the scope of—the negotiations of the Free Trade Area of the Americas (FTAA). The FTAA is an
ambitious undertaking intended to link every country in the Western Hemisphere (except Cuba) through a free-trade agreement covering a broad array of issues. Proponents claim that the accord would serve to increase trade and economic
growth among the participating countries, leading to increased prosperity and strengthened democracy throughout the region. A large and growing number of civil-society organizations and some of the region’s governments, on the
other hand, are deeply concerned that the proposed accord would have a devastating impact on farmers, working people and the environment, and would consolidate the power of transnational corporations to move in and out of countries at will, with no responsibilities to the communities in which they operate.
Key Points
- The Free Trade Area of the Americas (FTAA) would link every country in
the hemisphere (except Cuba) through an accord modeled on NAFTA. - Nine negotiating groups, covering a broad range of key economic issues,
have been working to complete the FTAA by 2005. - There is strong and growing opposition to the FTAA among civil-society
organizations and some governments in the region.
The concept of an FTAA was first raised in 1990, when then-President George
H. Bush called for a hemispheric accord stretching from "Anchorage to
Tierra del Fuego." The first step in that plan was the negotiation of
the North American Free Trade Agreement (NAFTA), which began shortly after
Bush’s announcement, and concluded in 1993. NAFTA is significant on a number
of levels. It is the first such regional agreement among countries at such
vastly different levels of development, and it includes no measures to reduce
those asymmetries. It broke new ground with far-reaching provisions on investment,
services, intellectual-property rights and agriculture. NAFTA’s rules on many
issues go beyond those established in the World Trade Organization (WTO) agreements.
They have been used as the basis for advancing similar positions in other
talks, including a series of bilateral agreements reached by Mexico with countries
in the region, as well as in the failed Multilateral Agreement on Investment.
When, at the first Summit of the Americas in Miami in December 1994, President
Bill Clinton proposed the establishment of an FTAA by the year 2005, he held
out Mexico as the model of economic reform and NAFTA as the model trade agreement.
Just 10 days later, however, the Mexican peso experienced a massive devaluation.
Stunned observers watched as billions of foreign-investment dollars flowed
out of the country. That, coupled with the austerity and adjustment conditions
attached to the bailout package financed by the U.S. Treasury and the International
Monetary Fund (IMF)—particularly the requirement that interest rates be
maintained at very high levels ed to further devaluation, and sent the Mexican
economy into a deep depression.
That crisis, along with increasing evidence of job losses in all three
NAFTA countries, dampened congressional enthusiasm in the United States for
free-trade agreements for several years. Congress refused to grant fast-track
authority in 1998, and proponents were forced to withdraw the measure in 1999.
After it was finally approved in 2002, the Bush Administration pushed to accelerate
trade talks on several fronts, including the FTAA.
Formal negotiations for the FTAA began in 1998, with the work divided among
nine negotiating groups focused on: agriculture; market access; subsidies
and countervailing duties; investment; intellectual-property rights; services;
government procurement; competition policy; and dispute resolution. The negotiating
groups produced two drafts of the FTAA, published in July 2001 and November
2002. While the publication of those draft texts was groundbreaking, and as
a result of demands by civil society, they have been difficult to interpret.
Nearly every provision in these texts has been heavily "bracketed",
indicating competing proposals on a given issue. Many of the provisions, however,
have been lifted nearly verbatim from NAFTA, which is clearly serving as the
model for the FTAA. Negotiations are set to conclude in early 2005 so that
the resulting agreement could be implemented by the end of that year.
There is currently very little consensus among the participating countries
about either the timing or the scope of the FTAA. The United States, along
with 12 other nations (those with which the United States either already has
or is negotiating bilateral trade deals), is pushing for the completion of
an "ambitious" and far-reaching accord on schedule for implementation
by 2005. The countries of the Mercosur, the South American common market led
by Brazil and Argentina, on the other hand, are advocating a "possible"
FTAA, with drastically scaled-back goals. Venezuela and many Caribbean countries
have also expressed misgivings about the timing of the negotiations and their
scope.
Problems with Current U.S. Policy
- The Bush administration plans to advance its trade agenda not only through
the FTAA, but also through sub-regional accords such as the U.S.-Central America
Free Trade Agreement (CAFTA). - Proposals for an "investor-state" clause in the FTAA would give
investors the power to challenge national and local laws. - Brazil and Argentina have proposed an FTAA "lite" that would
relegate investment and other key issues on the U.S. agenda to the limbo of
the WTO.
In June 2003, the Bush administration described its key trade-policy objectives
for the coming year in a report to Congress, stating that "the United
States will advance bold market access proposals for manufactured and consumer
goods, agriculture, services, government procurement and investment"
in the FTAA negotiations. The administration has also made clear its plans
to advance its trade agenda not only through the FTAA, but also through sub-regional
trade agreements. It intends to complete CAFTA negotiations by December 2003,
and then allow the Dominican Republic to join CAFTA with only minimal changes
in the terms.
One of the purposes of CAFTA is to increase pressure on other negotiating
partners in the hemisphere. The United States Trade Representative (USTR)
fact sheet on CAFTA states, "Agreement between the United States and
Central America on free trade would promote greater convergence of positions
at the FTAA negotiating table. Together with NAFTA and the U.S.-Chile Free
Trade Agreement (FTA), an agreement with Central America would improve the
likelihood of forging common views on a wide range of topics." CAFTA,
therefore, serves a double purpose: to advance U.S. negotiating objectives
on a piecemeal basis, and to increase pressure on recalcitrant negotiating
partners to complete the FTAA, or risk being excluded from a possible opening
of markets.
The U.S.-Chile FTA was completed in March 2003, but its formal signing
was held up for several months after Chile’s government refused to support
the U.S. position on the Iraq War at the United Nations. In fact, U.S. Trade
Representative Robert Zoellick said in May that the U.S. government expects
"cooperation—or better—on foreign policy and security issues"
from its potential partners in trade agreements.
Prominent among the U.S. proposals for an "ambitious" FTAA is
the controversial investor-state provision contained in both NAFTA and the
failed Multilateral Agreement on Investment (MAI), as well as in a series
of bilateral investment agreements negotiated by the U.S. government. That
clause, which grants corporations legal status formerly reserved for nation-states,
represents a significant expansion of investors’ abilities to use trade agreements
to challenge local laws. When this sweeping procedural right to challenge
governmental regulatory actions is coupled with the broad and vaguely worded
investor protections in Chapter 11 of NAFTA, virtually all government regulations
become potential targets. In the past, investment agreements or national laws
have provided for compensation in cases where governments take control of
investors’ assets in the public interest. Under the MAI/NAFTA approach, that
right is broadened to include measures tantamount to expropriation, which
investors have used to demand compensation for potential lost profits arising
from regulatory changes. These challenges are adjudicated by dispute-resolution
panels meeting in secret, without input from citizen groups.
In 1998, the Canadian government was forced to rescind its ban on MMT,
a gasoline additive believed to cause nerve damage, after a challenge was
brought under the investor-state provision of NAFTA by the U.S.-based Ethyl
Corporation. Currently, the Canadian corporation Methanex is suing the U.S.
government for $970 million because of a California executive order banning
the use of MTBE, another gasoline additive associated with serious health
and environmental risks. The inclusion of such a provision in the FTAA could
effectively provide corporations with a de facto veto power over local laws
and regulations throughout the hemisphere.
As with NAFTA, the U.S. Trade Representative’s (USTR) proposals would result
in greater rights for investors, without establishing any corresponding responsibilities.
The USTR’s position is that investors should have the right to move funds
into and out of countries without delay, meaning that provisions such as capital
controls and performance requirements to ensure that investments promote development
goals would be illegal under an FTAA. In fact, the U.S.-Chile agreement forced
Chile to abandon its successful capital controls in favor of an "emergency"
program that would kick in only once a crisis is already underway.
There was considerable debate in the U.S. Congress on the investor-state
clause during the last fast-track debate. The resulting legislation requires
USTR to increase the transparency of the adjudication process, and to narrow
the scope of potential challenges. The U.S.-Chile FTA includes some minor
modifications of the NAFTA investor-state language, but the extension of that
clause throughout the Americas remains a priority for both USTR and the U.S.
business community.
This commitment to extend the NAFTA terms sharply contrasts with the proposal
for an "FTAA lite," first advanced by Brazil in June 2003. This
proposal, supported by Argentina and, to a lesser extent, Uruguay and Paraguay,
would remove investment, services, intellectual-property rights and government
procurement from the FTAA negotiations, relegating them instead to the WTO
deliberations.
The U.S. government has vigorously opposed the "FTAA lite" approach,
attempting in the press to isolate Brazil, and insisting that it will negotiate
with "can do" countries. In late October, the Brazilian government
posed an alternative approach, including the on-schedule completion of negotiations
on certain issues, and the extension of negotiations on controversial issues
into some indefinite future. Venezuela and many Caribbean countries have also
proposed extending the deadline for the FTAA’s completion.
Toward a New Foreign Policy
- Citizens’ groups in the hemisphere have implemented a massive public-education
campaign to educate people about the FTAA and to register their opinions. - Investment and other trade policies should balance investors’ needs for
clear rules with the requirements of each country’s development strategy. - The FTAA and other accords modeled on NAFTA should be rejected so as to
open space for meaningful talks on just and sustainable development.
It is entirely possible that the outcome of the Miami FTAA ministerial
meeting will be similar to that of the failed Cancun WTO ministerial, with
the participating governments unable to reach a consensus about the direction
of the trade talks. Governmental concerns are growing in response to the widespread
opposition voiced by citizens’ groups throughout the hemisphere. This opposition
has intensified since the Quebec Peoples Summit in 2001 (held parallel to
the official Summit of the Americas), when the Hemispheric Social Alliance
(HSA), a broad coalition of labor, environmental, family-farm, women’s and
other civil-society organizations, announced an ambitious plan to convene
a "peoples’ consultation" on the FTAA.
The peoples’ consultation began in September 2002, and involves a variety
of public-education campaigns on the FTAA, along with opportunities for citizens
to register their opinions on the proposed accord. The first such campaign
was carried out in Brazil, where more than 10 million people voted against
the FTAA. It is no coincidence that the new Lula Administration, elected just
after that vote, continues to listen closely to voices of opposition in that
country. Similar campaigns are being carried out in the U.S., Mexico, Argentina,
Ecuador and Peru, among other countries. The hemispheric campaign culminates
at the November civil-society mobilizations in Miami.
This campaign, and civil-society opposition to the FTAA in general, is
based on careful analysis of the actual contents of the agreement. There are
"national treatment" provisions in nearly every chapter of the FTAA
that require countries to treat foreign investors (or goods) at least as well
as domestic companies, despite the fact that foreign companies often enjoy
much greater access to financial resources, market information and expertise.
There is no mention in the FTAA text of the differential impact of trade on
women, or how the resulting problems might be addressed. There are no proposals
to ensure that low wages and poor working conditions do not serve as a country’s
primary "competitive advantage," or to provide funds needed to raise
standards internationally or to cancel illegitimate foreign debts. Current
FTAA proposals on agriculture and market access would likely result in a flood
of foreign goods into local markets with devastating consequences for local
producers.
Along with its critiques of the FTAA, the HSA has prepared Alternatives
for the Americas, a comprehensive proposal for a different kind of trade agreement.
The document includes chapters both on the issues under negotiation in the
FTAA, and on other relevant social issues that must be included in any agreement
if it is to achieve just and sustainable development. The HSA insists, for
example, that language regulating investments be changed to balance investors’
needs for clear rules with the development objectives of national economies.
Governments should retain the right to impose performance requirements on
foreign investors and be allowed to protect small- and medium-scale producers
and other key economic sectors in order to promote national development priorities.
Each country’s right to maintain food and nutritional security (for example,
by excluding basic grains from trade-liberalization measures) should also
be guaranteed. Likewise, governments must be free to regulate without having
to compensate foreign investors for "economic harms."
Despite prolonged attempts by the HSA and many other civil-society groups
to influence the official negotiations, and despite their success in educating
the public and affecting public opinion, none of these proposals are reflected
in the FTAA. It is therefore unreasonable to expect to transform the FTAA
at this late date. The FTAA negotiations, along with those of CAFTA and other
bilateral accords designed along the lines of NAFTA, should be scrapped. Only
then could a new process begin, one designed with the active participation
of affected sectors to achieve just and sustainable development.
