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Commentary On a fast track to disaster for the
worlds poor
By THOMAS E. AMBROGI
On Dec. 6, by a one-vote margin of 215-214, the House voted to
give President Bush fast track authority to negotiate new trade
agreements without any meaningful congressional oversight. The Senate has yet
to approve a similar measure.
Fast track legislation will become significant in coming months
when a bill is introduced calling for a Free Trade Area of the Americas, of
crucial importance to the growing power of transnational corporations. If fast
track is in place, Congress will have to vote on the matter quickly, with
limited debate, and without the ability to amend the measure.
The Free Trade Area of the Americas, often called FTAA, will be a
disaster for the worlds poor, with a special focus on the 34 countries of
this hemisphere. It is crucial to understand the roots and the context of this
bill as it arrives under the urgent pressure of fast track.
In 1994, at the Summit of the Americas in Miami, the 34 nations of
North America, Central America, South America and the Caribbean (except Cuba)
agreed to sign the trade and investment pact called Free Trade Area of the
Americas. With a population of 800 million from Alaska to Argentina, and a
combined gross product of $11 trillion, it would be the largest free trade zone
in world. It is intended for completion by 2005.
NAFTA on steroids
The plan is based on models from the North American Free Trade
Agreement -- NAFTA -- and the World Trade Organization, but it goes far beyond
each of these in both scope and power. One observer has remarked, FTAA is
NAFTA on steroids. It incorporates from the World Trade Organization the
General Agreement on Trade in Services, and sneaks in all the powers of the
Multilateral Agreement on Investment, which was roundly rejected by
public outrage in 1998.
It also expands on the Structural Adjustment Programs,
which have been imposed in recent years on most countries of the region by the
International Monetary Fund and World Bank, and which are so much a part of the
unpayable debt in the Third World.
In the principles of the Free Trade Area of the Americas, we have
the apex of the economic and political globalization process. The world today
is no longer effectively ruled by nation states. There has been a massive
restructuring of the global economy in favor of transnational corporations.
Between 1970 and 1998, their number increased by 800 percent. Of the top 100
economies in the world, 51 are now corporations, and 49 are countries. Seventy
percent of global trade is controlled by just 500 corporations.
The proposed Free Trade Area of the Americas represents a global
corporate system in which the transnational corporation is undisputed king, and
the planets new rule will be by extra-parliamentary and transnational
fiat.The Free Trade Area of the Americas agreement will contain no safeguards
to protect workers, human rights, social services or health and environmental
services.
In 1998, a Free Trade Area of the Americas Trade Negotiations
Committee was set up, with nine working groups on major areas of negotiations,
including such areas as services, investment, market access, agriculture,
competition policy and dispute settlement. Three non-negotiating special
committees were established to deal with issues of smaller economies, civil
society and electronic commerce.
Since early 1999, over 900 trade negotiators have been meeting in
closed sessions in Miami. Big corporations and lobby groups have been integral
to the process. Over 500 corporate representatives have security clearance and
access to the documents. The public has been granted only bits and pieces of
official information about these proceedings. Some negotiating documents have
been leaked, including a substantive report from the Negotiating Group on
Services in October 1999.
There is no public participation in drafting these agreements, and
no appeal allowed by anyone except corporate or state representatives. All
disputes will be adjudicated in secret before unelected authorities and
tribunals, with no public observers permitted and with no published record of
the proceedings.
Of the nine negotiating groups, we shall look at only the first
two, on services and on investment, since there is more leaked information
about them than about the other seven groups, and because these two capture the
heart of the Free Trade Area of the Americas.
Corporate takeover of services
The Negotiating Group on Services seeks 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. The most fundamental purpose of the recent global trade
agreements has been 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, education, law,
energy, water services, environmental protection services, real estate,
insurance, postal services, transportation, publishing, broadcasting and many
others.
The proposed Free Trade Area of the Americas services agreement is
even more sweeping in scope. The vast new authority to overrule government in
this agreement demands that all public services at all levels of government
would have to be opened up for competition from foreign for-profit service
corporations. It would disallow any level of government from giving
preferential funding to domestic service providers in services as diverse as
health care, education, municipal services, libraries, culture and sewer and
water services.
A key prescription in the agreement is that
investors/corporations from all FTAA countries must be treated the same
as domestic and local service providers.
For the first time in any international trade agreement,
transnational corporations will gain competitive rights to the full range of
government service provisions and will have the right to sue for financial
compensation from any government that resists, since publicly funded services
are considered monopolies in the new world of international
trade.
Services are the fastest growing sector in international trade,
and of all services, health, education and water are potentially the most
lucrative. Already over 40 countries, including all of Europe, have listed
education services with the General Agreement on Trade in Services, opening up
their public education sectors to foreign-based corporate competition, and
almost 100 countries have done the same in health care.
Columbia, the largest for-profit private hospital corporation,
says that health care is a business no different in kind than aviation or
manufacturing ball-bearings, and it has vowed to destroy every public hospital
in North America, since they are not good corporate citizens.
Numerous investment houses predict that public education will be privatized in
the hemisphere over the next decade, just as health care has been, and say
there is a great deal of money to be made when this happens. Standards for
health, education and social work professionals will be subject to Free Trade
Areas of the Americas rules and review to ensure that they are not an
impediment to trade.
The infamous Chapter 11
It builds on and significantly expands the investment chapter of
NAFTA, the infamous Chapter 11, which many analysts have called the very
heart and soul of NAFTA. The exclusive focus of the Free Trade Areas of
the Americas mandate on investment is on the protection of foreign
investors. And the key question is whether or not the Free Trade Areas of
Americas will force governments to entirely give over their sovereign power to
regulate in the public interest.
NAFTA was the first international trade agreement 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 another NAFTA government if its laws, policies and practices impinge
on the established rights of the corporation. Chapter 11 gives the
right to sue for compensation for lost current and future profit from
government actions, no matter how legal these actions may be. It incorporates
the rather astounding principle that a government cannot implement legislation
that expropriates a companys future profits.
As with the conditions on public services, the investment rights
granted in the second negotiating group of the Free Trade Area of the Americas
are very broad. No country can discriminate on behalf of its own domestic
sector. A foreign investor or corporation can claim compensation
for lost business or profit from the creation of regulations, including
environmental laws, by the government of another Free Trade Areas of the
Americas country. No country has the right to place any performance
requirements on foreign investment.
A panel of trade bureaucrats can override a governments
legislation or force a government to pay substantial compensation if they
continue to enforce that legislation. To adjudicate all disputes, NAFTAs
Chapter 11 sets up secretive tribunals at the World Bank or United
Nations, made up of three persons named by the parties in dispute. These
hearings are never open to the public, offering the confidentiality corporate
investors consider essential. NAFTA panels are not bound by the rulings of
previous panels; they create no precedents.
NAFTAs secret cases
It appears that about a dozen major cases have been brought to
NAFTA tribunals; but one never knows for sure how many, or their outcome, since
the whole process is highly confidential. But here are just a few about which
there seems to be some reliable public information.
The first Chapter 11 case, brought before a NAFTA tribunal at the
United Nations, was one in which the U.S.-based Ethyl Corporation sued the
Canadian government for $251 million in damages over its ban of Ethyls
gasoline additive, which Canadian Prime Minister Jean Chrétien once
called a dangerous neurotoxin. Canada settled the case in 1998,
agreeing to lift the ban, allow the additive, and pay $13 million in damages to
Ethyl.
The case with the greatest chutzpah for the amount of money
involved is that of Sun Belt Water of Santa Barbara, Calif., which is suing the
Canadian government for $10.5 billion in damages. Sun Belts claim
revolves around British Columbias having banned the export of its bulk
water in 1993, thus preventing Sun Belt from getting into the water business in
that province. The case is pending.
In another case, United Parcel Service is suing Canada for $160
million in damages, claiming that government subsidies to the Canadian postal
service represent an unfair trade advantage against UPS. The case is pending,
but lots of public service providers are watching for the outcome of that
one.
Another important case, the largest brought in the United States,
has the potential for creating a significant backlash against these outlandish
suits. It is that of Methanex, a Canadian corporation that is the worlds
largest producer of methanol, a key ingredient in the gasoline additive MTBE.
In 1999, California banned MTBE, after studies at the University of California,
Davis, warned that it may cause cancer in humans. Methanex claims that
Californias action is a confiscation of its property, what
Chapter 11 calls tantamount to expropriation. Though its quarrel is
with a state law, Methanex sued the U.S. government for $970 million, and if a
NAFTA tribunal at the United Nations finds this a regulatory
taking, the U. S. government can be held liable for the
corporations lost profits.
The Methanex case is pending, and it has become a main focus for
the California senates new Select Committee on International Trade Policy
and State Legislation, the first committee of its kind in the 50 states. It is
chaired by State Sen. Sheila Kuehl, and its core concern is sovereignty, in
this case the ability of a state to set antipollution standards that are
tougher than federal minimums.
In the sheer size of its economy, California outstrips all 34
parties to the Free Trade Authority of the Americas except for the United
States itself. If Kuehl gets her way, the FTAA will not get by without intense
scrutiny. Admittedly, her committee is only a select committee in the
California senate, not a standing one. Nevertheless, following its lead,
legislatures throughout the Americas could begin to open global trade
negotiations to public examination and make them responsive to the concerns of
civil society.
From the beginnings of the Third World debt crisis in the early
1980s, access to multimillion-dollar loans from the World Bank and
International Monetary Fund was made contingent on a countrys agreement
to carry out a drastic economic program of liberalization. This
array of monetary, budgetary, market and trade reforms have together come to be
known as Structural Adjustment Policies. We have noted above that these
economic reform principles are also the basis of the NAFTA and the Free Trade
Area of the Americas agreements. The Structural Adjustment package varies in
detail from country to country, but the main policies include: reducing the
states role in the economy; lowering barriers to imports; removing
restrictions on foreign investment; raising taxes; eliminating subsidies for
food staples and for local industries; reducing spending for social welfare;
cutting wages; devaluing the currency; and emphasizing production for export
rather than for local consumption.
FTAAs brave new world
Because so much of NAFTAs workings operate in corporate
seclusion, it is difficult to get a reliable evaluation of its track record
since it began in 1994. But Public Citizens Global Trade Watch has
recently released a lengthy and richly documented report titled Down on
the Farm: NAFTAs Seven Years War on Farmers and Ranchers in the
U.S., Canada and Mexico. Their findings on the fate of agriculture
in the three countries since 1994 hint at what is in store for the rest of the
hemisphere under the brave new world of the Free Trade Area of the
Americas.
The report shows how independent farmers in the United States,
Canada and Mexico have seen agricultural prices plummet, farm incomes collapse
and critical agricultural subsidy programs dismantled. NAFTAs rules
empowering investors, guaranteeing large corporate traders access rights and
constraining government regulatory power has set up a race to the bottom in
farm income, wages and sanitary and environmental standards.
In the United States, commodity prices have sharply declined.
Between 1995 and 2000, the bushel price received by U.S. farmers declined 33
percent for corn, 42 percent for wheat, 34 percent for soybeans and 42 percent
for rice. About 33,000 U.S. farms with under $100,000 annual income have
disappeared during the seven years of NAFTA. This is a rate six times steeper
than the pre-NAFTA period.
Ironically, to counteract the failure of NAFTA and its farm
deregulation policies, Congress has had to appropriate emergency farm supports
-- in massive farm bailout bills -- every year since the legislation went into
effect.
All over Mexico, the alteration of property rights through NAFTA
has brought sweeping changes in land use, particularly in agriculture. The
rights of peasants and indigenous people to ejidos, communally owned
land, along with a law prohibiting foreigners from owning land, were first
promulgated in 1917. Under NAFTA, ejidos and the prohibition of foreign
ownership were considered nontariff barriers that prevented
foreigners from receiving the same treatment and economic rights as Mexican
citizens, and, in the name of free trade, the government repealed
or weakened these laws.
U.S. corn dumping has devastated Mexican farmers and undermined
the genetic diversity of Mexicos corn breeds. Before NAFTA, Mexican
peasant farmers mostly grew corn, primarily to feed their families, on small
parcels of land of five acres or less, often on ejidos. Between 1994 and
1998, the import of cheap corn by huge agribusinesses forced millions of
Mexican maize farmers and their families off the land; some projections run to
as many as 15 million people, or about one in six Mexicans were forced off. The
government reduced tariffs on corn, price supports for growers, and subsidies
on tortillas. The price of corn tortillas has risen drastically, and even
quadrupled in some places, proving wrong the oft-repeated free trade mantra
that greater imports and lower commodity prices benefit consumers with price
cuts.
The reports conclusion is that NAFTAs twin policies of
free trade and elimination of domestic farm protections have handed the entire
food production and distribution system over to giant agribusinesses who have
reaped huge profits while the majority of farmers and consumers have been major
losers.
Under the Free Trade Area of the Americas, this process will only
accelerate through all 34 countries of the hemisphere, and traditional
medicine, education and cultural diversity will be wiped out. One top World
Trade Organization official has said that the goal is really worldwide economic
and cultural homogenization, and that it wont stop until foreigners
finally start to think like Americans, act like Americans and -- most of all --
like Americans.
The U.S. Constitution gives Congress exclusive authority to
regulate commerce with foreign nations. Fast track is a
mechanism established in 1974, and used only five times since, that delegates
away to the executive branch this congressional authority for setting trade
terms. It suspends normal congressional rules and leaves Congress with 60 days
to act, 20 hours maximum of debate in each chamber of Congress, and an
up-or-down vote with no amendments.
Fast track power expired in 1994, after it had been used by
President Clinton the previous year for passage of NAFTA. Clintons
requests that congress again delegate its trade authority in 1997 and 1998 were
refused by the House of Representatives. The Bush administration has now
renamed it trade promotion authority. On May 10, a bipartisan deal
was worked out making it more likely the Senate will pass this legislation.
At a glance |
The U.S. Constitution gives Congress exclusive authority
to regulate commerce with foreign nations. Fast track
is a mechanism established by President Nixon that delegates that authority
away from Congress to the executive branch. It expired in 1994, just after
President Clinton used it for passage of the North American Free Trade
Agreement, commonly called NAFTA. The Bush administration has renamed it
trade promotion authority. On May 10, U.S. Senate negotiators
reached a bipartisan deal to break the logjam on trade promotion authority,
President Bushs main legislative goal this year. If it passes the Senate,
Bush will have authority to move forward in two major negotiations: the next
round of trade talks at the World Trade Organization and plans to negotiate a
Free Trade Areas of the Americas.
In 1994, North and South American nations agreed to sign a
trade and investment pact called Free Trade Area of the Americas -- FTAA --
which would create the largest free trade zone in the world. Signatory nations
hoped for the agreement to be ratified by all participating nations by 2003 and
implemented by 2005.
The Free Trade Area of the Americas is part of a massive
restructuring of the global economy to favor transnational corporations.
Between 1970 and 1998, the number of these entities has increased by 800
percent.
The proposed Free Trade Area of the Americas is a kind of
global corporate system in which transnational corporations are sovereign, with
no safeguards to protect workers, human rights, social or health services or
environmental regulations.
Two areas of special concern are included in the proposed
agreements that will charter and direct Free Trade Area of the Americas:
- Services. All public services at all levels of
government would be opened up for competition from for-profit service
corporations worldwide.
- Chapter 11 of NAFTA: The mandate of the Negotiating
Group of the Free Trade Area of the Americas is to establish a fair and
transparent legal framework to promote investment through the creation of a
stable and predictable environment that favors the investor, his investment and
related flows, without creating obstacles to investments from outside the
hemisphere.
The Free Trade Area of the Americas builds on and
significantly expands the investment chapter of NAFTA, the infamous Chapter 11,
which critics have named the heart and soul of NAFTA. Chapter 11
allows a private interest to bypass its own government and directly challenge
another NAFTA government if its laws, policies and practices impinge on the
rights of the corporation. Already there have been 15 cases filed
under Chapter 11. |
Related Web sites |
For more information:
The Free Trade Area of the Americas: The Threat to
Social Programs, Environmental Sustainability and Social Justice by Maude
Barlow, a special report by the International Forum on Globalization,
originally published as a paper with a Canadian focus for the Council of
Canadians, January 2001. It can be accessed at: www.ifg.org and
www.canadians.org.
For more on organizing the global economy and on the
future of NAFTA: see the links to these articles: www.prospect.org
Public Citizens Global Trade Watch report:
Down on the Farm: NAFTAs Seven-Years War on Farmers and
Ranchers in the U.S., Canada and Mexico is informative. The report and
other excellent analyses can be accessed at: www.tradewatch.org.
One can get shadowy sketches of agendas and reports on the
official FTAA Web site at: www.ftaa-alca.org. |
Thomas E. Ambrogi is an interfaith theologian and human rights
advocate.
National Catholic Reporter, May 24,
2002
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