Fair Trade for the Americas

With all the excitement down in Washington these days—trillion-dollar tax cuts, tense confrontations with foreign powers—it is easy to miss a little item like an interhemispheric free trade agreement. Easy to miss, but crucial to watch: the Free Trade Agreement of the Americas (FTAA) has become a top priority of the new Bush Administration. FTAA? Trade agreement? Big acronym—big deal. Eyes glaze over.

But the proposed international treaty could dramatically infringe upon the ability of signatory nation-states to maintain democratic control over economic, health and environmental laws and regulations. This treaty, the most far-reaching trade agreement in history, will see intensive negotiations in Quebec over the weekend of April 20-22. In essence, the Bush Administration seeks to extend the North American Free Trade Agreement (NAFTA) to all of the Americas by 2003; if ratified, the FTAA could compromise the potential for democratic self-government of over 800 million people on two continents.

Hyperbole? Not at all. The FTAA is based in part upon the innovations in international trade law crafted under NAFTA, which has developed an extensive track record since its ratification in 1993. To get a sense of the potential impact of the FTAA, we can start by looking at what provisions the FTAA is importing from NAFTA and the effect these provisions have already had under the latter agreement.

First, the FTAA, like NAFTA, would govern not only disputes between nations but also disputes between investors and nation-states. Corporations gained for the first time in Chapter 11 of NAFTA an institutional mechanism through which suits can be filed against foreign governments.

Second, the FTAA, like NAFTA, would expand the jurisdiction of trade agreements well beyond the traditional realm of tariffs: corporations can sue foreign governments for taking “measures tantamount to nationalization or expropriation” of an investment. Such measures can include health, safety, environmental and labor protection laws. Who gets to decide which laws and regulations are “tantamount to expropriation”? Under NAFTA and under the would-be FTAA, when an investor sues a government the case is submitted not to a national court but to an international tribunal that holds private proceedings and is not required to accept any input from the public.

What has been the impact of these provisions under NAFTA? In 1998, an Ohio-based hazardous waste disposal company won a suit for $20 million against Canada for expropriation of its business due to a Canadian ban on the import of PCBs, a highly toxic coolant used in electrical transformers. The same year, another U.S. corporation filed suit against Canada, claiming a law passed by the Canadian Parliament (which had banned the use of the gasoline additive and potentially harmful neurotoxin MMT) was a “measure tantamount to expropriation.” The Canadian government, hearing that it was likely to lose the case before a NAFTA tribunal, settled out of court for $15 million. Such cases should inspire concern among citizens due to the precedent they set. Are the validity of health, safety and environmental laws to be decided by elected representatives—or by unelected and secretive tribunals?

One might wonder why we might want to apply such a destructive trade agreement to the entire hemisphere. According to the most recent FTAA ministerial declaration, the economic integration achieved through the FTAA would help in “strengthening democracy, creating prosperity and realizing human potential.” The evidence from NAFTA shows the emptiness of such rhetoric. But the FTAA would not stop at simply extending NAFTA to the Americas—its provisions would be much more extensive.

Take, for example, trade in services, which was not extensively covered in NAFTA. A leaked Oct. 7 1999 FTAA Negotiation Group report indicates that the U.S. is intent on liberalizing trade in services, including publicly-funded services like social security, health care and education.

As Organization of American States (OAS) Deputy Trade Director Sherry Stephenson put it, “liberalization of trade in services implies modifications of national laws and regulations”—notably to limit the ability of nations to preclude private competition (foreign or domestic) for government services. Such a provision, coupled with an investor-state dispute clause as in NAFTA, would enable transnational service corporations to compete for the full range of government services covered by the agreement and allow them to sue for compensation any government that denies them “market access.” To cite one implication, this would potentially spell an end to nationalized health care in Canada or any other nation signatory to the FTAA.

If the FTAA would so compromise the ability of nation-states to maintain democratic control over basic regulatory powers, why are 34 of the nations in North and South America participating in the FTAA negotiations? First, most smaller nations, saddled with debt to the World Bank, IMF and northern investors, don’t have much of an option: with poorly capitalized markets, opting out of a trade agreement offered by the North would most likely precipitate a sudden fall in “investor confidence” among foreign investors, a corresponding crash in currency value and a decline in economic growth. It is easier for less-powerful nations to opt into trade agreements in order to maintain investor confidence, promote investment and pay off their debt. Second, in the negotiation of such a treaty we confront a failure of democracy already present. For example, the administration has only just begun to release the preliminary text of the FTAA, despite a March 15 letter signed by 50 members of Congress demanding that the U.S. Trade Representative supply the documents to the public.

Given such an erosion of democratic accountability, one can either accept the loss as inevitable or take hold of democracy as citizens of the Americas have always done—in public protest. At a rally in opposition to the FTAA on April 21 in Quebec, thousands of citizens from North and South America will take to the streets and demand a public and accountable negotiating process. Boston will be holding a solidarity rally in opposition to the FTAA this Saturday at Harvard. Beyond the protests, citizens will continue to hold conferences to discuss the possibility of fair, not “free” trade, crafting alternatives to corporate globalization.

Brian Shillinglaw ’01-’02 is a social studies concentrator. Anna Falicov ’02 is a special concentrator in urban studies and a member of the Progressive Student Labor Movement. Both are residents of Dudley Co-op.