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Frequently Asked Questions About the FTAA
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by Global Exchange

What is the 'FTAA'?

The Free Trade Area of the Americas (FTAA) is the expansion of the North American Free Trade Agreement (NAFTA) to every country in Central America, South America and the Caribbean, except Cuba. Negotiations began right after the launch of NAFTA in 1994 and are set to be completed in 2005.

What Are the Similarities Between FTAA and NAFTA?

The FTAA relies on NAFTA rules for guidance in the negotiations. The proposed agreement is essentially NAFTA on steroids. But NAFTA has proven a nightmare for working families and the environment.

The FTAA will impose the failed NAFTA model of increased privatization and deregulation hemisphere-wide. The nine working groups set up to negotiate the FTAA correspond closely to the chapters of NAFTA and cover the following topics: agriculture, competition policy, dispute settlement, government procurement, intellectual property rights, investment, market access, services, subsidies and anti-dumping. FTAA would deepen the negative effects of NAFTA we've seen in Canada, Mexico and the U.S. over the past eight years and expand NAFTA's damage to an additional 31 countries.

The FTAA will empower corporations to constrain governments from setting standards for public health and safety, to safeguard their workers, and to ensure corporations do not pollute the communities in which they operate. Effectively, FTAA rules will handcuff governments' ability to pass public interest laws. The agreement will enhance corporate power at the expense of citizens throughout the Americas.

How Has NAFTA Affected Working People in the US and Mexico?

When NAFTA was under consideration by the US Congress, the agreement's backers promised big job gains along both sides of the border. This hasn't occurred.

In the US, an estimated 766,000 jobs have disappeared since NAFTA as companies relocate to Mexico to take advantage of weaker labor standards and lower wages. When workers look for new jobs, they often end up in the service sector, where wages are 23 percent lower than in manufacturing. Also, unionization efforts are often undermined by threats to transfer production unless employees end their organizing attempts. According to a Cornell University study, two-thirds of manufacturing and communication companies faced with union organizing campaigns since NAFTA threatened workers with moving their jobs abroad.

Workers in Mexico have also suffered from NAFTA. In December 1994 Mexico was forced to devalue the peso to attract the foreign investment needed for a free trade, export-oriented economy. This devastated the Mexican economy, pushing 8 million families out of the middle class and into poverty. Over one million more Mexicans work for less than the minimum wage of $3.40 per day now than before NAFTA. Approximately 28,000 small businesses in Mexico have shut down due to the entrance of foreign companies. Manufacturing wages dropped 21 percent from 1995 to 1999, and have only started to recover.

The FTAA would intensify NAFTA's "race to the bottom." Under FTAA, corporations will pit workers in Mexico against even more desperate workers in Guatemala or Haiti. Already, Mexico is losing maquiladora jobs to countries with cheaper wages. In the last two years, 280,000 jobs have vanished with the closure of some 350 maquiladoras.

How Has NAFTA Affected the Public Health and the Environment in the US and Mexico?

Mexico, along with most of Latin America, lacks strong environmental laws. And those regulations that do exist often go unenforced.

The increase in manufacturing along the US-Mexico border region has exacerbated environmental and public health threats in the area. Most maquilador waste goes unaccounted for; according to EPA officials, only a fraction of all waste is properly disposed of. No wonder that in some border areas birth defects are twice the US national average. In some border counties, the rate of hepatitis is two or three times the national average due to lack of proper sewage treatment.

Also, the export-driven growth model perpetuated by NAFTA is destroying ecosystems around Mexico as the country cuts down its forests to earn hard currency. Since NAFTA,15 US wood product companies have set up operations in Mexico, and logging there has increased dramatically. In the state of Guerrero, massive clear cutting has led to soil erosion and habitat destruction.

Who Is Involved in the FTAA Negotiations, and How Did They Get Started?

High on their NAFTA victory, U.S. officials organized a Summit of the Americas in Miami in December 1994 to launch discussions on a hemisphere-wide "free trade" zone. After the "Miami Summit," however, little more was done on FTAA until the "Santiago Summit" in Chile in April 1998. At this second summit, the 34 nations set up a Trade Negotiations Committee (TNC), consisting of vice ministers of trade from every country. Since then, negotiators have been meeting every few months.

Despite repeated calls for the open and democratic development of trade policy, the FTAA negotiations have been conducted without citizen input. A system has been set up to solicit comments from non-governmental organizations (NGOs), but there is no mechanism to incorporate the public's concerns into the actual negotiations. The general public has been given nothing more than a suggestion box.

At the same time, however, hundreds of corporate representatives are advising the US negotiators. Under the so-called "trade advisory committee system," more than 500 corporate representatives have the security clearance to get advance access to FTAA negotiating texts. While citizens are left in the dark, corporations are helping to write the rules for the FTAA.

How Will the FTAA Impact Public Services and Government Safeguards?

FTAA negotiators have included services as one of the many items covered by the treaty's rules. Under the FTAA, trade in services would be "liberalized" to create "certainty and transparency" for investors. In practice, this means that government health, labor, and environmental regulations would be eroded, all under the guise of reducing "barriers to trade." The proposed FTAA rules would also speed up the process of deregulation and privatization already underway throughout the hemisphere, a process that is eliminating public oversight of essential services.

Essential Social Services Endangered:

The FTAA will contain a series of commitments to "liberalize" services, which is much like the General Agreement on Trade in Services (GATS) within the WTO. "Services" is a broad category that includes education, health care, environmental services, energy and water utilities, postal services and anything else that you can't drop on your foot. Possible effects of the FTAA services agreement include:

•Removal of national licensing standards for medical, legal and other key professionals, allowing doctors licensed in one country to practice in any country, even if their level of training or technological sophistication is different.

•Privatization of public schools and prisons in the US, opening the door to greater corporate control, corruption and the temptation to cut critical corners (such as medical care for inmates or upkeep of safe school facilities) in the interests of improving profit margins.

•Privatization of postal services. Already, the Canadian Postal Service is under attack by US multinational UPS, which claims that the Canadian government's subsidies to the postal carrier constitute unfair competition and a barrier to trade. If the tribunal upholds the UPS claim, government participation in any service that competes with the private sector will be threatened.

Public Interest Laws Threatened:

The UPS challenge to the very existence of the Canadian Postal Service is taking place under the so-called "investor-to-state" lawsuits established by NAFTA's Chapter 11. These lawsuits give corporations the right to sue governments for any action that may decrease the corporation's future profits. For example, if a multinational health care company feels its operations are being curtailed by local labor laws, it can sue the government for compensation.

FTAA negotiators want to include investor-to-state lawsuits in the upcoming treaty. A look at some past lawsuits illustrates how these suits are being used to elevate corporate profits above all other interests.

•Ethyl Corporation vs. Canada. In 1998, the Virginia-based Ethyl Corporation forced the Canadian government to drop its existing ban on the chemical MMT, a fuel additive that had been linked to nervous system damage. Although the US Environmental Protection Agency already bans MMT in the US, the NAFTA tribunal ruled that the Canadian government's prohibition was impacting Ethyl's current and future profits. The Canadian government reversed its ban and was also forced to apologize and pay $13 million to the corporation in damages.

•Methanex Corporation vs. US. In 1999, in a strikingly similar case, a Canadian corporation, Methanex, used NAFTA's Chapter 11 to sue the US government for $970 million because of a California phase-out of the gasoline additive MTBE. California Governor Gray Davis ordered the phase-out because it had been shown that MTBE, a known toxin, was leaking into the state's ground water. Methanex, which makes the M in MTBE, claims that the state's move caused a decline in its stock prices. Methanex is basing its $970 million claim on the profits the company says it will lose over a 20-year period. The case is still under consideration. If Methanex wins, the US government will essentially be paying a polluter not to pollute.

•Loewen Group vs. US. A Canadian-based funeral corporation, Loewen Group, used the NAFTA investor protections to sue the US government after a Mississippi court found Loewen guilty of malicious and fraudulent business practices that unfairly targeted a local company. The jury in Mississippi levied $500 million in damages against Loewen, and now the corporation is seeking $725 in compensation from the US government. Loewen argues that the very existence of the state court system violates its NAFTA rights. The FTAA rules on services will open the door to a wholesale assault on government health, safety, labor, and environmental regulations. The FTAA rules on investment will apply to "all measures affecting trade in services taken by governmental authorities at all levels."

In plainer English: To meet the FTAA requirements, countries will have to change their laws governing the obligations placed on business. The FTAA will prevent governments—national, state, or local—from passing regulations that are "more burdensome than necessary." That frighteningly vague definition will discourage governments from passing and enforcing meaningful environmental, health, and labor laws.

How Will The FTAA Spread GMOs?

The US is trying to use the FTAA as a way to force all countries in the hemisphere to accept biotechnology and genetically modified (GM) foods in which unregulated US corporations have taken a lead. Yet food security organizations all over the world agree that these technologies will increase hunger in poor nations. Being forced to buy expensive patented seeds every season, rather than saving and planting their own, will force traditional subsistence farmers in the developing world into dependency on transnational corporations and closer to the brink of starvation. If the U.S. position wins out, FTAA will promote the interests of biotech and agribusiness giants like Archer Daniels Midland (ADM), Cargill and Monsanto over the interests of hungry people in developing nations.

The US is also trying to expand NAFTA's corporate protectionism rules on patents to the whole hemisphere. These rules give a company with a patent in one country the monopoly marketing rights to the item throughout the region. These rules are enforced with cash fines and criminal penalties, making these rules even harsher than the WTO regulations, which have been used as justification for pharmaceutical companies to quash compulsory licensing mechanisms to allow competitor companies to manufacture a drug in exchange for a fee for "renting" the patent. Monopoly patent control allows pharmaceutical corporations to keep drug prices high and block production of generic versions of life-saving drugs, which spells disaster for the ill and impoverished, especially in developing nations. These rules also allow companies to "bioprospect" and lock down patents for Indigenous medicines that are considered "traditional knowledge," effectively robbing Indigenous people of their cultural heritage to fatten corporate wallets.

How Will the FTAA Undermine Real Development that Benefits Everyone?

Our hemisphere is characterized by enormous inequalities among countries. The United States has a GDP equal to 75 percent of the total goods and services produced in the hemisphere. Its capacity to mobilize technological and capital resources is far greater than that of most of the Americas. But the FTAA would establish a system under which poor countries and wealthy countries alike are held to the same standards. This is short-sighted: You can't ask countries to compete on a level playing field when the terrain is already so badly skewed. Asking Bolivia‹a land-locked, impoverished country with an economy just 2 percent the size of the US's‹to meet the same requirements as the US doesn't make sense.

Foreign debt handicaps the hopes of many of the FTAA countries by greatly reducing governments' capacity to invest in key areas of development such as housing, health, education, and the environment. The debt burden forces governments to divert scarce financial resources to pay off the combined costs of the debt and the interest payments from the debt. Structural adjustment policies mandated by the IMF and the World Bank throughout Latin America during the past two decades have further weakened the ability of governments to chart equitable development strategies. The FTAA will lock in place‹and create legal structures to enforce‹the negative impacts of structural adjustment programs.

If NAFTA and Mercosur (an existing "free trade" zone including Brazil, Argentina, Uruguay, and Paraguay) are any indication of what FTAA countries have in store for them, the FTAA will hamper real, sustainable and equitable development. Both NAFTA and Mercosur include measures to deregulate foreign investment, making it difficult to tailor foreign investment according to local needs. Rules that promote foreign investment are often in direct conflict with local economic development policies. A common provision of international investment agreements‹"national treatment"‹requires foreign investors to be treated no differently than local investors. Policies that limit grazing land or fisheries to local citizens or forbid foreign investors from owning domestic utilities, for example, violate national treatment. If countries cannot regulate foreign investment, then they will be unable to implement a coordinated development strategy. They will thus be forced to continue to lower wages, working conditions, and environmental regulations in increasingly desperate moves to attract mobile international capital.

If the FTAA Is Detrimental Socially, Economically and Environmentally, Why Is Every Country in the Western Hemisphere Negotiating on it?

Not everyone loses in "free trade" agreements. Corporations and wealthy business owners from all participating countries—who are helping to write the rules of these agreements—stand to gain financially from a system that puts their interests above all others. Politicians often own or have large sums of money invested in corporations and therefore have personal interests at stake.

What Is the Current Status of the FTAA Negotiations?

Negotiations began in 1994 and have continued regularly for ten years. During three Ministerial meetings -- in Quebec City in April 2000, Buenos Aires in April 2001, and in Quito, Ecuador in October 2002—negotiators tried to work out differences in the draft texts among widespread protests. But the differences among the negotiators' positions has widened over the years rather than narrowing. More progressive governments have been elected in countries like Venezuela, Brazil, Bolivia, Uruguay, and Argentina -- that weren't willing to negotiate their countries' futures under the FTAA. At the Ministerial in Miami in November 2003, negotiators vastly scaled back the scope of the proposed FTAA because of the growing divergences.

Then in Puebla, Mexico in February 2004 and Buenos Aires, Argentina in April, 2004 the negotiations faltered. The deadline for signing the deal of January 1, 2005 passed without any agreement. Negotiations are currently suspended (as of March 2004) -- a huge victory for social movements throughout the hemisphere who have made stopping the FTAA our #1 priority.

At this point, the Bush Administration is using "divide-and-conquer" tactics to piecemeal the FTAA together with more compliant countries. An agreement between the U.S. and Honduras, Guatemala, Nicaragua, El Salvador, Costa Rica, and the Dominican Republic -- the U.S.-D.R.-Central American Free Trade Agreement (CAFTA) was signed by those governments in 2004. CAFTA may go before the U.S. Congress for ratification in 2005, and it is a "NAFTA expansion" we must stop to stop the FTAA.

And in November 2004, the U.S. announced the beginning of negotiations with Ecuador, Peru, and Colombia for an Andean Free Trade Agreement -- a clear attempt to break Andean unity with Venezuela. Negotiations for the AFTA are ongoing, but social movements are geared up to fight it.

FTAA negotiations could be reinvigorated at a future date, especially if the Central America Free Trade Agreement is passed.

What Are the Alternatives?

Policy makers and pundits often try to make it seem that top-down, corporate globalization is a naturally occurring phenomenon. Nothing could be farther from the truth. In fact, the current economic processes known as "globalization" have been defined and driven by a very small number of people. United, citizens around the world can create a kind of grassroots globalization—a people's globalization—that puts economic, social and political justice at the center of trade and investment. Citizens groups from across the Western Hemisphere have written an "Alternative Agreement for the Americas" that offers a picture of what socially responsible and environmentally sustainable commerce would look like. You can find the document here on the Global Exchange website.

As detailed in this proposal, governments should retain the right to impose performance requirements on investors, as well as maintain protections for small and medium-scale producers and key sectors in their respective national development plans. Countries have the right, and the responsibility, to maintain food and nutritional security (such as excluding basic grains from liberalization measures). Any hemisphere wide economic pact should reinforce, not undermine, internationally recognized accords such as International Labor Organization Conventions, the United Nations Convention to Eliminate All Forms of Discrimination Against Women, and the Inter-American Convention on Human Rights. The process for developing economic policy must be democratized by opening up the negotiations to all the hemisphere's peoples, not just a relatively small, elite and well-connected group of investors. The future stability of the region depends on it.