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And the Threat to Social Programs, Environmental Sustainability and Social Justice in Canada and the Americas
Part 3 of 6
by Maude Barlow, January 18, 2001
For the PDF version click here. 
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
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
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