SECTIONS

And the Threat to Social Programs, Environmental Sustainability and Social Justice in Canada and the Americas

Part 5 of 6
by Maude Barlow, January 18, 2001

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What Impact Will the FTAA Have on Canadians?

Social Security

The expanded powers proposed for the FTAA in combination with Chapter 11 of NAFTA and the introduction of "universal coverage of all service sectors" pose a grave threat to Canada's social programs. Universal health care, public education, child care, pensions, social assistance and many other social services are now delivered by governments on a not-for-profit basis.

Until the recent GATS negotiations, and now the FTAA negotiations, Canada has always maintained that these social programs were a fundamental right of citizenship for all Canadians, and have exempted them from trade agreements. However, with these two agreements, the Canadian government is opening up itself, and every other level of government, to trade-sanctioned threats by transnational service corporations keen to break down the existing government monopolies in the hemisphere.

Services is the fastest growing sector in international trade, and of all services, health, education and water are shaping up to be the most potentially lucrative of all. Global expenditures on water services now exceed $1 trillion every year; on education, they exceed $2 trillion; and on health care, expenditures exceed $3.5 trillion. In Canada, the service sector accounts for 75 percent of all jobs.

These and other services have been targeted by predatory and powerful entrepreneurial transnational corporations that are aiming at nothing less than the complete dismantling of public services by subjecting them to the rules of international competition and the discipline of the WTO and the FTAA. (Already over 40 countries, including all of Europe, have listed education with the GATS, opening up their public education sectors to foreign-based corporate competition, and almost 100 countries have done the same in health care.)

In the United States, health care has become a huge business, and giant health care corporations are registered on the New York Stock Exchange. Rick Scott, the president of Columbia, the world's largest for-profit hospital corporation, says that health care is a business, no different from the airline or ball-bearing industry, and he has vowed to destroy every public hospital in North America, as they are not "good corporate citizens." Investment houses like Merrill Lynch and The Lehman Brothers predict that public education will be privatized in the hemisphere over the next decade the way public health has been, and say there is an untold amount of profit to be made when this happens.

If services are included in the FTAA, as they so clearly appear to be, foreign for-profit health, education and other social service corporations from anywhere in the hemisphere will have the right to establish a "commercial presence" anywhere in Canada. They will have the right to compete for public dollars with public institutions like hospitals, schools and day care centres. Standards for health, education, child care and social work professionals will be subject to FTAA rules and review to ensure they are not an impediment to trade. Degree-granting authority will be given to all hemispheric-based education corporations. Foreign-based telemedicine services will become legal in Canada. And Canada won't be able to stop the transborder competition of low-cost health and education professionals.

If any government at any level in Canada attempts to resist these developments and tries to maintain these services in domestic control, every service corporation of the hemisphere will have the legal right to sue for financial compensation for lost revenues under the investor-state provisions of the FTAA. This is not speculation; in areas covered by the current NAFTA, there have now been many precedents of governments reversing decisions and paying onerous compensation packages to private interests affected by public policy.

As well, there is already a disturbing precedent in health care under the existing investment provisions of NAFTA. A March 2000 legal opinion by Canadian trade expert Steven Shrybman shows that when Alberta passed Bill 11, which permits for-profit corporations to compete with public hospitals for public funding to provide health care "services," it gave trade-sanctioned rights to U.S. for-profit foreign corporations to set up shop not only in Alberta, but in any province in Canada and to sue for compensation if denied this access.

"While in theory a government could retreat from contracting out health services to private companies, that government would face the full force of foreign investor compensation claims for not just present, but future losses. The costs of compensation resulting from re-establishing a public system would be prohibitive."

The reality is simple: once privatization is established in any public sector, it would be almost impossible to reverse. With time, Canadian governments would no longer be able to afford to publicly fund health care, social security programs and education as they would have to be prepared to give equal access to such funding to private contractors from the other FTAA countries.

Canadians have already seen a steady erosion of their social security under the new rules of economic globalization and trade agreements like NAFTA and the WTO, as Canada's economy has merged into the American orbit and American rules. Socially, Canada now looks more like the U.S. than in any time in its history, with its huge gaps between haves and have-nots. In Canada, as in the U.S., while great prosperity abounds in some quarters, great poverty is growing in others.

In fact, Canada has experienced the highest rise in child poverty in the industrialized world in the last decade - the same years in which the number of millionaires has tripled and corporate salaries have grown at an average of about 15 percent a year. In the very free trade years that corporate salaries skyrocketed, workers' wages rose just 2 percent, less than the rate of inflation.

The cuts to social programs and Employment Insurance (only one third of unemployed workers now receive EI benefits they have paid for, compared to almost 80 percent in 1989) have been so deep that Standard and Poor says that the myth of a "kinder Canada" must be put to rest. For the first time in 1999, says the New York-based ratings institute, Canada spent less on its elderly and unemployed than did the United States.

With the proposed FTAA, the assault on social security will dramatically escalate.

Environment

The FTAA draft, as it now stands, contains no safeguards for the environment. The original mandate for the FTAA, drawn up at the first Summit of the Americas in Miami in 1994, contained a promise to promote economic integration of the hemisphere in such a way as "to guarantee sustainable development while protecting the environment." A major Summit on Sustainable Development was held in Bolivia in 1996 in order to ensure that the principles of the 1992 Rio Earth Summit would be integral to the FTAA process. Out of that meeting (at which civil society groups and environmentalists were notably absent), came 65 initiatives know as the "Santa Cruz Action Plan," and a new body, the OAS Inter-American Committee on Sustainable Development.

However, the whole process was badly underfunded and had no clear mandate for action; it has been widely regarded as a failure. As a consequence, the whole goal of sustainable development was completely dropped from the FTAA's new mandate at the Santiago Summit in 1998, and the tracks of trade and environment were completely separated. With George W. Bush now in the White House, it is even more certain that environmental concerns about the hemispheric free trade deal will be set aside.

The Canadian government's recently published "position paper" on the FTAA contains a reference to the environment in its proposed Preamble. It calls for the FTAA to commit to "Better protecting the environment and promoting sustainable development by adopting trade and environmental policies that are mutually supportive." However, Preambular language in trade agreements is non-binding and unenforceable, so any promise in this section of the agreement is fairly meaningless. In any case, it is not possible to find compatibility between a trade agreement that contains investor-state rights for corporations and environmental stewardship.

Chapter 11

As briefly documented above (see Investment in "What's in the FTAA?"), and well documented in a number of other sources, the investor-state provisions of NAFTA have already had a very serious impact on government environmental policy. Not only have a number of health and environmental regulations in Canada, the United States and Mexico already been successfully challenged by the corporations of the continent, Chapter 11 is used to create a "chill effect," whereby governments are warned not to contemplate certain new regulatory measures for fear of running afoul of the investment provisions of NAFTA.

As legal trade expert Steven Shrybman explains: "The investor-state suit provisions of NAFTA represent nothing short of a radical departure from both the domestic and international legal norms in at least three fundamental ways. First, by providing corporations with the right to directly enforce an international treaty to which they are neither parties, nor under which they have any obligations. Second, by extending international commercial arbitration to claims that have nothing to do with commercial contracts and everything to do with public policy and law. Third, by creating substantive legal rights - concerning expropriation and national treatment that go far beyond those available to Canadian citizens or businesses."

Any new regulations that are brought to Parliament or any provincial legislature can be challenged by American corporations with interests in the sector in question. In essence, governments have to be prepared to pay dearly for the right to protect the ecological, human and animal health concerns within their mandate. As trade lawyer Barry Appleton explains, "They could be putting liquid plutonium in children's food; if you ban it and the company making it is an American company, you have to pay compensation."

To avoid this scenario, Canadian federal and provincial governments now have to allow all prospective environmental and natural resource protection regulations to be vetted by DFAIT. In an October 2000 exchange at a Parliamentary Environment Committee meeting, Liberal MP Clifford Lincoln asked senior DFAIT officials Nigel Bankes and Ken Macartney whether it was true that International Trade Minister Pierre Pettigrew is fighting against the inclusion of the precautionary principle in domestic environmental legislation, such as the proposed new law to protect endangered species, so as to ensure that Canada is in compliance with the WTO. The trade bureaucrats confirmed that this was indeed so.

Environment ministers now have less power over their jurisdiction than their trade counterparts. When the environment ministers of the three NAFTA countries announced in December 1998 that they were going to allow the Commission for Environmental Co-operation (CEC) - the NAFTA side deal that has become a toothless "environmental watchdog" - to scrutinize these Chapter 11 cases, they stepped way over the line drawn for them by DFAIT and its sister agencies in Washington and Mexico City. Months later, the environment ministers totally retracted the new powers, reigning in the agency so far, in fact, that they stopped just short of dismantling it altogether.

Given this track record, and the dropping of the goal of sustainable development from the principles of the FTAA process, there is little reason to believe that environmental concerns will fare much better in the hemispheric trade pact.

Energy

While there is no separate FTAA Negotiating Group on energy or any mention of the subject in the Canadian government's "position paper," there is a consensus to come up with an "early harvest" agreement on energy at the Quebec City Summit in April. In fact, it is highly likely that the FTAA will mirror the controversial energy provisions that were integral to both the Canada-U.S. Free Trade Agreement and NAFTA.

In these agreements, negotiators created an anti-environment, anti-conservation, deregulated continental energy policy based on short-term, high-cost, high-profit exports and controlled by transnational energy corporations with little interest in rising prices or the environmental consequences of their actions. If this deregulated energy regime gets extended to the hemisphere, it will have devastating consequences in the fight to reduce the overuse of climate-warming fossil fuels in the countries of the Americas.

In Canada, to comply with these NAFTA provisions, the National Energy Board was stripped of its powers and the "vital-supply safeguard" that had required Canada to maintain a 25-year surplus of natural gas was dismantled. No government agency or law now exists to ensure that Canadians have adequate supplies of our own energy in the future. (The United States, however, declared that its 25-year reserve was necessary for national security purposes, and maintained it.)

Export applicants, Canadian or American, were no longer required to file an export impact assessment and the all-Canadian gas distribution system was abandoned, setting off a frantic round of North-South pipeline construction. Export taxes on our energy supplies were banned, resulting in the loss of a source of tax revenue for governments and giving American customers, who don't have to pay the GST, a price advantage over Canadian consumers.

Most important, the trade agreements imposed a system of "proportional sharing" whereby Canadian energy supplies to the U.S. are guaranteed in perpetuity. In an astonishing surrender of sovereignty, the Government of Canada agreed that it no longer has the right to "refuse to issue a licence or revoke or change a licence for the exportation to the United States of energy goods," even for environmental or conservation practices.

This led to a spectacular increase in the sale of natural gas to U.S. markets; since 1986, exports have more than quadrupled to over 8.5 billion cubic feet a day. About 55 percent of total Canadian gas production is exported to the U.S. where American distribution companies, supplying a much larger population, have been able to sign long-term contracts at rock-bottom prices. Canadian consumers are left to compete for their own energy resources against an economy 10 times bigger with rapidly dwindling reserves and accelerating demand. The story in oil is the same. Canada now produces 2.3 million barrels a day and ships 1.3 of those barrels to the U.S.

The free trade agreements committed Canada to an energy policy driven by massive, guaranteed exports to the U.S., corporate control of supplies and an economic policy more dependent than ever on the exploitation of primary resources. Because they exempted Canadian government subsidies for oil and gas exploration from trade challenge, they ensured that Canadian public funds would continue to pay for uncontrolled and environmentally destructive fossil fuel exploration, a process that has already destroyed habitats in the North and that threatens the sensitive spawning grounds off Cape Breton and Newfoundland, all to the benefit of transnational corporations.

In the FTAA, these provisions will very likely extend to all the countries of the Americas, who should be made aware of the resulting loss of sovereignty over their energy supplies and their environmental responsibility to husband those resources well.

Water

Similarly, it is unlikely that the United States would not extend the provisions of NAFTA concerning water to the other countries of the hemisphere under the FTAA. these provisions establish a continental water market in the case of the commencement of commercial water exports; for the countries of Latin America concerned about water privatization schemes, this is an issue urgently needing attention.

Chapter 3 of NAFTA establishes obligations, including national treatment rights, regarding market access for the trade in goods. It uses the General Agreement on Tariffs and Trade (GATT) definition of a "good," which clearly lists "waters, including natural or artificial waters and aerated waters" as a good, and adds in an explanatory note that "ordinary natural water of all kinds, other than sea water," is included.

When the NAFTA deal, and its predecessor, the Canada-U.S. Free Trade Agreement, were being negotiated, opponents urged that water be clearly exempted from them altogether. The governments said no, arguing that no water was being traded commercially at that time in any of the NAFTA countries; therefore, water in its "natural" state was safe. Critics argued that any such protection was temporary at best and that the moment any jurisdiction started selling its water for commercial purposes, key provisions of NAFTA would become applicable, putting public control of water in jeopardy.

There are three key provisions of NAFTA that place water at risk once it is traded. The first is national treatment, whereby no country can discriminate in favour of its own private sector in the commercial use of its water resources. Once a permit is granted to a domestic company to export water, the "investors" - i.e., corporations - of the other NAFTA countries have the same "right of establishment" to the commercial use of this water as the domestic companies. This applies to provinces as well; if British Columbia allows the commercial export of bulk water, all provinces will have to allow national treatment rights to the same foreign companies as well.

The second provision is Chapter 11, the investor-state clause. It applies to water in two ways. First, if any NAFTA country, state or province tries to allow only domestic companies to export water, corporations in the other NAFTA countries would have the right to sue for financial compensation. Second, if any NAFTA government introduced legislation to ban bulk water exports, by that act water would automatically become a commercial "good"; foreign investors' Chapter 11 rights would be triggered by the very law that excludes them, and they could demand financial compensation for lost opportunities.

The third key provision is Article 315, "proportional sharing," the same provision that has created a continental market for Canada's energy supplies. Under Articles 315 and 309, no country can reduce or restrict the export of a resource once the trade has been established. Nor can the government place an export tax or charge more to the consumers of another NAFTA country than they charge domestically. Canadian exports of water would be guaranteed to the level they had acquired over the preceding 36 months; the more water sent south, the more water required to be sent south. Even if new evidence were found that massive movements of water were harmful to the environment, these requirements would remain in place.

The proposed FTAA adds another threat to water sovereignty and conservation. "Environmental Services" are included in the list of services now being negotiated by the GATS. It is very likely that environmental services, which include water services, will similarly be included in the FTAA. This means that public water services could be challenged under the national treatment provisions of the proposed agreement, forcing public services such as water delivery and wastewater treatment to be privatized and contracted out to transnational water corporations like Suez Lyonnaise des Eaux and Vivendi. If any government attempts to maintain its water services in public hands, these corporations would have enormous compensation rights under Chapter 11.

This loss of public control of water is a very serious one for Canada, and of even greater urgency for the countries of Latin America, where water privatization, strongly promoted by the World Bank, is spreading very quickly.

Combined with the TBT and SPS agreements of the WTO and the plans for "early harvest" agreements in forests and fisheries, the proposed FTAA appears to be a disaster for ecological stewardship for the Americas.

Culture

No mention is made of culture or cultural exemptions in the mandates of any of the Negotiating Groups. Canada does mention culture in the Preamble to its position paper: "Recognizing that countries must maintain the ability to preserve, develop and implement their cultural policies for the purpose of strengthening cultural diversity, given the essential role that cultural goods and services play in the identity and diversity of society and the lives of individuals." Again, however, this Preambular language is largely decorative. It is very likely that culture will either be fully included in the hemispheric pact or there will be a cultural "exemption" similar to the one that exists in NAFTA. And that is almost as bad as having culture fully included.

The terms on culture were clearly set out in NAFTA Annex 2106. While one article (2005:1) exempts the cultural industry from the agreement with the exception of tariff elimination, divesture of an indirect acquisition, and transmission rights, another (2005:2) puts culture right back in by giving the U.S. the right to retaliate against Canada with measures "of equivalent commercial effect" and to do so using sectors unrelated to culture. Yet another (2011:2) permits the U.S. to circumvent the dispute settlement procedure when it retaliates. Other sections of the agreement, particularly dealing with investment, competition policy and monopolies also infringe on the right of Canadians to protect cultural policy.

This means that the U.S. has the legal right to unilaterally decide if a Canadian cultural measure is "inconsistent" with NAFTA, to retaliate against Canada and to select the nature and severity of the retaliation. Canada has no legal rights whatsoever. It cannot even request a panel to judge whether U.S. accusations are justified and, if so, to ensure U.S. retaliation is commensurate with the offence.

It appears from the mandate of the FTAA Negotiating Committees that an additional risk to Canada's cultural programs will find its way into the FTAA in the services chapter. If cultural services are included in the definition of services, as they appear to be ("universal coverage of all service sectors"), and the principles of national treatment and most favoured nation apply to these cultural services, as they also appear to do, then government subsidies to the arts and culture could not be allocated exclusively to Canadian artists, publications, production companies and the like.

There are really only three forms of cultural protections left in Canada in the wake of WTO rulings: government subsidies, such as those given to the CBC or to book publishers of Canadian titles; Canadian content quotas, such as content regulations in radio and television; and investment policies, such as investment controls limiting non-Canadian investment in broadcasting, telecommunications and cable companies.

Under a regime that allowed the direct challenge of government programs, all three could be deemed trade illegal. Just as in social programs, any government support of a Canadian "service" - in this case, cultural services - would have to be applied in a non-discriminatory manner; American and other corporations of the hemisphere in the entertainment industry could demand equal rights to compete and receive government funding. As with social programs, any government that continued to favour the Canadian cultural sector could be sued for compensation under Chapter 11 by transnational industry corporations, from big-box retailers to movie networks.

If the proposed FTAA is adopted unchanged, Canadian cultural diversity and Canada's cultural industries will become a relic of a past time.

Agriculture and Food Security

Canada's farmers have already felt the full blast of global competition, as the Canadian government has slashed farm subsidies and farm income support far more and far faster than have its major trading partners. As a result, 1999 and 2000 were the worst years for Canadian farmers since 1926, the year that the Canadian government began to keep such records.

By choosing the WTO agreements on agriculture (AOA) and standards (SPS and TBT), the FTAA negotiators plan to give new powers through this pact to curtail the traditional rights of Canada's farmers and to downgrade Canada's food safety laws. Under WTO disciplines, farmers can no longer collectively negotiate prices for products with both domestic and foreign buyers. And the elimination of domestic agriculture price supports to protect farmers has left them at the mercy of international prices.

Because the WTO prohibits import and export controls, only the big - big farms, big countries, big corporations - can survive. As a result, the WTO's Agreement on Agriculture has almost exclusively benefited large agribusiness corporations around the world no matter what their country of origin.

Furthermore, the WTO AOA assault on non-tariff measures, such as environmental standards and supply management programs, has been used to downgrade safeguards to public health and protection for farmers. For example, through the WTO, the U.S. has successfully challenged Japan's health-related pesticide residue testing requirements for agricultural imports. Countries can no longer maintain emergency food stocks in anticipation of drought or crop failure; they must now buy what they need on the open market. "Food self sufficiency" now means having enough money to buy food, not the domestic ability to produce it.

The WTO SPS agreement has had a terrible impact on the right of the world's citizens to safe food. Canada and the United States successfully used the SPS agreement to strike down a European ban on North American beef containing harmful, possibly cancer-causing hormones. The EU, deeply sensitive to lingering concerns about mad-cow disease, implemented a ban on the non-therapeutic use of hormones in its food industry, citing many studies linking them to illness. The WTO panel demanded "scientific certainty" that these hormones cause cancer or other adverse health affects, thus eviscerating the precautionary principle as a basis for food safety regulations.

The FTAA appears poised to promote a model of agriculture to the hemisphere where food is not grown by farmers for domestic consumers, but by corporations for global markets. The results will be far-reaching indeed.

What Impact Will the FTAA Have on the Countries of Latin America?

The countries of Central and South America and the Caribbean are being given all sorts of promises about the FTAA: more liberalized trade and investment will create the biggest trade powerhouse in history, thereby spreading prosperity to the many millions of the region currently without work or hope, they are told.

Latin Americans should examine these promises very carefully before jumping into this pact.

The reality is that Latin America has been living under this FTAA model for over a decade. It is based on the Structural Adjustment programs of the World Bank and the IMF that Latin Americans know well. It was the deregulation and privatization imperatives of structural adjustment that forced most to dismantle their public infrastructures in the first place. In order to be eligible for debt relief, many dozens of the countries of the Americas were forced to abandon public social programs, allowing for-profit foreign corporations to come in and sell their health and education "products" to "consumers" who can afford them.

Now these countries are allowed to maintain the most basic of public services only for the poor; but these services are so inadequate that the corporations aren't interested in them, and many millions of people in the hemisphere go without the most basic of education and health services. Not surprisingly, Latin American countries are experiencing an invasion of U.S. health care corporations, like Aetna International and American International, who report a 20 percent growth in the region per year.

Under the FTAA, this process will accelerate, wiping out traditional medicine, education and cultural diversity. In fact, worldwide economic and cultural harmonization is the goal, says one top U.S. WTO official, who adds, "Basically, it won't stop until foreigners finally start to think like Americans, act like Americans and - most of all - shop like Americans."

The last decade of trade and investment liberalization has already caused great suffering in Latin America. Interest rates on debt payments have soared from 3 percent in 1980 to over 20 percent today. Latin America, as a region, has the highest rate of inequitable income distribution in the world. After swallowing its free market medicine, it now has a poverty rate higher than it was in 1980 and the buying power of Latin American workers is 27 percent lower. Eighty-five percent of all job growth has been in the precarious sector with no benefits or protections.

Mexico, eight years into NAFTA, now has record-high poverty rates of 70 percent; the average minimum wage lost more than three quarters of its purchasing power in those years. Ninety million Latin Americans are now indigent and 105 million have no access to health care whatsoever. Child labour has grown dramatically; there are now at least 19 million children working in terrible conditions. Massive environmental degradation has resulted from the region's desperate rush to exploit its natural resources and the use of pesticides and fertilizers has tripled since 1996; there are now 80,000 chemical substances produced and used in the Americas.

The exploitation of Latin America's natural resources by Canadian and U.S. corporations now taking place would dramatically increase under a hemispheric pact. Transnational mining, energy, water, engineering, forestry and fisheries corporations would have new access to the precious resource base of every country and the investor-state right to challenge any government that tried to limit their access to them. The ability of governments to protect the ecology or set environmental standards regarding the extraction of natural resources would be greatly reduced, as would the right to ensure local jobs from any activity of foreign corporations.

Joining the FTAA under these circumstances would be "tantamount to suicide," says the coalition of trade unions of the Southern Cone countries. In December 2000, the major unions of Argentina, Brazil, Paraguay and Uruguay held the MERCOSUR Trade Union Summit where they called upon their governments to submit the FTAA to national plebiscites, which they believe would result in its defeat. The FTAA process is deepening the already growing poverty of the region, the union leaders said, putting "limits on national institutions that should decide the future of each country, while pushing aside the mechanisms that allow society to ensure a democratic administration of the state."

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updated January 18, 2007