MAIN STORY
FTAA Spells Seriously
Bad News For Jobs
And Democracy

For working people, the North American Free Trade Act was bad news. The news could get a lot worse.

The United States and other governments in the Americas are currently negotiating a trade deal to cover the entire Western Hemisphere (except Cuba). Scheduled to take effect in 2005, the Free Trade Area of the Americas would be like NAFTA — but even more of a threat to jobs, living standards and democracy.

The Free Trade Area of the Americas (FTAA) would dramatically expand NAFTA:

Geographically: NAFTA links the economies of three nations; FTAA would encompass 34.

Corporate rights: FTAA would give corporations more rights under law, taking the strongest provisions of NAFTA, the World Trade Organization and the (unratified) Multilateral Agreement on Investment. In particular, corporations could sue governments for profits "lost" due to laws protecting workers, consumers or the environment.

Coverage: FTAA would cover not only manufacturing and investment, but also consumer and public services — everything from child care and transportation to insurance and drinking water.

Even more than NAFTA, this new exercise in "free" trade would override democracy — attempts by communities to determine living standards, working conditions and the norms of doing business could be swept aside.

"The goal of the FTAA is to impose the failed NAFTA model of increased privatization and deregulation hemisphere-wide," according to the organization United for a Fair Economy.

Why FTAA?

Impetus for an ever-expanding trade bloc based on the U.S. economy has come in large part from corporate fears here about the emergence of a powerful European single market (see timeline, at left). Hemispheric trade agreements on this side of the Atlantic are U.S. capital’s response to this perceived competitive threat. First came the Canada-U.S. free trade agreement in 1989, followed by NAFTA in 1994.

Governments throughout the Americas agreed to the concept of a hemispheric trade deal at the first Summit of the Americas in 1994. The second Summit in 1998 established a trade negotiating committee and working groups on topics including agriculture, services, investment, dispute resolution, intellectual property rights, market access and government procurement. Negotiating groups met in 2000.

The negotiations have taken place in secret, off limits to the public and news media — but not to big business. More than 500 corporate representatives have security clearance and access to FTAA draft documents. In addition, corporate committees advise U.S. negotiators.

In January, the Office of the U.S. Trade Representative responded to demands for disclosure by releasing copies of summaries of U.S. positions on FTAA. While vague, these summaries indicate that FTAA proposals incorporate the strongest provisions from NAFTA, MAI and WTO. (Copies of FTAA drafts have not been given directly to members of the U.S. Congress — but our representatives are allowed to view them in the U.S. State Dept. reading room.)

The Multilateral Agreement on Investment (MAI) was another secret scheme designed to give capital the upper hand in the global economy. World-wide in scope, MAI was kept closely under wraps — few members of Congress had any idea of its existence. Citizens’ groups got hold of a copy, however. Public Citizen (founded by Ralph Nader) posted the text on its website. Once exposed, MAI was doomed — its provisions were that outrageous.

Unfortunately for the peoples of the Americas, many of FTAA’s provisions are likely to copy those of MAI. Like the global plan, the hemispheric trade agreement would force signatory nations to:

• Treat foreign corporations no less favorably than domestic corporations.

• Access granted to corporations from any one FTAA country must be granted to corporations from all FTAA countries.

• Remove performance requirements — rules established by local government to protect the local economy. For example, a living wage, using local suppliers or minority businesses, or reinvesting in the local economy.

• Allow corporations to sue governments directly for alleged restrictions on profit-taking.

• Submit to a dispute-resolution process involving international panels, not domestic courts.

And MAI’s not the only model. The services agreement of the WTO (the General Agreement on Trade in Services, or GATS) seeks to open the service sector of each nation to transnational corporate penetration. According to trade specialist Maude Barlow, FTAA negotiators are combining the most extreme features of NAFTA and GATS.

"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," writes Barlow. The goal is the dismantling of public services. "The FTAA negotiating services agreement is even more sweeping than the GATS," she says. "It calls for ‘universal coverage of all service sectors’ at every level of government and gives sweeping new powers to the service corporations of the hemisphere to move wherever they want and demand equal access to government funding now reserved for domestic public programs."

That could remove basic services — everything from education to water supply — from local control.

Leaked documents indicate that FTAA will copy NAFTA’s Chapter 11, which gives corporations the right to sue governments for the loss of profits — including the anticipated loss of profits.

"The real goal of GATS and the FTAA is to dramatically reduce or completely destroy the ability of governments anywhere to legislate or regulate on behalf of their citizens," says Barlow.

FTAA would bar any government (local, state or national) from giving preference in services as varied as health care, child care, education, municipal services, libraries, culture and sewer and water services.

Among the possible effects of FTAA on services are removal of national licensing standards for medical, legal and other professions, allowing doctors licensed in one country to practice in any country, regardless of the level of training; and privatization of public schools, and postal services.

No government could enforce a requirement that the goods and services it purchases come from its own country.

FTAA negotiators seek to eliminate all tariffs and "non-tariff" barriers. Tariffs are border taxes on goods, largely eliminated already under NAFTA and WTO. Non-tariff barriers are the rules, policies and practices of governments that can impact on trade. "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," says Barlow.

That could include food safety regulations, warns Barlow, national chairperson of the Council of Canadians and author of several books on globalization. After examining WTO and NAFTA language, she concludes, "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."

A trade deal may be negotiated in secret, but ultimately the fate of a scheme like FTAA lies in the public process of Congressional debate and voting. Public exposure halted MAI. The labor and environmental movements and concerned citizens denied President Clinton "fast-track" negotiating authority, successfully blocking expansion of NAFTA — up until now. The fight against fast track will be crucial to stopping FTAA.

UE members are already fighting back. As reported in the May UE NEWS, union members took part in protests April 21 in Chicago and Quebec, site of the third Summit of the Americas.

Education and mobilization can prevent this latest assault on jobs, the environment and democracy.

"We will stop GATS; we will defeat the FTAA; and we will begin the long journey of building democratic institutions to serve our rights at every level from the local to the global," says Maude Barlow.

(This article is based in part on a training prepared by Robin Alexander, UE director of international labor affairs, and on FTAA for Beginners, published by United for a Fair Economy.)

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HISTORY
Seven Years of NAFTA
Best Argument
Against NAFTA Expansion

The experience of seven years with the North American Free Trade Agreement (NAFTA) may be the best argument against the Free Trade Area of the Americas (FTAA), the plan to extend NAFTA throughout the Western Hemisphere but with an expanded scope and more rights for corporations and investors.

NAFTA has been a disaster for workers in all three countries: the U.S., Mexico and Canada.

For workers in the U.S., NAFTA has meant lost jobs and stagnating wages, and an economy distorted by a ballooning trade deficit.

NAFTA promoters promised that increased trade would mean more jobs. They were part right — since NAFTA took effect on Jan. 1, 1994, exports to Mexico grew by 147 percent, and exports to Canada by 66 percent.

But something else happened, too. The shift of capital from the U.S. to Mexico meant the loss of jobs here and more imports from Mexico. Imports grew dramatically faster than exports. Imports from Mexico grew by 248 percent, those from Canada by 79 percent.

The net export deficit between the U.S. and its neighbors grew from $16.6 billion in 1993 to $62.8 billion in 2000, in real dollars.

That deficit translates into lost U.S. jobs. As of September 2000, more than 260,000 U.S. workers had qualified for a special NAFTA retraining program for people who lose their jobs because their employer moved production to Mexico or Canada or because of direct import competition from those countries.

Further, the Economic Policy Institute estimates that the trade deficit led to the loss of more than 765,000 jobs since the implementation of NAFTA. "These job losses are spread across all 50 states and the District of Columbia, with the biggest losses — where more than 20,000 job opportunities were eliminated per state — in California, Michigan, New York, Texas, Ohio, Illinois, Pennsylvania, North Carolina, Indiana, Florida, Tennessee, and Georgia."

This job elimination has exerted powerful downward pressure on workers’ wages, leading to several years of stagnating wages in the midst of an economic boom.

Displaced manufacturing workers looked for jobs in the service sector, where the average wage is 77 percent of the average manufacturing wage. The expanded labor pool depressed wages. In manufacturing, corporations resisted wage increases (or attempted to bargain down wage levels) by threatening to move to Mexico. In organizing campaigns, employers threatened to move jobs if workers exercised their right to have a union.

With NAFTA, Mexico became more attractive to U.S. investors. U.S. capital fueled an increase in foreign investment, from $4.4 billion in 1993 to $10.2 billion in 1998. NAFTA brought about both short-term, speculative investment in the Mexican stock market and long-term investment in factories and other businesses. As a result, Mexican exports to the U.S. increased from $49.4 billion in 1994 to $109.7 billion in 1999. And the number of Mexicans employed in factories that produce goods for export more than doubled, from 420,000 in 1990 to 1.3 million in 2000.

But for Mexican workers, the experience of NAFTA has been anything but rosy.

"Despite the increases in foreign investment and exports," writes Sarah Anderson of the Institute for Policy Studies, "Mexico has faced extreme financial instability, rising poverty, falling wages, and increased environmental problems under NAFTA." The NAFTA provisions that encouraged capital flows into Mexico also made the country vulnerable to rapid capital flight, Anderson says. NAFTA plunged Mexico into financial crisis. Mexican-owned business went bankrupt. Interest rates soared. The purchasing power of ordinary Mexicans declined.

Meanwhile, without import protections, hundreds of thousands of small farmers have been forced off the land.

The incomes of salaried workers have fallen by 25 percent since 1991; the incomes of the self-employed have fallen by 40 percent. Manufacturing wages dropped by 21 percent between 1993 and 1999. The labor side agreement to NAFTA has provided little assistance to workers trying to organize unions.

During the 1990s the Mexican minimum wage lost nearly 50 percent of its purchasing power. "The number of Mexicans living in ‘severe’ poverty (surviving on less than $2 per day) has grown by four million since NAFTA began," writes Anderson. "Adding those who face ‘moderate’ poverty (earning $3 per day), the total number of Mexican poor comprises over half the population, up from 47 percent in 1994."

NAFTA has brought an alarming increase in industrial pollution — and increase in public health problems — to the border region. Mexican natural resources are under threat from U.S.-based corporations like International Paper.

Under NAFTA, Mexico has seen its total debt burden grow by nearly $20 billion between 1994 and 1998. Debt service has diverted funds from social programs. The awful pressure of debt forces Mexico "to attract foreign investment by any means necessary" — which includes ignoring the misery and oppression of workers and ruination of the environment and public health.

NO GAIN FOR CANADIANS

Between 1989, when Canada entered into a free trade agreement with the U.S., and 1996, the country’s manufacturing sector experienced a 13 percent decline. Imports destroyed more jobs than exports created. Living standards declined and slowed. Income inequality worsened. To be more "competitive," the Canadian government cut public spending and slashed the safety net — and cut taxes paid by the corporations and the rich, too.

Hard to express in dollars and cents, but also important are the NAFTA rules that give corporations new powers and privileges. For example, NAFTA’s Chapter 11 includes a clause which allows private corporations to sue governments for compensation if a country’s regulations reduce profits. A Canadian firm, Metalclad, is suing the U.S. for almost $1 billion to protest a California regulation on water contamination.

NAFTA says plenty about what a trade deal shouldn’t look like. Unfortunately, FTAA will be much more of the same — unless stopped.

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UE News - 06/01