In November 2003, Ministers of Economy from across the Americas came together for the latest negotiations on creating a Free Trade Area of the Americas (FTAA). The meeting of Ministers in Miami highlighted the controversy surrounding the FTAA — the world’ s most ambitious trade agreement that proposes to “unite” the economies of the Western Hemisphere. What happened in Miami, and what does it mean for the direction of future trade agreements in the Americas?

Downsizing the FTAA

In Miami, a number of countries successfully pushed for a slimmed-down FTAA, or “FTAA-Lite.” Citing the difficulty of uniting 34 economies of different sizes and stages of development under one package agreement, Brazil and others proposed a new framework for the FTAA under which a country could reserve the right to “opt out” of some provisions of the agreement.

What this scaled-down version of the FTAA will actually look like is still to be determined, and will not be discussed until February, in Puebla, Mexico.

In Miami, the Bush Administration abandoned its position of demanding a single, comprehensive FTAA by 2005. The failure to make progress on the agenda for a comprehensive FTAA is widely recognized as a setback for the Bush Administration, which has called the FTAA the cornerstone of its vision for trade in the Western Hemisphere.

Brazil Takes a Stand

Profoundly different visions for hemispheric trade mark the administrations of George W. Bush and Ignacio “Lula ” da Silva. Lula’s Brazil, with support from President Kirchner of Argentina, is a force to be reckoned with; together, Brazil and Argentina account for nearly two-thirds of South America’s economic output.

Tension between Brazil and the U.S. over trade policy did not begin with the FTAA. In September 2003, Brazil played a leading role among a group of countries that pushed the U.S. and European Union to reduce agricultural subsidies, contributing to the eventual collapse of the World Trade Organization (WTO) talks in Cancún.

Subsidies were a similarly contentious issue in Miami’s FTAA Ministerial. Brazil led the charge, arguing that subsidies from U.S. taxpayers give U.S. agribusinesses an unfair advantage over farmers in Latin America, as they are able to produce and export agricultural goods at below the costs of production. The U.S. refused to discuss its farm subsidies in the context of the FTAA.

Brazil responded to U.S. recalcitrance on the issue of subsidies by refusing to negotiate on other key provisions of the FTAA, including intellectual property rights, investment and government procurement. Other nations also voiced concerns on issues such as access to generic drugs, agriculture, and privatization of social services. Across the hemisphere criticism of U.S.-style “free” trade agreements is growing, particularly as Latin Americans observe the effects of 10 years of NAFTA in Mexico. The negotiations in Miami were gridlocked almost before the meeting began, and the U.S. had little choice but to accept the proposal for a smaller, less comprehensive FTAA.

What’s Wrong with the FTAA?

The FTAA negotiations were conducted in secret with no citizen input. A system has been set up to get comments from NGOs, but there is no mechanism to incorporate these concerns into the actual negotiations.

A number of the proposals in the FTAA would undermine the democratic process in the countries that are party to the agreement. Provisions on services, investment and other areas are to be applied at all levels of society. This means that the decisions of the national government representatives negotiating the agreement could override local laws (which have come from a more democratic process).

The FTAA has particularly problematic investment rules. The General Assembly has stated that the investor/state dispute resolution rules are the most dangerous provision in the entire agreement. “[It] gives investors (that is, corporations) the right to directly sue federal, state, or local governments for having laws that get in the way of corporate profits (such as environmental, food safety, labor, or human rights standards).” Under a similar provision in NAFTA, the U.S.-based Metalclad Corporation successfully sued the Mexican government for compensation when a municipal government refused to allow the company to build a toxic-waste dump in its community.

Another provision of the investment chapter directly interferes with a national government’s ability to decide what is best for its citizens. If a government were to decide that privatization of a public service such as health care had been a mistake, and then decided to retake control of the service, it could be forced to pay millions of dollars in compensation to foreign investors for their lost potential profits.

Services that help meet people’s basic right to food, education, health, and basic utilities are not exempt from trade rules. Applying trade rules to these services would make it harder for governments to adequately support or regulate them, resulting in price increases, reduced access, and compromised quality. The services chapter would allow transnational firms to provide healthcare services in competition with public-health systems, potentially leading to foreign firms accepting only relatively healthy patients. Other patients would be left to public systems, most likely underfunded because of provisions found in both the services and competition policy that would cut subsidies.

In addition, the intellectual property rights section may make it more difficult for governments to supply needy patients with lower-cost generic drugs. This section may also enable corporations to patent traditional plants and to copy traditional artistic designs and compete with local artisans.

– From Catherine Gordon

A Shift Toward Bilateral
Trade Agreements

Faced with opposition to the FTAA in Miami, the U.S. reacted by declaring its intent to seek bilateral trade agreements with Colombia, Ecuador, Bolivia, and Peru. A bilateral agreement with Chile took effect this January. It appears the U.S. is trying to build an FTAA country by country, using bilateral agreements to undermine alliances in Latin America that threaten to block the U.S. trade agenda. For example, separate, bilateral negotiations with the Andean countries are viewed as an effort to disrupt Andean trade unity, while the bilateral agreement with Chile is seen as an attempt to diminish the power of the South American trading block, Mercosur.

The new focus on bilateral negotiations extends to smaller “mini-regional” agreements, such as the U.S.-Central American Free Trade Agreement (CAFTA). Rather than trying to negotiate with Central America as a block, the U.S. focused on one-on-one negotiations with the five countries involved. As a result “CAFTA” looks different for Costa Rica (which effectively demanded greater concessions from the U.S.) than it does for Guatemala (which capitulated early to U.S. demands). Efforts are also underway to graft the Dominican Republic onto CAFTA, following bilateral negotiations.

Bilateral negotiations are a double-edged sword. They allow greater flexibility by backing away from the “one size fits all” approach of the original FTAA; but such negotiations also pit small, weak economies against the full force of the U.S., without the benefit of regional alliances. The U.S. should promote trade agreements that encourage development and make our Latin American neighbors true partners in trade. CAFTA and the other bilateral negotiations underway will not achieve this aim.

What is CAFTA?

The U.S.-Central America Free Trade Agreement (CAFTA)—modeled after NAFTA and the proposed FTAA—is an agreement between the United States, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. Negotiations for CAFTA were recently completed, and the agreement now faces ratification in the U.S. Congress and in the Central American National Assemblies.

Why Oppose It?

• Labor: CAFTA is a step backward for organized labor in Central America as, unlike earlier trade agreements, it does not require compliance with international labor standards. CAFTA only requires that participating countries enforce their domestic labor laws, which in Central America are grossly inadequate.
  
• Agriculture: Central American farmers are concerned that they will be unable to compete in the face of an influx of highly subsidized imports from the U.S. under CAFTA. Two-thirds of Central America’s poor live in rural areas. Trade policy that undermines rural livelihoods will exacerbate poverty and accelerate migration.
  
• Investment: Investment rules under CAFTA restrict the ability of Central American governments to regulate foreign investment. For example, under CAFTA foreign companies can sue governments if regulations (such as environmental or labor laws) impinge upon the company’s profits. (Similar provisions exist under NAFTA, and have had a chilling effect on public interest legislation in Mexico.)

The Fight to Stop CAFTA

Under the 2002 Trade Promotion Authority granted to President Bush by the U.S. Congress, legislators can only vote ‘yes’ or ‘no’ on CAFTA when it is presented to the Congress, and cannot amend the trade agreement.

Suggested Action:

Call your Members of Congress. Tell them to vote for fair trade in Central America by opposing CAFTA when it comes to Congress.

To reach your member, call the Capitol Switchboard at (202) 224-3121.

Put CAFTA in the news! Write letters to the editor of your local paper explaining why CAFTA is not a good agreement for Central Americans or for U.S. workers.

Make CAFTA a campaign issue! Democratic Presidential hopefuls have been talking a lot about trade on the campaign trail. Use town meetings, rallies and other public events to ask candidates to take a position on CAFTA and to support policies that will promote fair trade with Central America. See http://www .birddogger.org for information on when a candidate will be in your area.

For more information on CAFTA, see http://www.wola.org/economic/cafta.htm.

The 215th General Assembly (2003) called on the PC(USA) to:

1. Support efforts to strive toward international cooperation based on fair trade, respect for diversity, and common concerns for a peaceful, just, and sustainable world.
2. Oppose multinational actions and trade agreements that elevate rights of corporations over the right of governments and indigenous peoples to pass and enforce laws that preserve the public good and protect their citizens, economies, and environments.
3. Oppose the Free Trade Area of the Americas (FTAA) in its current form.
4. Direct the Stated Clerk of the General Assembly, as well as representatives of PC(USA) programs dealing with economic justice, hunger, and advocacy, to promptly communicate the General Assembly position to the U.S. trade representative, U.S. senators and representatives, congressional committees with trade jurisdiction, and state legislators.
   1. Call on the U. S. trade representative to withdraw from any further negotiations on the proposed FTAA until there has been full public disclosure of its proposed text, open public debate, and a place at the negotiating table for representatives of the diverse sectors of civil society who would be affected by this agreement.
   2. Petition the federal government to refuse to sign any new trade and investment agreements, such as the proposed FTAA, that include investor-state provisions, where corporations can directly sue governments for lost profits (“regulatory takings”). (Minutes, 2003, Part I, pp. 618-619)