On a Fast Track to Disaster

News & Politics

On December 6, by a one vote margin of 215-214, the House gave President Bush "fast track" authority to negotiate new trade agreements without any meaningful congressional oversight.  The bill has been sent to the Senate, where it has yet to be voted on. Labor leaders, human rights activists and environmentalists are all actively following the upcoming Senate vote and its potential for speeding up the ratification of the Free Trade Area of the Americas.

In lobbying for "fast-track" authority, House Speaker Dennis Hastert passionately urged lawmakers to "support our president who is fighting a courageous war on terrorism and redefining American world leadership or undercut the president at the worst possible time," underlining that the vote was "being watched closely by our allies and by our adversaries."

But the dubious premise that a congressman's patriotic vote will aid the president in fighting  terrorism only masks the true intent of this legislation. A bill called Free Trade of the Americas (FTAA), will be introduced in the Congress in the near future, and the only way it can pass will be if the House and Senate abdicate their constitutional right to debate and amend trade legislation and rush it through by "fast track" presidential authority.

The Free Trade Area of the Americas (FTAA) will be a disaster for the poor of the 34 countries of this hemisphere. It is crucial to understand the roots and the context of this bill in as it arrives under the urgent pressure of Fast Track.

In 1994, at the Summit of the Americas in Miami, the 34 nations of Canada, United States, Mexico, Central America, South America and the Caribbean (except Cuba) agreed to sign a trade and investment pact called Free Trade Area of the Americas. With a population of 800 million from Anchorage to Tierra del Fuego, and a combined GDP of $11 trillion, it would be the largest free trade zone in world. It is intended for completion by 2005, but there is some pressure, especially from the United States and Chile, for ratification by 2003.

FTAA is based on models from the North American Free Trade Agreement (NAFTA) of 1994 and the World Trade Organization, but it goes far beyond each of these in both scope and power. One observer has remarked that "FTAA is NAFTA on steroids." It incorporates from the WTO the General Agreement on Trade in Services , and contains all the powers of the Multilateral Agreement on Investment, which was roundly rejected due to a concerted public outcry in 1998. It also expands on the Structural Adjustment Programs which have been imposed in recent years on most countries of the region by the International Monetary Fund (IMF) and World Bank, and which are in part responsible for so much of the crushing debt weighing down less developed nations. 

The principles of the FTAA represent the apex of the economic and political globalization process.  There has been a massive restructuring of the global economy in favor of Transnational Corporations (TNCs) over the past three decades. Between 1970 and 1998, the number of TNCs increased by 800 percent. Of the top 100 economies in the world, 51 are now corporations and 49 are countries. Seventy percent of global trade is controlled by just 500 corporations. As with the WTO and NAFTA, the FTAA agreement will contain very few safeguards to protect workers and human rights, or health and environmental standards.

For the first time in any international trade agreement, transnational corporations will gain competitive rights to a full range of government service provisions. They will also have the right to sue for financial compensation from any government that resists, since publicly-funded services are considered "monopolies" in the new world of international trade.

Services are the fastest growing sector in international trade, and of all services, health, education and water are potentially the most lucrative. Already over 40 countries, including all of Europe, have opened up their public education sectors to foreign-based corporate competition, and almost 100 countries have done the same in the health care sector. FTAA also significantly expands the investment chapter of NAFTA, the infamous Chapter 11, which many analysts have called "the very heart and soul of NAFTA." The exclusive focus of the FTAA mandate on investment is on the protection of foreign investors.  Thus, the key question is whether FTAA will force governments to give up their sovereign power to regulate in the public interest.   

NAFTA was the first international trade agreement 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 another NAFTA government if its laws, policies and practices impinge on the actual and potential profits of the corporation.  Chapter 11 gives the right to sue for compensation for lost income, regardless of the legality of government actions.  It incorporates the remarkable principle that a government cannot implement legislation that "expropriates" a company's future profits.

A panel of trade bureaucrats can override a government's domestic legislation or force a government to pay substantial compensation if they continue to enforce it.  To adjudicate all disputes, NAFTA's Chapter 11 sets up secretive "tribunals" at the World Bank or United Nations, made up of three persons named by the parties in dispute. These hearings are never open to the public, offering the confidentiality which corporate investors consider essential.  NAFTA panels are not bound by the rulings of previous panels.

No one knows for sure how many cases have been brought to NAFTA tribunals, or their outcome, since the whole process is highly confidential. But there are a few cases for which there is some reliable public information.

The first Chapter 11 case, brought before a NAFTA tribunal at the UN, was one in which the US-based Ethyl Corporation sued the Canadian government for $251 million in damages over its ban of Ethyl's gasoline additive MMT, which Canadian Prime Minister Jean Chrétien once called a "dangerous neurotoxin."  Canada settled the case in 1998, agreeing to lift the ban, allow the additive, and pay $13 million in damages to Ethyl.     The case with the greatest chutzpah for size is that of Sun Belt Water of Santa Barbara, which is suing the Canadian government for $10.5 billion in damages.  Sun Belt's claim revolves around British Columbia banning the export of its bulk water in 1993, thus preventing Sun Belt from getting into the water business in that province. The case is pending.

But the most egregious case is that of United Parcel Service, of the friendly brown trucks. UPS is suing Canada for $160 million in damages, claiming that government subsidies of the Canadian postal service represent an unfair trade advantage against UPS.  The case is pending, but a lot of public service providers are watching for the outcome of this one.

Another important case still pending, the largest brought in the United States, has the potential for creating a significant backlash against these outlandish suits.  It is that of Methanex, a Canadian corporation which is the world's largest producer of methanol, a key ingredient in the gasoline additive MTBE.  In 1999, California banned MTBE, after studies at the University of California at Davis warned that it may cause cancer in humans.  Methanex claims that California's action is a "confiscation" of its property, what Chapter 11 calls "tantamount to expropriation."  Though its quarrel is with a state law, Methanex sued the U.S. government for $970 million, and if a NAFTA tribunal at the U. N. finds this a "regulatory taking," the U. S. government can be held liable for the corporation's lost profits.

But local government is starting to fight back at this erosion of people's right to know and determine how multinational corporations are litigating against their interests and safety. The Methanex case galvanized California's new Select Committee on International Policy and State Legislation, chaired by State Senator Sheila Kuehl, to make sure FTAA will not get by without intense public scrutiny.  On December 10, 2001, the Committee held a town meeting in Los Angeles to debate how each level of government will be impacted by these trade agreements.  Following the lead of the Kuehl Committee, legislatures throughout the Americas could begin to open secret trade negotiations to public examination to make them more responsive to the concerns of civil society.

Because so much of NAFTA's workings still operate in corporate seclusion, it is difficult to get a reliable evaluation of its track record since it began in 1994. But Public Citizen's Global Trade Watch has recently released a lengthy and well documented report entitled, Down on the Farm: NAFTA's Seven Years War on Farmers and Ranchers in the U.S., Canada and Mexico.  Their findings on the fate of agriculture in the three countries since 1994 hint at what is in store for the rest of the hemisphere under the brave new world of FTAA.

The report shows how independent farmers in the United States, Canada and Mexico have seen agricultural prices plummet, farm incomes collapse and agricultural subsidy programs dismantled. NAFTA's rules empowering investors, guaranteeing large corporate traders access rights, and constraining government regulatory power have resulted in a race to the bottom in farm income, wages, and sanitary and environmental standards. 

For example, the Canadian government has slashed farm subsidies and farm income support, so that farm incomes in Canada have declined while farm debts have risen sharply. Canadian farm bankruptcies and delinquent loans are five times greater than they were before NAFTA.  Dropping prices meant that farmers' net incomes in Canada declined 19 percent between 1989 and 1999, although Canadian agricultural exports doubled during the same period.

The report's conclusion is that NAFTA's twin policies of free trade and elimination of domestic farm protections have handed the entire food production and distribution system over to giant agribusinesses, which have  reaped huge profits while the majority of farmers and consumers have been major losers. 

The negative outcomes of seven years of NAFTA have helped define the growing national debate over President Bush's urgent demand that Congress give him "Fast Track" power to rush trade agreements through Congress, just as soon as FTAA agreements are ready. The U. S. Constitution gives Congress exclusive authority "to regulate Commerce with foreign Nations" (Art. I-8). "Fast Track" is a mechanism established in 1974, and used only five times since, that delegates to the Executive Branch what is constitutionally congressional authority for setting trade terms. It suspends normal congressional rules, and leaves Congress with 60 days to act, limits debate to a maximum of 20 hours in each chamber of Congress,  and  allows no amendments to be attached to legislation.

Fast Track power expired in 1994, after it had been used by President Clinton the previous year for passage of NAFTA. Clinton's requests that congress again delegate its trade authority in 1997 and 1998 were refused by Republican-controlled House of Representatives. The Bush Administration has now renamed it "trade promotion authority," the Trade Promotion Authority Act of 2001: HR 2149 originally introduced by Representative Phil Crane (R-IL).  On the day the bill was introduced, the president received a bipartisan letter from 61 senators insisting that labor and environmental rights are sacrosanct and must be protected in any trade agreement.  The December 6 bill, HR 3005, was an amended version of the Crane bill, and it is that bill which  will now go the Senate.

The question of Fast Track is crucial to the fate of FTAA, just as it was to NAFTA.  The debate over NAFTA, such as it was, largely boiled down to a rhetorical public relations battle, in which the two sides were largely cast as defenders or enemies of "free trade." Not surprisingly, NAFTA's advocates emerged as the clear winners on all counts. After all, who could oppose the abolition of barriers to free trade?  

But NAFTA's most contentious provision, Chapter 11, was never about trade at all. It was about the curbing the sovereign power of governments, elected by the people, to regulate in the public interest when faced with massive and rapacious corporate power.  With the passage of "Fast Track" on December 6, the Western Hemisphere is speeding towards an even further erosion of democracy in the interest of corporate profits.

Thomas Ambrogi, a former Jesuit priest, is an analyst for Foreign Policy in Focus (www.fpif.org) and a human rights activist.

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