Fast track to disaster for the world’s poor
by Thomas E. Ambrogi

As this issue of The Witness went to press, it seemed certain that the U.S. Congress would approve legislation giving President Bush "fast track" authority to negotiate new trade agreements without any meaningful congressional oversight. Labor leaders, human rights activists and environmentalists recognize that Fast Track is crucial to the fate of the proposed Free Trade Area of the Americas (FTAA) a bill that will be introduced in the Congress in the near future. The only way the bill 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 as it arrives under the urgent pressure of Fast Track.

‘NAFTA on steroids’

FTAA is a trade and investment pact first envisioned in 1994, at the Summit of the Americas in Miami, by the 34 nations of Canada, U.S., Mexico, Central America, South America and the Caribbean (except Cuba). 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 the world. Intended for completion by 2005, there is some pressure, especially from the U.S. 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 (WTO), 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.

Corporations suing governments

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 U.S.-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.    

A case that is pending involves 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 there.

Public service providers are watching another case that involves the United Parcel Service, which is suing Canada for $160 million in damages. UPS claims that government subsidies of the Canadian postal service represent an unfair trade advantage against UPS. Another important case still pending, the largest brought in the U.S., 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 UN finds this a "regulatory taking," the U.S. government can be held liable for the corporation’s lost profits.

Local government fighting back

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. 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." The report shows how independent farmers in the U.S., Canada and Mexico have seen agricultural prices plummet, farm incomes collapse and agricultural subsidy programs dismantled. 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, quite obviously for immediate use as soon as the FTAA draft 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 the 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 the Republican-controlled House of Representatives. The Bush Administration has now renamed it "trade promotion authority." Representative Phil Crane (R-IL) originally introduced the Trade Promotion Authority Act of 2001, which was amended as HR 3005 and passed December 6. Two weeks later, the Senate Finance Committee approved the Baucus/Grassley Trade Promotion Act which, at this writing, has yet to be brought to the Senate floor.

Presidential Fast Track authority is crucial to the fate of FTAA, just as it was to NAFTA. It is simply astounding that the 20 hours of debate over NAFTA in the House and Senate in 1993 does not contain a single reference to Chapter 11, its most contentious provision. The debate, such as it was, was simply 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 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. And this will be the central issue of FTAA, magnified many times through the entire hemisphere. For all who care about economic and social justice for the whole human family, the struggle over FTAA will be the defining political issue of the coming several years.

Thomas E. Ambrogi is an interfatih theologian and human rights advocate. He is a member of All Saints Church, Pasadena. A more detailed version of this story is available in the "A Globe of Witnesses" section of The Witness’ web site, <www.thewitness.org/agw>. Ambrogi can be reached at <Tambrogi@aol.com>.