FTAA: Free Trade Area of the Americas
by Leo Lynch
A GUIDE TO:
- Intro - What is the FTAA
- Objectives of the FTAA
- FTAA Issues
- Vision of the FTAA
- Timeline of Events
- Anticipated Effects of the FTAA
- Mexico under NAFTA; A Case Study
- Alternatives to FTAA
- Useful Links
The Free Trade Area of the Americas is an accord between leaders of 34 countries of the Western Hemisphere, which was officially launched in December, 1994 at the Summit of the Americas. Participating countries resolved to "begin immediately to construct the (FTAA), in which barriers to trade and investment will be progressively eliminated."
The FTAA was concieved as a progressive expansion of the North American Free Trade Agreement (NAFTA). The FTAA encompasses every country in the Americas bar Cuba.
Member states offered the following rationale for this undertaking: "Eliminating impediments to market access for goods and services among our countries will foster our economic growth. A growing world economy will also enhance our domestic prosperity. Free trade and increased economic integration are key factors for raising standards of living, improving the working conditions of people in the Americas and better protecting the environment."
Negotiations began right after the launch of NAFTA in 1994 and were set to be completed in 2005.
- Member states of the FTAA stated the following objectives:
- Promote prosperity through increased integration and free trade
- Establish a Free Trade Area in which barriers to trade in goods, services and investment are progressively eliminated by no later than 2005
- Maximize market openness
- Facilitate integration of smaller economies into the FTAA
- Strive to make trade liberalization and environmental policies mutually supportive
- Secure observance and protection of worker rights
Nine working groups were set up to cover the following areas:
Intellectual Property Rights
Subsidies / Anti-Dumping
Official Vision of the FTAA:
"We, the Ministers, reaffirm our commitment to the successful conclusion of the FTAA negotiations by January 2005, with the ultimate goal of achieving an area of free trade and regional integration. The Ministers reaffirm their commitment to a comprehensive and balanced FTAA that will most effectively foster economic growth, the reduction of poverty, development, and integration through trade liberalization. Ministers also recognize the need for flexibility to take into account the needs and sensitivities of all FTAA partners".
Unofficial Vision of the FTAA:
"Our objective with the Free Trade Area of the Americas is to guarantee control for North American businesses over a territory which stretches from the Arctic to the Antarctic, free access over the entire hemisphere without any difficulty or obstacle for our products, services, technology and capital". Colin Powell, US Secretary of State.
5 Timeline of Events:
THE PREPARATORY PROCESS 1994-1998
During the preparatory phase (1994-1998), the 34 Ministers responsible for trade established twelve working groups to identify and examine existing trade-related measures in each area, with a view to identifying possible approaches to negotiations. The results of the preparatory work of the Groups were made available to the public. Four ministerial meetings took place during this preparatory phase: the first was in June 1995 in Denver, U.S.A., the second in March 1996 in Cartagena, Colombia, the third in May 1997 in Belo Horizonte, Brazil and the fourth in March 1998 in San José, Costa Rica.
In the San José Declaration, the Ministers set out the structure of the negotiations, agreed upon general principles and objectives to guide these negotiations, and recommended that their Heads of State and Government initiate the formal negotiation of the FTAA.
The FTAA negotiations were formally launched in April 1998 at the Second Summit of the Americas in Santiago, Chile. The Heads of State and Government participating in the Second Summit of the Americas agreed that the FTAA Agreement would be balanced, comprehensive, WTO-consistent, and would constitute a single undertaking. They also agreed that the negotiating process would be transparent and take into account the differences in the levels of development and size of the economies in the Americas in order to facilitate full participation by all countries. Furthermore, they agreed that the negotiations should proceed in order to contribute to raising living standards, improving working conditions of all people in the Americas, and better protecting the environment. Finally, they agreed upon a structure under which the negotiations would be conducted.
1999 - 2001 DRAFTING THE AGREEMENT:
The fifth Ministerial meeting took place in Toronto in November 1999. At this meeting, Ministers instructed the negotiating groups to prepare a draft text of their respective chapters, to be presented at the sixth Ministerial meeting.
The negotiating groups responsible for market access issues were directed to discuss the modalities and procedures for negotiations in their respective areas. Ministers also approved several business facilitation measures, designed to facilitate commercial exchange in the Hemisphere. These measures, included in the Annexes to the Ministerial Declaration, were concentrated in the areas of customs procedures and enhanced transparency.
At the sixth Ministerial meeting, held in Buenos Aires in April 2001, a number of key decisions were made regarding the FTAA negotiations. Ministers received from the Negotiating Groups draft text of the FTAA Agreement, and, in an unprecedented move designed to increase the transparency of the process, agreed to make this text publicly available.
The Technical Committee of Institutional Issues was created to consider the overall architecture of an FTAA Agreement (general and institutional matters). Ministers also highlighted the need to foster dialogue with civil society, and directed the Committee of Government Representatives on the Participation of Civil Society to forward to the Negotiating Groups the Civil Society submissions in response to the open invitation, which refer to their respective issue areas, and those related to the FTAA process in general. Ministers reiterated the importance of the provision of technical assistance to smaller economies in order to facilitate their participation in the FTAA
The Third Summit of the Americas was held in Quebec City on April 20 - 22, 2001. At this meeting, Heads of State and Government endorsed the decision of the Ministers to make the first draft FTAA agreement available as soon as possible to the public in all four official languages. The final text of the agreement was published on the Official FTAA Website on July 3, 2001.
In addition, deadlines were fixed for the conclusion and implementation of the FTAA Agreement. Negotiations were to be concluded no later than January 2005; entry into force to be sought as soon as possible thereafter, no later than December 2005.
2002 - 2004 - PUTTING THE FINAL PIECES IN PLACE.
As instructed by Ministers Responsible for Trade, recommendations on methods and modalities for negotiations were submitted by April 1, 2002, and market access negotiations were initiated on May 15, 2002.
At the Seventh FTAA Ministerial Meeting, held November 1, 2002 in Quito, Ecuador, the Ministers took various steps to revive the negotiations. Among other things the Ministers confirmed the schedule for the exchange of initial market access offers, set deadlines by which new drafts of the texts of the FTAA Agreement needed to be produced, provided guidance to some of the FTAA entities on resolving issues in their negotiations, and made public immediately the second draft of the FTAA Agreement on the official FTAA website in the four official languages. Ministers also made public the Trade Negotiations Committee document on Guidelines or Directives for the Treatment of the Differences in the Levels of Development and Size of Economies.
At Quito, Ministers approved a Hemispheric Cooperation Program (HCP). This strengthened the capacities of poor countries that needed assistance to participate in the negotiations and implement their trade commitments.
At Quito, Ministers confirmed the timetable established by the TNC for market access-related negotiations to exchange initial offers between 15 December 2002 and 15 February 2003; review offers and submit requests for improvements to offers between 16 February and 15 June 2003; and initiate the presentation of revised offers and subsequent negotiations on improvements as of 15 July 2003.
Ministers also reiterated the need to increase civil society participation in the FTAA process and exhorted all countries in the Hemisphere to strengthen and deepen their consultation processes with civil society at the national level. Moreover, Ministers encouraged the holding of civil society events organized parallel to the Ministerial and Vice Ministerial meetings, as well as the organization of regional and national seminars related to the process of establishing the FTAA.
The final phase of FTAA negotiations would be guided by the co-chairmanship of the Brazil and the United States. It was agreed that two meetings of the Ministers Responsible for Trade would be held, one in November 2003 in Miami, U.S.A., and one in 2004 in Brazil.
At their eighth meeting in Miami on November 20, 2003, Ministers reiterated their commitment to the Free Trade Area of the Americas. Ministers instructed the TNC to develop a balanced and common set of rights and obligations applicable to all countries.
They reaffirmed their commitment to take into account, in designing the FTAA, the differences in levels of development and size of economies in the hemisphere to create opportunities for their full participation and increase their level of development.
Also enshrined in the agreement was a commitment to hold regular consultative meetings with government officials and civil society including business, labor, agricultural producers, NGOs, academics, rural and indigenous groups.
2004-2005 BRAZIL & ONWARDS:
Although the FTAA agreement was meant to be in force by the 1st January 2005 by the time senior American and Brazilian officials met in Switzerland to try to breathe fresh life into the deal the talks had been stalled for more than a year and the deadline had already been missed.
The United States and Brazil are co-chairs of the FTAA negotiations but have had vastly different views of what the final agreement should look like.
There is currently very little consensus among the participating countries about either the timing or the scope of the FTAA. The United States, along with 12 other nations (those with which the United States either already has or is negotiating bilateral trade deals), is pushing for the completion of an "ambitious" and far-reaching accord on schedule for implementation by 2005.
The countries of the Mercosur, the South American common market led by Brazil and Argentina, on the other hand, are advocating a "possible" FTAA, with drastically scaled-back goals. Venezuela and many Caribbean countries have also expressed misgivings about the timing of the negotiations and their scope.
For the time being the final workable form of the FTAA remains to be thrashed out at the negotiating table.
- JOB LOSSES:
Will further the effects that NAFTA had on American jobs. Companies are lured progressively south in search of cheaper wages. Companies who have not moved abroad are closing plants because they cannot compete with cheaper imports.
- EFFECT ON UNIONISING:
Companies are able to discourage unionising by threatning to close operations and move factories elsewhere where wages are lower and regulations are broken.
- SAFETY & ENVIRONMENTAL LAWS:
Visiting corporations can claim that local environmental laws are restricting their profits. Therefore corporations set the agenda rather than citizens.
- LOCAL SUPPLIER SUBSIDIES:
Governments are restricted from favouring small local suppliers for purchasing goods. Small farmers are denied subsidies and price controls therefore making it impossible to compete against corporations.
- PRIVATISATION OF UTILITES:
Vital services such as education, health care, environmental services, energy, prisons would be threatened with privatisation. This means that private companies could cut corners and dodge laws to ensure efficiency and maximised profits.
- INTELLECTUAL PROPERTY RIGHTS:
The area of intellectual property rights is an enormous one and is potentially a legal minefield. It would allow the likes of pharmaceutical giants to patent traditional medicines and recipes that have sustained generations of local communities and control the production and sale of them. For instance there is currently a dispute over the legal rights to produce Basmati Rice. If the patent is seized and registered nobody can produce Basmati Rice without the say so of the patent holder.
- SWEATSHOP AREAS:
The U.S. - Mexican border has become crowded with sweatshops since the installation of NAFTA. These involve mainly women working in dangerous low paid jobs in unsanitary shacks which are prey to diseases and environmental pollution. The installation of the FTAA would spread these sweatshop areas over both continents.
- INCREASING DEFICITS:
The elimination of trade barriers with low wage countries will expose goods to fierce competition and exacerbate high levels of debts between the US and it's trading partners even further.
Critics of the FTAA have warned that as practiced the agreement is weighted in favour of Corporations and caters for their needs before the communities it is supposed to benefit.
To understand the effects that the FTAA agreement may have on the rest of the Americas it is instructive to look at how Mexico fared under NAFTA, an agreement that is very similar to that proposed under the FTAA.
Jobs & Unions:
Under NAFTA the agreements backers promised big job gains on each side of the border. In fact 766,000 jobs disappeared in the US as companies relocated to Mexico. Approximately 28,000 small businesses in Mexico have shut down due to the entrance of foreign companies. Manufacturing wages dropped 21 percent from 1995 to 1999, and have only started to recover.
Efforts to unionise in the manufacturing sector have also led to threats by the owners to relocate their operations. In 1994 Mexico was forced to devalue the Peso to attract foreign investors. Between 1994-2004 Mexico effectively repaid it's national debt four and a half times over yet still found itself crippled by interest repayments to the World Bank. The knock-on effect on the Mexican economy pushed 8 million families into poverty. After NAFTA one million more Mexican families now work for less than the minimum wage.
Mexico's eagerness to sign up to NAFTA was shown in the rewriting of Article 27 of the Constitution. This allowed for the sale of the privatised lands of indigenous communities to the highest bidder.
"A race to the bottom":
Under the FTAA agreement corporations will progressively search for the lowest possible labour costs and move their operations accordingly.
This pits ever more desperate workers in Guatemala and Haiti against those in Mexico. Temporary benefits in the way of newly created jobs will disappear quickly as the corporations relentlessly move on in search of bigger profits.
Environmental & Public Health Effects:
Mexico, along with most of Latin America, lacks strong environmental laws. And those regulations that do exist often go un-enforced.
The increase in manufacturing along the US-Mexico border region has exacerbated environmental and public health threats in the area. Most waste goes unaccounted for; according to EPA officials, only a fraction of all waste is properly disposed of. No wonder that in some border areas birth defects are twice the US national average. In some border counties, the rate of hepatitis is two or three times the national average due to lack of proper sewage treatment.
Also, the export-driven growth model perpetuated by NAFTA is destroying ecosystems around Mexico as the country cuts down its forests to earn hard currency. Since NAFTA,15 US wood product companies have set up operations in Mexico, and logging there has increased dramatically. In the state of Guerrero, massive clear cutting has led to soil erosion and habitat destruction.
The current economic processes known as "globalization" are defined and driven by a very small number of people. Although they are sold as beneficial and revolutionary to the communities they will affect in fact they are anything but community friendly. In practice they're effects have brought poverty, environmental and health damage and the erosion of human rights.
United, citizens around the world can create a kind of grassroots globalizationÑa people's globalizationÑthat puts economic, social and political justice at the center of trade and investment. Citizens groups from across the Western Hemisphere have written an "Alternative Agreement for the Americas" that offers a picture of what socially responsible and environmentally sustainable commerce would look like. You can find the document here on the Global Exchange website.
As detailed in this proposal, governments should retain the right to impose performance requirements on investors, as well as maintain protections for small and medium-scale producers and key sectors in their respective national development plans. Countries have the right, and the responsibility, to maintain food and nutritional security (such as excluding basic grains from liberalization measures). Any hemisphere wide economic pact should reinforce, not undermine, internationally recognized accords such as International Labor Organization Conventions, the United Nations Convention to Eliminate All Forms of Discrimination Against Women, and the Inter-American Convention on Human Rights. The process for developing economic policy must be democratized by opening up the negotiations to all the hemisphere's peoples, not just a relatively small, elite and well-connected group of investors. The future stability of the region depends on it.
9 Useful Links:
FTAA Information Sites: