Free Trade Area of the Americas

by Cathleen Sullivan

Alliance for Global Justice



The Free Trade Area of the Americas (FTAA). Never heard of it? Well that's not surprising as it has been negotiated in private since the 1994 Summit of the Americas. Like the infamous North American Free Trade Agreement (NAFTA), the FTAA is an international free trade agreement that aims to eliminate the remaining barriers to the free flow of money, goods and services across borders in the Western hemisphere (excluding Cuba), to create one huge integrated open market. This guide explains what that will entail, and uncovers the transnational corporate agenda integral to this agreement and its threat to the well-being of all forms of life throughout the Americas.

The stated goals of the FTAA, according to the Organization of American States (OAS) and the Inter-American Development Bank (IDB), are to provide "free market access to goods and services for the entire continent,"' to link less open and less developed economies with more open and more developed economies in a spirit of solidarity and commercial interdependence, promoting modernization, efficiency and "more open, competitive and stronger democratic societies in Latin America and the Caribbean." Sounds great doesn't it? Free trade and free markets are put forth by economic policy makers and promoted by the World Bank, International Monetary Fund (IMF) and World Trade Organization (WTO) to be the catch-all solution to poverty and inequality, and the key to increased prosperity for all people. But what does all this really mean?

The FTAA will NOT be beneficial for the majority of the 755 million inhabitants of the 34 countries of the Americas and the Caribbean, especially endangering women, sweatshop workers and small farmers. The rules and policies of free trade are designed to create a stable and profitable environment for corporations and investors. They do not deal with the real and pressing problems facing the Americas today and in fact exacerbate many of them. By giving corporate investors greater rights and freedoms while restricting individuals and governments, the FTAA will threaten environmental, labor, human rights and food safety protections and endangers democracy, sovereignty, indigenous culture, healthcare and other basic services.

It is easy to hide behind complex jargon and fancy goals, but we plan to demystify the terminology of the FTAA and get to the bottom of what it will mean for you and me and the majority of folks in the Americas who earn our incomes through work, not wealth. Once we get past the propaganda put forth by proponents of the FTAA to reveal the superficiality and hollowness of their promises of prosperity for all, we hope that you will be convinced to join us in the struggle against the FTAA and the continuing injustice of corporate globalization.

What is the FTAA?

The idea for the FTAA emerged in 1994 and is targeted to take effect by 2005. Progress on the negotiations will be discussed and the doctrine of "free trade" reaffirmed by heads of state and trade ministers at the Summit of the Americas in Quebec City, Canada in April 2001. We cannot be sure what the final text of the FTAA will include because the treaty is being negotiated in secret. Activists are calling for release of the text.

No non-governmental organization (NGO) has been allowed to participate in the drafting of the text. However, we can be sure that business interests are heard because the American Business Forum holds parallel meetings when the FTAA negotiators meet and they also meet directly with those FTAA negotiators. The interests of civil society have been relegated to "making recommendations" to the FTAA's "Joint Committee on Civil Society Participation." In other words, there is no space for dialogue, only a one-way input of information with no response from the committee, and thus no real ability to influence the content of the agreement.

The FTAA is the most recent step on the path of corporate globalization preceded by NAFTA and a series of free trade agreements as well as the establishment of the World Trade Organization (WTO). Another treaty, the Multilateral Agreement on Investment (MAI), was defeated in 1998 by an international organizing effort.

The following descriptions are based on a summary of the U.S. negotiating provisions and the FTAA Ministerial Declarations. It is also based on our knowledge of the devastating consequences that free trade policies have had on people and environments around the world in recent history. The FTAA will only speed up the trend towards an already extreme concentration of power and wealth in the hands of an elite few.

What does the agreement include?

Barriers to Trade

The FTAA intends to gradually eliminate tariff and non-tariff barriers that restrict or regulate the flow of trade between countries to make all markets more "accessible" to foreign goods and investment. This is the most basic free trade concept, in that tariffs are a direct restriction on the flow of trade, but, as you will see, tariffs are one of many equally important free trade elements.

Normally, governments put tariffs, or taxes, on imported goods making them more expensive. Among other reasons, this gives an advantage to domestic industry, especially necessary for an emerging industry not strong enough to compete in an international arena. Tariffs, like any tax, also provide government income. This crucial income, if not taken from wealthy multinational corporations, can be made up through value-added and sales taxes which disproportionately burden the poor.

Non-tariff barriers are any government policy that may affect trade such as regulations that protect workers and the environment. For example, requiring companies to provide maternity leave could be a non-tariff barrier.

Under the FTAA, many such "barriers to trade" will likely be subject to negotiation and eventual removal. The neo-liberal rationale is that this leads to growth and increased efficiency in the whole system through a competitive atmosphere. It "levels the playing field" so that anyone can succeed if they make the best and cheapest product. But what is a level playing field between ants and elephants? This ignores international structural power dynamics, the reality of small and large economies and the benefits of small local business. Basic protections for individual members of society, small local industry, and the environment in every country of the Americas are endangered by making markets "accessible" to profit-seeking corporations.

National Treatment

This was an element of NAFTA and the defeated MAI that increasingly "levels the playing field." National treatment is the requirement that corporations and foreign investors be treated at least as well as domestic investors. In addition, the FTAA is expected to impose a policy of "nondiscrimination" forbidding governments from having policies that favor locally produced goods and services. In other words, favoring local business would be outlawed which would give wealthy multinational corporations an unprecedented advantage in establishing monopolies in poorer countries.

If we look past the single indicator of "efficiency," domestic industry and agriculture carry many advantages such as providing a stable source of employment, creating and maintaining domestic markets, and providing a product that is more suited to local needs. For example, currently in Haiti, the domestic rice industry has been almost completely wiped out by U.S. Agribusiness. This "Miami Rice" can be produced more efficiently than the more nutritious varieties of Haitian rice and thus have put them out of business. It is a national tragedy that has devastated the economy of many of the rice-growing parts of the country.

We each see this in our daily lives as the locally-owned coffee shop is put out of business by Starbucks, or the family sandwich shop undersold by Subway moving in next door. The FTAA would provide more incentives for this to happen all over the hemisphere.

Broader Definition of Investment

Foreign investment has traditionally referred to the purchase of stocks, bonds and national industries by foreign corporations. The defeated Multilateral Agreement on Investment (MAI), which many believe will be reborn in the FTAA, called for an expansion of the definition of investment, and thus an expansion of what will be available on the free market. Anything that can be given a monetary value could be bought and sold internationally, like a nation's forests, oil reserves, the administration of hospitals, health care, energy or water provision.

Deregulation of Capital Controls

It may surprise you that 90% of the transactions that take place around the world are speculative. In other words, they consist of gambling on things like currencies, stock options, and commodity futures (ie. the future prices of crops and precious metals). These short term investments simply use money to make money. They don't produce anything that we can eat, wear, or use. They don't result in new investments in factories, homes, or schools.

When speculative investments are withdrawn too rapidly, financial panic can ensue as happened in Southeast Asia in 1997. Some countries such as Chile and Malaysia have tried to control this speculative flow of money going in and out of their economies through regulations. These "speed bumps" help protect a country from becoming reliant on foreign money in their economy and then being devastated if it is rapidly removed in a financial panic.

The WTO, the World Bank, the IMF, NAFTA and in the future the FTAA, lessen the control that governments can have over this flow, called the deregulation of capital controls . They say such investment liberalization leads to the most efficient distribution of investment and the highest returns and that it builds up economies. However, speculators are often irrational. Their investments can damage rather than help countries if the money can be withdrawn rapidly.

Essentially, investors want the ability to move their money around easily and rapidly to take advantage of money-making opportunities around the world. However, this eliminates the crucial and fundamental tools that governments use to stabilize their economies and thus protect the well being of their people. The only people it benefits are the investors themselves and it makes economies very vulnerable on the world stage.

The Mexican "Peso Crisis" in 1994-5 is a classic example of hordes of investors suddenly deciding to move money out of short-term investments to more profitable ventures. Mexico had been widely praised by the IMF for taking steps to make its economy very attractive for short-term foreign investors, even creating special bonds, Tesobonos, to enable people to invest easily. However, U.S. interest rates went up which made it more profitable to invest in the U.S., and a new Mexican president came to power which created a bit of uncertainty. Panic ensued, investors bailed out, and suddenly Mexico was devastated. Mexican businesses went bankrupt, people lost their jobs, interest rates skyrocketed, and people lost their homes.

In the Asian Financial Crisis, the IMF recommendation to all the countries was to further liberalize their economies. Malaysia took the controversial and much criticized approach of strengthening capital controls, allowing less and less money to move out of their economy. After a year, the IMF was forced to recognize that Malaysia survived the crisis in much better shape because it had refused the IMF's advice.


Privatization is when the financing and operation of a public company or government service is sold to a privately run firm. The idea behind it is that state inefficiency is replaced by major savings and improved quality. However, more often than not, unemployment rises because the private companies lay off workers and labor unions are abolished. In addition, prices go up so the poor are denied access to products and services and accountability is lost.

Many believe there are certain things that are necessary for human survival and integral to basic human rights which should not be included in the private market sector such as access to safe drinking water, health care and public education.

The FTAA will promote further privatization of health care, education, food, energy, telecommunications, water, postal service and other services through rules that favor the private sector. Should these services be provided with the motive of profit maximization, or with the provision of quality services in mind because people need them?

For example, when control of schools or prisons is given over to private corporations the incentive to sacrifice necessary things like safety or inmate health care in order to increase profits is strong. Furthermore, once privatized, these services are made available to international investors who have no accountability to the population they are serving, but are principally accountable to their foreign stockholders.

Performance Requirements

The FTAA is expected to limit the ability of governments to put conditions or performance requirements on foreign investments. Historically, many countries have had laws restricting the percentage of a business that can be owned by a foreign corporation or requiring that some percentage of the profit be reinvested in the host country. These laws often require the use of local materials or local labor, or require a factory to stay put for a determined number of years. These, along with environmental protections like regulating logging or mining techniques, are all crucial to the development, protection and stability of local communities. The elimination of performance requirements would mean that multinational corporations would have virtually no obligations to the local communities in which they operate. The MAI would have banned performance requirements outright and similar bans are in some WTO agreements, so its a pretty sure bet that this will be part of the FTAA.

Investor-To-State-Dispute Resolution

This is designed to give special legal protections to corporations that invest in another country. Under the WTO's Dispute Settlement Body, disputes over trade are settled between governments. Investor-to-state dispute resolution, a feature of NAFTA and the MAI, and a near certainty for the FTAA, allows a corporation to sue a government directly if they assert that a national, state or local law threatens corporate profits or even the company's reputation. This essentially allows corporations to challenge democratically enacted laws and force governments to pay compensation, privileging profits over government sovereignty. When Congress, a state legislature, or a local governing body is considering a policy, especially one regarding environmental or human rights' protections, should they have to worry about whether some foreign company might sue them for the financial implications of that law? This fundamentally endangers a just law-making process and the well-being of the people.

Regulatory Takings

Regulatory Takings has traditionally meant that a government needs to compensate a company for a "taking" like a forced relocation of a building in order to build a road for the public good. The FTAA would expand the rules on regulatory takings so that a corporation could demand compensation for any government action that directly or indirectly limits the value of an investment or decreases present or future profits. So legitimate, non-discriminatory government laws and regulations on things like pollution, toxic chemicals, land use? environment, and consumer protection can be challenged by a corporation. This basically places the right to investment over the protection of environmental and public health and safety.

For example, if a government passes a law requiring strict pollution controls, a multinational corporation that owns a polluting factory can demand compensation if the clean-up cuts into its profits. A government's ability and right to protect its citizens is severely limited by transnational corporations' attempts to get around democratically established domestic laws.

Intellectual Property Rights

The reasonable concept of protecting intellectual property is intended to encourage and reward innovations and new ideas. Before the WTO, governments were free to balance between patent rights and the public good depending on the benefit to society that an invention might have. For example, they might limit patent protections to ensure that life-saving medicines and technologies are made available and affordable to the general public, or to enable response in the case of a public health emergency.

Under the FTAA, the ability to make these exceptions would be removed. Patent protections would become grants of monopoly for extended periods of time. This would allow large, multinational drug companies to keep drug prices high by preventing the production of cheaper generic equivalents by small pharmaceutical companies. Impoverished people, those who may need the medicine most acutely, would be denied the ability to purchase medicines while corporate profits soar.

Also, while most people accept copyright and patent protections for books, records, inventions, etc., corporations want to expand those protections to include seeds that peasants have used for generations, medicines that indigenous cultures have developed, and even genes unique to particular populations. They want to sell those "products" back to the same people who have used them for centuries.

In the name of increased multinational corporate power and profit, the FTAA would build on the WTO and NAFTA to further allow long-term monopolies by corporations. The result: technological dependence of third world countries, a loss of control over their genetic resources, and limited access to medicines crucial to their poor, ill populations!

Genetically Modified Organisms

The U.S. government is hoping to expand the market for genetically modified organisms (GMOs) and other biotechnology. The FTAA is likely to include provisions that require countries to remove regulations or restrictions on the sale, importation or production of GMOs. The questionable safety of these organisms is an important issue in all nations, but the debate over genetically modified crops takes on additional critical elements in the Global South.

A large percentage of the population in the Global South work in agriculture and are mainly vulnerable, poor farmers on small marginal farms. The widespread use of GMOs would force farmers to use expensive, patented, genetically engineered seeds that must be bought every year. This would replace subsistence farmers' traditional ways of life the time-tested practice of saving some seeds to plant the next season and the exchange of seeds with other farmers to extend the process of natural ecological variation. Local networks and survival systems that have existed and prospered for centuries would give way to a devastating dependency on transnational corporations. The world's food supply, and the livelihood of millions would be in the hands of a few over-powerful corporations.

For example, Monsanto Co. an agriculture biotechnology giant developed the "terminator technology," a crop seed that becomes sterile at harvest time requiring farmers to repurchase seeds every season. Thankfully confronted by a massive protest campaign by civil society organizations, farmers, scientists and governments, they have promised not to commercialize this particular product, but the threat of using any seeds manufactured by corporations takes the control of food supply out of the hands of the people.


The FTAA will affect every member of society and every corner of the hemisphere, yet it is fundamentally undemocratic. Democracy is about people, not profits. Numerous calls by non-governmental organizations' (NGOs) for transparency and civil society participation in the negotiations have been denied, whereas corporate interests are well represented. Moreover, allowing corporations and international trade bodies to annul food safety and labor laws, undermine human rights, and destroy the environment is undemocratic and very dangerous. Many of the labor and environmental laws that are undermined by free trade agreements took decades of struggle to win.

Many people throughout the hemisphere are not convinced of the merits of free trade and challenge the idea that it is the only option.

International trade can play a useful role in prosperity and global well-being, but it should not be seen as a goal in and of itself or as the catchall solution to hemispheric problems. Free trade in fact worsens conditions of poverty, inequality and environmental degradation.

Opposition to the FTAA is wide spread and alternatives DO exist. There are already thousands of people across the hemisphere working to replace current corporate-led free trade with people-centered fair trade. For example, the People's Summit of the Americas took place in Santiago, Chile in 1998 and began a document, Alternatives for the Americas. Building a People's Hemispheric Agreement, that continues to be modified as people throughout the hemisphere input new ideas. Leading this movement is the Hemispheric Social Alliance, a broad-based network of civil society, environmental, and union groups started in 1998 to create alternatives and unite people in solidarity. (See below for more information sources on these issues.)

We need a system that makes popular participation a priority, ensures a democratic process, favors human, labor and environmental concerns over economic ones, reigns in corporate power, has policies that promote an equitable distribution of wealth and creates a people-centered economic and political system. That will take pressure and mobilization from all corners of the hemisphere. Past successes should inspire us. The Multilateral Agreement on Investment was defeated by a massive popular mobilization. We hope you will join us in this struggle to defeat the FTAA.

Fast Track Authority

Under Fast Track, after a trade agreement is fully negotiated, it is submitted for the first time to Congress. The House and Senate are limited to 20 hours of floor debate and may not amend the agreement. There is little time for NGOs to educate Congress and the public on the negative effects that the trade agreement will have on the environment, labor, agriculture, education, etc. President Bush has already announced that Fast Track, which was defeated in Congress by a united front of labor, environmental and progressive groups in 1997, is a top priority for his administration. Defeating new Fast Track authority is likely to be the opening round in the battle to defeat the FTAA.

Trade policy like the FTAA has direct and broad effects on citizens' lives. U.S. Iaws will have to be modified to ensure that they are in compliance with the FTAA. Therefore, the full range of U.S. interests needs to have input in the specific content of the agreement. By preventing Congressional input, Fast Track prevents our needs from being heard through our elected representatives.

Rewriting national laws undermines national sovereignty and it is undemocratic to have international bodies of trade bureaucrats and corporate representatives deciding the legality of environmental and labor regulations. These regulations and modifications to national laws invariably effect the poorest and most powerless sectors of society, indigenous people, women and low-income people.

Fast Track, which is usually designated for 5 year increments, if passed, will not only apply to the FTAA but to future trade and investment agreements negotiated in the next five years.


North American Free Trade Agreement {NAFTA)

One of the immediate predecessors to the FTAA and a model on which it is based is the North American Free Trade Agreement (NAFTA). Its supporters have cited some signs of the success of its policies. For example, in Mexico, exports grew, U.S. investments in Mexican factories and other businesses grew, the number of Mexicans employed in factories that produce goods for export grew, prices of some foreign consumer goods lowered, all of which further benefited an already wealthy Mexican elite and transnational corporations' bank accounts. But let's take a look at the other side of the story:

* "Increased economic development throughout Mexico," has expressed itself as Mexican workers who previously worked in agriculture (40% before 1980) are forced into maquiladoras. These foreign-owned assembly plants for export are located mainly in the border regions. Maquiladoras are known for their brutal labor conditions. This is due to very low labor standards-one of the "incentives" for investment.

* Development of the environmental and health infrastructure along the border has not adequately kept up with the surge in industrial development, so pollution from industry and growing population has increased drastically. This is because the Mexican government offered substantial incentives for this foreign investment, one of which is almost total exemption from taxes. So the Mexican state doesn't have the resources to provide health care and enforce environmental protections even if it had the will.

* In the border region, the occurrence of some diseases, including hepatitis, is two or three times the national average, due to lack of sewage treatment and safe drinking water.

* Where did these factories re-locate from, you ask? It's estimated that 5-6 million U.S. jobs have been lost since NAFTA came into effect as companies relocated to Mexico to take advantage of the weaker labor standards and lower wages. Those U.S. workers who found new jobs usually had less security and about 77% of their previous wages. Factories that remain in the U.S. can use the threat of moving to Mexico as a strategic tactic against union organizing.

* The number of Mexicans living in "severe" poverty has grown by four million since NAFTA began and the total number of Mexican poor went from 47% to 51% of the population.

* Agribusiness has triumphed throughout Canada, Mexico and the U.S. Meanwhile, the number of U.S. small farmers has fallen 9% and the percentage of farm households at or near the poverty line has reached 93%. NAFTA has undermined the viability of U.S. wheat, winter fruit, and vegetable and tomato producers.

* In Mexico, wages in manufacturing have fallen 9.5% and systematic repression of workers trying to organize has been documented.

* Canada first entered a free trade agreement (FTA) with the U.S. in 1988. Between 1989 and 1996, the income gap between the top 10% and bottom 10% of families went from 50-to-1 to 314-to-1. Due to pressures of FTA and NAFTA Canada has significantly decreased its social programs as well.

* The Mexican economy has been tremendously destabilized, causing the government to take extreme measures that for ordinary Mexicans means high interest rates, bankruptcies of Mexican-owned businesses, and from 1994-2000 a 39% plunge in purchasing power for the bottom 80% of the population.

* Mexico's total debt was nearly $20 billion greater in 1998 than in 1994, the first year of NAFTA, forcing the government to direct funds that otherwise would go to social programs into debt payment.


Opposition to Neoliberal Policy Met by US. Militarism
from SOA Watch

The United States' main goal in the FTAA process is to secure economic and political hegemony over the Western Hemisphere through the FTAA. The Georgia-based School of the Americas (SOA), recently renamed the Western Hemisphere Institute for Security Cooperation, a combat training facility for Latin American soldiers has a crucial role in this project. This school has also become known as the 'School of Assassins'.

Soldiers at the SOA are trained to protect the interests of U.S. corporations and maintain the economic status quo for the few rich and powerful in the U.S. and their cohorts in Latin America. In official SOA publications "economic development along free market principles" is identified as the "primary foreign policy goal[s] of the U.S." in Latin America. The SOA strategy is "to prepare military and police forces to respond to current threats to the achievement of those goals."

For example, in Mexico, hours after NAFTA went into effect, Indigenous communities rose up to say "No!" The Mexican military moved in immediately with troops, helicopters, and artillery. Today at least 18 of the high-level officers involved in the civilian-targeted warfare are SOA graduates.

In Colombia, recent reports from Human Rights Watch and the U.S. State Department link SOA-trained soldiers to numerous peasant massacres and the assassinations of Labor leaders and striking workers.

Last year the Bolivian government sold the public water system of Cochabamba to a private corporation and the water rates immediately doubled and at times tripled. As thousands peacefully took the streets, Bolivian President and former military dictator, SOA graduate Hugo Banzer sent out the armed forces to attack civilians.

Gen. Walter Cespedes Raallo, Military Governor of Cochabamba, is an SOA grad as well. In 1998, while he was Commander of the Joint Task Force in the Chapre coca region, the level of state sponsored violence escalated. Fifteen farmers were killed and others were brutally tortured. Cespedes was indicted for negligent homicide in three of these deaths, but the case is slow to move forward because of death threats against the prosecution and human rights workers

It is no surprise that as state sponsored violence is used to support economic injustice against the people in Latin America, graduates of the 'School of Assassins' are consistently at the forefront.


It is also important to note that the SOA is one of about 17 military facilities in the US. that provide training in low intensity warfare for Latin American militaries. Thanks to the excellent work of SOA Watch, the School of the Americas is the most infamous, but it is only the tip of the iceberg.


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