A Comparative Analysis of Citizen Opinion on New Rules for the Global Economy
By Michael Schmidt, New Economy Information Service,
with an Introduction by David Jessup, August 6, 1999
In This Document: Some governments may be sowing the seeds of their own defeat by blocking citizen input in the negotiation of new agreements to expand trade and investment. In the Western hemishpere, for example, a Committee of Government Representatives (CGR) of the Free Trade Area of the Americas (FTAA) has angered civil society organizations by failing to report their views to trade ministers. The New Economy Information Service's Michael Schmidt has compiled a comparative analysis of the civil society submissions received by the committee. Although these opinions are directed at the hemispheric FTAA process, they apply to trade rules in general, and are thus a valuable resource for understanding the diversity of civil society opinion in anticipation of the November World Trade Organization (WTO) meeting in Seattle.
Introduction: Will Governments Sabotage Trade by Excluding Civil Society?
Some governments may be sowing the seeds of their own failure by blocking citizen input in the negotiation of new agreements to expand trade and investment. Angered by this exclusion, a growing movement of environmental organizations, trade unions, consumer groups and other "civil society" organizations from around the world are mobilizing to confront trade ministers in November at the opening of the new round of trade talks of the World Trade Organization (WTO) in Seattle.
Reserving hotel space in Seattle became next to impossible after it was tied up months in advance by Microsoft and other large U.S. corporations. The objective was to ensure a large business presence at the meeting. The leaders of these businesses were embarrassed earlier this year by press revelations that they had promised special business access to trade ministers in return for large contributions to the "host" committee.
Non-business groups, in contrast, are being kept at arms length.
The same pattern of insider access for business and exclusion of everyone else is evident in Western hemispheric trade talks designed to create a Free Trade Area of the Americas (FTAA) by 2005. Although the 1994 Miami Summit declaration advocated the participation of civil society in all aspects of the hemispheric agenda, little has been achieved in the area of trade negotiations. The U.S. and Canada, backed somewhat tepidly by Argentina, Chile and some Caribbean countries, tried to establish an FTAA study group on labor and environmental issues, only to be blocked by a group of countries led by Mexico and backed by Peru and several Central American governments.
As a compromise, a Committee of Government Representatives on the Participation of Civil Society (CGR) was established to receive citizen input. Yet even after some 70 civil society submissions were received in March of this year, the CGR was unable to agree on whether to convey their substance to the trade ministers when they meet in Toronto in November, several weeks prior to the WTO meeting. Mexico, once labeled by author Mario Vargas Llosa as a "perfect dictatorship" because of its system of iron-clad control overlaid with the surface trappings of democracy, once again took the lead in scuttling the report. In the meantime, the FTAA Business Forum, which meets just prior to all hemispheric trade meetings, will ensure continued business input.
In the absence of an official CGR report, the New Economy Information Service's Michael Schmidt has compiled a comparative analysis of the civil society submissions received by the committee. Although these opinions are directed at the hemispheric FTAA process, they apply to trade rules in general, and are thus a valuable resource for understanding the diversity of civil society opinion in anticipation of the upcoming WTO round.
Although the civil society organizations, including business groups, are largely united in their effort to gain access to the process, they don't always agree on the substantive issues of trade. Some seem more inclined to do away with trade agreements altogether, while others seek to expand trade and investment with rules that protect consumers, labor and the environment in addition to business. Still others believe these issues are not "trade-related."
U.S. trade negotiators worry that refusal to listen to citizen input will make it that much harder to gain "Fast Track" trade negotiating authority in the Congress and risks eventual defeat of any trade agreement that emerges. Free trade policy wonks, including the much-quoted Jagdish Bagwati, have also concluded that civil society must be taken into account if trade liberalization is to proceed (see our web site article entitled, "Bagwati, Free Traders, Concede Ground On Linkage," November 23, 1998). But many government leaders, including those whose countries might benefit most from freer and fairer trade, just don't seem to get it.
David Jessup
Background
In March 1998, trade ministers from 34 Western Hemisphere countries decided in San Jose, Costa Rica to receive input from civil society groups on the creation of a (Western) hemispheric trade bloc, the Free Trade Area of the Americas (FTAA). A Committee of Government Representatives (CGR) on the Participation of Civil Society was established to discuss how this input might be solicited and received. The CGR, chaired by Canada with Argentina as vice chair, was to be aided by the FTAA's Tripartite Committee, which consists of the Inter-American Development Bank (IDB), the Organization of American States (OAS) and the United Nations Economic Commission for Latin America and the Caribbean (ECLAC).
The pressure for civil society participation in the FTAA process has been growing ever since the "Miami summit" of 1994 initiated the process of creating a hemispheric free trade area. Groups from both North and South America have grown more insistent that labor and environmental concerns be included in talks for a trade area that would ultimately encompass 800 million people. These groups wanted treatment equal to that of the business sector, which meets directly with trade ministers.
At one point the U.S. government floated the idea of creating an official working group to discuss these issues, similar to the other working groups set up to negotiate various points of the trade agreement. Resistance came from countries like Mexico, which said that powerful U.S. and Canadian lobby groups could "muddy" trade negotiations and lead to protectionism, keeping developing country products out of the United States and Canada because they fail to comply with their national standards.
The CGR was established as a compromise. According to the Office of the U.S. Trade Representative (USTR), the U.S. hoped to "ensure that the Committee functions as a direct and effective channel of communication between governments participating in the FTAA negotiations and the full range of private, non-governmental interests in the hemisphere so that the views they represent can be taken into consideration." The United States wants to assure that non-governmental organizations (NGOs) are able to provide their comments directly to the FTAA process "without first being filtered by their governments."
After its establishment, the CGR invited civil society groups from throughout the hemisphere to submit their opinions on the process and substance of the FTAA. By the March 31, 1999, deadline, 72 submissions had been received, representing 96 organizations. The organizations include 57 from the United States and Canada, and 31 from Latin America (including 17 from South America, 8 from the Caribbean, 4 from Central America and 2 from Mexico). Eight were regional or the country of origin was not indicated. Twenty-four are business groups; 20 are environmental groups; 11 are from labor; 7 are academic, and 34 are from other sectors of civil society.
The CGR met June 17-18 in Miami to decide what to do with the submissions. The Canadian chair of the group put forward a draft report that was limited to listing the topics raised by civil society groups without conveying much in the way of the substance of their recommendations. Even this attenuated report was attacked by Mexico, which wanted to omit any material that was not "trade related" and disband the CGR as soon as its report is submitted to the next meeting of hemispheric trade ministers in Toronto on November 4. Unable to agree on what the report should contain or whether the Committee should continue to exist, the CGR terminated its meeting in stalemate.
CGR Chair Kathryn McCallion of Canada said she would take the dilemma to the next meeting of the FTAA Negotiating Committee in Cochabamba, Bolivia on July 28-29, to solicit instructions on how to proceed. According to one trade source (Americas Trade, July 29), McCallion said that no way has yet been found "to bridge the gap between those nations, like Canada and the United States, that need to deliver an active process of consultation to make the FTAA politically tenable, and those at the other end of the spectrum who sense a hidden protectionist motivation behind the 'civil society' agenda."
As a result of this stalemate, most NGOs are pessimistic about their involvement in the FTAA process and predict that civil society recommendations will be ignored. Echoing the view of most civil society groups, Atziri Ibanez of the National Wildlife Federation stated, "What is going to come out of the CGR is going to be a totally useless report."
In the absence of an official report, the New Economy Information Service has compiled this summary of the major concerns of civil society groups toward the FTAA process. In addition, more extensive quotes from organizations' submissions are included in the appendix, grouped by issue area. LINK to Compendium
Note: This report on civil society submissions is based in part on executive summaries compiled and translated by the U.S. Department of State. The original documents should be consulted for a more comprehensive picture of their content.
The Issues
In their submissions, the civil society groups raise a number of issues with the CGR. Their concerns can generally be broken up into two areas — procedural matters and substantive ones.
A. Procedural matters
Some of the procedural issues relating to civil society participation in the FTAA process include:
B. Substantive Matters
In addition to the procedural matters above, civil society submissions expressed concerns and offered recommendations regarding the substance of a future hemispheric trade agreement in the areas listed below (In addition, there were concerns expressed about particular and sometimes narrow industries, which are not included here.)
Civil Society Views on Procedural Matters
In their submissions to the CGR and the Tripartite Committee, civil society groups, both from North America and Latin America, generally argued:
Transparency and timeliness
Key issues: What will the CGR, if it continues, provide in the way of information to civil society groups – both about it's own functioning (providing drafts in advance of reports) and about the other negotiating groups?
Fourteen (14) of the 72 submissions made statements about transparency, with all but two in favor of the FTAA being more open. All sectors (business, labor, environmental, other) were in favor of greater transparency, as were groups from all regions of the Americas. Four of the five business groups (American Forest and Paper Association, Brazilian National Confederation of Industry, National Committee on Commercial Negotiations of the Dominican Republic, Chamber of Commerce, Industries and Agriculture of Panama) that addressed the issue called for more transparency, three of them from Latin America.
Some of the submissions were general calls for an open process, while others were quite specific about the details of disclosure. For example, the Environment Foundation, a Costa Rican group, stated:
The CGR should implement a policy of access to information which includes a policy of non-restriction of information. [Official and temporary agendas, official drafts, temporary and final agreements and work documents of the Negotiating Groups] should be released immediately after their preparation and distributed to the public at the same time that they are circulated among the negotiating parties.
The Environment Foundation continued, "The CGR should see to it that the documents identified in the preceding section are collected, systematized and placed at the disposition of the public through the respective Ministries of Foreign Trade as well as via the web page." The U.S. branch of Transparency International (TI-USA) also made a comprehensive proposal in which they pushed for enhanced public access to FTAA records.
"The CGR should use the Internet to provide greater public access to information. The CGR and the FTAA Secretariat should consider the efforts of other important public organizations, including the OAS, OECD, IMF and WTO, and enhance the posting of summaries of negotiations and other information on the FTAA homepage. This forum can be used to disseminate civil society positions to FTAA negotiators and delegations, as is the case with the WTO."
TI-USA also said that FTAA documents should be presumed public unless there is a compelling reason to restrict them. Currently, only press communiqués of negotiating group sessions are made public. "There must be greater public access to information about the FTAA negotiating process and substance," the group contended.
Support for transparency also came from the business sector. The Brazilian National Confederation of Industry said "governments [need to] develop transparent mechanisms for the diffusion of information on the course of the negotiation to its respective private sector," while the National Committee on Commercial Negotiations of the Dominican Republic, said that without greater openness, the FTAA's development will suffer.
"The real power of a free trade area will only be understood when the actors involved have a common awareness of its objectives and direction," the Dominican group said. "A mechanism should be developed that permits real, direct and active participation of the private sector in negotiations."
Civil Society Input / Responses to Input
The question of civil society input and how the FTAA responds to civil society groups poses another problem. Some governments want to limit information to civil society groups to national venues, allowing those groups to only obtain information from their own governments. Others want a hemispheric-level information source.
Civil society groups are also concerned with:
Sixteen submissions made suggestions about civil society input, with five (5) others stating their view on how the FTAA should respond to civil society input. All of the groups, including six (6) from Latin America, sought greater input than is now provided in the process. There was a consensus from business, labor and environment organizations that input should come on a hemispheric as well as national level, that the ministers be required to respond to the input and that a mechanism for discussion be established.
Both the Interamerican Regional Workers Organization (ORIT), the hemispheric labor organization affiliated to the International Confederation of Free Trade Unions (ICFTU), and the Canadian Labour Congress (CLC), said the current system set up by the CGR was insufficient. The CLC said that civil society participation is a farce, relegated to the status of a "suggestion box."
"It is lamentable that certain governments of the countries of the Americas oppose real participation of civil society in the FTAA process," ORIT wrote.
ORIT noted that Mercosur, the trade pact between Argentina, Brazil, Paraguay and Uruguay, includes provisions dealing with labor and social issues.
"The obdurate commercialism of the FTAA is contradicted by the presidential initiative of the Mercosur countries, which in December [1998] produced a Social-Labor Declaration [that] starts to recognize a social-labor dimension," the Latin labor group said.
In addition to the issue of input, Transparency International-USA said that the CGR must communicate better with the civil society community. The group said that the Committee of Government Representatives on Civil Society should make their report available well in advance of the November 1999 ministerial to provide an opportunity for comment on their report.
In addition, TI-USA suggested that the CGR should clarify how civil society recommendations will be transmitted to ministers and advocated that the CGR hold regular hearings in accessible locations to receive input from civil society groups. It recommended that civil society groups meet directly with the trade ministers:
The CGR intends to receive submissions but does not provide a forum for an exchange of views. Regular and early interaction between stakeholders and ministers charged with forging policy helps ensure consensus on trade objectives. ... The CGR should consider the model provided by the trade ministers, who meet annually with the business sector, and the WTO, which permits civil society attendance at ministerials and provides logistical support and regular briefings on the progress of the working sessions.
The AFL-CIO added that in order for the CGR to serve a useful role, it must ensure that "the input of civil society is given full and thoughtful consideration by the Trade Negotiating Committee and the trade ministers."
Several business groups also pronounced in favor of civil society input.
The National Association of Manufacturers said that "the solicitation of all comments by all sectors" on matters of trade is of benefit. The National Committee on Commercial Negotiations, a Dominican business group, agreed, saying a "mechanism should be developed that permits the real, direct and active participation of the private sector in the negotiations." The group added, "No official position can be established without previously consulting with the sectors involved."
Standing
Nine (9) submissions addressed the question of standing, with several stating that the business sector's privileged access to trade ministers should cease. Only three business groups (American Forest and Paper Association, Panamanian Association of Engineers and Architects and AILA) engaged the issue and all were against equal standing for civil society groups.
The American Forest and Paper Association (AFPA) opposes civil society gaining increased access to trade negotiations, saying "trade negotiations are fundamentally a government-to-government function, and national delegations are presumed to represent all legitimate interests."
AILA agreed with AFPA, making the case that trade negotiations should only include trade and business issues.
"Only measures that strictly comply with the concept of 'facilitation of business' should be implemented," the group said in its submission.
However, non-business organizations were united in saying that the business sector's special treatment must stop or be equaled by civil society groups.
"We expect that all of the groups included in the description of civil society by the Committee will receive the same treatment by the FTAA process," the United Auto Workers (U.S.) said. "Business interests continue to be the only civil society sector to have privileged access to the official process ... all other civil society sectors have been excluded from active participation, merely invited to mail in briefs," the Canadian Labor Congress said in its submission to the CGR.
The hemispheric labor group ORIT stated, "For several years, ORIT and its affiliates have been insisting on the recognition of a Union Court. The governments have in fact recognized the Business Court, in an exclusionary attitude that does not comport with democratic posturing. ... The Business Court [should] approach the Committee, in order not to have a privileged position, which is unacceptable discrimination against other sectors of the civil society."
The AFL-CIO also protested the business sector's preferential treatment, saying that such favoritism flies in the face of a FTAA's democratic mission.
"All non-governmental input into the FTAA process, including that of the business community, should be subject to equivalent procedures," the AFL-CIO wrote. "[We] strongly object to the Business Forum continuing to enjoy privileged and superior access to the negotiating process relative to groups representing other segments of civil society," the labor federation continued. The AFL-CIO called on the FTAA to create a labor forum, similar to the one established for the business sector. "We reiterate our request ... that the FTAA negotiators officially recognize the Labor Forum, and that the Labor Forum's input be given the same weight and terms of access as that of the Business Forum."
"As currently constituted, the CGR is not an acceptable substitute for an official Labor Forum," the AFL-CIO said.
The Alliance for Responsible Trade, a U.S. coalition of NGOs, also said that civil society groups should be given more access to the ministers.
"The Business Forum [should] cease to have privileged access to the trade ministers and the negotiating groups. If the CGR is to be the conduit for non-governmental input into the FTAA process, all civil-society organizations, including businesses, should use that channel," the Alliance said.
The Center for Concern (U.S.) asked, "Why does one sector of civil society maintain privileged and independent access to trade ministers while all other sectors are lumped into a government-directed committee? This imbalance and injustice must be corrected," the group said.
Future Status of the CGR
Four civil society groups, three from North America, agreed that the CGR should play a continued role in the FTAA process.
Transparency International suggested that the CGR should continue at least through the Third Summit of the Americas, which is to be held in Toronto later this fall. In contrast, some governments in the hemisphere hope to kill the CGR right after it submits its report to the November 1999 ministers' meeting.
Civil Society Views on Substantive Issues
In addition to procedural matters, civil society groups raised a number of substantive concerns to be addressed as part of the Free Trade Area of the Americas. Worker rights and environmental protection in the FTAA trade pact were the two issues most frequently mentioned.
Workers Rights
Twenty-four (24) of the 72 submissions addressed the workers rights issue. Not surprisingly, labor organizations from both North and South America insisted that workers be protected by the FTAA. They were not alone, however. An overwhelming majority of other civil society groups said labor issues should be included in the FTAA talks.
However, two large business groups — the U.S. Chamber of Commerce and the National Association of Manufacturers — said trade and business "should not be held hostage" by labor agreements. The Chamber and NAM were joined by the Business Network for Hemispheric Integration and the American Apparel Manufacturers Association as the only groups opposed to including labor.
The business sector's view was best summed up by the Business Network for Hemispheric Integration. "The labor and environmental issues must be treated on a separate manner independent from the issues relating to trade and at its specific international forums," the group said.
The U.S. Chamber of Commerce said "investment agreements should [not] be used as vehicles to enforce labor or environmental standards of other countries. Investment, however, should not be used as an excuse for countries to lower standards to attract an investment."
The Chamber said it disagreed with the notion that investment agreements "can accelerate a 'race to the bottom' with regard to labor standards and protection of the environment." "Countries that practice good growth policies generally have good labor and environment standards," the Chamber wrote in its submission.
However, one business group, the Chamber of Commerce, Industries and Agriculture of Panama, said the FTAA should seek to "improve the labor conditions of all the peoples of the Americas." The Central American group was the only Latin business group to respond to the issue.
The AFL-CIO and several other labor and environmental groups argued for inclusion of an enforceable worker rights mechanism in the trade agreement.
"The negotiation of the FTAA shall take into account the broad social and economic agenda …with a view to contributing to raising living standards, to improving the working condition of all people in the Americas and better protecting the environment," the AFL-CIO said, quoting the San Jose Ministerial Declaration.
The labor group said that the FTAA must incorporate enforceable worker rights standards that all members must abide by upon entry into the trade pact: "Commitment to observing internationally recognized core labor rights, in addition to adequate enforcement of each country's own labor laws, should be a condition of entry into the FTAA."
The group stressed that "appropriate enforcement mechanisms, including effective financial penalties" must be established to ensure that countries adhere to core standards and enforce their own labor laws.
To discuss these mechanisms, the AFL-CIO urged the FTAA to create a negotiating group on workers rights. The FTAA currently has nine negotiating groups which are investigating the issues surrounding market access, investment, government procurement, dispute settlement, agriculture, intellectual property rights, subsidies, antidumping and countervailing duties and competition policy.
The ICFTU/ORIT, representing all the major trade union confederations in the hemisphere, has long-supported the inclusion of a "social clause" in trade agreements to enforce worker rights and to limit the kind of low-wage competition that leads to a "race to the bottom." It reiterated this view in its submission, and also recommended the creation of an FTAA negotiating group to consider labor and environmental issues.
Speaking for unions in the Caribbean, the Bahamas National Congress of Trade Unions said, "... all Labour Standards need to be enforceable. While it is recognized that the FTAA will have Labour standards that are ILO consistent, what must be included is an enforcement of these standards."
The Graphic Communications International Union (U.S.) made it clear that such worker rights protections are not to be misused for protectionist purposes: "Workers should not have to "match" their counterparts in the U.S. [on wages], but they have to have the capacity to seek such gains as can be achieved through prudent collective bargaining, where it is desired."
The United Auto Workers (U.S.) stated: "The UAW and other unions throughout the Hemisphere have demanded that worker rights must be included in the text of any agreement, subject to the same dispute resolution mechanism as all other covered issues. Ignoring worker rights issues or relegating them to 'side agreements' is simply unacceptable."
The UAW also raised concerns about the job dislocations that may result from increased economic integration. "NAFTA has demonstrated that U.S. workers can lose their jobs as a result of increased imports from Mexico or other developing countries due to decisions by multinational corporations to move their production or to arrange for contractors to supply them from other countries," the UAW submission stated. "The standard safeguard mechanisms of NAFTA and other trade agreements have been grossly inadequate to prevent economic damage."
The International Metalworkers Federation, with many Latin American affiliates, stated, "International core labour standards and trade liberalisation are not mutually exclusive but they are mutually reinforcing goals. The implementation of these standards would enhance economic growth and assure broadly-based prosperity. Workers' rights are basic human rights."
The International Association of Machinists added, "Without universal enforcement of these and other rights, the world will engage in the infamous 'race to the bottom' as stiff competition in the global trading economy forces workers to sacrifice their rights in the so-called name of 'flexibility.' Effective and enforceable internationally recognized labor standards are trade issues."
Environmental groups echoed calls for labor clauses, as did many of the other submissions, including that of the Alliance for Responsible trade.
In a slightly different twist, the Leadership Council for Inter-American Summitry, which is affiliated with the North-South Center of the University of Miami, advocated that only democratic nations participate in the FTAA.
"An explicit linkage between democracy and free markets would emblazon regional integration in the Americas with a special Bolivarian character," the Center said. "In preparing for the third summit, Canada should take the lead in building a hemispheric consensus on this strategic political-economic linkage."
In addition, with regard to the labor question, the group noted that the Santiago summit was against "the use of labor for protectionist purposes."
Environment
Environmental issues were discussed by 27 groups in their submissions to the CGR. As with labor issues, the groups were split, with four business groups (U.S. Chamber of Commerce, the National Association of Manufacturers, Business Network for Hemispheric Integration, and the Danzer Group) opposing the inclusion of environmental provisions and all other groups favoring them. Pro-environment provisions were supported by both North and South American non-business civil society groups.
The U.S. Chamber of Commerce asserted in its submission that free trade naturally supports worker rights by increasing standards of living. Similarly, free trade benefits the environment because it "creates the resources necessary to protect" nature, the association said.
The Chamber contended that "trade should not be held hostage while governments wrestle with this complex issue." The National Association of Manufacturers (NAM) agreed. "It is imperative that the FTAA trade negotiations be limited to international trade policy objectives," NAM submitted. "U.S. manufacturers do not support the use of trade sanctions to enforce agreements in other areas."
The group added, "Business should no more be held hostage by, or penalize for, its trading partners' social domestic failures than should any country's labor or environmental requirements or regulations be suspended for business profiteering."
However, like the Chamber, NAM realizes that a confrontation is coming on the labor and environmental fronts. And thus, both groups said that although they don't want trade talks taken "hostage" by these issues, there will have to be "intersection." "There is room for compromise," NAM said.
The Danzer Group, a German firm that produces wood products with interests in the United States, elaborated on this compromise view.
We also feel that a free trade area is just that — an area free of any tariff or non-tariff barriers — and, therefore, no social or environmental conditions should be attached to it. This does not mean that once the FTAA is established we cannot have any environmental controls — quite the contrary. Some kind of uniform environmental requirements should be required, but only after the FTAA is established and not as a precondition for it.
U.S. and Canadian "green" groups, such as the National Wildlife Federation (NWF), believe that environmental protections should be included in the trade agreement. In what is shaping up to be a highly contested debate, the NWF is calling for the use of environmental impact assessments (EIAs), which would force governments to estimate the "trade-related environmental effects" of every multilateral agreement.
Other groups, like one coalition of environmental groups from North and South America, simply said "it is critical that the environment be considered within the Free Trade Area of the Americas negotiations."
"Hemispheric trade liberalization is not an end into itself, but rather an undertaking, because it provides the promise of economic growth and social welfare gains," the group articulated. However, the coalition held that if trade liberalization proceeds without regard to environmental harm, "there is a high probability that environmental damage will have to be offset [by] whatever [economic] gains there are from trade."
The Alliance for Responsible Trade, a U.S. group representing labor, environmental, human rights and development organizations, said simply that the FTAA has ignored "topics of great social importance," such as the environment and labor.
The University of Miami's North-South Center said that "disappointingly the Santiago Summit largely bypassed sustainable development," but some progress has been made as the OAS, the United Nations and the World Bank, which have created the Inter-American Strategy for Public Participation in Sustainable Development Decisionmaking.
Capital Flows / Financial Architecture
This topic also exposed a rift between business groups and the rest of the civil society community. Business groups held that investment rules and capital markets should be liberalized, while several labor and environmental groups said the harmful effects of capital flows must be addressed. In all, thirteen (13) civil society submissions (5 labor, 2 business, 1 environmental, 5 other) addressed the issue, with many stating that short-term capital flows are destabilizing to economies.
Business organizations have argued that the financial architecture should simply avoid "political considerations" and create a "level playing field." Environmental and labor groups emphasized that the FTAA must ensure that countries retain the ability to regulate the flow of speculative capital and create transparent market access rules.
One business group, the Latin American Industrial Association, sought an informational rather than a regulatory solution, saying that the FTAA should "expand on information about trade and investment flows of the countries in the hemisphere."
Labor groups generally argued for restrictions on capital flows, "to ensure that countries retain the ability to regulate the flow of speculative capital in order to protect their economies from excessive volatility," as the AFL-CIO put it.
"Governments must therefore introduce effective controls on short-term capital movements in the interest of economic and social stability," the International Metalworkers Federation submitted. "Any future FTAA must incorporate provisions which allow governments to establish and implement policies that prioritize long-term productive investments with a view to preventing disruptive capital flight."
The Consultative Andean Labor Council added that international corporations' control of capital are dangerous if left unchecked. "The globalization of the world economy has the multinational corporations as the main players that move enormous amounts of capital, the large investors being the ones that hold the power of great influence in our countries," the Council said. "Policies are adopted from their headquarters, [and] on many occasions these collide with international labor rights. For this reason we specifically propose the adoption of the Declaration on Multinational Corporations."
One U.S. citizen who made a submission to the CGR also blamed multinational corporations for bringing instability.
"Since our companies, especially the multinationals, have a very short-term outlook, and put short-term profits first, our trade policies must aim at restraining them, and persuading them to reverse their priorities," Caroline Mitton said. "Their way is not sustainable and will do — possibly already has done — irreparable harm to our planet. It is in our best interests — actually, it is imperative — to restrain them," she said.
Other groups, such as the Alliance for Responsible Trade argued that the FTAA must keep capital flows in check.
"Hemispheric rules should encourage foreign investment that generates high-quality jobs, sustainable production and economic stability, while allowing governments to screen out investments that make no net contribution to development, especially speculative capital flows," the Alliance said.
Consumers International's Regional Office for Latin America Consumers was concerned that the FTAA, as it stands now, does not have consumers, but investors in mind: "In the last few years we have witnessed a rebirth of integration processes which are limited mainly to free trade zones, concerned almost exclusively with offering all types of facilities and guarantees to investors, as well as promoting their rights to free mobility and national treatment. In these types of agreements or treaties, consumers are conspicuously absent, seem to have no rights and only appear remotely when the possible benefits of economic liberalization are pointed out," the group said.
Friends of the Earth, a U.S. environmental group, reminded the CGR that Latin America could suffer at the hands of an economic flu, like the one which brought recession to Southeast Asia in 1998, if capital flows are not restrained. "Recent economic trends in East Asia have highlighted the role played by short-term capital inflows and outflows in contributing to financial instability," the group said.
Investment
Much like the capital flows debate, business groups clashed with labor and environmental groups over how the FTAA should structure its investment rules. A total of eleven (11) submissions addressed the issue (2 business, 4 labor, 4 environmental, 1 other).
The only business group that tackled investment in some detail was the U.S. Chamber of Commerce, which called on the FTAA Negotiating Group on Investment to "establish a fair-and transparent legal framework to promote investment through the creation of a stable and predictable environment that protects the investor, his investment and related flows, without creating obstacles to investments from outside the hemisphere."
The negotiating group "has a unique opportunity to establish rules on investment to create a level playing field that will allow firms to compete on the basis of their best offerings rather than political considerations" and "should seek the highest standards now found in bilateral and regional agreements in FTAA countries," the Chamber said.
The group contended that by if the FTAA promotes investment, social benefits will follow. "Protecting investment and opening markets to foreign investment serves to stimulate economic growth and development. Countries actively court foreign direct investment because it brings tangible benefits, such as advanced technology, and improves management techniques. Where investment is intense, there tends to be higher labor productivity and higher wages. For the home country, investment abroad helps them remain competitive in foreign markets and stimulates exports of goods and intermediary products that otherwise would not have taken place."
The counter argument was made mainly by the environmental groups, but also by labor groups, who said that the FTAA must ensure that investment rules do not undermine a government's ability to protect their citizens and the environment they live in.
Two environmental groups from North America – the Washington-based Center for International Environmental Law (CIEL) and the Canadian Environmental Law Association – expressed concern that an investment agreement would undermine environmental laws.
CIEL warned the FTAA not to base its investment rules on the model of the North American Free Trade Agreement (NAFTA). The group said that if FTAA bases its investment rules on NAFTA, it "could undermine efforts to promote sustainable development" and "restrict the ability of governments to take action to ... safeguard the environment."
CIEL urged the FTAA not to link an investment agreement to its free trade agreement.
The Canadian Environmental Law Association made the point that domestic regulations will suffer and investors will gain if the FTAA's institutes a Multilateral Agreement on Investment (MAI).
"The MAI is the latest in a network of international agreements being used to undermine local, national, provincial and international initiatives for various public policy goals" because it creates a "legal regime of deregulated trade and deregulated investment."
The group continued, "Domestic regulations, including environmental ones, are precisely the targets of investor-rights documents like the MAI, since regulations do affect the capacity of corporations to engage in profit-generating activities. 'Investment protection' actually means the removal of regulatory controls on corporate activity."
Yet another environmental group, Friends of the Earth, made it clear that they will not stand by idly if the FTAA favors investors and corporations in the MAI.
If the FTAA investment rules are written solely with the investor in mind, Friends of the Earth said it would "raise awareness" in the United States and impel civil society groups to "oppose the entire FTAA process."
While not offering as much detail on this point, labor groups also warned that investment rules must not undermine the capacity of elected governments to set appropriate investment regulations.
"Labour and social issues must be a significant part of the FTAA agenda," the International Metalworkers Federation said. "The financial crisis in emerging economies has added urgency to the labour agenda. There have been massive lay-offs, instability and adverse impact on workers' lives in countries with inadequate labour standards and social safety nets."
The AFL-CIO concurred, saying that "investment rules that do not undermine governments' ability to regulate corporate behavior to protect the economic interests and public health of their citizens" should be established.
Dispute Settlment
Altogether, eleven (11) submissions addressed the dispute settlement issue. Environmental groups made sweeping proposals, while the business community said very little about how the FTAA should handle state-to-state and investor-to-state disputes. Except for two Latin American business groups (Latin American Industrial Association, Business Committee on Commercial Negotiations of the Dominican Republic), all others making submissions were from the United States and Canada.
One of those groups, the Latin America Industrial Association (AILA), a federation of comprised mainly of South American industrial lobby groups, said that dispute resolution should be handled by each country, unlike the European Union which has one body settling disputes.
"A system of dispute resolution without supra-national characteristics should be created which guarantees a faithful interpretation and implementation of the agreements," AILA said. "Implementation of the decisions should be compulsory."
The U.S. Chamber of Commerce proposed that the FTAA Negotiating Group on Investment develop rules that include "investor-to-state, as well as state-to-state dispute settlement procedures." The Chamber added that those rules should be "transparent and highly accessible to investors."
In stark contrast, many environmental groups were alarmed that the FTAA might follow the model of the North American Free Trade Agreement (NAFTA) in creating dispute resolution rules.
One concern is secrecy. The Center for International Environmental Law (CIEL) pointed out that in a NAFTA dispute, resolutions and arbitrations are kept secret. "Private individuals, even those with direct interests in the controversy, have no right to present their views during the arbitration or even know that a claim has been brought," CIEL said.
"This practice sets a dangerous precedent because it affords a special interest group — investors — the right to be heard, yet provides no mechanism to ensure that all other stakeholders to a dispute are consulted."
The Washington-based group noted that the international arbitral panels established under [NAFTA's] Chapter 11 do not provide appropriate fora for resolving disputes in a way that balances the concerns of investors with the concerns of neighboring property owners and local communities. In addition, the intergovernmental dispute resolution system, Chapter 11 relies on private, for-profit arbitration institutions, CIEL said.
CIEL advocated the following provisions in lieu of the NAFTA model for dispute resolution:
Another environmental group from the United States, Friends of the Earth, said that the FTAA's dispute resolution rules cannot only take investors into account and must protect national governments.
"The current model's investor-to-state dispute resolution rules grant excessive power to foreign investors, expose governments to potentially large monetary awards, and do nothing to open dispute resolution processes to public scrutiny and participation," the group said.
"Allowing investors to initiate binding investor-to-state challenges before international arbitral panels inappropriately 'privatizes' international dispute settlement. With diplomatic checks removed, governments could face suits over any policies which investors believe violate the current model, potentially for large monetary damages. International arbitral panels are closed to the public and are therefore not acceptable forums for addressing complaints aimed at democratically enacted laws. The FTAA dispute rules should not allow investor-to-state dispute resolution," Friends of the Earth said.
Gender Issues
Only four submissions (one from Latin America) addressed the gender issue. The hemispheric labor group ORIT said the CGR should hold public hearings "to request and receive the points of view of the male and (emphasis in original) female participants."
Womens Edge, a U.S. group, and its affiliates, recommended that "the United States (and other countries) initiate and/or participate in studies that assess the social impacts of the FTAA, with particular attention given to the gender impacts of the FTAA.
"These studies should be widely disseminated throughout the hemisphere," the group said. "No conclusive action should be taken on the FTAA until these assessments are completed and distributed."
Government Procurement
Transparency International USA placed this issue at the top of its agenda and recommended to the CGR that the FTAA conclude an agreement defining rules on government procurement by 2000. The concern is that governments can essentially subsidize industries with its own purchases, thus skewing free trade. The group was one of eight (none from Latin America) that opined on how government procurement should be handled.
"An FTAA agreement on transparency in government procurement should be promptly concluded in order to bring similar disciplines to non-donor financed procurement," TI-USA stated.
The San Jose Trade Declaration states that the FTAA negotiations on government procurement should seek a 'normative framework that ensures openness and transparency of government procurement processes.' With billions of public procurement at stake annually, there is an urgent need for rapid and concerted action on this negotiating objective.
TI-USA noted that an agreement shouldn't be too hard to forge, as there was consensus on the issue at the 1998 Americas Business Forum.
The AFL-CIO argued that the FTAA must incorporate government procurement rules that "preserve state and local preferences for domestic purchases." This issue is currently coming to a head in the United States, where a Massachusetts law allowing state and local governments to discriminate in the procurement of goods and services according to whether the countries of origin respect human rights is being challenged in the courts by a business coalition, USA Engage.