FTAA, The Hydra’s New Head

Martin Hart-Landsberg

CAPITALISM IN MANY ways is like the mythical hydra of Greek legend, a gigantic serpent with multiple heads, the center one being immortal; every time an attacker chopped off one of its outer heads, two others grew in its place. It was killed by Heracles, with the assistance of his charioteer Iolaus. As Heracles chopped off a head, Iolaus would burn its neck cavity to keep new heads from growing. Eventually they were able to reach the center head and sever it from the body.

Capitalism resembles the hydra in that its own dynamic generates multiple agreements and institutions that represent and defend its interests. All work to promote the expansion of private profit-making activities regardless of their overall social, economic, political, and environmental costs. Examples include the International Monetary Fund (IMF), North America Free Trade Agreement (NAFTA), World Bank, and the World Trade Organization (WTO).

The ongoing tensions and contradictions of capitalism ensure that new “heads” are almost always in formation. One of the newest is the Free Trade Area of the Americas (FTAA). Built upon elements of NAFTA, the failed Multilateral Agreement on Investment (MAI), and the WTO, its growth” has received almost no public attention in the United States despite the fact that trade ministers from 34 nations have been working for over five years to make it a reality.

Capitalism is also like the hydra in that it is not easily overcome. Reform attempts directed at its individual “heads” are, for structural reasons, rarely able to produce lasting benefits. Because of their destructive impact on working people, the various institutions must be destroyed. But given the hydra-like nature of capitalism, attacking only the institutions — one at a time or in combination — will likely produce only exhaustion.

What is needed is a political strategy that uses each individual confrontation to build a larger movement directed at capitalism itself. In this paper I focus on the FTAA both to reveal its destructive potential and to encourage the strategic thinking necessary for successful movement building.

Origins of the FTAA Initiative

The FTAA represents one of many recent U.S. initiatives to reverse “unfavorable” political and economic dynamics. The 1970s had been a traumatic decade for U.S. capital: The Bretton Woods international financial system collapsed; the U.S. trade position deteriorated; corporate profits fell; third world nationalism grew.

The specter of anti-capitalist revolutions spread in Asia, Africa and Central America; the Middle East crisis created an oil price shock; the dollar went into free-fall; German and Japanese capital greatly enhanced their regional power and autonomy. Responding to cries of alarm from the business community, the Reagan-Bush administrations eagerly took up the challenge to remake the international economic environment.

Among other things, these administrations carried out both direct and indirect military attacks on those countries and movements they viewed as hostile to U.S. business interests. They took advantage of the Latin American debt crisis in the early 1980s to force governments to adopt neoliberal policies that helped increase U.S. exports to and foreign investment in the region.

U.S. policymakers also sought to improve the U.S. trade balance with East Asian countries by using the threat of a trade war to force governments to revalue currencies and open up domestic markets to U.S. goods and investment.

These unilateral measures were complemented by regional and multilateral efforts at economic restructuring. Beginning in 1983, the U.S. government pushed hard for a new round of GATT talks. The result was the 1986 launch of the Uruguay Round.

In an attempt to strengthen its bargaining position within the Uruguay Round and more directly counter the growing Japanese and German export challenge, the U.S. government also took steps to consolidate its own regional dominance. Talks with Canada produced a Free Trade Agreement in 1988 that went into force in 1989.

The following year, President George Bush announced his Enterprise for the Americas initiative, which involved creating a region-wide free trade zone. The initiative was shelved, however, when Mexico, following the logic of its recent “embrace” of neoliberalism, proposed joining the U.S. and Canada in a three-country free trade pact. The NAFTA agreement was completed in 1992 and, after heavy lobbying by President Bill Clinton, was ratified in 1993 and went into effect January 1, 1994 (the very same day that the Zapatista rebellion erupted in Chiapas).

Benefiting from the self-reinforcing nature of globalization, the successful NAFTA negotiations, fear of U.S. unilateralism, third world dependence on U.S. import markets and capital, and German and Japanese economic difficulties, the United States was able to secure completion of the Uruguay Round in December 1993. The final agreement was ratified in April 1994, and the WTO came into existence on January 1, 1995.

The Clinton administration simultaneously pursued two new regional trade initiatives. The first was a renewal of Bush’s Enterprise for the Americas initiative. The First Summit of the Americas, which included the heads of state from every country in the region except Cuba, was held in Miami in December 1994.

The attending leaders approved a Declaration of Principles calling for construction of “the Free Trade Area of the Americas (FTAA) in which barriers to trade and investment will be progressively eliminated.” They also approved a Plan of Action that directed their respective trade ministers to initiate the process.(1)

The second regional initiative was an attempt to win Asia-Pacific Economic Cooperation (APEC) support for the creation of an Asia-Pacific free trade and investment agreement. At the November 1994 meeting in Indonesia, U.S. pressure produced agreement by APEC leaders to establish a free trade and investment regime no later than 2010 for “industrialized economies” and 2020 for “developing economies.” The agreement was always contentious, however, and the process lost momentum after the 1997 East Asian economic crisis.

While media analysts often speak of a tension between regional and global trade agreements, no such tension appears to exist for U.S. policy makers. Regardless of venue, they seek agreements that protect and expand intellectual property rights, trade in goods and services, and investment opportunities.

For them, victory in one arena becomes a starting point for negotiations in another. Thus agreements achieved in NAFTA are carried into the WTO. Gains achieved in the WTO are brought to APEC. In other words, U.S. trade activity appears designed to advance an upward spiral of concessions from other countries.

Recent developments have led U.S. officials to upgrade the importance of the FTAA. U.S. attempts to negotiate an Asia-Pacific free trade agreement were brought up short in 1997. U.S. efforts to negotiate a Multilateral Agreement on Investment were frustrated in 1998. U.S. efforts to expand the WTO were frustrated in 1999. But the FTAA process remains relatively free of obstacles.

In fact, FTAA negotiators hope to have a completed treaty by April 2001 to present to the Third Summit of the Americas in Quebec City, Canada. And this treaty, as we see next, is likely to combine and expand upon NAFTA, the WTO, and the MAI. In short, the FTAA appears to be the leading edge of U.S. globalization efforts.

The FTAA Negotiating Process

As noted above, the region’s trade ministers were given responsibility for directing the overall FTAA negotiating process. They have met five times: June 1995 in Denver, U.S.; March 1996 in Cartagena, Colombia; May 1997 in Belo Horizonte, Brazil; March 1998 in San Jose, Costa Rica; and November 1999 in Toronto, Canada. Their next scheduled meeting is April 2001 in Argentina.

The first three meetings gave rise to the creation of twelve working groups dealing with issues such as market access, investment, intellectual property rights, services, and dispute settlement. Each group was chaired by a vice trade minister and met several times at different locations throughout the Americas.

At their March 1998 meeting in San Jose, the trade ministers recommended that the heads of state approve an upgrading of the process, which they did in April at the Second Summit of the Americas in Santiago, Chile. Nine negotiating groups were established: Market Access; Investment; Services; Government Procurement; Dispute Settlement; Agriculture; Intellectual Property Rights; Subsidies, Antidumping and Countervailing Duties; and Competition Policy.

Three committees were also established: the Consultative Group on Smaller Economies, the Committee of Government Representatives on the Participation of Civil Society, and the Joint Government-Private Sector Committee of Experts on Electronic Commerce.

A support structure, the Administrative Secretariat for the Negotiations, was also created. It operates in the city where the various groups and associated committees meet. The secretariat in turn is supported by the Tripartite Committee Institutions (the Inter-American Development Bank, Organization of American States, and United Nations Economic Commission for Latin America and the Caribbean). Rotating national chairs were also chosen.

At their November 1999 meeting, the trade ministers decided to advance the process once again. They instructed each negotiating group to produce a draft text “no later than 12 weeks prior to our next Ministerial meeting to be held in Argentina in April 2001.”(2) Their aim, as noted above, is to have a completed treaty ready to present to the heads of state at the Third Summit of the Americas scheduled to meet later that same month.

While governments shape and direct the negotiation process, the business community also has a recognized and significant role. The major business associations in each country have created their own policy forum, the Americas Business Forum (ABF). Although composed of associations shaped by vastly different political and economic conditions, the forum appears able to speak with a unified voice in favor of further regional integration and market liberalization.

The ABF meets in conjunction with (and at the same location as) the ministerial meetings and is organized to mirror the official negotiating structure. The first ABF began a day after the first ministerial meeting concluded. The following ABFs have concluded the day before the start of the ministerial meetings. This allows ABF leaders to formally present their recommendations to the ministers before the latter begin their own meeting.

According to the trade ministers, “The recommendations we have received from previous ABF’s, as well as those received here in Toronto [in 1999] serve as valuable input into the FTAA process.”

The FTAA process includes one other “formal” (but indirect) avenue for input. The Committee of Government Representatives on the Participation of Civil Society was established to receive input from civil society “on issues to be negotiated, as well as on the important relationship between trade and the environment and on labor issues as they may affect trade.” The Committee issued an “Open Invitation to Civil Society” to comment on the negotiations, which was posted on “the official web site, and further disseminated widely by individual FTAA governments, as appropriate.”

The comment period ran from November 1, 1998 to March 31, 1999. Not surprisingly, the business community offered the most responses, the majority of which were offers to assist the negotiators. Pleased with the results, the Committee plans to issue another “invitation.”

Substance of the Agreement

Because the negotiations are secret, it is impossible to know with any certainty what negotiators have already agreed upon much less what the final draft treaty will contain. However, it is possible to make some educated guesses.

The ministers have stated that their goal is to “improve upon WTO rules and disciplines wherever possible and appropriate.”(3) This is likely to mean extending the reach of existing WTO agreements (such as the General Agreement on Trade in Services) and shortening implementation periods.

This, however, is just the starting point. According to the official FTAA web site, “the FTAA negotiations will include areas not presently under the WTO such as a common investment regime, government procurement, and competition policy, which are not yet subject to commonly-agreed disciplines among a large number of trading nations.”(4)

This is no mere public relations statement. In fact, reports in the Canadian press claim that negotiators have gone beyond discussion and have already agreed to include an investment regime similar to the abortive Multilateral Agreement on Investment.

The MAI was negotiated in secret by OECD countries from 1995 to 1997, when a draft copy was leaked to the press. The negotiations were finally halted in 1998. The proposed treaty had a broad definition of investment: “every kind of asset owned or controlled, directly or indirectly, by an investor.” In short, the treaty was designed to cover all aspects of business activity from direct investment to the purchase and sale of stocks and bonds to intellectual property rights.

As to specifics, the MAI consisted of a set of rules that limited the ability of governments to shape or control “investor” activity. The draft treaty said: “A contracting party shall not impose performance requirements or enforce any commitment or undertaking, in connection with the establishment, acquisition, expansion, management, operation or conduct of an investment of an investor of a contracting party or of a non-contracting party.” Even “a lost opportunity to profit from a planned investment would be a type of loss that is sufficient to give an investor standing.”

Translated into policy terms, the MAI would likely have prohibited governments from requiring that foreign investors make use of local suppliers, partners, or employees; abide by local living wage agreements; meet specified export or import targets; transfer technology; or satisfy domestic content requirements. It would also bar any restrictions on capital mobility or the repatriation of profits.

The proposed treaty also gave corporations the right to directly sue foreign governments (investor-state dispute resolution) if they thought their rights had been infringed upon; required that countries withdrawing from the agreement undergo a five year waiting period before their termination became official; and even then, laws brought into compliance with the treaty would have to remain in place for an additional fifteen years.

NAFTA’s Chapter 11 offers a glimpse of what we can expect from a region-wide, MAI-type investment agreement. It offers “limited” protection to U.S, Mexican, and Canadian multinational corporations against loss of income due to “foreign” government actions (national, state, or local) and contains an investor-state dispute mechanism.

U.S. companies have used this chapter to sue the Canadian government over environmental regulations, water ownership rights, and logging restrictions. A Canadian company is suing California for attempting to protect the state’s water supply. And a U.S. company has successfully sued Mexico in retaliation for a state ban on its waste disposal operation.(5)

The trade ministers have also publicly stated their desire to negotiate a government procurement agreement. The WTO contains such an agreement but, unlike all its other agreements, it is voluntary. So far, only twenty-seven countries have signed on. The U.S. government failed in its attempt to make it mandatory for all countries at the infamous 1999 WTO meetings in Seattle.

The WTO agreement requires open bidding on major government contracts and “national treatment,” which means that governments cannot give preference to domestic firms. Even more significantly, the agreement bans consideration of non-commercial factors (such as a firm’s labor, human rights, or environmental practices) in awarding contracts. The EU and Japan used this agreement to challenge Massachusetts’ selective purchasing law which “discriminated” against firms that did business with Burma.

In sum, the FTAA is likely to be a disaster for working people, further privileging private profit making over satisfaction of basic social, political, economic, and ecological needs. And given the hydra-headed nature of capitalism, the negative effects of the agreement will extend far beyond the Americas.

Ideology Versus Reality

In one sense, the trade ministers are not being honest about the forces driving their work. They never mention capitalism or capitalists. In another sense, they are. Their 1999 ministerial declaration states:

“Underlining the objective of the FTAA to eliminate progressively barriers to trade and investment and thereby stimulate world trade, we reiterate our commitment to avoid to the greatest extent possible the adoption of policies or measures that adversely affect trade and investment in the Hemisphere.”

Simply put, the goal of the ministers, representing their respective elites, is maximum market-structured economic integration. Prosperity, equality, and environmental sustainability are all said to be important and desired, but these are secondary to the promotion of greater economic integration.

Working people do not share the view of the ministers that market-structured economic integration is both “means” and “end.” Thus, the ministers recognize that they need to convince working people that globalization is in their interest, if not in the short run, then in the long run. For example, their 1999 declaration claims:

“Notwithstanding the many challenges that have confronted regional economies since our last meeting, including financial turbulence, economic down<->turns and natural disasters in a number of our countries, we are pleased that trade and investment flows across the Hemisphere have in general been maintained. We are convinced that the commitment of our countries to open economies, market-based principles and rules-based trading systems will contribute to a rapid recovery and growth in the most-affected economies.”

The contrast between the ideology of capitalist progress and the reality of capitalist accumulation in the Americas is stark. According to Ricardo Hausmann, chief economist of the Inter-American Development Bank (IDB), “This [1999] has been a really lousy year, especially for South America. We have seen traumatic declines in growth rates for all of Latin America, the result of a collapse both of international capital flows and commodity prices.”(6)

Not surprisingly, mainstream analysts can always find a “success story” in the midst of the suffering that can be used to support their predictions of a brighter future. For the present, that story is Mexico, whose success is attributed to its ties to the U.S. and its free-trade policies. After joining NAFTA, Mexico signed trade agreements with Chile, Venezuela, Colombia, Bolivia, Costa Rico and Nicaragua. It also negotiated a trade agreement with the European Union and is in negotiations with Japan, South Korea, China and Israel.

These agreements are transforming Mexico into a hub for corporations seeking to export their products throughout the Americas. Free trade supporters note that Mexico’s economy has grown every year since the recession of 1995, largely powered by exports. But what has this integration and export success brought the Mexican people? According to the Wall Street Journal:

“In terms of what they can buy for themselves, most consumers are worse off today [1999] than they were a decade ago. Even those lucky enough to have one of the new assembly-plant jobs can’t buy as much as they could have five years ago, before Mexico abandoned its fixed exchange rate. Since Mexico’s big 1994 currency devaluation, consumers here have suffered a staggering 39% drop in their purchasing power. Just since 1997, the number of people living in extreme poverty — defined as workers earning less than $2 a day — has grown by four million, or twice the growth of the population.(7)

Despite following U.S./IMF policies to the letter, and being touted as a star economic performer, the United National Development Program (UNDP) retorts that the number of Mexicans living in “dire” poverty has grown from one in seven before the county’s currency crisis to one in five two years later.

If we include workers living in “moderate” poverty (daily income of $3), almost two-thirds of the population is poor; less than half were poor before the crisis. According to one of the authors of the UNDP study, the country will have to maintain a 5% yearly growth rate through 2003 to bring poverty rates down to 1984 levels.(8)

To put that target in perspective: 1984 was the first recovery year after the Mexican debt crisis of 1982-83. Thus, poverty in 1984 was already unacceptably high. And this is the record of the region’s star performer!

While obviously incomparable to Mexico, conditions for U.S. working people are far from ideal. Income and wealth inequality has grown sharply and wage gains remain limited. And despite expansion, the government refuses to provide meaningful support for social services and public infrastructure.

Moreover, the entire region’s growth rests ever more precariously on the United States’ ability to continue to run larger and larger trade deficits. Sooner or later the shaky foundation underpinning the United States’ record expansion will collapse, triggering new crises for working people throughout the Americas.

However, the ideologues can admit of no wrong for capitalism. If conditions remain problematic, it is only because markets are not yet free enough. Thus, governments throughout the region continue to push forward the capitalist agenda, this time through the FTAA, all the while proclaiming to be working in the best interest of the people.

Responses

There has been very little public discussion of the FTAA in the United States. As with the WTO, negotiations are proceeding without formal authorization or input from the U.S. Congress and out of public view. The primary cause is not “executive” secrecy or even political corruption.

Most members of Congress know that there are FTAA negotiations and have chosen not to involve themselves, most likely because they fear the consequences of opposing dominant capitalist interests. No doubt, they are happy that the Clinton administration has allowed them to remain invisible during the FTAA negotiating process.

This situation underscores the fact that the political process is driven by structural pressures or, in other words, capitalist dynamics; it cannot be relied upon to represent our interests. Therefore, we need to build a movement for a new political-economy.

We have marched and demonstrated against many institutions including NAFTA, the WTO, the IMF and the World Bank. And we should also oppose the FTAA. However, we must avoid the trap of promoting a series of campaigns that target only the policies of individual institutions.

We must use these campaigns to build an anti-capitalist movement, or run the risk of exhausting our energies in a noble but losing effort. The movement-building process should target the FTAA, but in a way that incorporates participants from past organizing efforts and helps all involved understand this new outrage as a logical consequence of capitalist imperatives.

Organizing efforts should be directed not only at forcing Congress to halt the negotiating process but even more importantly at restructuring underlying relations. Thus, our organizing against the FTAA must connect with and strengthen, in a mutually reinforcing way, other efforts that challenge capitalist class dominance: struggles for decent jobs and living wages; strong and democratic unions; environmentally sustainable communities; racial justice; and a revitalized, equitably funded, and responsive public sector.(9)

In the process, we must make explicit the ways in which capitalism works against popular interests, build labor-community alliances, and encourage the development of alternative social visions. We must also shape our efforts in ways that strengthen the regional solidarity which is absolutely essential if we are to defeat the FTAA.

Many important links have already been established between working people throughout the region thanks to past labor solidarity campaigns and organizing efforts against NAFTA, the WTO, IMF and World Bank. As a result, growing numbers of people in the United States are now aware of how these agreements and institutions push nations to adopt policies that lead to deteriorating living and working conditions that highly mobile capital can take advantage of to create a disastrous “race to the bottom.”

These links need to be expanded and new ways found to bring people together for the purpose of sharing experiences and developing mutually supportive national strategies for defeating the FTAA, and for the radical restructuring of national economies. Clearly these are related: As people reject the FTAA they will seek out alternatives and as they come to recognize that alternatives exist, they will become more effective opponents of the FTAA.

Capitalism’s own motion has created closer economic, political, and social ties among the region’s people. While capitalists have promoted these ties for their own benefit, these regional relationships can also empower working people. Alternatives to capitalism that seem impossible within a national context can appear more realistic when pursued by multiple movements within a regional framework that can encompass and to a meaningful degree contain capitalist mobility.

In addition, differing national conditions mean that national movements will be developing strategies whose diversity can offer activists throughout the region a wealth of experiences to inspire and guide their own organizing efforts. In sum, the struggle against the FTAA provides us with an important opportunity to help people see that they are engaged in a world-wide struggle against capitalism.

Notes

1. “Summit of the Americas Declaration of Principles,” Miami, U.S.A., 1994, at: http://www.alca-ftaa.org/ministerials/miami_e.asp.
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2. “Free Trade Area of the Americas Declaration of Ministers, Fifth Trade Ministerial Meeting, Toronto, Canada, 4 November, 1999,” at: http://www.alca-ftaa.org/ministerials/minis_e.asp.
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3. “Summit of the Americas, Fourth Trade Ministerial San Jose, Costa Rica, March 19th, 1998, Joint Declaration,> at: http://www.alca-ftaa.org/ministerials/costa_e.asp.
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4. “Overview: Chronology of the FTAA Process,” at: http://www.alca-ftaa.org/view_e.asp.
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5. For more information about Chapter 11 and investor suits against NAFTA governments see the articles by Gerard Greenfield at: http://www.wtoaction.org/research.phtml.
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6. Larry Rohter, “After a Hard Year, Latin America Looks for Better Times,” New York Times, December 20, 1999.
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7. Joel Millman, “Is the Mexican Model Worth the Pain?” Wall Street Journal, March 8, 1999.
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8. Ibid.
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9. For a discussion of movement building strategy see Martin Hart-Landsberg, “After Seattle: Strategic Thinking About Movement Building,” Monthly Review, July-August 2000.
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ATC 90, January-April 2001