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July/August 2001 NW Newsmakers
The Free Trade Agreement -
Why We Should Be Concerned

by the FTAA Working Group of the Alliance for Democracy

Why is a firestorm of opposition generated every time international trade representatives and world leaders meet to negotiate the Free Trade Agreement of the Americas (FTAA)?

Under new trade agreements now being negotiated by the U.S. government, local and national governments can be put in the position of a) being forced to pay polluters not to pollute, or b) to weaken laws protecting the environment, clean water and food safety. Under the provision of the new FTAA, laws protecting the environment, public health and safety, and local sovereignty may be challenged by foreign corporations as “trade barriers.”

The FTAA differs substantially from prior agreements such as the North American Free Trade Agreement (NAFTA) and the WTO, which mainly focused on such issues such as tariffs.^[1] This difference is the source of much of the popular opposition to this latest agreement, which is being written and negotiated in secret. Many environmental and labor groups are seriously concerned about its potential impact.

 The President has asked Congress to pass Fast Track Authority this fall. Fast Track authority would require Congress, to pass or reject the agreement without considering any amendments, even though Congress has the constitutional responsibility to “regulate Commerce with foreign Nations.” (“Fast Track” has now been renamed the “Presidential Trade Promotion Authority.)

What Is the FTAA

The FTAA is the name given to the expansion of NAFTA (the North American Free Trade Agreement) that would include all of North, Central and South America (except Cuba). The goal of this agreement is to create a free trade and investment zone. The effect of FTAA and the other recent global trade agreements is to open markets to foreign competition, to reduce government regulations on transnational companies and to limit the ability of local and national governments to restrict investments, the sale of products or with whom they do business.^[2]

What are the Effects of Investor Protections?

While the text of the FTAA agreement has not been made public, it is expected that the controversial investor protections that are included in Chapter 11 of NAFTA will also be made part of the FTAA agreement. Chapter 11 has two principal requirements. One is that foreign investors are not treated any less favorably than U.S. corporations. The second prohibits the direct or indirect “expropriation” of the investment of foreign corporations without compensation. The no-less-favorable treatment poses threats to state and local government’s abilities to give preference to local businesses for some types of purchasing. The provision of services by government can also be challenged. The second requirement is the one that has been the basis of damage suits against both state and local governments for enforcing environmental laws such as those to ensure clean water supplies. Following are two suits brought under NAFTA’s Chapter 11.

Safe Drinking Water At Risk

Two claims have been brought under Chapter 11 of NAFTA that undermine the right of state and local governments to ensure a safe water supply.

US Sued by a Canadian Corporation
It was discovered several years ago that a widely used gasoline additive called MTBE was leaking from gasoline storage tanks into California’s water supply. Added to gasoline to improve engine performance, MTBE is also a carcinogen. It had been detected in groundwater and surface water sources throughout California, forcing officials to shut drinking water wells from Sacramento to San Diego. To protect the state’s water supply, California’s Governor Gary Davis ordered MTBE phased out. This ban triggered a drop in the stock price of the Methanex Corporation, a Canadian company that makes MTBE. In September 2000, Methanex sued the US government for $ 970 million to pressure California to stop the phase out. Methanex filed its complaint before the Centre for Settlement of Investment Disputes that is authorized under NAFTA to arbitrate disputes over investments. If the tribunal rules that California deprived Methanex of its property and awards damages, the federal government could, in turn, force California to roll back its MTBE ban and/or pay damages.

US Company Sues Mexico
Last year a NAFTA tribunal ordered Mexico to pay $19 million in damages to a US company, Metalclad Corporation. The state of San Luis Potosi blocked Metalclad’s planned toxic waste storage facility that threatened to pollute the region’s water supply. Metalclad had sought more than $90 million in damages. Mexico has appealed the decision.^[3]

Other Attacks on Environmental Laws

Other claims have been brought that are similar to these. In 1998, Canada was required to settle a NAFTA “takings” complaint filed by the Virginia-based Ethyl Corporation over Canada’s ban on MMT, a gasoline additive known to damage the nervous system. As conditions of the settlement, Canada reversed its ban on MMT, paid $13 million to Ethyl, and publicly declared that MMT is safe, despite known risks. ^[4]

What Can Be Done to Stop the Passage of the FTAA?

Educate yourself and others about the issues involved with the FTAA. Websites of local groups provide excellent information. The Alliance for Sustainable Jobs and the Environment’s Global Working Group site is: www.fasttrackinfo.com, and the Local to Global working group www.localtoglobal.org.

Write your congressperson about your concerns about the FTAA this summer. Information is provided on the websites above or call Dolores Hurtado of the Alliance for Democracy at 503 636-5049.

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Noreena Hertz: Why we must stay silent no longer

“At the headquarters of the World Trade Organisation on the banks of Lake Geneva we see rulings being made in the names of the free market that limit states' abilities to safeguard their people's interests. When the European Union tried to ban synthetic hormones from beef on the basis of strong evidence that they could cause cancer, reduce male fertility and in some cases result in the premature onset of puberty in young children, it found itself unable to do so thanks to a WTO ruling which put the interests of Monsanto, the US National Cattlemen's Association, the US Dairy Export Council and the National Milk Producers Federation first.

Time and time again the WTO has intervened to prevent governments from using boycotts or tariffs against companies that they find to be acting in ethically or environmentally unacceptable ways.”

Noreena Hertz is one of the world's leading young thinkers, whose agenda-setting new book, The Silent Takeover: Global Capitalism and the Death of Democracy, published by Heinemann, is already sparking intense debate on both sides of the Atlantic. This quote comes from a remarkable special essay for The Observer in which she argues that governments' surrender to big business is the deadliest threat facing democracy today. For the full text of her essay, go to www.observer.co.uk/comment/story/0,6903,470283,00.html.

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