Sunday, April 19, 2009
Chapter 2: The FTAA & the Roots of Resistance to the US Model for Regional Integration of the Americas
Photo taken in El Salvador: "No to the FTAA - Another World is Possible - May 1st - Hemispheric Social Alliance"
Heather Day's Masters Thesis:
‘A Deep Expression of Hope’:
The Role of the Hemispheric Social Alliance in Constructing
Alternatives to the US Model of Regional Integration
University of WA Geography, June 2007
*note: ASC refers to the Spanish acronym for Hemispheric Social Alliance (Alianza Social Continental)
Overview of Chapter
-Making neoliberalism meaningful
-The deep roots of resistance to neoliberalism: US imperialism in Latin America
-1970s: The sordid beginnings of neoliberalism
-1980s: Roll-back neoliberalism
-Late 1980s – 1990s: Neoliberalism achieves hegemony
-1994: The US model of hemispheric-wide integration of the Americas is launched
-Are free-trade agreements really about “free-trade” or “negotiations”?
-The NAFTA/FTAA model of regional integration
-Nine Negotiating Areas of the FTAA
-Implications and Impacts of the FTAA Model
-NAFTA’s Legacy I: Workers
-NAFTA’s Legacy II: Farmers, Food Production & Migration
-NAFTA (and the WTO’s) Legacy III: Democracy
-Neoliberalism’s legacy in the Americas
In this chapter I provide the political economic context of the emergence of the Hemispheric Social Alliance, in addition to a brief consideration of the discourse promoting the FTAA. Conceived in 1997 in Brazil during a parallel summit to the FTAA Ministerial, the Alliance was formally constituted in 1999 to organize and coordinate hemispheric-wide opposition to the FTAA, the US model for regional integration of the Americas. Thus in order to understand the significance of the Hemispheric Social Alliance and the alternatives it promotes, we must begin with an analysis of what the FTAA represents. By examining the history of the FTAA negotiations within their broader political and economic context, the FTAA is revealed to be the continuation, albeit in a distinctly intensified form, of US-backed policies and discourses first implemented in the region in the 1970s, and culminating in the North American Free Trade Agreement (NAFTA). Furthermore, neoliberal policies were preceded by almost two centuries of US intervention in Latin America and the Caribbean (referred to hereafter as LAC), to protect US business interests. While the FTAA negotiations are either stalled or dead (depending on whom you ask), NAFTA, the “agreement” on which it is based, has been in effect for over ten years. Since the demise of the FTAA, the Bush (Jr.) administration has aggressively pursued bilateral and subregional deals such as the Central America Free Trade Agreement (CAFTA). Thus it is possible to talk about the FTAA not only in the abstract, but we can also examine the results of these, and other, regional pacts. However, the FTAA is also similar to many aspects of the World Trade Organization, parts of which have been enforced for over ten years, and it aimed to make permanent the reforms required of governments by the World Bank and International Monetary Fund through Structural Adjustment Programs, implemented throughout Latin America for over two decades. Therefore, opposition to the FTAA is a reaction to the specific results of so-called free trade agreements in the region, but people also mobilize in response to the impacts of other, related policies, which are commonly grouped together under the banner of ‘neoliberalism’.
Making neoliberalism meaningful
Neo-liberalism refers to the renewed interest, in the second half of the twentieth century, in the ideas of political economists like Adam Smith who advocated economic liberalism and “free” trade in the eighteenth century. Starting out as rogue economists challenging the received wisdom of the primarily Keynesian era, in the nineteen-seventies and eighties Milton Friedman and his “Chicago boys” successfully converted their theories of the superiority of the (supposedly) self-regulating market into the virtually unquestioned, pervasive, common-sense knowledge that free-trade discourse represents today. This was accomplished with the help of hundreds of millions of dollars invested into “a huge international network of foundations, institutes, research centers, publications, scholars, writers and public relations hacks to develop, package and push their ideas and doctrine relentlessly” (George 1999). Despite, (or perhaps because of) its pervasiveness, neoliberalism is a contested term (Sparke 2006), but it is commonly used by critics to refer to a market-obsessed ideology which drives a set of policies aimed at “freeing” the market from the constraints of government intervention. These policies, which were first implemented in the US and England in the eighties, and then imposed on the majority of countries in the Global South through loan conditionalities from the eighties until now, include trade liberalization, foreign capital liberalization, deregulation of finance, reduction in government spending, privatization of government functions, and tax cuts (Tickell and Peck 2003). The economic narrative of globalization is used to justify neoliberal restructuring: it is argued that countries will not be able to compete globally if they don’t submit to the laws of comparative advantage and insert themselves into the global economy (Sparke 2008a); Individualism, competition, faith in the market, and suspicion of government form the core values of neoliberal ideology.
One point of contention in analyses of neoliberalism is over the role of the state. The goal of “downsizing” or “shrinking” government is an oft-heard refrain. The “weakening state” thesis is supported by the evidence of decimated government services that has taken place around the world over the past three decades. It is also raised, often urgently, by social movements and political parties in the Global South whose ability to enact alternatives to neoliberalism is constrained by burdensome debt obligations imposed from outside by institutions that are directly accountable to no one. One can find many other examples of how the power wielded by the supranational trinity of the World Bank, IMF and WTO, in addition to free trade agreements, directly challenges national sovereignty and states’ decision-making power. Traditional territories of political economic activity are certainly being remade by neoliberal globalization, with the nation-state at times being subsumed by new regional and supranational entities (Sparke 2005, O'Tuathail and Luke 1994).
However, while these claims may be true, critical theorists of neoliberalism question the degree to which the state is actually undermined or made irrelevant by neoliberalism. Instead, they argue that the state is required to play a new role, that of facilitating transnational capital. Putting these “new forms of statecraft” center-stage, Tickell and Peck define neoliberalisation (a term used to emphasize the contingency of neoliberalism), as “the mobilization of state power in the contradictory extension and reproduction of market(-like) rule” (2003: 5). Emphasizing the role of the state in their definition of neoliberalism is a conscious political move, meant to clarify what has been obscured by neoliberal discourse, the fact that the state is continuously mobilized whenever it helps achieve the goals of transnational capital, for example to negotiate trade deals. This view shifts the question to not whether government intervention is necessary, but in whose benefit?
A related point of contention is that the differences in how neoliberalism has been implemented in and between countries of the North and South matter. Part of the political project of dismantling neoliberalism relies on tracking these specific histories and trajectories, in order to contest the often monolithic, and therefore disabling, portrayal furthered by advocates and critics alike. This is the point of Tickell and Peck’s argument that neoliberalism should be understood as “a contingently realised process” (2003: 3, original emphasis), as opposed to a uniformly imposed policy program. In this sense, neoliberalism is usefully understood as a geographically and historically differentiated process with at least three distinct phases (Tickell and Peck 2003). While a more detailed analysis is possible and desirable – at national, regional, or even finer-tuned scales like the household, here I am limited to providing some of the major landmarks of neoliberal intervention in North and Latin America, starting with the Chicago boys’ role in Chile in the early seventies, through the second and third phases in the eighties and nineties.
The deep roots of resistance to neoliberalism: US imperialism in Latin America
The purpose of this overview is to contextualize the emergence of the Hemispheric Social Alliance and their attempt to foster an alternative to the US vision of regional integration. The roots of Latin American opposition to neoliberalism go much deeper, however, to encompass the specific histories of US intervention in Latin America. The US has played a dominant role in the hemisphere for the past two hundred years. One cannot truly appreciate the drive to organize alternatives today without understanding this history of US imperialism. Due to these histories, Latin Americans commonly interpret the FTAA as yet another manifestation of US imperialism, and neoliberalism is more generally considered a form of neocolonialism. For example, Lula, in his 2001 campaign to become Brazil’s President, regularly referred to the FTAA as the US plan to "annex Latin America” (Hill, 2002).
Lula’s reference to US intentions in the 21st century take us back to 1823, when President James Monroe essentially declared that Latin America was now US turf. As the Spanish Empire was coming to a close, the Monroe Doctrine warned the Old World “that the American continents, by the free and independent condition which they have assumed and maintain, are henceforth not to be considered as subjects for future colonization by any European powers” (Richardson 1907). Furthermore, any attempt by France, Spain or other nations to reclaim territories in the hemisphere would be considered “as dangerous to our peace and safety” (ibid). What appeared at first to be a declaration of solidarity with the colonies in the hemisphere that had recently won their independence, became instead the guiding vision for an interventionist foreign policy based on the idea of “America for the Americans” (Harris and Azzi 2006: 8).
The Spanish colonies in the Americas had won their independence with the leadership of Simón Bolívar, a Venezuelan popularly referred to as “The Liberator” for his role in freeing the territories known today as Peru, Ecuador, Bolivia (named after Bolívar) Panama, and Venezuela. In 1826 Bolívar put forth his vision of a unified Americas at the Congress of Panama. The United States was not initially invited by Bolívar, who envisioned a federation of states similar to what had been achieved through the American Revolution. However this dream never came to fruition, due to political conflicts within South and Central America. Bolívar’s legacy, however, is huge, and his vision is held up by many as the alternative to the US model of regional integration – this will be explored further in the next chapters.
President Theodore Roosevelt amended the Monroe Doctrine in 1904 to make intervention in Latin American countries’ domestic affairs an explicit policy of the United States. In his annual message to Congress on December 6, 1904, Roosevelt declared:
“All that this country desires is to see the neighboring countries stable, orderly, and prosperous. Any country whose people conduct themselves well can count upon our hearty friendship. If a nation shows that it knows how to act with reasonable efficiency and decency in social and political matters, if it keeps order and pays its obligations, it need fear no interference from the United States. Chronic wrongdoing, or an impotence which results in a general loosening of the ties of civilized society, may in America, as elsewhere, ultimately require intervention by some civilized nation, and in the Western Hemisphere the adherence of the United States to the Monroe Doctrine may force the United States, however reluctantly, in flagrant cases of such wrongdoing or impotence, to the exercise of an international police power.” (Latin American Studies 2007)
Thus Roosevelt announced his intentions to "speak softly and carry a big stick" (although the superior, patronizing tone must have shouted prejudice to many). Under Roosevelt, US intervention took two forms: “gunboat diplomacy” referred to military invasion and occupation, while “dollar diplomacy” referred, euphemistically, to US take-overs of domestic banking systems in order to ensure payment of debts to foreign investors and the US government (Barry et. al. 2005). In 1935 US Major General Smedley Butler (then in his retirement), the most decorated Marine in US history, wrote about the use of US military force to guarantee the interests of capitalists;
“I spent 33 years and four months in active military service and during that period I spent most of my time as a high class muscle man for Big Business, for Wall Street and the bankers. In short, I was a racketeer, a gangster for capitalism. I helped make México and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. I helped purify Nicaragua for the International Banking House of Brown Brothers in 1902-1912. I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went on its way unmolested.” (Butler 1935)
Indeed, from the 1890s through the 1930s the US military invaded Latin America over thirty times, including multiple occupations, especially in the Caribbean and Central American states. Militarization took other forms as well: US training of militaries begins in this period. The US established a military academy in Nicaragua in 1929, after occupying that nation almost continuously from 1909 on. Before the US was finally forced to leave in 1933, Undersecretary of State Robert Olds stated, "There is no room for any outside influence other than ours in this region. We could not tolerate such a thing without incurring grave risks... Until now Central America has always understood that governments which we recognize and support stay in power, while those which we do not recognize and support fall" (Rosenfelder 1996:1).
Latin America received a brief respite from constant military intervention during President Franklin Delano Roosevelt’s terms, although FDR’s “Good Neighbor Policy” was tarnished by alliances with some repressive regimes (ibid.). An important aspect of this non-interventionist policy was reciprocal trade agreements signed with fifteen Latin America countries. Roosevelt’s aim, influenced by the First Lady Eleanor, was to end the neo-mercantilism of past administrations, in an effort towards cultivating peace. He stated, “We do not maintain that a more liberal international trade will stop war, but we fear that without a more liberal international trade, war is a natural consequence” (Barry et. al. 2005).
This policy was overturned in 1947 and replaced with the doctrine of “National Security” (establishing the National Security Council and the Central Intelligence Agency), introducing a sordid era characterized by covert operations, funded and approved by the US, aimed at taming perceived communist threats during the Cold War. Various efforts at regional cooperation had been underway since the late 1800s; in 1948 the US spearheaded the formation of the Organization of American States (OAS), with the explicit intent of fighting communism in the Americas. Free-trade was part of the OAS mission from its founding; today the OAS is one of three institutions that provide technical support to the FTAA negotiations (OAS.org 2001).
The 1959 Cuban Revolution solidified the anti-communist mission, and justification, of United States intervention in Latin America during the following decade. The Kennedy administration launched the Alliance for Progress in 1961, administered by the OAS. Basically a counterinsurgency campaign, the Alliance greatly expanded the role of the United States Agency for International Development (USAID) in the region, with the intention of addressing the root causes of popular rest (understood as “underdevelopment”), and the turn to the Left. The Alliance also involved military and police training (Barry 2004).
US support of violently repressive dictatorships in Brazil, Argentina, Uruguay, Chile, Central America, and elsewhere, was guaranteed by training of military personnel in counter-insurgency tactics at the U.S. Army School of the Americas, which opened in Panama in 1946 (Rosenfelder 1996). Throughout this history, US foreign policy and militarism were geared towards protecting US investments abroad, which were worth billions , and earned billions more (ibid). Militarization and economic policy have always represented two sides of the same coin in the Americas, a point made by popular columnist Thomas Friedman, who is probably the best-read cheerleader of neoliberalism in the US today; “The hidden hand of the market will never work without a hidden fist. McDonald’s cannot flourish without McDonnel Douglas, the designer of the US Air Force F-15. And the hidden fist that keeps the world safe for Silicon Valley’s technologies to flourish is called the US Army, Air Force, Navy and Marine Corps” (Friedman 1999: 373).
1970s: The sordid beginnings of neoliberalism
In their first published version of Alternatives for the Americas, the Hemispheric Social Alliance contextualizes the 1998 launch of the FTAA in Santiago, Chile by remembering “the birth of neo-liberalism in our hemisphere” which had occurred a quarter of a century earlier in that same place. The introduction locates the beginnings of neoliberalism in “the bloody, US-backed coup in Chile that put General Augusto Pinochet in power” (ASC 2001a: 2).
The two-pronged approach of US policy in Latin America was not altered with the onset of neoliberalism in the 1970s. At this early stage, the market fundamentalism of neoliberalism constituted a radical ideological critique of Keynesianism that had yet to be implemented (Tickell and Peck 2003). Speaking to the strangeness of these ideas in the era of the Bretton Woods conference, author and activist Susan George commented, “The idea that the market should be allowed to make major social and political decisions; the idea that the State should voluntarily reduce its role in the economy, or that corporations should be given total freedom…such ideas were utterly foreign to the spirit of the time” (George 1999). Thus, what has become hegemonic today started out as a radical critique of theories advocating state-led development, such as dependency theory, which was very influential in the fifties and sixties in Latin America. Founded by Argentine Raul Prebisch, and developed during his directorship of the United Nations Economic Commission for Latin America, dependency theory had several schools of thought, but generally aimed to account for the imbalance of wealth between the richer and poorer parts of the world. This imbalance was attributed in part to the history of colonialism, and the reliance of the colonizing nations on resource extraction from the colonized. The value added when these resources were manufactured into commodities in the Global North made their cost prohibitive to the South, leading to the widespread adoption of import substitution industrialization, which advocated industrialization of the Global South through protective tariffs on imports (Kay 1989).
While dependency theory developed in Latin America, Milton Freidman and other economists at the University of Chicago were formulating radical new theories premised on the suspicion of government intervention and the supremacy of “the market” that would later become known as neoliberalism. In the fifties they established a partnership with the Catholic University in Santiago, Chile, training many economists who were called the “Chicago Boys” (Valdés 1995). These economists had the opportunity to enact the first real-world experiment in neoliberal policies as a result of the coup d’etat in Chile, on September 11, 1973; this date, ironically, simultaneously marked the end of another first-time experiment, that of socialism led by a democratically elected leader, Salvador Allende. He was killed, or committed suicide, when the Presidential palace was bombed by the Chilean armed forces under the direction of recently appointed Minister of Defense, General Augusto Pinochet. Recently de-classified documents reveal that, following a familiar pattern, the Nixon administration, and particularly Secretary of State Henry Kissinger, intervened directly in the domestic politics of Chile, first by trying to prevent the election of Allende, and later by executing a concerted campaign to destabilize his government, including economic sabotage, assassination of his allies, and support of the dictator who took his place, Pinochet (Kornbluh and White: 2006).
Enter the Chicago Boys. Pinochet welcomed them into top posts in his government, encouraged by Milton Friedman himself, who urged Pinochet to drastically reform the Chilean economy during a visit in 1973 (PBS 2002). Friedman, who won the Nobel Prize for economics in 1976, called the subsequent transformation of the economy “an economic miracle” in 1982 (Cypher 2004). Economist James Cypher astutely describes the political motives of the economic strategy employed by the Chicago Boys, who oriented the economy away from import substitution industrialization (ISI) and towards export-fueled growth. Cypher explains that this choice was due not only to economic theories, but because workers, who benefited from ISI, had struggled to organize powerful unions in the industrial sectors, particularly in mining and manufacturing. “The economists…realized that an economic development strategy based on industrialization could not exclude a real voice for labor. One that drew upon Chile's vast treasure of untapped natural resources, however—the unceasing ocean, the endless forests of the south, the exceedingly fertile farm lands—could do just that” (ibid).
During the seventeen years of Pinochet’s dictatorship, anyone suspected of affiliation with communist or socialist organizations, or even deemed sympathetic, was targeted by a violently repressive political regime. Organized labor was a primary target. “Its union and party leaders were tortured, assassinated, imprisoned, or exiled. Political parties were banned and unions made virtually illegal. The dictatorship introduced a "flexible" labor system that left workers with the formal right of individual contract, but stripped them of any right to organize and bargain collectively” (ibid).
Labor was just one of many sectors of the population terrorized by the Pinochet regime. According to the Rettig Commission, (the Chilean government’s investigation of crimes committed against civilians during the reign of Pinochet), from 1973-1990, 3,197 people were executed or “disappeared” in Chile, and tens of thousands more were persecuted and tortured (Brett 1999). Operation Condor, initiated by Chile and indirectly funded by the CIA (Dinges 2004), engaged the intelligence and security services of Argentina, Bolivia, Brazil, Paraguay, and Uruguay in locating, observing and assassinating political opponents, at times sending teams to France, Portugal, Spain, Italy and the United States (as in the case of the assassination of Orlando Letelier and Ronni Karpen Moffitt, on US soil). Discovered inadvertently in Paraguay in 1992, an archive documenting Operation Condor provided evidence that 50,000 Latin Americans were murdered, 30,000 "disappeared" and 400,000 incarcerated (ibid). This archive provided some of the evidence used by Spanish Judge Baltasar Garzón to indict Pinochet in 1998. Garzón’s invevstigation documented cases of more than 300,000 Chileans who were detained, and over 100,000 who were forced to leave Chile (Yanel 1998).
The brutal political context of the first application of neoliberalism is a particularly reprehensible recurrence of militarization underpinning US economic policy in Latin America. However it is also an important reminder of the agency of Chileans in carrying out the wishes of the US government. While the Chicago Boys cannot be held responsible for Pinochet’s brutality, their willingness to be employed by the regime certainly indicates their complicity. Some claim that the association of neoliberal policies with Pinochet deterred some states from adopting them (PBS 2002). But the “success” of neoliberalism in Chile came at another kind of price, which is also shocking given the persistent claim that Chile represents the “poster child” for this economic model. While per capita income did almost double in the eighties and early nineties, today income distribution in Chile is the third most unequal in Latin America, behind only Brazil and Guatemala (Cypher 2004); other indicators tell a similar story, of wealth generated, but distributed very unequally. Chile’s economy stagnated in the late nineties; some question whether its export-orientation is sustainable. Perhaps, as some economists in Latin America had predicted, “the "Chilean miracle" had reached its own self-imposed limits” (ibid).
1980s: Roll-back neoliberalism
In the 1980s, neoliberalism gained a solid foothold in the US and UK under Reagan and Thatcher, although not without considerable confrontation and conflict. During this period of “roll-back“ neoliberalism (Tickell and Peck 2003), the gains of the welfare state were slowly undone in the US and UK. US intervention in Latin America continued on two fronts. Where the US wasn’t fighting illegal counter-insurgency wars, such as in El Salvador and Nicaragua , it was wielding its influence internationally through the International Monetary Fund and the World Bank, whose ranks had filled with neoclassical economists (ibid.). As a result of Nixon’s de-pegging of the dollar from gold, and the ensuing oil crisis, the developing world found itself awash in loans with variable interest rates. Banks were eager to invest petrodollars (profits deposited in European banks by major oil-exporting countries), which were badly needed to pay for oil and the results of massive instability in currency markets. When interest on the loans suddenly skyrocketed in the early eighties, countries unable to pay back their debts faced a crisis; many began taking out new loans to pay off old loans, shifting resources away from basic needs. In 1982 México defaulted. As a result, all future loans were guaranteed by the IMF, which began requiring governments to abide by neoliberal doctrine in the form of Structural Adjustment Programs (SAPs). Meant to stabilize their economies by re-orienting them to economic growth models, SAPs spelled the end of import-substitution models, emphasizing instead export-led growth, devaluation of currencies against the dollar, balancing budgets through cuts to government spending, privatization of government-run entities, finance deregulation and trade liberalization, including cuts to subsidies, price controls, and elimination of tariffs (SAPRIN 2002).
Thus the debt crisis resulted in the radical ideas of neoliberalism being implemented beyond Chile, and throughout Latin America, as many countries had become heavily indebted to commercial banks, and thus were required to abide by IMF rules for all future loans. Results of the first decade of neoliberal reforms were so poor that the eighties are widely referred to as “the lost decade”; income per person decreased by 3.1% from 1980 – 1989 (Weisbrot and Rosnick 2003). Debt servicing was a major cause of this devastating economic performance, as the percentage of government spending dedicated to debt-servicing grew, causing drastic cuts to other expenditures, including health-care and education. Most countries can only pay interest on their debts, as the value of the principle continues to grow, creating an unsustainable situation. Organizations formed to pressure for cancellation of debts argued that the original loans have been paid off many times over. For example 50 Years is Enough states, “The flow of money between the North and South was reversed some time ago; developing countries now pay more in debt servicing than they get in new credit. Between 1982 and 1990, the South transferred a net $418 billion to the North. Between 1987 and 1995 the IMF received $4 billion more in debt repayments from the most indebted and impoverished countries than it has provided” (50 Years is Enough 2007). Neil Watkins, coordinator of the Jubilee USA Network, asserts, “Canceling debt is not an act of charity by rich creditors or institutions. It is an act of justice. Consider that from 1970-2002, UNCTAD found that African nations took out $540 billion in loans, and over the same period paid back $550 billion. But today Africa owes almost $300 billion” (Watkins 2005).
A major shift towards democratization occurred in Latin America in the nineteen eighties and nineties, replacing dictatorships with elected governments. However, there is much debate about the real meaning of ‘democratization’ in Latin America, as this shift coincided with the dominance of international financial institutions in economic policy-making at the national scale. A comprehensive 2004 UNDP investigation of Latin Americans’ attitudes towards democracy found that democratically elected regimes are suffering a “crisis of legitimacy” in the region, mainly due to the fact that governments have failed to redistribute wealth or significantly reduce poverty or inequality, yet, as Gibbs (2004:9) argues, “Why should we be surprised that Latin Americans are not that impressed with democracy when most of the key decisions affecting their economic well-being are made by international actors with the help of foreign-trained technocrats?”. As Robinson (1996:20) states, "any discussion of democracy under such conditions becomes meaningless” (cited by Hristov 2005:7).
Late 1980s – 1990s: Neoliberalism achieves hegemony
Neoliberalism became a hegemonic discourse in the late eighties, particularly after the fall of the Soviet Union, which began in 1989. Tickell and Peck describe this period in which there was a “shift to a more technocratic and managerial form of neoliberalism” (2003:15) as “roll-out” neoliberalism: “today [neoliberal experiments] are deeply imbedded in a complex of inter-and extra-local policy networks, institutional circuits and political structures” (2003:22). This deeper, more embedded form is characterized by co-optation, as the “left” and right, in the US and UK, champion “welfare reform” and penalization of those who have been left out by the crises of earlier periods. In the US, incarceration rates rise in increasingly privatized prisons, immigrants are scapegoated and punished by repressive legislation, such as Prop 187 in California, homelessness becomes a national topic of discussion, and South-Central Los Angeles explodes when the beating of Rodney King by the LA police is caught on videotape, revealing the cruel intersection of race and persistent and worsening poverty. Tickell and Peck note that the “penal state [is] a perversely logical response to the contradictions engendered by previous waves of deregulation and commodification” (2003:20).
In Latin America in the nineties, the model of development defined as economic growth achieved through integration into the global economy, failed to deliver the promised results. Non-governmental organizations proliferated, in an attempt to fill the gaps left by the abandonment of social services by strapped governments (Petras 1997, Roy 2004). After prolonged civil wars fueled by US military aid, Salvadorans and Nicaraguans transition out of shooting wars to the economic wars most of the rest of the region had been experiencing. US intervention began to take the shape we see today, when the US and Canada signed their bilateral free trade agreement in 1989, and then, for the first time, integrated a “third world” country, México, when they negotiated the North American Free Trade Agreement. As awareness of the NAFTA spread, particularly through the determined efforts of Canadian activists such as Maude Barlow and Tony Clarke, an effective, cross-border coalition formed to raise the alarm and educate the public about this new breed of economic and political policy. Yet, amongst the political elite, “free-trade” is dogma: its assumptions remain unchallenged by the vast majority as the “Washington Consensus” envelops the leadership of the Democratic Party, led by President Clinton and the Democratic Leadership Council. NAFTA’s boosters promised to bring México into the “First World”, and jobs to a suffering middle class.
After a last minute push for side deals on the environment and labor, and many promises made by President Clinton in exchange for ‘yes’ votes , the US Congress narrowly approved NAFTA in 1993. The world was stunned by the emergence of the Zapatista Army for National Liberation on the day NAFTA went into effect, January 1, 1994. Using sophisticated organizing strategies, including the use of the internet from within the Lacondón jungle of Chiapas México, the Zapatistas touched a nerve in the millions of people around the world who had been marginalized by, and resisted neoliberalism. Neoliberalism became widely known as a term after Subcommandante Marcos, the Zapatista spokesperson, used it frequently in his regular communiqués. Though the Zapatistas retreat after a few days, making it clear that they have no intention, nor the means, of taking state power, the Mexican military occupies Chiapas; amongst their ranks are at least 18 officers trained at the School of the Americas (Sullivan 2001). US journalists exposed the influence of foreign investors on México’s government when they revealed a memo sent by a Chase Bank consultant to President Zedillo two days before he sent federal troops into Chiapas, declaring that “The government will have to eliminate the Zapatistas” (Silverstein and Cockburn 1995).
1994: The US model of hemispheric-wide integration of the Americas is launched
The tri-national networks that formed in an attempt to defeat NAFTA remain an integral part of the Hemispheric Social Alliance today. Other, new transnational networks of solidarity formed to support the Zapatistas and their struggle for autonomy. Thus the battles against NAFTA and the US model of intervention in the early nineties mark the beginning of the phase in which the Hemispheric Social Alliance emerged. In December 1994, fresh from the launch of NAFTA, and at the cusp of the transition of the GATT into the World Trade Organization in 1995, President Clinton convened the first ‘Summit of the Americas’ in Miami to promote the US vision of hemispheric-wide integration, first proposed four years earlier by President Bush as part of the Enterprise for the Americas Initiative (Barlow and Clarke 2003). The Miami Summit had a triumphant air about it, as it was seen as the revival of a long history of relations amongst the countries of the hemisphere that had suffered during the Cold War period. “Points of consensus” were reached, reflecting the consolidation of neoliberalism at this time; they were: “democracy, free markets and the need to strengthen multilateralism in the region as a response to the phenomenon of globalization” (Summits of the Americas 2006). The final summit declaration committed the countries to complete negotiations of the FTAA by the year 2005.
This vision would have been concretized sooner, but the “peso crisis” hit México just ten days after the Summit, dampening broader regional integration efforts for a few years (Barlow and Clarke 2003, Hansen-Kuhn 1996). Having predicted a boom in economic growth as a result of trade liberalization, México’s fate in 1995 exposed the risks of an export-led strategy. The massive devaluation of the peso that caused the crisis was necessitated by the need to attract foreign investment to increase manufacturing of exports (Economic Policy Institute 1997). Moreover, the value of the peso had been intentionally left artificially high before the devaluation in 1995 because it “helped to win votes in the U.S. Congress for passage of NAFTA in 1993, and improved the electoral prospects of Mexican Presidential candidate Ernesto Zedillo in 1994” (Barlow and Clarke 2003). Ripple effects of the devaluation and the bailout, which was financed by the IMF and the US Treasury, were felt throughout Latin America (Hansen-Kuhn 1996). The crisis was devastating for Mexicans, for example the total number unemployed doubled, and the value of hourly wages dropped 37% below 1980 levels (ibid.). (I will expand on NAFTA’s effects on México later in the chapter.)
The second Summit of the Americas took place in 1998 in Santiago, where FTAA talks were officially launched, transforming the promises made at the 1994 Summit "from words to deeds" as President Clinton declared (Feinberg and Rosenberg 1999: 33). In Santiago (a location dripping with symbolism), Clinton described the trade liberalization efforts as creating "a thriving market of 800 million people invested in each other's future, enriching each other's lives, weaving a tapestry of interdependence that
strengthens every nation" (ibid: 29). Notwithstanding this hopeful vision, inclusion of excluded actors from the benefits of the global economy also appeared to be high on the agenda of the Santiago Summit, as then-President of the World Bank, James Wolfensohn declared, "persistence with economic reforms, though essential, is not in itself enough." He praised the Summit for "contributing…a new vision of the need to make the social dimension of development integral in your map for the years ahead" (ibid: 37). Education was the overarching theme of the Summit. However, the distance between rhetoric and reality grew as it became clear that the FTAA was “designed to be an aggressive expansion of NAFTA” (Barlow and Clarke 2003:15), meaning it would expand to 31 new countries (see Figure 2.1), and include new rules from the WTO.
Negotiations took place regularly from 1995 until 2003, through the auspices of working groups focused on nine negotiating areas: services, investment, government procurement, market access, agriculture, intellectual property rights, subsidies, anti-dumping and countervailing duties, competition policy and dispute settlement. There are also three groups addressing issues that cross-cut the working groups’ negotiations: 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 (Summit of the Americas 2006). Major aspects of the agreement were negotiated in 18-month intervals by each country's trade ministers at gatherings called "Ministerials". The last Ministerial took place in Miami in November of 2003; due to disagreements over direction, the next scheduled meeting, for November 2004 in Brazil, was cancelled. Three more “Summits of the Americas” have taken place since 1998; in Québec in 2001, when the Organization of American States (OAS) was officially designated as the Secretariat of the Summits of the Americas, in Monterey, México in 2004, and in Mar del Plata, Argentina in November of 2005 . Since 2003, little progress has been made in hemispheric-wide negotiations; an effort to resume talks was blocked by Brazil, Argentina, Uruguay, Paraguay and Venezuela in Mar del Plata, who insisted “that the necessary conditions are not yet in place for achieving a balanced and equitable free trade agreement with effective access to markets free from subsidies and trade-distorting practices” (Summit of the Americas 2006).
When multilateral negotiations broke down in 2003, first in Cancún in September, where the WTO talks failed to make significant progress, and again at the FTAA ministerial in Miami in November, where a “FTAA-lite” agreement was the best negotiators could come up with, the US Trade Representative (USTR) began aggressively pursuing bi-lateral and regional multilateral trade agreements. A new National Security strategy in the wake of 9/11 also played a role in determining future trade partners (Barfield 2007).
Up until 2001 the US had agreements of this type with only the two members of NAFTA, Jordan, and with Israel (with whom it arranged preferential trade relations in 1985) (Bi-laterals.org 2006). Since 2003 the US has entered into bi- and multi-lateral trade negotiations with 25 more countries. Free trade agreements (FTAs) have gone into effect between the US and Australia, Bahrain, Chile, Morocco, Oman and Singapore (USTR 2007, bilaterals.org 2006). After the FTAA negotiations faltered in 2003, the US focus in LAC became Central America. The Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) was signed into law in the US in 2005, and includes El Salvador , Honduras, Guatemala, Costa Rica, and Nicaragua, plus the Dominican Republic (as of June 2007, every country except Costa Rica had ratified the agreement). Having initiated the CAFTA talks, the US began to pursue “AFTA” – the Andean Free Trade Agreement, including Colombia, Peru, Ecuador and Bolivia. However, after the government in Quito annulled a contract with US-based Occidental Petroluem, the US cut off FTA talks (Lettieri 2006). Bolivia was initially prevented from inclusion due to massive social unrest, which was followed by the election of Evo Morales in 2006, who is pursuing an alternative trade strategy (to be discussed in more detail in Chapter 5). The US has concluded negotiations with Colombia, Peru and Panama, in addition to the Republic of Korea, but as of writing, these agreements are mired in controversy in the US Congress, with strong protests in each country as well. Negotiations have also begun with Malaysia and the United Arab Emirates, but are on hold until the Congress votes on whether to renew fast-track authority for President Bush, which expires June 30, 2007. Finally, in talks with the Southern African Customs Union (SACU), including Botswana, Lesotho, Namibia, South Africa and Swaziland, the USTR is blamed for its inflexibility; after failing to convince SACU to accept its usual list of demands, the USTR switched course in late 2006, to pursue a so-called trade and investment cooperation agreement (Tica) (bilaterals.org 2006). This vast constellation does not include the many agreements meant to pave the way to FTA’s, called Bilateral Investment Treaties and Trade and Investment Framework Agreements (including one with Uruguay) (USTR 2006, Bilaterals.org 2006).
Clearly, free trade agreements have gained in importance, and become a major component of the current administration’s foreign policy. Yet, until the South Korea agreement, “new U.S. FTA partners together amounted to less than 10 percent of total U.S. trade” (Barfield 2007). The failure of the FTAA was, and remains, a significant obstacle to US aspirations in the region where it has always dominated, and the US is increasingly competing with the EU and China in Latin America, who are also signing many FTAs around the world (ibid., bilaterals.org 2006). However, economic factors are not the only thing motivating current trade policy – national security concerns also play a key strategic role.
In 2003 President Bush announced his intention to create the Middle East Free Trade Area (MEFTA) by 2013. The MEFTA fulfills a recommendation by the 9/11 Commission Report to counter terrorism with “comprehensive free trade agreements with the Middle Eastern nations most firmly on the path to reform” (USTR 2007), with the promise that these policies will “encourage development, more open societies, and opportunities for people to improve the lives of their families and to enhance prospects for their children’s future” (The 9/11 Commission Report, 378-379, cited in USTR 2006). The Jordan FTA already under their belt, the Bush administration has since pursued this strategy by completing FTAs with Morocco, Bahrain and Oman; a deal with the United Arab Emirates is close, as well as Saudi Arabia, Kuwait, Qatar, Yemen, Egypt, Algeria, and Tunisia who have signed preparatory agreements (USTR 2006). According to Claude Barfield, an analyst at the American Enterprise Institute, “Australia was moved to the front of the line as an FTA partner because of its support in the Iraq war” (Barfield 2007).
Since the US has been unable to complete a comprehensive deal in Latin America, it has pursued small trade blocs with the nations most amenable to relations with the US, such as the Central American nations, and Colombia, who is the staunchest ally of the US in South America (Figure 2.2 shows the current status of FTAs). At this time, changes in the US political scene are making the future of such trade deals uncertain. Meanwhile, Venezuela is promoting ALBA and Bolivia has launched the People’s Trade Agreement as alternatives, and social movements are signaling their preference for these models over the US model of integration.
I will now take a closer look at the US model for the FTAA, first introduced in the NAFTA. I will begin with what the FTAA ministerial declarations claim the FTAA is about. The contradictions between these claims and the reality of the NAFTA and FTAA have given rise to the social movements of which the Hemispheric Social Alliance is part, demanding alternatives.
Are free-trade agreements really about “free-trade” or “negotiations”?
The official stated objectives of the FTAA, as stated on the Summit of the Americas web-site (2006) are:
a. To promote prosperity, raise standards of living, improve working conditions and protect the environment through increased economic integration.
b. To establish a Free Trade Area by 2005.
c. To maximize market openness through a balanced and comprehensive agreement.
d. To facilitate the integration of smaller economies.
e. To strive to make our trade liberalization and environmental policies mutually supportive.
f. To further secure worker rights and renew Governments commitment to the observance of internationally recognized core labor standards.
According to these objectives, the FTAA is a model of development (a term whose value is taken for granted) premised on the belief that “increased economic integration” through “maximize[d] market openness” will result in prosperity and improved living conditions. The objectives also suggest that it is possible that trade liberalization, worker rights and the environment can be “mutually supportive”. FTAA Ministerial declarations in 2002 and 2003 proclaimed the goals of economic integration also included "strengthening democracy, creating prosperity and realizing human potential" and “growth, job creation, higher standards of living, greater opportunities, and poverty reduction in the Hemisphere” (ftaa-alca.org 2002). This vision is expanded by the commitment to “strengthening social dialogue and social protection, improving the levels of health and education and better protecting the environment. We reaffirm the need to respect and value cultural diversity…" (ibid).
There is also a focus in Ministerial declarations on taking into consideration the difference in the size of economies in the hemisphere. The “need for flexibility to take into account the needs and sensitivities of all FTAA partners” is heavily emphasized in the Miami declaration of 2003 (ftaa-alca.org 2002). Suggesting a model that incorporates aspects of the EU model of integration, the declaration states:
“We…reaffirm our commitment to take into account in designing the FTAA, the differences in levels of development and size of economies in the hemisphere to create opportunities for their full participation and increase their level of development. We will establish mechanisms that complement and enhance the measures that address differences in the level of development and size of economies, in particular smaller economies, in order to facilitate the implementation of the Agreement and to maximize the benefits that can be derived from the FTAA. Such measures shall include but not be limited to technical assistance and transitional measures including longer adjustment periods.” (ftaa-alca.org 2002).
To summarize, according to these declarations, free-trade agreements are about:
-economic integration (while recognizing the needs of smaller economies), market openness and growth, leading to:
-democracy and realizing human potential
-prosperity, job creation, higher standards of living, greater opportunities, health-care, education and poverty reduction
-promotion of the environment, worker rights, and cultural diversity
The view represented in the declarations is, of course, the hegemonic neoliberal view that claims that trade liberalization is the best way to accomplish growth, and assumes that economic growth reduces poverty, and leads to democratization. I quote the following remarks made by Anne Krueger, First Deputy Managing Director of the IMF, in whole, because they illustrate this argument so well, and to demonstrate the congruity between the claims of the FTAA and that of a top policy maker in the IMF . These remarks were made at the IMF Seminar on Trade and Regional Integration, in Dakar, Senegal on December 6, 2004:
“There is now almost universal agreement on what the principal economic objectives should be—and, I would argue, on how to achieve them. All developing economies need more rapid and sustained rates of growth that will in turn permit large scale and lasting poverty reduction and rising living standards for all…Trade has a central role in helping achieve more rapid growth. Economies need to open up to the rest of the world as fast as possible. Full participation in a healthy growing world economy is essential if countries are to experience the rapid growth needed to alleviate poverty on a significant scale. Multilateral trade liberalization—all countries reducing their trade barriers with each other—is undoubtedly the best way to achieve this opening, but unilateral liberalization still offers very considerable benefits—far more than waiting for others to lower their trade barriers. No country has achieved the sustained rapid growth needed to reduce poverty without opening up its trade with the rest of the world. Trade liberalization is closely linked with economic growth. Trade is an engine of global growth because it brings competition. It enables producers to have access to inputs at the lowest possible prices. No modern industry can compete without access to the world market for inputs. Trade ensures that scarce resources are used in the most effective possible way.” (Krueger 2004:1)
Krueger’s arguments in favor of trade agreements – whether they be multi or unilateral – closely resemble the Ministerial Declarations, and both focus on “trade”. The FTAA and Summit Declarations are an odd exercise – supposedly their purpose is to communicate to the public what their governments have decided, yet anyone with a little knowledge about the actual talks will tell you that they are exercises in rhetoric, and that they say little about what the negotiations are actually about. Indeed, to the casual observer, it is difficult to see what the problem is with the above goals of FTAs. However, critics of mainstream development and neoliberalism immediately recognize the flawed, economically biased assumption that all good flows naturally from integration focused only on the economic realm, market openness (another term for free-trade or trade liberalization), and growth. Evidence of the results of these policies over the past several decades bears out this point, as will be shown later in this chapter. Additionally, aspects of these claims are completely empty, for example environmental concerns, worker rights and cultural diversity are not addressed directly in any way within the text of the FTAA. Claims about democracy are ironic, given that the text of the agreement (and therefore whether it addressed the concerns cited by the declarations) was kept secret for the first eight years of negotiations. The text was made public in 2001 only after a concerted campaign by civil society organizations had sufficiently undermined the FTAA’s democratic claims (Barlow and Clarke 2003; see Chapter four for more on this topic). The Committee on Small Economies started a data-base of the technical assistance needs of smaller economies, but overall the plan “appears vague” (Barlow 2001: 21).
The point many have made is that arguments like Krueger’s and the FTAA declarations are more fundamentally misleading: NAFTA, the FTAA and all other pacts that the US negotiates are not really about “trade” in the sense of tariffs on goods that have been negotiated, for example, under the auspices of the GATT (General Agreement on Tariffs and Trade) from the close of World War Two until the formation of the WTO (Wallach and Woodall 2004). Instead, these agreements establish enforceable rules for protecting and expanding the rights of foreign investors. Joseph Stieglitz, 2001 Nobel Laureate for Economy and former Chief Economist of the World Bank, confirmed this point recently, when he was interviewed about the US-Colombia FTA; he said this was not necessary or desirable because, in his view, “within these treaties there isn’t really much commerce. They are mainly about protection of investments and intellectual property” (Stiglitz 2000). NAFTA and subsequent agreements are considered radical because they include much more than schedules for reducing tariffs on goods, so that they may be traded “freely” across borders. Rather, they are tools to increase the ability of corporations to “freely” make investments through new rules on intellectual property, competition, services such as water and electricity, and state purchases. Fundacion Solon (2007), a Bolivian based NGO, argues on their web-site, “The most important thing to learn about “Free Trade Agreements” is that [they are] not “free” and “trade” is not its most important feature. It is not free because it has high human and environmental costs and essentially only gives freedom to the powerful”.
The language of “negotiations” is also misleading. Commenting on the process of drafting CAFTA, Carlos Pacheco of the Centro de Estudios Internacionales in Managua, Nicaragua stated, "Where there is no balance of power, negotiation means imposition" (Ricker and Stansbury 2006: 21). Elaborating on this point, Ricker and Stansbury assert,
“It would be difficult to find another multilateral negotiation process with less "balance of power." The U.S. economy is a global behemoth, topping $11 trillion in 2003 and accounting for nearly 80 percent of the economic size of the entire Western Hemisphere. Meanwhile, the combined economic output of countries in Central America was $58 billion in 2000 - smaller than the total income of just two U.S.-based agribusiness companies that will benefit from the accord: Cargill and Archer Daniels Midland” (ibid).
Ricker and Stansbury documented several instances of the US wielding its power inappropriately in the trade talks. For example, having seen the devastating impacts of NAFTA on México’s farmers, Central American negotiators requested that agriculture be left our of the talks, or be dealt with separately. The US simply refused. Guatemala’s position in the trade talks was weakened by their failure to be “certified” for curtailing drug production. In an attempt to regain certification, the President “offered to privatize his country's seaports and turn control over to the United States”, an extreme measure that would damage Guatemalan sovereignty. Guatemala was later rewarded for breaking Central American unity in the talks by receiving military assistance that had been withheld due to human rights concerns. (Ricker and Stansbury 2006: 21)
Contradictions between the claims and the realities of the new rules for the global economy contained in the proposed FTAA eventually overpowered the ability of the FTAA’s negotiators to continue. These contradictions fuelled unrest and social movement organizing in many countries of the Americas, leading in some cases to the election of sympathetic leaders. However, US government hypocrisy also played a role in the FTAA’s demise, when the Bush administration pushed through a huge new farm subsidy bill, high tariffs to allow the US steel industry to recover, and protections for citrus growers in Florida (Barlow and Clarke 2003: 23). These moves strongly contradicted the US’s free-trade mantra, and angered potential trading partners around the world, particularly Brazil, who was impacted by all three measures.
When the heads of state were unable to agree to resume FTAA talks at the fourth Summit of the Americas in Mar del Plata, Argentina in 2005, the Summit declaration proved to be a more accurate reflection of reality, representing the views of two different groups that had formed. One group, representing the majority of countries (29 out of 35), predictably stated, "Our objective is to expand our trade, as a means of boosting growth and our capacity to generate more, higher quality, and better-paying jobs" (OAS.org). Towards that goal, they directed trade officials “to resume their meetings, during 2006, to examine the difficulties in the FTAA process, in order to overcome them and advance the negotiations” (ibid); as of March 2007, they have yet to resume. The other group, quoted above, registered their refusal to advance negotiations in the declaration. This group represents only five countries - Brazil, Argentina, Uruguay, Paraguay and Venezuela - but the FTAA is considered meaningless without them, as these are the largest economies in the hemisphere, outside of the US.
The failure of the FTAA is often represented as successful resistance to the historical hegemony of the US in Latin America with the Global South representing David, and the US representing a crushing Goliath. Along these lines, perhaps the most honest assessment of the FTAA was provided by U.S. Secretary of State Colin Powell, whose statement of the goals of the FTAA blatantly declare U.S. imperialist aspirations in the Western hemisphere: "Our objective with the FTAA is to assure for American corporations control of a territory that runs from the North Pole to the Antarctica, free access, without hindrance or difficulty for our products, services, technology and capital through the hemisphere” (León 2002 ). Comments like these reinforce the colonizer/colonized vision of the US and Latin America, and make it difficult to deny this version of the story. As the reader can see in Figures 2.3 – 2.6, the representation of a voracious United States can be found in Latin America as well as in other regions who have engaged in “free-trade” “negotiations”.
However, this binary representation is problematic in two ways. First, it elides the complicity of elites in the Global South with neoliberalism, which in many cases benefits them. Secondly, there are many differences within the Global South, and more specifically, between the nations and corporations of Latin America, some of which are accused of imperialist ambitions, alongside the US. For example, Brazil’s state oil company, Petrobras, has been the target of frequent criticism. When Evo Morales ‘nationalized’ gas in Bolivia last year, keeping a campaign promise, Petrobras was forced to accept higher costs for their investments in the country. After negotiating the changes in Petrobras’s contract, Brazil’s President Lula countered these criticisms, claiming Brazil "is not imperialistic as many say, nor hegemonic as some would like" (Osava 2007). This raises the question of whether the FTAA should be considered the “US model” of regional integration, as I have been arguing, and not the transnational elite-class model. After all, thirty-three governments did engage with negotiations with the US for many years, and many seem willing to continue. And several countries have already entered into ‘agreements’, although it is revealing who the first ‘partners’ have been: Chile and the Central American countries, with their specific histories of nefarious alliances with the US. Jeff Faux, founder of the Economic Policy Institute, reported that a retired U.S. State Department official told him, "What you don't understand is that when we negotiate economic agreements with these poorer countries, we are negotiating with people from the same class. That is, people whose interests are like ours - on the side of capital"; Faux also reports that in 1996, “22% of the world's billionaires were from the developing nations” (2002). Wallach and Woodall argue that “it is more accurate to suggest that it is not the economies that are integrating but that global business networks are becoming more integrated…The expansion of exports from these internationally integrated businesses largely benefits the companies, not the nations where they are produced” (2004:172-173).
Thus is it fair to suggest that a certain model was “imposed” by the US?
In my view this remains an accurate portrayal, because every country of Latin America is already deeply embedded in the neoliberal model of the global economy, due to the imposition of structural adjustment programs, which were implemented by the IMF and World Bank, both of which are controlled by the US (Faux 2002, Stiglitz 2000). In this model, the US market represents the best chance of the Global South to survive, and free-trade agreements offer the promise of improved access to this market (Wallach and Woodall 2004: 174). Unless countries can break free from servicing their debt, and the related control exercised by the international financial institutions, they are more or less obliged to follow this model. The sequence of events that leads to the signing of such ‘accords’ therefore makes the mutuality implied by terms like ‘accord’ and ‘agreement’ questionable.
The question is, to what extent do the governments of the region represent the interests of the disenfranchised, who mostly have not benefited from neoliberal policy? The momentum towards consolidating neoliberalism further was slowed in the past few years partly as a result of social movements, representing the majority who have been left out, pushing leftist political parties in the region to take state power in countries including Brazil, Argentina, Venezuela, Bolivia and Ecuador. This had a direct impact on the FTAA negotiation’s progress, and ultimately, failure.
Brazil in many ways embodies the many possible positions of countries in Latin America these days vis-à-vis US and transnational corporate power. Brazil led the formation of the G20, a group of Global South countries that forged an alliance to further their agricultural interests in the WTO talks, previous to the Cancún ministerial on August 20, 2003. This represented the first widely visible effort by Global South countries to forge strong negotiating positions, which enabled them to more effectively resist pressure from the US and the EU during the Ministerials, and to represent the views of the South. Bringing together many of the largest economies of the Global South, including China, India, Brazil, México and South Africa, along with 14 other countries , the G20’s legitimacy came partly from the fact that it represented “almost 60% of the world population, 70% of world’s rural population and 26% of world’s agricultural exports” (G20 2006). To many, this was an exciting example of the Global South directly confronting the hegemony of the US and the EU. Yet Brazil later was criticized for acting only in the interest of large agricultural interests to the detriment of small farmers, in addition to “selling out” and being co-opted by the US when it negotiated the “July framework” that kick-started the WTO again, when many thought the institution was in need of deep reform (Bello and Kwa 2004).
Despite the complexities of global trade talks, in which the interests of the Global South are varied, and not always aligned with each other against the dominant US and EU, the model of hemispheric integration put forth by the US, modeled after the NAFTA, remains that against which alternative proposals are put forth by groups including the Hemispheric Social Alliance. As discussed in this section, this model has more to do with expanding investor rights than trade in goods and services. It aims to lock in many of the neoliberal policies imposed up until this point by the World Bank and IMF, and to a certain degree by the WTO. It is precisely this “locking-in” that has inspired the ire of social movements who defend their national sovereignty, who hope to determine their own futures through democratic processes. I will now describe the rules allowing this lock-in, along with an overview of the nine negotiating areas of the FTAA.
The NAFTA/FTAA model of regional integration
What is actually included in the proposed FTAA that inspired the Hemispheric Social Alliance to organize continent-wide opposition? Details of the negotiations were not known until the text was made public in 2002, but the Alliance understood that NAFTA would be the model the US pursued. FTAA negotiators actually combined aspects of the WTO, for example the intellectual property and service provisions, with aspects of NAFTA. The draft generally included which ever of the provisions was the most far-reaching (Barlow and Clarke 2003). The following overview, organized according to the nine negotiating areas, conveys the essentials of the FTAA, but is not comprehensive . References to the FTAA obviously refer to the proposed FTAA. However, while the FTAA is currently not under discussion, the majority of provisions included here accurately represent all other FTAs negotiated since NAFTA.
According to an analysis co-drafted by Fundación Solon (Peru), Social Watch (Uruguay), and Global Trade Watch (US), the overarching goal of the FTAA is,
“to eliminate the maximum number of government policies regulating trade, investment and finance, corporate conduct, food safety and other public-interest regulations, while putting in place new property rights and protections, [a]s well [as to] commodify elements of the domestic economy not fully available to [companies’] exploitation, such as public services and government expenditures of tax revenues” (Solon et al. 2004: 263).
This agenda is the “unfinished business” of the Uruguay round of the GATT, where the US faced resistance from Japan and the EU, and from the defeat of the Multilateral Agreement on Investments at the first meeting of the WTO in 1996 and at the OECD in 1998 (Solon et al. 2004: 264 and Barlow 2001:6). However, the proposed FTAA mirrors the full reach of NAFTA, where “Canada and especially México had considerably less leverage” and the US was able to include many radical, new provisions never before seen in so-called “trade” agreements (ibid: 264). Still facing opposition in the WTO talks, the US aimed to impose their vision on the Western hemisphere through the FTAA.
Nine Negotiating Areas of the FTAA
1. Investment: Considered the “very heart and soul of NAFTA” (Barlow 2001:11) this area includes a broader definition of investment than previously used in trade agreements, giving a monetary value to anything that can be bought or sold, converting areas that were considered part of the public domain, like social services or forests, into commodities that can be “invested” in for the purpose of making a profit. Several legally binding rules enforce this definition:
-Investor-to-State Dispute Resolutions: The most controversial new rule, included under Chapter 11 of NAFTA, provides the legal basis for the first time in any agreement in the world (not even in the WTO) for foreign “investors”, ie corporations to sue states to claim financial compensation if a national, state or local law (called a non-tariff barrier to trade) causes or threatens to result in lost profits, giving foreign corporations more rights than domestic ones. This provision has already caused governments to reconsider, and many times to drop new proposals for regulations, for fear of the financial burden of compensation if sued.
-National treatment: This is the requirement that foreign investors/corporations be treated at least as well as domestic ones, including in the government provision of services. Most government services were protected from national treatment challenge under NAFTA, but the FTAA and other FTAs aim to go further. If a domestic company has a contract, then foreign “investors” have the same right to those contracts. Governments are prohibited from rules that privilege local businesses.
-Performance requirements, used by citizens to put conditions on foreign investments, are limited. For example, requiring governments to source products locally, or to ban products made under repressive regimes or in sweathops, could be prohibited.
-Regulatory takings: expands compensation to corporations for “takings”, normally interpreted as a physical property, but expanded to include any action that directly or indirectly limits the value of an investment.
2. Services: Never included in trade agreements before the WTO, "services" covered under GATS and the FTAA include: water, health care, home care, dental care, child care, education - primary, secondary and post-secondary, museums, libraries, insurance, tourism, postal services, and transportation. Meant to be compatible with the WTO GATS agreement, and extend the NAFTA model on services, which seeks to permanently “lock in” the deregulation and privatization mandated by IMF loan conditionalities. This is possible due to the above investment rules, which when applied to public services means foreign investors are guaranteed the right to privatize, backed up by the threat of trade sanctions, or Investor-to-State suits. This is unprecedented: “For the first time in any international trade agreement, transnational service corporations will gain competitive rights to the full range of government service provisions and will have the right to sue any government that resists for financial compensation” (Barlow 2001:11). It also means that it would be virtually impossible to reverse privatization, resulting in the defunding of the public sector, making privately provided services the only option.
3. Competition policy: Also fairly new area of trade agreements, the goal is to “reduce or eliminate practices that appear to protect domestic monopolies”. Monopolies, in this context, refer not only to private sector corporations, but services provided by the government. While this could help to break up giant TNCs, the result is often that foreign-based TNCs establish new monopolies. (Barlow 2001:19).
4. Market Access: mandate is to eliminate all barriers to accessing markets, including border taxes/tariffs and non-tariff barriers, for example rules, policies and regulations (e.g. environmental and public safety laws) than may impact trade. FTAA rules expand beyond NAFTA, requiring the elimination of all tariffs on all imports within 10 years. Investment rules apply to market access as well, for example foreign, for-profit corporations are permitted to challenge government service “monopolies” by demanding “national treatment”.
5. Agriculture: Mandate is to rapidly remove all tariffs and programs that support domestic farmers (although the US has attempted to exempt certain crops, including beef, sugar and soy (Solon et. al 2004) Takes the “culture” out and replaces it with business; rules offer no recognition of the “social functions of extreme than the WTO (where agriculture has proved the primary sticking point, preventing the WTO from moving forward). Under the FTAA, national food security programs can be challenged as trade barriers; requires the removal of subsidies for exports and; rules on food aid programs
6. Intellectual property rights: Removes ability of government to limit patent protections, giving corporations long-term monopoly control. This results in higher prices for life-saving drugs, and has impact particularly on generic medicines. Rules also grant corporations the right to patent seeds. US wanted to require countries to remove regulations on the sale, importation or production of GMOs in FTAA, to replace subsistence farmers’ way of life with expensive, patented, genetically engineered farming methods
7. Government procurement/purchases: Aims to open all government contracts, at federal, state and local level, of services and goods, to competitive bidding from other FTAA countries’ corporations, in order to expand access to these markets. Goes further than WTO. Restricts measures that favor local or national suppliers or community investment rules.
8. Subsidies, Anti-dumping and Countervailing duties: Area’s proposals are less clear, but uses WTO rules as basis, which set limits on what countries can and cannot subsidize. However, the WTO and FTAA exempt subsidies to the military sphere to “protect security interests”, allowing the US arms market to expand its market in Latin America.
9. Dispute settlement: Establishes economic punishment for the violation of the above rules. The FTAA incorporates state-to-state model from the WTO, and investor-to-state model from NAFTA. Both systems rely on dispute panels of appointed, not elected, “experts” whose rulings aim to determine whether a violation of the trade rules has taken place. Proceedings are secret, and take place behind closed doors. “Violations” are generally laws regulating public health and safety and environmental concerns. If a country loses a dispute, they have three choices: they can make the disputed law or regulation conform to WTO rules. ie overturn the law, pay compensation in cash to the country who brought the suit, or face economic sanctions. Investor-to state cases allow for compensation to go directly to the corporation that brings the suit. (Barlow and Clarke 2003: 19).
Implications and Impacts of the FTAA Model
Opposition to the US model of regional integration by the Hemispheric Social Alliance has been consolidated since they formed in 1997, as evidence of its impacts on North America has accumulated. Many studies have been published documenting these effects, including by the Alliance in 2003. In this section I will briefly review some of the data related to NAFTA’s effects, in addition to Latin America’s development more generally, over the period in which neoliberal policies have dominated. The trends overall indicate that while “trade” agreements result in greater cross-border investment, and, in some cases economic growth, only a small minority of the population benefits.
While it can be difficult to isolate impact of NAFTA from other neoliberal policies, some of which were already in place, “What is important is that they reinforce each other and their effects are cumulative. NAFTA is both an integral component of this policy package and also a mechanism for locking it in.” (Campbell 2006: 53). According to Campbell, the Executive Director of the Canadian Centre for Policy Alternatives, NAFTA is about “removing restrictions on the mobility of capital…it is an economic constitution, conferring enforceable rights on investors, limiting the powers of government, and making it extremely difficult for future governments to change” (ibid). The chief Mexican negotiator of NAFTA, Dr. Herminio Blanco, made his government’s intentions clear, declaring, “The best national plan is not to have a national plan and to let the market shape the best México possible” (Arroyo 2003: 3).
NAFTA’s Legacy I: Workers
NAFTA was sold to the US public with promises of more, better-paying jobs. This was based on the belief that exports would grow faster than imports, supporting job creation, and the claim made by the USTR that export-related employment paid better than the national average (Scott et. al. 2006: 12). Yet the opposite has happened. While exports grew and created close to one million jobs, a huge trade deficit has resulted from much greater growth in imports from Canada and México. This has caused the trade deficit with México and Canada to increase from $18.8 billion in 1993 to $126.2 billion in 2004 (ibid.:5, based on Bureau of Labor Statistics and Census Bureau data). With the current account deficit with México and Canada setting new records, the promises of trade surpluses made by NAFTA’s boosters will soon represent “a $1 trillion mistake” (McMillion 2005).
US workers paid a high price for NAFTA. According to Robert Scott of the Economic Policy Institute, two million jobs were displaced by imports from 1993 - 2004, which, contrary to the USTR’s claims, typically earn higher wages than those created by the export sector. Subtracting the jobs maintained or created by exports to Canada and México, the net jobs displaced totaled 1,015,290 (Scott et. al. 2006:3-9). Two-thirds of US jobs lost were in manufacturing, which pay above average wages, and employ a larger percentage of the workforce with only a high-school education (ibid). Today, “the US has fewer manufacturing jobs…than it had in August 1942” (McMillion 2005). This can be attributed to factors beyond NAFTA, certainly, however the outsourcing trend was “certainly accelerated” by NAFTA (Scott et. al. 2006: 22). Evidence to support this claim includes the fact that the trade deficit with Canada and México accounted for one-fifth of the total goods deficit (ibid: 24).
Downward pressure on US wages was partly a result of NAFTA, as the workers displaced by rising imports were forced into lower-paying jobs; workers with a high-school degree or less were hardest hit (ibid:12). Unionization rates also declined as a result of losses in the manufacturing sector, where unions were strongest, and shifts to the service sector, where unions are weakest. Studies have shown that 15 – 25% of growth in wage inequality in the US can be attributed to trade (ibid: 24). After gaining 80% in the previous period, from 1973 – 2000 US median wages have remained flat (Global Trade Watch 2004b).
Promises to Mexican workers were the same: NAFTA would increase the number of well paying jobs. However, even though exports increased tremendously, resulting in job creation, they did not keep up with population growth, thus there were nearly 50% fewer jobs created than were necessary to meet the needs of people entering the workforce (Arroyo 2003: 19). The manufacturing sector, known as ‘maquiladoras’, accounted for the vast majority of growth in the export-sector, however in 2003 there were 9.4 % fewer jobs in this sector than before NAFTA (ibid: 20). Some argue that since this sector already existed previous to NAFTA’s signing, the only reason it grew during NAFTA was because of the peso devaluation in 1994 (Salas 2006: 39). In any case, the quality of life of the mostly young women who found jobs in maquiladoras did not necessarily improve, as they faced stressful working conditions, including sexual harassment and other forms of abuse, and their rights to vacation, Christmas bonuses and social security are frequently denied (Arroyo 2003: 19, Spieldoch 2004: 4).
It appears contradictory that huge increases in exports would not lead to growth in the Mexican economy. Alberto Arroyo, researcher at the Universidad Autonoma Metropolitana and member of Mexican Action Network on Free Trade (RMALC) , argues that the explanation lies in the fact that NAFTA greatly increased intra-firm trade, that is, nearly all of the components of exports are imported goods, made by the companies themselves. Thus the export-oriented economy that NAFTA reinforced did not generate industry outside of the maquila sector, causing stagnation, despite the creation of a trade surplus with the United States . Even though foreign direct investment increased fourfold during NAFTA, it did not translate into higher quality jobs (Salas 2006), and it was highly concentrated in already highly developed areas, resulting in the abandonment of rural areas (Arroyo 2003: 12). Consequently, according to Arroyo, “The neoliberal economic strategy, and within it NAFTA, have resulted in the lowest rate of economic growth compared with any other economic strategy carried out by the country during the twentieth century” (2003:18). Indeed, according to ECLAC, the average annual GDP growth from 1980 – 2003 never surpassed 4%, whereas it was between 6 and 7% from 1950 – 1980; per capita GDP growth rates have been less than half during the NAFTA years than in the period from 1960 - 1980 (Salas 2006: 35-36).
Jobs created in México in the period since its increased economic opening can be characterized by their relative precariousness, meaning they lack benefits, or work with only a verbal contract (accounting, in 2004, for 43% of total wage-earning workers in México) (Salas 2006:43). Many workers are only able to find work in enterprises with 5 or fewer workers, that typically pay low wages, and often go out of business during economic downturns (ibid: 45). According to Carlos Salas of the Institute of Labor Studies and El Colegio de Tlaxcala, in México “job creation has been left to fate; there is no employment policy other than that of low wages” (ibid).
Similar promises were made in Canada, although previous to signing the trade agreement with the US in 1989, Canada had much stronger social welfare state than the US or México. Thus Canada’s workers were seeking a more diversified economy, higher standards of living and the ability strengthen their unique “social model” (Campbell 2006: 54). Results reflect México’s experience in that exports and manufacturing both grew at very high rates, but increased imports of inputs offsets the actual gains in employment related to exports. Diversification has revealed itself as a false promise, as exports of more knowledge-based industries fell a quarter (ibid: 55). Following the overall trend, high-wage employment has decreased (in 1997, 47% of plants in existence in 1988 had closed), while lower-wage, non-union jobs in the service sector offer the only hope of employment to many workers displaced by trade. Inequality and wealth disparity rose during the free trade era in Canada, with average wages of the top 1% increasing 64% as compared to an only 8% increase for the rest of the population; Incomes of the bottom 20% fell 7.6% from 1989 – 2004 (ibid: 57). The previously strong social safety net was significantly eroded in the late 1990s; spending cuts brought budgets down to 1940 levels (ibid: 58). Women workers, the most vulnerable, were the hardest hit (Spieldoch 2005).
NAFTA’s Legacy II: Farmers, Food Production & Migration
NAFTA (combined with the debt crisis and Structural Adjustment Programs) caused a massive restructuring of the Mexican economy, shifting the top source of employment from the agricultural sector (which persisted through the 1990s) to retail trade and manufacturing today (Salas 2006: 43). As a result, Mexican farmers, particularly corn farmers, have paid the highest price of anyone for NAFTA: one-sixth of the people who worked in the agricultural sector in the early 1990s have been displaced (ibid: 49). Over one million corn producers lost their jobs between 1991 and 2000 (ibid: 43, Global Trade Watch 2004a). Based on my own experience, I would argue that the devastating impact of NAFTA on farmers is the most oft-cited reason for opposition to the US model of regional integration, as well as the WTO (see Figure 2.7).
To pave the way for vast restructuring of México’s agricultural sector under NAFTA, in 1992 President Carlos Salinas pushed through reform of Article 27 of México’s constitution. A cornerstone of the Mexican revolution that re- distributed land to peasants and indigenous communities, Article 27 created ‘ejidos’, communally-held land, that could not be leased, sold or owned by individuals; foreign ownership was banned (Wallach and Williams 2005). The ejido system created a livelihood for millions of small-scale farmers; for example, 90% of corn farmers grew their crops on less than five acres (ibid). As a result of the reform, farmers laden with debt were pressured to sell, and hundreds of thousands of hectares of land were opened up to multinational companies, eager to profit from México’s vast natural resources (Wallach and Williams 2005, Global Trade Watch 2004a). The World Bank further entrenched the restructuring with a large loan targeted at privatizing the state-owned infrastructure, and cutting government spending on subsidies and other support programs (Wallach and Williams 2005). The share of México’s budget dedicated to agriculture dropped over 50% from 1994 – 2001 (Gomez and Rindermann 2003: 26).
The concentration of land into fewer hands in México is part of a global trend, pushed for by mega-corporations like Cargill, Archers Daniel Midland and ConAgra, whose profits have exploded, while small-scale farmers disappear. Neoliberal rules orient production away from domestic consumption and towards exports. Thus, under NAFTA all three countries were forced to eliminate quotas, or limits on how much was imported, policies whose goal had been to ensure that food supply met demand and fair prices. Price floors were also eliminated. Prices paid to farmers fell as a result, hurting small farmers, but benefiting agri-business, who could export large amounts of commodities cheaply, and make large profits (Global Trade Watch 2004a). Trade liberalization in agriculture also means that US farmers have had to compete with a surge in imports, adding to the large trade deficit in the US, and causing further downward pressure on prices. Many small farmers have not been able to survive: from 1995 – 2002, 38,310 small farms were lost in US (ibid). US subsidies go mostly to large farms, which deal with the crisis in overproduction by dumping crops in México.
The supposed benefit of increased competition is lower prices for consumers. However, despite drastic drops in prices for farmers – for example, corn prices dropped 70% in México – people are paying more for basic goods (Global Trade Watch 2004a). The price of corn tortillas rose 50% in México City, and in the US, food prices overall rose 22% from 1994 – 2002 (ibid). The National Union of Autonomous Regional Campesino Organizations (UNORCA) issued a final declaration of the “Corn, Tortillas and Food Sovereignty” summit, which took place in January of this year, explaining some of the multiple factors causing increased consumer prices. The dismantling of regulations mandated by NAFTA allows transnational corporations such as Cargil, ADM, and Monsanto, who control most of the corn market in México, to manipulate the price of corn so that the end result is a fatter pocket for the few that buy (sell and export – import corn), and a much thinner pocket for those that produce the corn. All of these corporations are beginning to invest in ethanol-based fuels that require yellow corn. This demand has lead many farmers to produce yellow corn instead of white corn which is used to make tortillas. This has lead to a shortage in white corn, therefore increasing its price, and the price of tortillas.
Market speculation compounds the problem; “The current increase in the price of tortillas, resulting from the increase in corn prices, is caused by corporate speculation, and the Mexican government’s lack of regulatory planning for the corn market” (National Union 2007). Agro-giants were able to buy corn at low prices then sell to monopolistic Mexican-based corn flour companies with a profit of roughly 80% - 120%; “They bought corn in the fall and winter of 2005 to 2006 from producers in the states of Sinaloa and Tamaulipas at 1,450 pesos a ton and in the spring and summer of 2006 at 2,200 pesos, but by the end of December they were able to command 3,000 to 3,500 pesos a ton, leading to an explosion in the price of corn tortillas” (National Union 2007). UNORCA summarizes the problem, stating, “The implementation of NAFTA’s open market policies, the elimination of CONASUPO (the National Company of Popular Subsistence), the actions of the State Corn Market Regulatory Board, and the formation of policies based on the principles of comparative advantage have left the market for the Mexican population’s principle food source and the principal crop of campesinos in the hands of a small number of transnational corporations” (National Union 2007).
This consolidation under NAFTA has created a greater dependency on imports in México, resulting in a “major outflow of foreign currency” (Gomez and Rindermann 2003: 29). As its food dependency increases (particularly on imported corn), México is losing its food sovereignty, and has spent 78 billion on food since NAFTA (ibid.). On January 21, 2003 over 100,000 farmers marched in México City with the rallying cry, “We Can’t Take it Anymore” to protest NAFTA, the Mexican government’s refusal to renegotiate the treaty, and transnational corporations (ibid: 24).
There exist many other, related concerns to the changes in food production that I cannot explore in depth here, including environmental, biodiversity, health and cultural issues, stemming from the importance of farming as a way of life. However, it is important to briefly address the connection to migration issues.
The dumping of corn produced at less than the cost of production caused massive internal migration in México, where choosing to live in rural areas is becoming more and more difficult, however finding a job in the overcrowded cities proves challenging as well (Gomez and Rindermann 2003). Many choose to risk the dangerous crossing of the increasingly militarized border to their Northern neighbor, where immigrants are often treated as criminals. It is estimated that “unauthorized immigration…increased sharply, more than doubling between 1990 and 2000, with the majority of growth seen after NAFTA’s implementation” (LCLAA and Public Citizen 2004: 5). Once in the US, undocumented Mexican immigrants are particularly vulnerable to exploitation by employers, and farmworkers are one of the most poorly paid sectors in the US, working almost exclusively without any benefits (Speildoch 2004: 6).
Yet migrant workers were left out of NAFTA; “Along with the US government, México has declared that NAFTA, by itself, will solve the Mexican emigration problem in the long term…under the assumption that free trade itself will permit the long-term generation of employment and improvement in living conditions of potential migrants, keeping them in their country” (ASC 2002a: 50-51). The ASC argues that “the elite technocrats who support” neoliberalism, have the tacit approval of local and national officials who agree to impose restrictive immigration measures (ibid).
The US is “attempting to regionalize and globalize” its immigration policy. For example, laws passed in 1996 mandated that pre-inspection stations be installed in the airports of the countries who export the most migrants, thus placing US government installations in other countries. (ASC 2002a: 50) Since the late nineties, the US has also pressured the governments of North and Central America to control the flow of migrants in regional immigration conferences. The 2nd Summit of the Americas incorporated immigration into its final declaration, emphasizing each nation’s sovereign right to implement its own laws, however the US model has been successfully imposed in many places, particularly since 9/11.
Before the terrorist attacks on the US, a new migration policy was being discussed, emphasizing temporary work visas and a yet to be decided ‘regularization’ of the 3.5 million undocumented Mexican migrants in the US. However, little progress has been made towards this goal, although immigration legislation has been before the US Congress for several years in row, motivating a new movement in the US. In the face of broadly prevalent racist attitudes towards Latinos, including the building of a fence along the US-México border, in 2006 and 2007 millions of migrants, mostly Latinos, organized massive marches throughout the country to demand fairness and respect.
Domestic and international migration flows continue to rise, while neither the US model, nor the South American models of regional integration (e.g. Mercosur and Andean Pact) address the issue of labor migration (ASC 2002a: 52). Remittances, the monies that immigrants send to their families in their home countries, are crucial to sustaining the livelihoods of people in poor countries. This cycle is explained well by William Robinson, a sociologist:
“Immigrant labor is exported across Latin America to intensive zones of accumulation and to the global economy, to the United States, Europe, and beyond. In turn, that immigrant Latin American labor sends back remittances. The amount of those remittances is vast, and they can't be underestimated. So you have $40 to $50 billion being sent by immigrants all over the world, particularly from the US and Europe, back to Latin America…In many countries remittances are the number one source of foreign exchange, which means that these countries are inserted ever-deeper into global capitalism.” (Interviewed by Brabazon and Brogan 2006: 6)
After NAFTA, women headed the households of 43.5% of families receiving remittances in the rural sector in México (Spieldoch 2004: 7).
NAFTA (and the WTO’s) Legacy III: Democracy
One of the primary claims made by NAFTA and FTAA’s promoters is that these agreements strengthen democracy, based on the belief that unfettered markets, ie economic “freedom” leads to political “freedom”. Critics assert that instead, democracy has been significantly undermined by neoliberalism, through both the WTO agreements, and those trade agreements pursued by the US (see Figure 2.8).
One area of concern is the way in which agreements are negotiated and decided upon. First, governments have very unequal representation in the negotiations, with the US participating with the support of much more staff, legal experts and lobbyists than other countries. Second, mechanisms for ensuring participation of civil society have proved to be empty gestures, resulting in no increased dialogue over the model of trade and investment. Negotiations are secret; even seeing a copy of the FTAA text required a campaign (which succeeded in 2002). At the same time, US business interests have direct access to the negotiations through the Trade Advisory Committees (USTR 2007, Barlow 2001: 4). Thus, public debate has been limited.
In the US this is compounded by the ‘fast-track’ authority (also known as ‘Trade Promotion Authority’, TPA), which limits the number of hours Congress can consider trade agreements once they reach the floor, and allows only full approval or total rejection, excluding the possibility of amendments. TPA legislation, which is renewed every five years, stipulates that Congress make recommendations to the President for future trade negotiations, in exchange for a commitment to support the result, unless Congress-members feel those recommendations have not been respected. Critics contend that Congress should maintain more control over trade policy, and that these documents, which are hundreds of pages long and have far-reaching repercussions, require greater attention than fast-track allows once agreements come up for a vote. Many US Congressional Representatives admit that they never read NAFTA before voting for it (Global Trade Watch 2007). Battle-lines are currently being drawn, as fast-track is up for renewal this summer. For critics of neoliberalism, giving Bush authority to pursue the same ‘free-trade’ policy is considered a recipe for driving the country off a cliff (see Figure 2.9).
Critics of the US model of integration also caution against placing crucial policy decisions out of the reach of citizens, and democratic accountability. Arroyo, writing in a Hemispheric Social Alliance publication, claims that the aim of trade agreements is “to convert the neoliberal model into supranational law” (Arroyo 2003: 2). Public Citizen has actively campaigned on this issue, arguing that trade pacts undermine state sovereignty, and many state legislators and governors have agreed, voicing their concerns in letters to the USTR . The ‘investor-state’ provision, known as Chapter 11 in NAFTA, but also included in CAFTA and other, bilateral agreements, is the primary mechanism that can, and has been used to undermine state laws. As described in the section above, investor-state rules are designed to allow corporations to sue governments, at the state, municipal or federal level, if their laws are deemed unfair barriers to trade, or if their ability to “invest” or make profits is affected. Thus, rules set by state (and other level) officials conditioning government purchasing can be challenged, threatening citizens’ ability to require governments to purchase “sweat-free” goods, or to buy from local suppliers, for example (Global Trade Watch 2007). Services provided by the government are also under threat of investor-state suits, if the government resists privatization.
Many investor-state cases have already been brought under NAFTA , with potential “damages” in the billions of dollars, paid by governments to for-profit corporations. Examples of laws and regulations that have been challenged so far include: challenges to Canadian environmental regulations, California’s public health and safety regulations (banning fuel-additives that seeped into groundwater supplies), UPS challenged Canada’s public mail-service, a “buy American” law meant to protect the US steel industry was challenged, bans on certain additives in fertilizer, and Mexican subsidies of sugar (Hansen-Kuhn et. al 2003: 71-72). There is evidence that the threat of expensive law-suits under Chapter 11 and related provisions have already had a chilling effect on law-making and regulation of industry (ibid: 70). If a state is sued, that state’s elected officials have no standing before the trade tribunal that hears the case. The state must rely on federal government officials, i.e. those who may have negotiated the agreement that allows for investor-state suits, to defend their challenged law. If the corporation wins the dispute, the law must be overturned, or the government faces ongoing fines or sanctions, and the federal government must do everything in their power to force states to comply with rulings (Global Trade Watch 2007).
Disputes involving corporate challenges of countries’ investment rules have proliferated in recent years, according to the United Nations Conference on Trade (UNCTAD) (Mekay 2004). UNCTAD has documented the number of countries facing arbitration over their investment rules, whether those rules are included in trade agreements, as is the case with NAFTA, or in other bilateral or multilateral treaties. The 2004 report found that 50 governments, the majority in the developing world, were involved in these disputes brought by companies suing them for lost profits. Regardless of who wins the case, arbitration is very costly, due to legal fees. Many disputes are brought before the World Bank Group's International Centre for Settlement of Investment Disputes (ICSID), based in Washington DC, where the number of cases went from only three at the end of 1994 to 106 by the end of 2004 (ibid).
One of the most controversial aspects of these radical new investment rules is that the cases are heard before unelected trade bureaucrats, and their proceedings take place behind closed doors. “Unless the parties agree otherwise, the hearings are held entirely in secret, with no obligation to release a written record, to allow any type of participation of private citizens, NGOs, or state or local government officials, or even reveal the details of the rulings” writes Karen Hansen-Kuhn et. al, also in an ASC publication (2003: 69). Attempts have been made to limit these rules, for example a “clarification” was issued by the tri-lateral NAFTA Commission on July 31, 2001, not to limit the ability of corporations to sue, but to increase the transparency of the process. However, this clarification, allowed for by the NAFTA, is not an actual amendment of the agreement, and therefore has carried little weight. Freedom of Information requests have gone unanswered in one case filed by Public Citizen (ibid: 70). The US Congress also attempted to change the investor-state provisions in future trade agreements by conditioning approval of fast-track authority, however the USTR has ignored this instruction, and México has included the provision in its bilateral agreements with other countries (ibid: 74).
In an unprecedented move, three governments recently announced their intention to pull out of the ICSID. In a joint statement, the leaders of Venezuela, Bolivia and Nicaragua declared, "[We] emphatically reject the legal, media and diplomatic pressure of some multinationals that...resist the sovereign rulings of countries, making threats and initiating suits in international arbitration" (Democracy Center 2007). It remains to be seen whether these countries will be able to completely withdraw from the ICSID due to legal obligations, but their challenge to the power of multinational companies is being watched with much interest around the world.
Neoliberalism’s legacy in the Americas
“Inequality is as Latin American as good dance music and magical-realist fiction. Like those other regional products, it thrives.” The Economist (2003)
Is inequality in Latin America and the Caribbean inevitable, a product of the “culture”, like books and music, as The Economist (2003) suggests in the above quotation? Many would find this suggestion offensive, and instead trace the roots of inequality to the legacies of colonialism and imperialism. A World Bank study that included household surveys of 3.6 million people, acknowledged “unequal distribution of resources that characterizes the region today follows a pattern set with specific traits of European colonization in the region” (World Bank 2003). In other words, neoliberalism has done little to undo the concentration of resources, especially land, in very few hands, a key legacy of the Conquest (ECLAC 2004: 62). Over a century of US intervention compounded the inequalities produced by colonialism, ensuring exploitation of natural resources, backed by US military might and dictators friendly to the US.
Today Latin America is widely recognized as the most unequal region in the world (World Bank 2003, Hoffman and Centeno 2003). Latin America is set apart by the concentration of wealth in the top ten percent: the richest one-tenth earns almost 50 percent of total income, while the poorest tenth earns less than 2 percent (World Bank 2003). While inequality in the region has deep roots, implementation of neoliberalism via Structural Adjustment Programs (SAPs) and other measures has resulted in no major improvements in the welfare of the majority. The UN Commission, ECLAC, (Economic Commission for Latin America and the Caribbean) estimates that the number of poor increased from 200 to 211 million in the 1990s (ECLAC 2003:18), equivalent to roughly 40% of the total population. Sixty-two million people, 14% of the total population of Latin America, live in extreme poverty; according to the World Food Programme, they suffer from hunger (Spieldoch 2005: 13). The crisis in the 1980s resulted in erosion of the middle class throughout the region, who lost gains made in the previous decades (Hoffman and Centeno 2003: 366). While it appeared that Latin America might recover from the “lost decade” in the 1990s, ECLAC’s in-depth study concludes, “the region’s economic performance in the 1990s did not significantly offset the negative trends of the 1980s” (ECLAC 2004: 22). The region suffered two major recessions from 1998 – 2002, the first as a result of the severe impact of the Asian economic crisis in 1997, then Argentina’s economy collapsed in late 2001, causing repercussions throughout the region, and throwing half of what was once the wealthiest nation in Latin America into poverty (Faux 2002, Wallach and Woodall 2004, Spieldoch 2005). While steady economic growth has been reported by ECLAC since 2002, some interpret this as a “rebound” effect, warning that all is not “rosy” in Latin America (Cevallos 2006).
An innovative study called the ‘Structural Adjustment Participatory Review Initiative’ (SAPRI) was launched in 1997 to engage civil society in a large-scale collaboration, with the active participation of the World Bank, to assess the impact of neoliberalism and SAPs throughout the world. Studies were carried out in Bangladesh, Ecuador, El Salvador, Ghana, Hungary, Mali, Uganda and Zimbabwe (SAPRIN 2002). It seemed surprising that the World Bank was willing to participate, given that SAPRI involved NGOs who had been waging high-profile campaigns to reform the Bank. However, then-president James Wolfensohn admitted in 1999, "At the level of people, the system isn't working" (Faux 2002). Hundreds of organizations around the world spent several years developing their methodology and carrying out their assessments. When they came to conclusions that were quite critical of neoliberalism, the World Bank distanced itself from the final report, which was damning. It claimed, “in the countries examined by SAPRIN, reforms have…simply increased the profit margins of lending institutions”, concluding:
“The intransigence of international policymakers as they continue their prescription of structural adjustment policies is expanding poverty, inequality and insecurity around the world…Their effects, particularly on the poor, are so profound and pervasive that no amount of targeted social investments can begin to address the social crises that they have engendered. Only the restructuring of the productive sectors through more appropriate public policy can ensure that economic opportunities, resources and benefits accrue to all segments of the population…The findings consistently centered on the regeneration of domestic economic activity and the creation of gainful employment – both currently being destroyed systematically by adjustment programs – as the basis for reducing poverty and inequality and stimulating sustainable development” (SAPRIN 2002:24).
Developing countries who did not fully adopt the neoliberal model, such as China, India, Malaysia, and Vietnam, fared better than those who were forced to implement SAPs (Wallach and Woodall 2004: 164).
Inequalities have also grown within the US. A recent study concluded that wealth is the most concentrated it has been since before the Depression, with the richest 300,000 people receiving 440 times the income of the bottom 50% of people in the US (Johnston 2007).
We can conclude that the legacy of neoliberalism has been severe inequality and suffering for the majority of the people of the Americas. The results of almost four decades of the development model premised on economic growth have failed to deliver the promised benefits, allowing only a small minority to prosper. Neoliberalism has not led to long-term growth in Latin America. While there has been growth in some sectors, such as in the export-processing zones in post-NAFTA México, it has not translated to improved quality of life for those who work there, nor in improved environmental health. Furthermore, the causal link made over and over by “free-trade’s” cheerleaders, between trade liberalization and export-orientation, and decreased poverty, is disproved by the evidence (Spieldoch 2006: 13, Wallach and Woodall 2004: 167).
The failures of neoliberalism have resulted in widespread disillusionment in this paradigm. While shifts to more democratic forms of governance in Latin America over the past two decades have created important openings for change, the ability of leftist political parties to enact new policies has been restricted by neoliberalism, forcing a radicalization of politics, as can be witnessed today in Venezuela and Bolivia (Bello 2006). Supporting this trend, the Hemispheric Social Alliance formed in defiance of cynicism, determined to fight for a better future:
“We refuse to accept the market as a god that controls our lives. We do not accept the inevitability of the model of globalization…Behind the neoliberal economic measures lies not just a political and economic strategy but an unacceptable underlying conception of the human being and a culture that must be eliminated.” (ASC 2002a: 10)
In the next chapter I describe the Hemispheric Social Alliance’s proposal for alternatives to the US model of regional integration, a key element in their strategy for disabling both the material and discursive force of neoliberalism.