| Presentation before the Standing Committee on Foreign Affairs and International Trade on the FTAA April 27, 1999-- Toronto, ON
Presenters:
We welcome the opportunity to present today before the standing committee on Foreign Affairs and International Trade in relation to it’s study of Canada’s priority interests in the FTAA process. We were glad to see Minister Marchi stating in his remarks before the committee in early February that "the negotiations cannot be left to only a few people in back rooms, but needs to engage the whole of society and governments at all levels." We are aware that you have heard many testimonies to date on the FTAA, certainly a lot of detail about what the government should and should not do in these negotiations. You have heard from the Minister, many experts, academics, various department staff and not to mention the many people who presented on your tour east of the country, in Ottawa at the roundtables last week and later this week as you head west. We are here to say that Canada can and needs to take a leadership position in these negotiations. It needs to engage the social agenda more formally and we regard this as part of the trade agenda. This process that we are embarking on needs to be democratic, taking into consideration our broad set of interests, it needs to be transparent with civil society participation in the negotiations. We need a balanced economic relationship. At the moment we feel this balance has been destroyed: we prioritize trade over everything else. The end result should be that the majority of the people of the hemisphere, and of the world benefit. We hope that our remarks will be informative, give you substance and help orient your final report and recommendations. About us: Common Frontiers is a multi sectoral working group. It provides national organizations a forum to discuss, coordinate and work together to develop an alternative to the economic model of integration in the Americas. We do this through a combination of research, analysis and action in cooperation with labour, human rights, environmental, church, development, anti-poverty and social justice organizations. Common Frontiers grew out of the experience gained by organizing around the Canada-US Free Trade agreement, NAFTA and now the FTAA. The ability to build links and work in solidarity with civil society in Latin America and the US has been crucial. The result has been an extraordinary experience in cross border social movement building. To give you an idea of who we are I will list off some of the groups most active on our board: the Canadian Autoworkers Union, the Canadian Environmental Law Association, the Canadian Labour Congress, the Communications, Energy and Paperworkers Union of Canada, the Ecumenical Coalition for Economic Justice, the Inter-Church Committee on Human Rights in Latin America, the Center for Human Rights and Democratic Development, Inter Pares, the Maquila Solidarity Network, Oxfam Canada, the Steelworkers Humanity Fund, Low Income Families Together just to name some. We also work very closely with our counterparts in Quebec the Reseau Quebecois sur l’integration continentale. Our hemispheric partners include: The Mexican Action Network on Free Trade, the Alliance for Responsible Trade in the US., the Alliance Chile for Just and Sustainable Trade, the Brasilian Network for a People’s Integration and the many organizations that belong to and are working towards building the Hemispheric Social Alliance. This Alliance could be described as a movement, a space to gather and build a broad based support to share information and knowledge, plan activities, strategize and work towards an alternative vision for the Americas. The idea of building an alliance was first agreed upon at our parallel Social and Labour forum along side the Trade Ministerial meeting in Belo Horizonte, Brasil in 1997. It was reinforced at the People’s Summit in Santiago, Chile–the event that was held parallel to the Summit of the Americas in April of 1998. Support for and participation in this broad Alliance is derived from throughout the hemisphere from the women’s, environment, labour, church, academic, social, campesino, indigenous and human rights sectors. Due to the brief time available and knowledge that our colleagues have or will be presenting to you on specific issues, we have chosen to focus our remarks on: civil society engagement, fast track in the U.S., some dynamics in the Americas and a process that we have been engaged in, that of developing "Alternatives for the Americas", which my colleague John Dillon will address.
On the committee of government representatives on civil society: In our opinion, the government committee on civil society that was set up in the FTAA is unacceptable. Not only was it struck without goals and objectives, but the way it has conducted itself has demonstrated how inadequate it is. When civil society organizations requested a voice or to participate they did not mean a committee of government representatives discussing civil society. They wanted to voice their concerns and preoccupations, put forward policy advice, and have a tangible impact on the outcome of trade negotiations, themselves. Furthermore had the committee that was struck been on social and labour issues with equal status as the working and negotiating groups, as the labour movement in the hemisphere has requested many times, it would have been of value. Instead, we have a committee without a purpose, without a chair, without a schedule and without participation of civil society. By default, as chair of the full process, Canada will now chair the committee till the Toronto Trade Ministerial, where the ministers will be asked to make the decision on what to do next. Furthermore, since the committee acts on consensus it will never advance as Mexico, Peru, Costa Rica and others continue to block it, and always will, because they do not support the principle. So for the moment unless something changes dramatically, it remains an ineffective use of time. The one action of this committee, as you know, was to call for briefs to be submitted to a mail box with a due date of March 31, 1999. We understand that the decision to open this process took much debate, disagreements and lobbying by the Canadian and American governments. A total of 72 submissions were received from all over the Americas. The question that begs is why not more? We believe that more than the fact that the consultation process was not advertised properly, people and organizations that represent civil society felt that the negotiators had not taken the committee seriously. Also, there was no reason to believe that submissions would be dealt with seriously or with respect and therefore no incentive to submit or believe this process would lead to results. Furthermore, it is difficult to "constructively engage" when you do not have access to the official discussion nor its documentation. What about the April 30th Canadian mailbox? Does the Canadian government believe there will be a good turn out when it has been only advertised in the Gazette and on the DFAIT web site? Does the government believe that the masses read either? Having information on a web site is not proper nor effective advertisement, nor is printing it in a paper that few read. It is incumbent on the negotiators of the FTAA to seriously and effectively engage civil society representatives in the negotiation process. Our government has a responsibility to make sure this happens.
On Fast Track: We will not go into detail on this issue. We know that you are aware that obtaining fast track is crucial if this set of negotiations or any trade negotiations involving the US are to be successful. Our colleagues in the US tell us that the possibility of fast track being approved before the next presidential election or even after, is almost nil. It is not a politically viable proposal when the Congress and Senate are so divided. The majority of Representatives see the discussion of any trade bill as a ticking time bomb. And, with an election so close no one will be willing to take a risk and be associated with a very unpopular bill. Lets not forget that the first time the fast track bill made it to the House of Representatives the Administration pulled it when they realized they did not have sufficient votes. Then in 1998 a fast track bill was reintroduced and eventually defeated by a vote of 243 to 180. While it is true that at the beginning of the negotiations of the Uruguay Round of the GATT the US did not have fast track and still negotiated we must remember a few things: 1. It was a very different political period. Today trade as a whole has a tarnished image, especially one that is viewed as extending the very unpopular NAFTA further south, and 2. This set of negotiations is not a priority, the WTO is. Even the supporters of fast track acknowledge that a successful vote can only take place if the fast track bill is very punctual and limited. If the priority is the WTO then one can deduce that fast track will target those negotiations. In the meantime, in the south, lack of fast track means that the countries are not coming to the table to negotiate seriously. As Minister Marchi told you at his March 3rd appearance before this committee "...clearly no self respecting nation will ever negotiate twice. They’ll do it once, they’ll do it properly, and they’ll do it when the United States clearly has fast track authority" Our partners tell us their governments have other priorities like MERCOSUR, the EU and the WTO.
In the Americas: Our Latin American partners say that if the FTAA were a person it would be diagnosed as having multiple personalities. In the few documents that have been approved like preambles and declarations of good intentions it is described as a hemispheric agreement for sustainable development, democracy and education. For the specialized press and negotiators we see a description of a trade negotiation where the Latin American governments and the White House are allies against the Republican right and some environmental groups. Meanwhile the underlying theme of the Santiago Summit of the Americas was investment. What we believe is really at play are the rights and ambitions of big business and the ability and capacity of the citizens of the hemisphere and the governments that they elect or will elect to decide their destiny. If we recall, in Santiago the US government proposed approving the investment chapter first and postponing the rest till later. The Brazilian government headed up the rejection of this suggestion till finally the principle of "nothing is approved till the whole thing is approved" was accepted. Afterwards we know that many of the Latin American negotiators expressed their frustration in the hallways stating that they had payed high social and political costs at home for opening up their economies–and it was about time their northern partners made good on their promise of expanded markets to the Latin Americans, or at least give them something so they could demonstrate that they too could win. Yet, all they had received is a vague promise of market access to the North in the year 2005. Our point here is that disenchantment of the present negotiations is wide spread and it doesn’t just lie with the critics of this model.
On the "Alternatives for the Americas": Alternatives for the Americas was developed as a process and a document first taken and discussed in a workshop with over 200 representatives of civil society as part of the Santiago Peoples’ Summit in April of 1998. Since then it has been modified to include all the comments received there and others that have come in from all over the continent, post Summit. It was developed in collaboration with and reflects the ongoing work of a number of the networks, organizations, researchers and experts from around the Americas. It is a living document that is presently being discussed and debated around the Americas and serves not only as a statement of a set of political principles and priorities of what we are advocating for, but also serves an educational purpose for our many communities. Alternatives for the Americas focuses on positive proposals not only on the official themes under discussion like Investment, International Finance, Intellectual Property Rights, Agriculture, Market Access, Enforcement and Dispute Resolutions but also on issues we see as priorities and very much part of the trade agenda like Labour, Human Rights, Environment, Immigration and the Role of the State. Along with our presentation we will table at these hearings the full document of Alternatives for the Americas in English, we understand that at the Montreal hearings our partners from the RQIC tabled the French version. We hope this stimulates further thoughts and questions with the members of the panel and in turn compels you to recommend that our government takes a leadership role on an alternative vision. Our Alternatives for the Americas document begins with chapters on human rights, environment, labour and immigration to make a very fundamental point. We believe these rights must take precedence over commercial interests. This is not to say that these rights should necessarily be enforced through trade agreements. However, it does mean that trade agreements should not contradict or circumvent rights established under such instruments as the Universal Declaration on Human Rights; International Labour Organization conventions or environmental agreements. In today’s testimony I shall concentrate on the chapters on investment and financial issues because these go to the heart of what the FTAA and similar agreements are all about. The Director General of the World Trade Organization (WTO), Renato Ruggiero, has compared the negotiation of international investment agreements to "writing a constitution of a single world economy". Indeed the investment rules written into the North American Free Trade Agreement (NAFTA), th model for the FTAA, and the Multilateral Agreement on Investment (MAI) are like constitutions that determine what governments can and cannot do. Although negotiations on the MAI have broken down within the OECD, the precedents set in NAFTA are clearly intended as the model for any investment chapter within a FTAA or within the WTO. Both NAFTA and the MAI are based on the principle of "national treatment" which requires treating foreign investors "no less favourably" than domestic firms. In our Alternatives for the Americas we propose an investment code based on principles that are fundamentally different than those in the MAI. Foreign investment should be welcome in our countries provided that it adheres to regulations that enforce the economic and social rights of citizens and environmental sustainability. In the event of a conflict, internationally recognized human, labour and environmental rights must take precedence over investors’ rights. We are opposed to unfair competition. Competition that results in a lowering of standards in a race to the bottom is by definition unfair. For example, if a government were to lower its standards or refuse to enforce minimum labour and environmental laws in order to attract foreign investment it would be guilty of unfair competition. Regulating investment should not involve protectionism for inefficient industries. Rather it should involve orienting investment and creating conditions to enable investment to serve national development goals while obtaining reasonable returns. Governments must have the power:
Performance requirements need not be protectionist measures. Rather they are a means through which host countries share the benefits of corporate investment. Governments must have the ability to impose performance requirements on investors to achieve goals such as national, regional or local content; requiring enterprises to purchase inputs locally; to hire personnel locally; to transfer appropriate technology and to provide incentives for the reinvestment of profits. Of particular concern is the destabilizing effect of simultaneous and massive withdrawals of fly-by-night portfolio capital. We must learn from the experience of Mexico’s 1994-95 financial crisis. At that time Mexico was unable to defend itself against the destabilizing effects of rapid capital withdrawals, in part, because its hands were tied by NAFTA’s investment rules. Many investors were attracted to Mexico by NAFTA’s guarantees against any kind of capital controls. Indeed the investment and financial services chapters in NAFTA have had enormous consequences for Mexico. For one thing they facilitate speculation by removing the ability of governments to channel foreign investment into productive uses. The investment chapter in NAFTA prohibits performance requirements that would oblige foreign companies to hire Mexicans or use Mexican suppliers. Article 1109 of the investment chapter (which also applies to financial transactions through Article 1401:2) prohibits any kind of restrictions on cross border flows of all kinds of financial dealings including profits, interest, dividends and fees. NAFTA took away from Mexico the tools it needed to confront the serious problem of volatile, fly-by-night capital. Under NAFTA Mexico has few policy levers to escape from the currents of speculative international capital flows. Ironically one country that has successfully slowed down international speculation in recent years is NAFTA’s prospective new member, Chile. The World Bank notes approvingly that Chile is the only country in the Latin America and Caribbean region in which direct investment has predominated over portfolio investment in recent years. However, the World Bank fails to point out one of the major reasons for this success. Chile’s law requiring portfolio investments to remain within the country for a minimum of one year saved Chile from the "tequila effect" that destabilized financial markets early in 1995 as nervous investors sought safe havens for their money in the wake of Mexico’s troubles. A law like that in effect in Chile requiring that portfolio investments remain within the country for a minimum of one year would not be compatible with NAFTA’s investment provisions. In the wake of Mexico’s troubles it would make sense to amend NAFTA to allow member countries, including Canada, to emulate Chile by requiring portfolio investors to hold their investments for longer periods. Yet trade negotiators seem bent on incorporating prohibitions on any type of capital controls into future agreements. This runs directly counter to the efforts being made this week in Washington by our finance minister, Paul Martin, to persuade members of the International Monetary Fund to adopt "emergency standstill clauses". These clauses would empower countries to halt outflows of hot money while governments renegotiate the terms of loans and bonds. This effort to "bail in" private creditors could be frustrated by trade agreements that prohibit any form of capital controls. National authorities must have the ability to regulate flows of "hot" money into and out of their countries. Governments and central banks should have the ability to require that portfolio investments remain in place for a minimum period as has been done in Chile. Another way to cool down destabilizing flows of hot money would be through a tax on foreign exchange transactions, as proposed by James Tobin, a prominent monetary economist and Nobel Laureate. We commend the Members of Parliament who voted by a margin of 164 to 83 on March 23rd in favour of a motion which said: "That, in the opinion of this House, the government should enact a tax on financial transactions in concert with the international community." Every agreement between countries at different levels of development must include compensatory financing to allow for achieving the competitiveness that integration implies and to fund social programs. In Europe, for example, the richer countries funnelled development aid into Spain, Greece and Portugal to lift up living standards before allowing them into the European Union. In the western hemisphere, the most effective way to level the playing field would be through a substantial reduction of the debts owed by low-income countries. The burden of external debt must be lifted as it continues to cause a perverse transfer of wealth from impoverished peoples to their creditors. Unsustainable external debts that accumulated due to high rates must be renegotiated and partially written off with the remainder payable over longer terms at low interest rates. Inasmuch as the International Monetary Fund and World Bank have failed to oversee the international financial system in a manner that supports sustainable and productive development, they should either be fundamentally restructured or new institutions put in their place.
In addition to the recommendations already made in the Alternatives’ presentation we recommend that:
To conclude, we would like to emphasise that we are not against the government’s right to be able to negotiate and sign trade agreements. We are well aware that 40% of our GDP is based on exports, and plus imports it means that 77% of our economy is trade oriented. What we are against is the integration of the elites and disintegration of our societies. We are against a model that was developed to work amongst "like" countries be applied to "unlike" countries. Furthermore, we are clear that the FTAA investment negotiations are based on similar principles already established in the NAFTA and that were proposed in the failed MAI negotiations. In our opinion, these principles expand the rights of transnational corporations and limit the capacity of governments and its citizens to establish national policies for economic and social development and protection of the environment. A significant sector of civil society has rejected this path forward. These negotiations should not go forward at the expense of the different nations and their ability to legislate for the public good; without previous involvement of civil society; without the explicit political mandate of the negotiating governments; and, without social, labour and environmental impact studies.
|