Statement by Global Exchange
April 2, 2001
As an international human rights organization committed to promoting
social justice, Global Exchange views the current proposals for the
Free Trade Area of the Americas (FTAA) as a dangerous elevation of
corporate rights above human rights. The imbalance between commercial
interests and other values such as human rights promotion and
environmental protection will lead to an erosion of basic rights and
living standards throughout the Western Hemisphere.
Despite repeated calls for the democratic and transparent negotiation
of international trade agreements, the FTAA talks have been conducted
in secret. The Canadian government's publication of its bargaining
position in December 2000, however, and the United States' release of
summaries of its positions provide enough information to know what the
FTAA will likely contain. Essentially, the FTAA takes the most
far-reaching provisions of existing agreements such as the World Trade
Organization (WTO) and the North American Free Trade Agreement (NAFTA)
and combines them. Establishing another "free trade" agreement on
these precedents is a blueprint for increased social insecurity,
inequality and ecosystem destruction.
The WTO and NAFTA dispute panels have consistently ruled that actions
based on environmental, humanitarian or human rights concerns are
invalid--in fact, illegal--if they in some way obstruct the free
movement of commerce. Global Exchange believes that the WTO and NAFTA
dispute-resolution decisions, and the reasoning behind those
decisions, are inherently flawed. Trade does not constitute simply a
commercial transaction; trade is also a political exchange that
affects workers' rights, the environment and communities' well being.
Two sections of the FTAA stand out for special concern--the expansion
of NAFTA's Chapter 11 "investor-to-state" lawsuits and the broadening
of intellectual property rights rules. These proposals reveal, more
than any other elements of the agreement, the way in which the FTAA
places corporate rights above citizen rights, in the process
threatening the common good and democracy. (The Canadian government
has said it will oppose inclusion of "investor-to-state" lawsuits in
the FTAA. The US negotiators, however, backed by business groups,
continue to push for Chapter 11 provisions.)
The complete lack of any measures designed to protect the environment
and labor rights is also a serious concern. Given the grossly
secretive and undemocratic FTAA negotiating system, the exclusion of
enforceable labor and environmental measures is not surprising. While
NGOs--and even members of the US Congress, which has not set the goals
for US participation--are locked out of the negotiations, corporations
have been helping write the rules of the FTAA. More than 500 corporate
representatives enjoy the security clearances needed to review the
FTAA documents. This kind of exclusive decision-making is intolerable,
and it means that the FTAA is from the outset illegitimate.
The case studies and analyses provided below demonstrate the
fundamental flaws of FTAA. These imbalances show why the agreement is
incapable of creating the kind of equitable development its supporters
promise.
Investor-to-State Lawsuits
The North American Free Trade Agreement includes provisions for what
are called "investor-to-state" lawsuits. These suits, established
through NAFTA's Chapter 11, give corporations the ability to sue
governments over acts that diminish a corporation's potential future
profits. These lawsuits grant corporations--but not citizens or
non-governmental organizations--powers formerly reserved only for
nation-states. Free trade proponents like to boast that their agenda
fosters democracy. But the existence of investor-to-state lawsuits
constitutes a direct assault on the democratic process.
During the seven years since NAFTA has been in effect, corporations in
the US and Canada have used Chapter 11 lawsuits to challenge and roll
back national laws designed to protect public health and safety and
the environment. If such investor-to-state lawsuit powers are extended
to the entire hemisphere, it is certain that such challenges will
increase. Practically every government regulation in the hemisphere
will then be at the mercy of multinational corporations seeking to
maximize profits.
Examples of investor-to-state lawsuits include:
- Ethyl Corporation vs. Canada. In 1998, the Virginia-based Ethyl
Corporation forced the Canadian government to drop its existing ban on
the chemical MMT, a fuel additive that had been linked to nervous
system damage. Although the US Environmental Protection Agency already
bans MMT in the US, the NAFTA tribunal ruled that the Canadian
government's prohibition was impacting Ethyl's current and future
profits. The Canadian government reversed its ban and was also forced
to apologize and pay $13 million to the corporation in damages.
- Methanex Corporation vs. US. In 1999, in a strikingly similar case,
a Canadian corporation, Methanex, used NAFTA's Chapter 11 to sue the
US government for $970 million because of a California phase-out of
the gasoline additive MTBE. California Governor Gray Davis ordered the
phase-out because it had been shown that MTBE, a known toxin, was
leaking into the state's ground water. Methanex, which makes the M in
MTBE, claims that the state's move caused a decline in its stock
prices. Methanex is basing its $970 million claim on the profits the
company says it will lose over a 20-year period. The case is still
under consideration. If Methanex wins, the US government will
essentially be paying a polluter not to pollute.
- Metalclad Corporation vs. Mexico. In 1996, Metalclad Corporation, a
US waste disposal company, accused the Mexican government of violating
Chapter 11 when the state of San Luis Potosí refused the company
permission to re-open a waste disposal facility there. The state
governor closed the site after a geological audit showed the facility
would contaminate the local water supply. The governor then declared
the site part of a 600,000-acre ecological zone. Metalclad claimed
that this constituted an act of expropriation and sought damages. In
August 2000, a NAFTA tribunal ruled in favor of the company and
ordered the Mexican government to pay $16.7 million in compensation.
- S.D. Myers Corporation vs. Canada. S.D. Myers Corporation, an Ohio
PCB waste disposal company, also successfully used a Chapter 11 threat
to force Canada to reverse its ban on PCB exports--a ban Canada
undertook in compliance with the Basel Convention limiting the
trans-border movement of hazardous waste. The corporation successfully
sued the Canadian government for $50 million in damages for business
it lost when the short-lived ban was in place.
- Loewen Group vs. US. A Canadian-based funeral corporation, Loewen
Group, used the NAFTA investor protections to sue the US government
after a Mississippi court found Loewen guilty of malicious and
fraudulent business practices that unfairly targeted a local company.
The jury in Mississippi levied $500 million in damages against Loewen,
and now the corporation is seeking $725 in compensation from the US
government. Loewen argues that the very existence of the state court
system violates its NAFTA rights.
The history of investor-to-state lawsuits under NAFTA shows how
government powers to protect the public interest are already being
eroded. As corporate rights are given absolute preference, all other
values and interests suffer.
Intellectual Property Rights Rules
US trade negotiators are pushing for the FTAA to include intellectual
property rights rules that go even further than the regulations
established by the WTO and NAFTA. This is a deadly mistake--especially
when it comes to the intellectual property rules governing medicine.
The WTO intellectual property provisions already are threatening
countries' abilities to produce affordable life-saving and
life-prolonging drugs for their citizens. The expansion of these rules
will certainly make it harder for the world's poor countries to
provide affordable medicines to their peoples.
Existing WTO rules obligate all WTO members to provide 20-year patents
on all inventions, including medicines. These rules give
pharmaceutical corporations 20-year monopolies on prices since they
prevent other drug manufactures from producing generic copies of
drugs. By limiting the creation of generic drugs, the WTO rules
effectively stifle competition in the already-concentrated
pharmaceutical industry, which leads to inflated prices. Without price
competition, the costs for new drugs will remain out of the reach of
many people in the Global South.
A recent report by the British aid agency Oxfam shows that as the WTO
rules go into effect (they are currently being phased in), drug prices
in the Global South will increase from 200 to 300 percent. This is not
a distant threat--especially when it comes to HIV and AIDS. The US has
already used WTO rules to intimidate countries that either make their
own generic versions of HIV drugs or else import such drugs. In
January the Bush Administration filed a WTO complaint against Brazil
for breaking WTO rules by producing its own drugs. US trade officials
filed a similar complaint against Argentina in May 2000.
The WTO rules allow countries facing public health crises to produce
their own drugs through a system called "compulsory licensing." This
allows governments in the midst of health emergencies to instruct
patent holders to license the right to its patent to other parties.
The experience of Brazil shows how generic production and compulsory
licensing can drive down prices and enable developing countries to
make drug treatments universally available.
Brazil manufactures generic HIV/AIDS drugs (which are not
patent-protected because Brazil has only recently adopted a WTO-style
patent system for pharmaceuticals), guaranteeing pharmaceutical
treatment to every person with HIV/AIDS. Brazil has proven that
generic production drives down prices--its cost for drug cocktails is
far below that of the multinational pharmaceutical firms, and the
price continues to decline. And the Brazil experience--where infection
rates are considerably lower than projected--strongly suggests that
treatment is an important component of prevention; healthier people
are less likely to spread HIV, and people are more likely to be tested
for HIV and then adopt safer practices if they know that those with
HIV/AIDS have hope of being treated.
Apparently unimpressed with this major public health victory, the US's
WTO complaint against Brazil charges the country with having
insufficiently strict guidelines for compulsory licensing. If the WTO
dispute panel rules against Brazil, it will be harder for the drug
manufacturers there and the government to produce affordable drugs.
Now, US negotiators want to make the FTAA intellectual property rights
rules even tighter than the already strict WTO regulations. In the
summary of its negotiating position, the US made clear that it is
seeking rules that require countries to provide stronger intellectual
property protections than required by the WTO.
The US negotiating position calls for an effective extension of the
patent term for pharmaceuticals (including patent extensions to offset
delays in marketing approval for pharmaceuticals). The result would be
to give drug companies longer-term monopolies, enabling them to price
gouge over longer periods.
The intellectual property rights rules created by the WTO need to be
loosened, not tightened. In the short run, tighter rules will make it
harder for the estimated 1.8 million HIV-positive people in Latin
America and the Caribbean to get life-prolonging medicine. In the long
run, the stricter regulations will increase the cost of the next
generation of pharmaceuticals needed to treat drug-resistant strains
of tuberculosis, malaria, diarrhea, gonorrhea, and other diseases.
By limiting competition and thereby increasing the price of medicines,
the draconian intellectual property rules proposed for the FTAA will
force poor people in the hemisphere to cut back on their health
expenditures. Public health will certainly suffer, and, especially
when it comes to HIV-AIDS, lives will be lost. This is intolerable.
Human health and human lives should not be sacrificed to serve the
financial interests of the already wildly profitable pharmaceutical
industry.
By seeking to tighten the WTO's intellectual property laws, the FTAA
once again elevates corporate rights above human rights.
The Flip Side
While the FTAA goes to great lengths to protect the interests of
multinational corporations--as shown by the US insistence on expanding
investor-to-state lawsuits throughout the hemisphere and strengthening
intellectual property rules--it does absolutely nothing to protect the
environment or labor rights. The FTAA merely states that countries
should "strive to ensure that environmental and labor laws are not
relaxed to attract investment." The absurdity of the "strive to
ensure" language is apparent. And there is no enforcement mechanism
for even this weak requirement. Moreover, this loose request is
virtually meaningless in countries where environmental and labor laws
are already thin and/or unenforced. In order to ensure passage of
NAFTA in the US Congress, President Clinton attached environmental and
labor "side agreements" to the larger agreement. These were
essentially fig leaves designed to attract the support of liberal
constituencies. During the last seven years only a handful of
union-busting and pollution complaints have been investigated under
the side agreements' arbitration process, and none of the them have
been settled. President Bush says his administration opposes even the
inclusion of such watered down rules. In any case, the NAFTA
experience demonstrates that mechanisms for enforcing environmental
and labor standards must be in place before further trade
"liberalization" if the goal of increased trade is really equitable
and sustainable development. Otherwise, there will be no way to hold
polluters and those violating individuals' right to freedom of
association accountable for their actions.
Two examples from the US-Mexico border help prove the point.
The Environment: Metales y Derivados. In 1994, authorities
in Tijuana ordered the closure of a battery recycling plant after it
was determined that for years the factory, owned by the San
Diego-based New Frontier Trading Company, had improperly disposed of
sulfuric acid, lead, and other heavy metals. The US owners and
operators of the Metales site abandoned the plant immediately, leaving
behind an estimated 6,000 metric tons of toxic materials. Fearing
criminal prosecution for failing to dispose of the waste, the plant
operator fled to the US. Meanwhile, a community of about 1,000
households just downhill from the plant was left to deal with the
hazardous waste.
In October 1998, the Environmental Health Coalition of San Diego and
the Comité Ciudadano Pro Restauración del
Cañón del Padre of Tijuana filed a petition with the
Commission for Environmental Cooperation (CEC), the NAFTA's
environmental dispute resolution body. The two groups charged that,
although Mexican officials did close down the plant and issue an
arrest warrant for Jose Kahn, the Metales operator, the Mexican
government failed to properly enforce its own environmental laws, as
required under NAFTA. The groups said that the Mexican government had
an obligation under its laws to press for the extradition of Mr. Kahn
and to adequately dispose of the hazardous material, neither of which
it did. The petition merely asked that the CEC investigate the Metales
case in order to assist with the cooperative--meaning
bi-national--enforcement of environmental laws. After nearly 18
months of bureaucratic wrangling, the CEC finally decided to conduct
the requested investigation. The investigation is currently taking
place.
The Metales case clearly demonstrates the failures of the NAFTA side
agreements, in the process revealing the importance of establishing
enforceable labor and environmental rules throughout the hemisphere
before expanding commercial pacts.
Under the CEC, a citizen plaintiff has no direct ability to compel any
of the NAFTA governments to effectively enforce their own laws.
Citizens must hope that another government chooses to act on the
factual record created by the original dispute and then pursue its own
claim. Even though a citizen submission may prove that a government is
failing to effectively enforce its environmental laws, the violation
may never be redressed. In comparison, the investor-to-state lawsuits
established under NAFTA--and likely to be included in the FTAA--allow
corporations to exert direct pressure on government decision-makers by
demanding financial compensation.
Equally important, the CEC does not accept submissions against
corporations or individuals. There is little way, then, for citizens
to hold a corporation and/or its executives directly accountable for
their actions.
Labor: Duro Bag Factory. As part of the NAFTA labor side
agreement, in 2000 the Secretaries of Labor from the US and Mexico
signed a pact committing themselves to promote secret ballot union
representation elections. As routine union-busting on both sides of
the border demonstrates, the side agreement has been worthless. It
demonstrates that without enforceable labor rights standards that set
up clear mechanisms for monitoring, enforcement, and accountability,
free trade agreements cannot guarantee against labor rights abuses.
To be sure, union-busting is not uncommon in the US. A 2000 report by
Human Rights Watch demonstrated that workers' right to freedom of
association is regularly violated in the US. But the problem is even
worse in Mexico, where the presence of unions controlled by the
Institutional Revolutionary Party (PRI) belies any claims about
independent unions. A recent episode of worker repression at a factory
in Rio Bravo, Tamaulipas, Mexico illustrates the massive obstacles
facing independent union organizers in Mexico.
The Duro Bag plant in Rio Bravo is a family-owned factory that makes
gift bags for export to the US; one of factory's best-known clients is
Hallmark, which purchases an estimated 15 percent of the Duro Bag
production. In 1999, the workers at the plant, dissatisfied by their
representation with the PRI-backed Paper Workers Union of the
Confederation of Mexican Workers, started a drive to form an
independent union. The organizing effort was immediately met with
intimidation: approximately 150 workers were fired, and another ten
were arrested during a work stoppage.
During the next year, as hundreds of fired workers camped out in front
of the factory, the plant management did everything it could to either
prevent or delay an election for an independent union. But finally, in
March 2001, under massive international pressure, the management
agreed to an election.
Thirty-nine monitors from Mexico, the US and Canada--including clergy,
human rights observers and union representatives--went to Rio Bravo to
observe the union election. The intimidation and repression witnessed
by the observers were extreme. A day before the election, the observes
watched in disbelief as the pro-government union thugs unloaded
automatic weapons from a car and conspicuously carried them into the
factory. The workers were then sealed inside a room inside the plant
and ordered to vote openly, without any provisions for a secret
ballot. Not surprisingly, perhaps, the independent union lost the vote
498 to 4.
The Duro Bag experience represents a gross violation of workers right
to freedom of association and of their right to form independent trade
unions. The episode shows that without a way to hold businesses and
government officials accountable with the same sort of lawsuit powers
corporations are given under the investor-to-state lawsuits, unions
and workers rights groups have little ability to guarantee workers'
basic rights. As the presence of dozens of observers illustrates, the
Duro Bag workers enjoyed incredible support from people throughout the
hemisphere. But that support was not enough to overcome the entrenched
power of the Duro Bag managers and the local government officials, who
turned a blind eye to the intimidation at the factor.
Again, without enforceable labor rights standards that set up clear
mechanisms for monitoring, enforcement, and accountability, free trade
agreements cannot guarantee against workers rights abuses. Unless
labor rights clauses are contained in the core language of the trade
agreement texts, there is little way to fight against violations of
workers' basic right to freedom of association.
