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The FTAA: a primer

(February 2001)

From International Socialist Review, Issue 16, February March 2001.
Downloaded with thanks from the ISR Archive Website.
Marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Tens of thousands of trade unionists and activists are expected to protest in Quebec City, Canada, on April 20–21 at the Summit of the Americas. There, President George W. Bush will meet with the heads of state from North and South America – minus Cuba – to renew Washington’s push for the Free Trade Area of the Americas (FTAA).

LEE SUSTAR looks at the latest effort by multinational corporations to push the “Washington consensus” of free trade, privatization, cuts in social spending, and openness to investment – and the growing movement to stop it.

Any discussion of the Free Trade Area of the Americas (FTAA) has to begin with its core, the North American Free Trade Agreement (NAFTA), and Washington’s drive in the 1990s to reverse U.S. economic decline and to consolidate its role as the world’s only superpower.

After a decade of boom in the U.S. and economic crisis in Japan, it is easy to forget the anti-Japanese hysteria that consumed U.S. business leaders, politicians, and the press in the 1980s. Every report of a growing trade deficit with Japan brought with it panicked predictions of exactly when Japan would surpass the U.S. as the world’s biggest economy. Unionized industrial workers were told by employers that taking concessions – cuts in pay and benefits and the elimination of hundreds of thousands of jobs – was the only way that U.S. companies could compete with their Japanese counterparts. [1]

The 1980s also saw the European Economic Community take the steps toward economic integration that would create the European Union (EU), which today has a population and economy bigger than that of the United States. To be sure, the EU is internally split over whether all members will join the common euro currency and much else. But the common currency and a series of huge corporate mergers have created a “Corporate Europe” that vigorously competes with the U.S. on several fronts. [2]

With the fall of the Berlin Wall in 1989, the East-West political and military imperialist division of the Cold War gave way to economic competition among three loosely organized trade blocs led by the U.S., Europe, and Japan. International corporate mergers and investment and the growth of trade didn’t create the “stateless corporation” imagined by many theorists of globalization. On the contrary. As author Josh Karliner put it, “To a large degree, the triad of Japan, EU and U.S. can be seen as three corporate states, at times cooperating, at times competing with one another to promote the interests of their rival transnational across the globe.” [3]

The recession of the early 1990s crystallized U.S. capitalists’ fears of new competition and spurred the creation of NAFTA. Negotiated by the administration of the senior George Bush, the agreement formalized the U.S.-Canada Free Trade Agreement of the 1980s and the growing U.S. economic ties to Mexico. NAFTA was not the merger of equals it was made out to be, of course. Canada, one of the world’s most advanced countries, does more than $1.3 billion of daily trade with the United States. Mexico is a poor, developing country that lost a third of its territory to U.S. conquest in the nineteenth century and has been pressured by U.S. imperialism ever since. So when Mexican president Raul Salinas de Gortari, a free-market ideologue, broke with decades of Mexican policy of high tariffs to protect state-owned industry from competition by U.S. corporations, Washington seized the opportunity to make a deal. Salinas carried out a Wall Street approved – and highly corrupt – privatization and deregulation program as a prelude to NAFTA. [4]

NAFTA would give U.S. corporations an edge over their main rivals by allowing them to ship parts to Mexican maquiladora plants for final assembly by low-wage workers and to reimport them duty-free. “NAFTA content” rules, however, would prevent European and Japanese firms from doing likewise. [5]

In 1993, the new Clinton administration, stuffed full of corporate lawyers eager to keep serving their former clients, quickly made NAFTA its own project. Clinton denounced organized labor for its “muscle-bound” tactics in opposing NAFTA while literally turning over the White House to an army of corporate lobbyists. [6] Tragically, the opposition to NAFTA was led not by organized labor but by Ross Perot, the nutty Texas billionaire who warned of a “giant sucking sound” of jobs leaving the U.S. if NAFTA were passed.

Perot was wrong, but so was Clinton. NAFTA failed to create the “millions of new jobs” promised by its backers. Estimates put U.S. job losses between 200,000 and 600,000. This was small compared to the more than 22 million jobs created since 1993, and accounted for just a fraction of the jobs lost in that period. But many of the jobs lost were union, decently paid, and impossible to replace.

For Mexican workers, NAFTA was a prelude to a hellish economic crisis. The speculative investments that poured into the country poured out following the devaluation of the peso, cutting living standards in half overnight. Even with a recovery, by1999, nearly two-thirds of the population of 100 million lived in poverty on wages of less than $3 per day. [7] The wage for industrial workers, adjusted for inflation, fell to its lowest level since 1939. [8] Mexico did, however, create a booming export industry that enriched Mexico’s newly minted billionaires and gave U.S. multinationals guarantees that free market “reforms” would be “locked in.”

The backlash against the WTO

The U.S. immediately used NAFTA as a “threat” in trade negotiations and in the creation of the World Trade Organization (WTO). [9] Created in 1995 as the successor to the General Agreement on Tariffs and Trade (GATT), the WTO would help the U.S. manage trade conflicts with its European and Japanese competitors. In turn, what the WTO euphemistically calls the “Quad countries” – the U.S., Canada, the EU, and Japan – would use their combined leverage to force concessions from the developing world. [10]

The 1999 “Millennial Round” of WTO negotiations in Seattle brought these conflicts to a head. Outside, a huge protest and police riot reflected a growing anger about a world economy in which profit is pursued at any environmental or social cost. Inside, final collapse came when many developing world governments refused to swallow the Quad countries’ demands for concessions. Particularly controversial was Clinton’s agreement to try to link labor and environmental standards to any new trade agreement, denounced by governments of developing nations as protectionism in disguise. [11]

Since then, the WTO has looked less like the “world government” decried by some of its opponents than a bureaucratic battlefield for trade wars between the big powers. The U.S. won cases in the WTO against the EU ban on imports of U.S. hormone-treated beef as well as restrictions on banana imports by the U.S. company Chiquita, triggering a wave of sanctions and countersanctions. The biggest confrontation is over civilian airplane manufacturing, with the EU and the U.S. threatening WTO sanctions against one another over government subsidies to Boeing and Airbus. [12]

As 2001 began, the WTO was adrift. Its officials felt threatened enough by the prospect of more protest that they scheduled the next summit in the tiny Persian Gulf state of Qatar, where demonstrations are banned. [13] The battle over beef, bananas, and Boeing rattled the free traders of the Financial Times newspaper. “Another failure, after the collapse of the World Trade Organization’s Seattle meeting, could have catastrophic consequences,” the FT editorialists wailed, warning that a U.S. focus on the FTAA “would ... risk a further fragmentation of markets into rival regional blocs and a further undermining of the WTO.” [14]

In fact, “globalization” is driven by the regionalization of the world economy. The WTO itself reports that there are today more than 100 regional trade agreements, compared to just 45 a decade ago. [15] Fully 42 percent of all world trade takes place within preferential trade agreements like the EU and NAFTA. [16] Although the ballooning U.S. trade deficit is primarily with East Asian countries, Japan remains weak, and the financial crisis of 1997 created greater openness for U.S. companies in that region. That is why U.S. trade warriors have concentrated most of their fire on Europe.

Thus, for the U.S., the FTAA represents a chance to sideline competitors and dominate a market of 34 countries with nearly 800 million people that accounts for just over half of world trade – all in a region where U.S. imperial power is most dominant.

The return of the FTAA

The FTAA was planned in 1994 as a follow-up to NAFTA, to take effect by 2005. But the Mexican financial crisis of 1994 created economic and political obstacles. No sooner were these overcome than organized labor and its allies successfully mobilized in 1997 to defeat the “fast-track” negotiating authority that Clinton sought to obtain from Congress in order to expand NAFTA to include Chile. By the late 1990s, the FTAA was on life support, administered mainly by Canada. [17]

The drift in the WTO has spurred a section of U.S. capitalists to revive the FTAA. So eager is Corporate America for success in a major trade agreement that leading U.S. multinationals like Caterpillar announced in February that they’re willing to swallow labor and environmental standards in the deal in order to get passage of fast-track negotiating authority in Congress. (As if Caterpillar – which went all out to crush its U.S. unions in the 1990s – has the interests of Third World workers at heart!) Johanna Schneider, a spokesperson for the Business Roundtable, explained the shift: “The EU is poaching on our turf in Latin America. Our CEOs are concerned that we’re falling behind.” [18]

The FTAA would also help the U.S. prevent Brazil from using the Mercosur trade bloc – with Argentina, Paraguay, and Uruguay – to create an independent trading bloc in South America. Founded in 1991, Mercosur saw trade between Argentina and Brazil expand 484 percent by 1996. In 1995, Mercosur reached a trade agreement with the EU, criticized as “discriminatory” by the U.S. and the World Bank. [19]

Since then, Washington’s policies have practically torn Mercosur apart. By encouraging Argentina to tie its currency to the dollar, the U.S. Federal Reserve literally took control of that country’s economic policy. The consequences of this became clear in 1998 when the International Monetary Fund (IMF) used a financial crisis to force Brazil to devalue its currency. Since the value of Argentina’s currency remained pegged to the dollar, its exports to Brazil – 30 percent of the total – dried up, deepening an already awful recession. Meanwhile, Brazil had to “qualify” for its $42 billion bailout by agreeing to massive cuts in social spending and a sell-off of state assets in order to funnel revenues into debt repayment. [20] These measures, coming after a series of Washington-approved privatization and free-market reforms in earlier years, dramatically increased poverty in what is already the most economically polarized country in the Western Hemisphere.

Argentina’s turn to bow before the IMF came two years later when speculation that the country couldn’t service its massive debts caused a financial panic. This time, the IMF put up $13.7 billion with private banks and pension funds providing another $26 billion. As usual, the IMF attached strings: raise the retirement age for women, abolish the state minimum pension and replace it with a sliding scale, and “reform” health care plans run by labor unions. When the Argentine Congress balked at this, President Fernando de la Rua ordered them by decree. [21] Today, one in four residents of Buenos Aires is poor. [22] When Chile, an associate member of Mercosur, announced at the end of 2000 that it would pursue a bilateral deal with the U.S., it left Mercosur in no shape to play its intended role as a counterweight to Washington in FTAA negotiations. [23] Elsewhere, the Clinton administration systematically tied trade and aid in the Americas to membership in the FTAA. [24]

These neoliberal policies benefited Latin America’s corporate elite but virtually no one else. The region’s economy grew in the 1990s by about 3 percent a year, but gross domestic product per capita increased just 1.1 percent a year, after declining in the 1980s. According to the World Bank, 36 percent of the 500 million people in Latin America and the Caribbean were poor in 1998 – that is, they lived on less than $2 per day. [25]

From bad to worse

In keeping with international trade agreements, the exact details of the FTAA are secret. However, Maude Barlow of the Council of Canadians, which campaigns against corporate globalization, has painstakingly gathered what documentation exists to expose the FTAA’s real agenda. [26] Essentially, the FTAA takes the worst of NAFTA, the WTO, and the failed Multilateral Agreement on Investment and rolls them into one.

From NAFTA, the FTAA takes the “investor-state” provision that allows private corporations to demand compensation from governments for “expropriation” of property or “unfair” treatment and to challenge basic government regulations. The “dispute resolution” mechanism can force unelected groups of judges to order countries to comply with rulings or face sanctions. This will give big multinationals – again, mainly from the U.S. and Canada – the ability to dictate terms to small countries.

The FTAA also incorporates the proposed General Agreement on Trade in Services now being negotiated under the umbrella of the WTO. The FTAA goes further by forcing governments to open to private competition any commercial activity, even if it is not for profit, such as a government-run health care program. Similarly, the FTAA would advance the WTO model of intellectual property rights, guaranteeing a corporation with a patent in one country the right to have one throughout the hemisphere.

Some other of the many objectionable features set for the FTAA include constraints on a government’s ability to set food-safety protections and environmental protection laws. Under the WTO model chosen by FTAA negotiators, such laws could be overturned as “technical barriers to trade.”

It isn’t difficult to imagine how the U.S. would use its dominant economic and military power to shape the enforcement of FTAA rules.

FTAA and the movement against corporate globalization

If the Latin American governments and ruling class are eager to sign on to Washington’s agenda, workers and peasants in those countries have set the pace for resistance to neoliberal policies in struggles, many of them covered in previous issues of the ISR. [27] Recent years have seen a series of waves of rural protests and general strikes in Argentina. More recently, mass land seizures by peasants and an autoworkers’ strike have hit Brazil. Last year saw an uprising in Bolivia that overturned the privatization of water, mass protests against election fraud in Peru, and a series of demonstrations demanding the prosecution of former Chilean dictator Augusto Pinochet. Mexico too has seen waves of protest since the Zapatista uprising by indigenous people in Chiapas in the mid-1990s, most recently a yearlong student strike at the national university.

This resistance provided some of the inspiration for a new generation of activists who burst onto the scene against protests at the WTO in Seattle and at several others since. The involvement of U.S. unions in Seattle – along with representatives from unions in many Latin American countries – carried a message of internationalism after decades in which U.S. unions fronted for State Department policy in Latin America.

The demonstration against the FTAA in Quebec City will bring together representatives of unions and organizations throughout the Americas. It provides one of the best opportunities yet to unite students and young activists with organized labor to protest the free-market agenda – and Washington’s drive to impose its will on Latin America. At the same time, the opponents of corporate globalization can begin to put forward their own alternative – a world economy based on genuine internationalism and the needs of working people rather than the profits of the multinationals.

* * *


1. Dana Frank, Buy American: The Untold Story of Economic Nationalism (Boston: Beacon Press, 1999), pp. 160–86.

2. Belén Balanyá, et al., Europe Inc: Regional and Global Restructuring and the Rise of Corporate Power (London and Sterling, Va.: Pluto Press, 2000), pp. 3–10.

3. Quoted in Balanyá, p. 91.

4. Lance Selfa, Mexico after the Zapatista uprising, International Socialism 75 (Summer 1997): pp. 62–67.

5. Graham Dunkley, The Free Trade Adventure: The Uruguay Round and Globalism – a Critique (Melbourne: Melbourne University Press, 1997), p. 93.

6. John MacArthur, The Selling of “Free Trade”: NAFTA, Washington and the Subversion of American Democracy (New York: Hill and Wang, 2000), pp. 167–226.

7. MacArthur, p. 83

8. Selfa, p. 65.

9. Diana Tussie and Ngaire Woods, Trade regionalism and the threat to multilateralism in The Political Economy of Globalization, ed. Ngaire Woods (New York: St. Martin’s Press, 2000).

10. Paul D’Amato, WTO: Corporate club, International Socialist Review 11 (Spring 2000): pp. 10–11.

11. David Sanger, A grand trade bargain, Foreign Affairs (January/February 2001): pp. 69–70.

12. British Broadcasting Corp., U.S. faces $4 billion trade threat, November 26, 2000.

13. Elizabeth Olson, WTO picks Qatar capital as meeting site, New York Times, January 31, 2001.

14. Trading system under threat, Financial Times, January 29, 2001.

15. World Trade Organization, RTAs and the WTO – General. Available on the WTO Web site at www.wto.org.

16. Jean-Marie Grether and Marcelo Olarreaga, Preferential and Non-Preferential Trade Flows in World Trade, World Trade Organization Staff Working Paper ERAD-98-10, September 1998. Available on the WTO Web site.

17. Kevin Hall, As interest wanes, negotiators meet to invigorate trade talks, Journal of Commerce, December 2, 1998.

18. Helene Cooper, Corporate America rethinks opposition to linking trade, labor, environment, Wall Street Journal, February 2, 2001.

19. Broadening the Mercosur, in The World Guide 1999/2000: A View from the South (Toronto: New Internationalist Publications, Ltd., 1999), p. 153.

20. Michel Chossudovsky, Brazil’s IMF-Sponsored Economic Disaster, Telepolis (German Web magazine), available at www.heise.de/tp/english/special/eco/6373/1.html.

21. Argentina’s distant allies and the fiscal gap, The Economist, January 13, 2001.

22. Matt Moffett and Pamela Druckerman, Hard times has the middle class in Argentina moving down ladder, Wall Street Journal, February 1, 2001.

23. Thomas Catan and Raymond Colitt, Mercosur partners wrestle with conflicting impulses, Financial Times, December 14, 2000.

24. Kevin Hall, Clinton bill ties parity to freer trade, Journal of Commerce, March 8, 1999.

25. The slow road to reform, The Economist, February 4, 2001.

26. Maude Barlow, The Free Trade Area of the Americas and the threat to social programs, environmental sustainability and social justice in Canada and the Americas. Available on-line at www.canadians.org.

27. See Crisis and class struggle in Latin America, International Socialist Review 10 (Winter 2000): pp. 7–41.

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