Small Steps for Corporate Trade Pacts

by Patrick Woodall

Multinational Monitor, May/June 2004

President Bush came into office intent on pushing a straightforward trade agenda that would benefit his corporate backers. His plan: Kickstart the stalled World Trade Organization (WTO) negotiations that had broken down after the demonstrations in Seattle in 1999 and expand the even more pro-business North American Free Trade Agreement (NAFTA) throughout the Americas. Three years later, these two broad trade agenda items are no closer to completion than they were in the Clinton administration.

In the United States, the political will for free trade deals withered during the Bush administration as nearly 3 million manufacturing jobs evaporated and high tech jobs were outsourced. Internationally, the will for NAFTA and WTO expansion was equally lacking. The September 2003 Cancun WTO Ministerial collapsed after industrialized nations refused to address the concerns of the developing world that the WTO disproportionately benefited rich countries and harmed poorer ones.

The next month, talks in Miami significantly scaled back the scope of the negotiations for the Free Trade Area of the Americas, a U.S.-led initiative effectively to expand NAFTA to the entire hemisphere, minus Cuba. Instead of continuing the negotiations of the entire agreement as a single undertaking, the negotiators agreed to an a la carte approach (with countries agreeing only to different parts of the trade treaty) that mired the negotiations. This April, an emergency meeting to resuscitate FTAA negotiations failed to produce a breakthrough.

While the U.S. continues to pursue a new round of WTO negotiations and enactment of NAFTA expansion through the FTAA, it is working on many parallel tracks to use bilateral and mini-regional free trade agreements (FTAs) to advance the WTO and FTAA agendas.

"Step by step, country by country, region by region, the United States is opening markets with top-notch, comprehensive FTAs that set the standard," explained U.S. Trade Representative (USTR) Robert Zoellick in December of last year.

Under the Bush administration, the United States has entered into trade agreements with Chile and Singapore, and commenced or completed negotiations for FTAs with the Central American countries and the Dominican Republic, Australia, Bahrain, Colombia, Peru, Bolivia, Morocco, Panama and Thailand.

Regardless of the scope (global, hemispheric, regional or bilateral), the goal of all of the trade agreements is to establish trade pacts that guarantee multinational corporate interests will be protected. Intellectual property rights of pharmaceutical companies are advanced while the ability for developing countries to ensure access to generic medicines is compromised. The agreements deem many national and local environmental regulations to be illegitimate expropriations of profit. Copyright and trademark protections are enforced with trade sanctions, but violations of labor and environmental law are at best subject to fines and more frequently are totally ignored.

The Bush administration's focus on smaller trade measures has a two-fold purpose: to isolate some countries who were skeptical of the U.S. trade agenda at the WTO and the FTAA; and to set markers for future trade deals based on what countries acquiesced to in bilateral agreements.

The United States is using FTAs to isolate FTAA critics and loosen the negotiating logjam.

Brazil, Venezuela and Argentina are resisting the U.S. agenda for the completion of the FTAA. They object to U.S. demands over services liberalization (that foreign companies should be able to compete for service provision everything from telecommunications to package delivery to electricity on equal footing with national companies), procurement rules (prohibiting governments from favoring national suppliers), investment measures (defining some environmental and other regulations that harm company profits as indirect expropriations requiring compensation) and agricultural tariffs and quotas (maintaining protections and subsidies for U.S. farmers, especially big agribusiness).

But the United States has already reached or started negotiations for trade deals with a dozen Latin American countries. Indeed, when announcing the proposed U.S.-Panama FTA negotiations, USTR noted that "high-quality agreements that promote regional economic integration (Chile, CAFTA) with like-minded, ambitious trading partners complement and provide impetus for the FTAA negotiations." Such deals disadvantage FTAA critics, because their neighbors are already entering into agreements with the United States that lower tariffs on their exports to the United States.

The smaller FTAs also set the standard for future agreements. For example, the Singapore FTA rolled back modest advances made by the Clinton administration on labor and the environment in the Jordan FTA. The Jordan FTA contained the strongest measures to date on enforcing domestic labor and environmental laws. These provisions were absent from the Singapore FTA and signaled that the Bush administration would remove any remotely effective labor and environmental provisions from future trade deals.

The inclusion of broader services agendas in the FTAs makes it more difficult to resist the stalled U.S. services market liberalization agenda in the FTAA or the WTO. The president of the Coalition of Service Industries, Robert Vastine, endorsed the Singapore FTA because "the agreement provides commercially meaningful market access for services" and continues the "negative list" approach to services negotiations. The negative list requires countries to open all of their services markets unless they specifically opt out of specific services liberalizations.

The Central America Free Trade Agreement (CAFTA) also includes the investor-to-state provisions of NAFTA that allow companies, instead of governments, to challenge domestic safeguards as illegitimate barriers to profits and trade, imperiling environmental and labor laws which restrict profiting from pollution and labor exploitation. "Since multinational companies could challenge environmental and public interest protections before international tribunals, demanding tens of millions in compensation, how many Central American countries will still take action to safeguard their citizens and the environment?" asks Friends of the Earth (U.S.) President Brent Blackwelder.

CAFTA also expands patent monopolies for U.S. pharmaceutical companies in Central America, effectively limiting affordable access to generic medicines to treat HIV/AIDS and other diseases. This intellectual property provision runs counter to promises made at the WTO negotiations in Doha in 2001 to respect countries' right to take measures to ensure "medicines for all."

"The issues that have [the WTO] hung-up, and that created a stalemate in FTAA, like investment, procurement, rules on competition and trade facilitation, are the issues Zoellick and his negotiators can get more easily on a one-on-one basis," concludes the Washington, D.C-based Global Trade Watch's Chris Slevin.

Whether this is an effective strategy for advancing corporate interests is controversial in the business community. Many corporate representatives say USTR is distracted by the numerous negotiations with small market countries and has lost sight of the big picture.

What is clear is that, unless citizen movements in the United States can defeat them in Congress, a legacy of the Bush administration will be a series of trade agreements that establish a wide array of special protections for corporations in many small and vulnerable economies around the world.

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