Free Trade Area of the Americas - FTAA

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May 27, 2003

Original: English



Name(s) Maureen Heffern Ponicki
Organization(s) American Friends Service Committee
Country USA

May 1, 2003

Chair of the Committee of Government Representatives on the Participation of Civil Society
Secretaria del Area de Libre Comercio de Las Americas (ALCA)
8 Oriente No. 1006
Paseo San Francisco
Centro Historico, Puebla 72000

Dear Chair:

I am writing to you in response to the open invitation to civil society for the submission of written contributions to be included in the report to the Ministers for their 2003 meeting in Miami. I have outlined the concerns of The American Friends Service Committee (AFSC), a Quaker organization that includes people of various faiths who are committed to social and economic justice, peace, and humanitarian service. For many years, we have been concerned about trade policy and its impact on the communities we work with in Latin America and the U.S. We have and will continue to advocate for transparent processes and a strong formal role for civil society during FTAA negotiations and to ensure that, upon completion, the FTAA support and promote equitable and sustainable development. While the AFSC is supportive of economic integration in the Western Hemisphere, we cannot support the FTAA as it is currently drafted due to our belief, and that of most civil society groups across the hemisphere, that this agreement will not only fail to promote equitable and sustainable development, but will also push more people into poverty. There is a very clear bias for corporate interests in the draft agreement, just as there was in NAFTA. Below I have outlined our specific concerns regarding the negotiations on investment, services, government procurement, and the engagement of civil society. We have done this despite the fact that the FTAA draft text remains in large part bracketed and fails to identify which governments support which proposals. In addition, the FTAA countries have not released their individual negotiating positions, which also leaves members of civil society with an inadequate amount of information about the FTAA. So while we appreciate the opportunity to express our opinion, we feel that this is merely a token effort at soliciting our input since we do not have access to the full negotiating positions.

We request more clarity in the language that exempts public services from the FTAA.
Currently the draft text relies on the exemption as outlined in the GATS agreement, which states that an exemption applies when a service “is supplied neither on a commercial basis, nor in competition with one or more service suppliers.” This definition would not guarantee the exemption of our public education system nor of our social services. Most governments have farmed out services to non-profits who compete with other non-profits and many government services include fees; therefore, this exemption would hardly protect these critical services. Furthermore, privatization of human services such as education and social services should be determined at a local level by the diverse stakeholders in a community. Local communities have been tackling the contentious issue of privatization for many years with many differing opinions. Do not take this decision away from them by leaving in language that is vague, open to loopholes, which could be eroded in future negotiations, and which would be close to impossible to reverse.

Furthermore, the “national treatment” rule contained in the agreement could entitle private foreign companies to “equal rights” to compete against local public service providers for funds to perform public services. This clause also has implications for water collection and water delivery. If private service provision of water causes prices to spike (as they did in Bolivia after the Bechtel Corporation privatized Cochabamba’s water system) there will be a detrimental impact on poor families, especially women and children in developing countries. Therefore, our recommendation would be that public education (especially K-12), social services, other critical human services, and water be excluded from the FTAA agreement through the use of carve outs.

In addition, the market access rules governing trade in services should not prohibit a government from conditioning permission to provide a particular service on a service provider’s commitment to also provide certain unprofitable services.

The FTAA should also allow local, state, or national governments to place limits on the number of service providers in a certain sector or region and allow each country flexibility to protect local businesses that are vital to the national economy. For example, local governments should not be prohibited from limiting the number of ecologically-damaging service activity in a certain area like toxic waste processing, mining, oil drilling, etc.

Lastly, with respect to domestic regulation, the FTAA should not curtail the ability of national and local jurisdictions to protect their residents. Limitations on domestic regulation through “no more burdensome then necessary” language would limit local governments from doing that. Service rules would put worker health and safety laws, laws on staffing, professional standards and licensing, quality and content of education curriculum, and other public interest regulations at risk. Each government should inform their public of how they intend to protect domestic regulations.

The second draft text stills retains bracketed text that defines expropriation in such a broad way that it threatens a government’s ability to protect the environment and the health of its citizens.
There is no reason that expropriation needs to be defined so broadly nor is there any reason to give foreign investors more rights that domestic investors. There is bracketed text that states that “disputes that arise as a result of direct or indirect governmental administrative decisions of a regulatory or enforcement nature shall not be subject to the dispute settlement provisions of this Agreement”. We request that this language be retained in order to protect a government’s ability to use regulations to protect public health and the environment.

Our governments publicize the FTAA as a tool of development so how is it then that performance requirements are expressly prohibited? Performance requirements have long been a tool of economic development. If investment is to benefit a host country there must be linkages back to the domestic economy and performance requirements are one method of doing so. Local economic development is supported by the transfer of appropriate technology or by the requirement that enterprises purchase a certain percentage of inputs locally. These are concrete tools that allow foreign investment to be used to spur sustainable economic development. Elimination of these requirements shows the clear bias trade negotiators have for large corporate interests and not for small businesses and micro enterprises. Lastly, there is bracketed language that states that smaller economies may exercise the right to impose certain development-related performance requirements. We support this, but request that performance requirements be a right all FTAA countries may use. For example, in the U.S., The Community Reinvestment Act requires banks, thrifts, and other lenders to make capital available in low- and moderate-income urban neighborhoods in order to boost the development of these underserved areas. Will the investment chapter of the FTAA prevent the use of this type of tool?

Lastly, all FTAA governments should be free to use capital controls in order to prevent rapid capital outflows that create instability and economic crises. Capital controls have been recommended as a sound tool of economic policy and yet it is unclear in the FTAA draft text whether they will be prohibited or not.

Government Procurement
Each FTAA country should be able to use government contracts as a means to promote equity and purchasing decisions should not be limited only to price and quality.
Currently, the draft text would prevent governments from giving preferences to local firms in granting contracts and would ban governments from setting qualifications other than price and quality and consider other kinds of criteria as “unnecessary barriers to trade.” Many small, women-owned, and other minority-owned businesses have been able to benefit from government set-asides and incentives and the national treatment principle places these policies at risk. Workers and concerned citizens across the country have fought hard for the passage of living wage legislation in the U.S. and yet if a municipality can only use price and quality to make purchasing decisions, then living wage legislation -which mandates that a municipality only hire suppliers that pay their employees a living wage (higher than minimum wage and determined locally)- would be undermined. The inclusion of these protections will not inhibit fair trade. There is support for the use of government purchasing decisions to promote goals of equity in many of the FTAA countries and we urge the negotiators not to undermine democratically made decisions.

Role of civil society
In the interest of transparency and democracy, the full texts of each country’s negotiating positions should be made public. In addition, all the governments should commit to releasing any future versions of the consolidated draft negotiating text along with notations identifying the countries making the proposals contained within it. While we appreciate the release of the second draft text after the Quito ministerial we maintain that if our governments are truly committed to making this a transparent process then the negotiating positions would be released. In most of our countries, there are few, if any, mechanisms for formally advising our negotiators and due to the scope of the proposed FTAA and the potential impact on communities across the hemisphere these positions must be released.

We insist that there be more direct contact between negotiators and civil society. In each country, negotiators should meet directly with representative civil society groups before each negotiating session. Following each session, the negotiators should then report back on how the issues raised by civil society groups were addressed in the negotiations.

Lastly, complete evaluations of the social and gender impacts of a possible FTAA must be conducted. Impact assessments are a prerequisite for negotiating just policies that benefit the majority of people. Labor and environmental assessments are not sufficient to evaluate the FTAA’s impact on women and other community interests not explicitly represented by labor nor addressed by the environmental assessment.

Maureen Heffern Ponicki
Democratizing the Global Economy Project
American Friends Service Committee

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