The Thistle Volume 13, Number 2: Dec., 2000/Jan., 2001.

More Free Trade: The Creation of the FTAA

In 1994, around the time of the passage of the North American Free Trade Agreement (NAFTA), President Clinton called for the expansion of free trade across the entire Western Hemisphere – the creation of a sort of capitalist’s paradise. This free trade zone – dubbed the Free Trade Area of the Americas (FTAA) – quickly gained popularity among the leaders of most of the Western nations. Under the auspices of the Organization of American States (OAS), the Western nations proposed and began planning to implement the FTAA by 2005.

The FTAA is modeled after NAFTA, which created an import duty-free zone across the North American continent. Economists reasoned that this ‘free trade’ zone would allow all three North American nations to prosper by allowing goods to move across borders more freely. And indeed, trade has exploded. Mexican exports to the United States have climbed from $40 billion in 1993 to $110 billion in 1999, while American exports to Mexico have gone from $42 billion to $87 billion. The astute reader will observe that the United States, in the intervening years, has built up a trade deficit to Mexico. In theory, this means, the Mexican economy is prospering, and Mexican people are doing better than ever before (also, of course, that the American economy is correspondingly losing cash). And in fact, Mexico has done quite well under NAFTA. Despite a crash in the value of the peso in 1995 which resulted in a drop in imports from the US, Mexico recovered, with exports increasing every year following the brief recession, and has now built a strong, export-based economy.

Prevailing economic wisdom tells us that NAFTA was not responsible for Mexico’s recession, but it did help in the recovery. This is evident because Mexico climbed out of its 1995 recession faster than it did out of its 1985 recession. Such a climb, however, does not seem like it would be helped by NAFTA – which prevented Mexico from raising protective tariff barriers against US imports. Furthermore, the crash itself was due to the artificial valuation of the peso, thanks to the neoliberal government of Ernesto Zedillo, who, by keeping the peso’s value high, hoped to encourage passage of NAFTA and stimulate the influx of foreign capital.

NAFTA also drove an increase in the number of maquiladora factories – foreign-owned operations that are tax-exempt on raw materials imports, so long as they produce for export. This, essentially, is a formula for cheap production in Mexico in return for lucrative export profits. Since export figures count the point of production as the exporter, a company like GM, which is the largest foreign employer in Mexico, can produce in Mexico, export to the United States, and send the profits to American shareholders, while the revenue is tabulated as a “Mexican export”.

NAFTA, essentially, was an invitation for American manufacturers to bring their manufacturing south of the border and compete for cheap labor and weak or non-existent unions. A maquiladora is a perfect ‘finishing station,’ a way to dramatically decrease the cost of extremely labor-intensive, low-technology assembly operations. The workers employed are frequently young, untrained, often female, with little concept of labor organization and an extremely high turnover rate (10-15% a month). Aside from the very real lack of labor protections in Mexico, the threat of moving south of the border allows American businesses to erode labor bargaining power in America, and thus job security is now becoming a major priority of American labor, surpassing wages and pensions.

Worse, environmental standards in Mexico fall far short of American standards. While this makes Mexican factories a much more attractive business prospect and encourages foreign investment, it also results in the further erosion of the Mexican environment. The United States-Mexico border has gathered an infamous reputation since the passage of NAFTA as the source of tremendous environmental pollution due to maquiladoras: smog in the atmosphere, raw sewage in the Rio Grande, toxins dumped in the desert.

As Mexico goes, NAFTA is a sour deal – Mexican industry has suffered, losing out to foreign-owned business, real wages have gone down, labor conditions have suffered, and Mexico has seen little of the promised technology transfer that would transform its economy. Not to mention NAFTA has not had the soaring positive effect it was supposed to have on the American economy. The Clinton Administration, in light of the new trade deficit to Mexico, cheered meekly that NAFTA was having a “modest positive effect” on the American economy. Establishment analysts backpedaled on the loss of jobs due to NAFTA, claiming that there was no good way to assess loss of jobs, despite their pre-NAFTA fairy tales of tremendous job creation. Older economic analysis, however, has used trade deficits to measure job loss, by which NAFTA has resulted in the loss of 420,000 American jobs. Even the NAFA-TAA, the agency created to alleviate NAFTA-induced job loss problems, had 166,000 relief applicants, probably only a fraction of the true number.

Pre-NAFTA proponents rationalized that the loss of jobs could be alleviated by further education and training. But labor organizers point out that American wages are 9 times what Mexican wages are, effectively making it impossible for American labor to compete, unless they somehow become nine times as productive as Mexicans.

Despite the plethora of confusions surrounding NAFTA it has been dubbed a success, and the larger project of converting the entire Western Hemisphere into a free trade zone (presumably followed by the rest of the world) is being actively pursued. The OAS has already designated six working committees to coordinate the various aspects of the creation, as well as to create the treaty framework by which the member nations must abide.

It must be said that the FTAA is being implemented in extremely undemocratic fashion – there has been absolutely no consultation with the public. In America, the public is vastly unaware of its existence, and no discussion of whether America should be involved exists. Presumably the economic managers feel that this is an issue out of the reach of the public’s grasp, and therefore there is no need to discuss it – or that dissenting voices suffer from a lack of education, and so any pretense of democracy is futile. Worse, however, is the colonial framework this imposes on the rest of the hemisphere, giving American business the ability to exploit the resources of two whole continents as they see fit. Given that most of the participants in this experiment suffer from an extremely poor standard of democracy (America included), no one should harbor the illusion that the FTAA is being pursued as a mandate of the people. If such a mandate exists at all, it is so far removed from the level of the government over which people have any control that it might as well be a dictatorial decree. The simple fact of lack of public consult should send up red flags, but the implementation of the organization itself is extremely disquieting.

The FTAA is structured into three main components: trade ministers, who developed the overall work plan for the FTAA; nine negotiating groups, which are gathering information on the current status of trade in the Hemisphere; and vice ministers of trade, who help coordinate the working groups and make recommendations to the trade ministers.

The nine negotiating groups are: market access; investment; services; government procurement; dispute settlement; agriculture; intellectual property rights; subsidies, antidumping and countervailing duties; and competition policy. The nature of these nine groups, and the lack of working groups on human rights, labor rights or the environment, should give some indication of the priorities of the FTAA.

The FTAA organizers are also committed to working under the World Trade Organization (WTO), which gained notoriety in late 1999 when protesters disrupted the December 1st WTO ministerial in Seattle. Unlike the WTO, however, the FTAA claims to be committed to transparency in its process, to which end it has established a committee of government representatives on Civil Society, which will take suggestions from organizations, businesses, or otherwise interested parties throughout the Americas. The Committee, according to the FTAA’s website:

“is given the responsibility to receive inputs from civil society, to analyze them and present the range of views to the FTAA Trade Ministers. The Trade Ministers stated: “We recognize and welcome the interests and concerns that different sectors of society have expressed in relation to the FTAA. Business and other sectors of production, labor, environmental and academic groups have been particularly active in this matter. We encourage these and other sectors of civil societies to present their views on trade matters in a constructive manner.”

The balance of their attention, however, appears to be to those suggestions devoted to business matters, as they lump “gender equality, social justice, human rights, poverty, immigration and education” under the heading “social issues.” Ostensibly the voices of the people have thus far been heard – and dismissed. Similar OAS rhetoric on their commitment to social justice issues does not appear to have manifested in any policy decisions, or even a pretense of exploring the steps that must be taken to ensure a sound, just framework.

Protest against this seeming eventuality has been building. While FTAA ministerials have gone mostly unheralded since the first OAS Miami summit of 1995, protest has picked up since the Seattle WTO actions. The OAS summit in Windsor, Canada, on June 6 of 2000, saw massive demonstrations and brutal police repression. The next Summit of the Americas, held in Quebec, Canada in April of 2001 will likely see similar levels of action. While it is unlikely that public mobilization will slow the tide of global capital, such action is the only forum of discussion open to the general populace. The OAS may march on, for the moment, nonplussed, but the countercurrent is growing stronger all the time.


The Thistle Volume 13, Number 3: Dec., 2000/Jan., 2001.