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1. The FTAA will not be free trade. Trade Minister Pettigrew has said as much: the FTAA is an extension of NAFTA. We know NAFTA is not a free trade deal: all the American protectionist measures still apply: just ask a P.E.I. potato farmer, a softwood lumber worker, or a steelworker. So, under the FTAA, the U.S. will still act against successful Canadian exporters — and against exporters from anywhere in the Americas as well. Worse, because of the recent Byrd amendment to U.S. trade law, it is U.S. companies, and not the government, that will collect any countervailing duties imposed on foreign exporters. It has become a profit opportunity for American companies to initiate protectionist trade actions.
2. For the Americans, international agreements like the FTAA are instruments of U.S. policy. The U.S. is the worlds dominant power and has no plans to give up any of the advantages that status brings with it. On trade, for over 50 years, they have pursued a carrot and stick approach. Under the NAFTA/FTAA the carrot is reduced tariffs and apparent increased access to their market. The stick is that U.S.trading partners have to give up the industrial policy measures they need to develop products for American customers, world exports, and even the home market. And if, despite this, any exporters become too successful for American taste, see point one above, and point three below.
3. NAFTA incorporates American protectionist measures in the agreement, and so will the FTAA. These measures are sometimes worse than before the trade deals. In NAFTA, the U.S. has the right to retaliate — take measures of equal commercial effect against any industry it wants — to any Canadian cultural initiative it says hurts U.S. entertainment industries. Contrary to what Liberal and Tory Ministers have told us, culture was not exempted in previous trade deals. The true meaning of the “Canadian cultural exemption” is that the U.S. gets a free hand to retaliate against anything Canadian. It does not have to prove its own industry has been injured before it acts against Canada, as it would have had to do following its own trade rules! That’s why we have not had any new cultural programmes and why we have cut back or eliminated the old ones.
4. U.S. corporations want the right to be treated as a corporate citizen of every other FTAA country. The FTAA negotiations propose to protect and to extend the rights of foreign capital, including the right to establish operations anywhere, and to sue for any potential profits lost, say, because of government policies on the environment, or because governments want publicly-owned corporations to supply a good or service. As well, it would give new, very valuable intellectual property rights to largely U.S. corporations. In fact the U.S. is the only country of the 34 FTAA countries that stand to benefit from these rights, since all others are net importers of patents, and trade marks. In pharmaceutical drugs alone, the cost to the Canadian consumers of NAFTA rules is measured in billions.
5. The FTAA will promote the international capital model of development. As with NAFTA, the key variables in this model are the rate of interest on foreign loans, the exchange rate, and the rate of growth in export markets, mainly the U.S. itself. All of these variables are most affected by U.S. economic policies, especially monetary policy. The U.S. operates monetary policy in response to developments in its domestic economy, not in the Americas. When U.S. interest rates go up, the cost of servicing foreign debt kills off any export surplus gains for other nations, and dampens markets for exports at the same time.
6. Latin America and the Caribbean need comprehensive action on debt not the FTAA. Coming to Quebec City we have 32, mostly debt laden, poor countries being asked to open their borders to more foreign investment which has to be serviced through an export surplus. It is hardly conceivable that all 32 can simultaneously achieve the level of surpluses needed to pay down existing debt. And remember, the FTAA is about promoting inward investment which will result in new, increased debt levels.
7. The FTAA is not mainly about lower tariffs for exports or cost savings for consumers. The reduction of tariffs had little to do with NAFTA, nor will it with the FTAA negotiations. For instance, the average tariff on all Canadian exports to the U.S. was one per cent before the first FTA. The average tariff on dutiable U.S. imports from Canada was four per cent. Once the much broader GST replaced the previous tax on manufactured goods (to make Canada more competitive under the FTA) consumers gave back more than they gained from tariff reductions.
8. Canada’s NAFTA dollar will be no higher, and may even be lower, when it becomes the FTAA dollar. The exchange rate has everything to do with what happens under the trade deals. From the beginning of bilateral trade talks with the U.S. in the 1980s, until 1991, three years after the first FTA took effect, the Canadian dollar appreciated by 17 percent. That was like putting a 17 per cent tariff on Canadian exports to the U.S. and simultaneously removing a 17 per cent tariff on imports. The Canadian economy faltered badly in that period and really didn’t begin to grow steadily again until the currency fell to the 65 cent U.S. range late in the 1990s. That’s the NAFTA dollar. But there are limits to the acceptability of currency devaluation. What if we have to devalue our way out of the next bad patch, say to the 50 cent U.S. level? Call that the prospective FTAA dollar.
9. Accepting the FTAA means facilitating U.S. dominance. Capital now flows from poor countries to the richest. This reflects unequal power relations in the Americas not sound economic principles. The FTAA means linking the rate of exploitation of natural resources –including energy and agriculture, to the needs of American consumers. (Why not build stronger national economies instead?)
10. In promoting the FTAA, Canada is doing American bidding. After the U.S. Congress blocked fast track negotiating authority, Canada began taking the lead in promoting the FTAA. Since the Monroe Doctrine, where the U.S. arrogated to itself the role of the hemispheric boss and guardian, Canada has largely avoided taking sides in disputes within the Americas or even participating in hemispheric affairs. Now that we are playing a role, why should it be to act as the surrogate for the U.S.?
Canada’s history, our economic structure, and policy needs suggest that we have much in common with Caribbean and Latin American nations. We need to establish a development model that serves their citizens needs and ours, not the U.S. government, and the transnational corporations. CP Duncan Cameron is a political economist at the University of Ottawa. He can be reached at: email@example.com