Magazine article Foreign Policy in Focus

Problems with Current U.S. Policy

Magazine article Foreign Policy in Focus

Problems with Current U.S. Policy

Article excerpt

Key Problems

* The U.S. government is promoting an approach to the FTAA based in large part on NAFTA, despite the failure of that accord to raise living standards.

* Proposals for an "investor-state" clause in the FTAA would give investors the power to challenge national and local laws.

* The USTR is promoting a significant expansion of trade in services, leading potentially to the privatization of such public services as health and education.

On the eve of the Clinton administration's departure, the U.S. Trade Representative's office (USTR)--in response to congressional and international NGO pressure--published summaries of its FTAA negotiating positions. The summaries, while giving only partial and rather vague information, do provide a clear indication that the United States is promoting proposals based in large part on NAFTA.

The USTR supports, for example, the controversial "investor-state" provision contained in both NAFTA and the failed Multilateral Agreement on Investment (MAI), as well as in a series of bilateral investment agreements negotiated by the U.S. government. That clause, which grants corporations legal status formerly reserved for nations, represents a significant expansion of investors' abilities to use trade agreements to challenge local laws. When this sweeping procedural right to challenge governmental regulatory actions is coupled with the broad and vaguely worded investor protections in Chapter 11 of NAFTA, virtually all government regulation becomes a potential target. In the past, investment agreements or national laws have provided for compensation in cases where governments take control of investors' assets in the public interest. Under the MAI/NAFTA approach, that right is broadened to include measures tantamount to expropriation, which investors have used to demand compensation for potential lost profits arising from regulatory changes. These challenges are decided by dispute resolution panels meeting in secret without input from citizen groups.

In 1998, the Canadian government was forced to rescind its ban on MMT, a gasoline additive believed to cause nerve damage, after a challenge brought under the investor-state provision by the U.S.-based Ethyl Corporation. Currently, the Canadian corporation Methanex is suing the U.S. government for $970 million because of a California executive order banning the use of MTBE, another gasoline additive associated with serious health and environmental risks. The inclusion of such a provision in the FTAA could effectively provide corporations with veto power over local laws and regulations.

As with NAFTA, the USTR proposals for the FTAA would result in greater rights for investors, without establishing any corresponding responsibilities. The USTR's position is that investors should have the right to move funds into and out of countries without delay--meaning that provisions such as capital controls or performance requirements to ensure that investments serves to promote development goals would be illegal under an FTAA.

NAFTA includes weak side-agreements on labor and the environment, in which the three countries commit not to break their own laws on those issues, but not even these meager measures are being considered under the FTAA. …

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