From: dale@dale.CAM.ORG (Dale Wharton)
Newsgroups: can.politics
Subject: NAFTA analysis--summary
Date: 18 Dec 92 01:49:00 GMT
Organization: private


         NAFTA analysis--summary
Date:    15 Dec 92 14:33 PST
Source:  Kai Mander <kmander@igc.apc.org>
         Institute for Agriculture and Trade Policy

U.S. CITIZENS' ANALYSIS OF THE NORTH AMERICAN FREE TRADE AGREEMENT
EXECUTIVE SUMMARY


E N V I R O N M E N T

The NAFTA lacks the funding mechanisms to ensure that a
sufficient share of the wealth it may generate will go towards
improvements in infrastructure and the strengthening of
environmental cleanup and oversight.  Funding for necessary
NAFTA-related expenditures should be explicitly linked to the
Agreement itself and sourced from those who benefit from it.
    No provision is included in the NAFTA to ensure that hazardous
wastes generated by NAFTA-induced investments will be
managed properly.  The NAFTA comes the closest to addressing
enforcement problems in its investment chapter, which meekly
encourages, rather than requires, countries not to lower their
standards in order to attract investment.  If a country believes
that environmental standards have been lowered by another country to
attract investment, its only recourse is to nonbinding consultations.
    The NAFTA leaves U.S. environmental and consumer protection
open to challenges as unfair trade barriers.  In contrast to earlier
drafts, the NAFTA puts the burden of proof on the challenging
nation rather than on the defendant.  Yet a U.S. law that is subject
to a challenge must meet a series of highly subjective
requirements, including that it be "consistent" in its level of
protection and applied "only to the extent necessary" to achieve a
NAFTA-approved policy goal.  Under the NAFTA a dispute panel,
meeting in secret and heavily biased in favor of free trade to the
exclusion of all other concerns, will judge whether or not the
challenged regulation represents an unfair trade barrier.
    Global treaties may run into problems with the NAFTA.  While the
NAFTA would appear to protect international environmental
agreements (IEAs), it nevertheless opens up two possible
complications.  First, for the treaties listed under the NAFTA, the
NAFTA itself becomes the arbiter of what is, and what is not,
allowed under the treaty.  Second, it requires all signatory nations
to submit in writing their desire to include new IEAs under the
NAFTA.  The difficulty in getting all the parties to the NAFTA to
agree to add other IEAs could be compounded if additional
countries accede to the NAFTA.


E N E R G Y   T R A D E

The NAFTA directly conflicts with the goal of energy conservation
and the development of alternative energy technologies by promoting
increased reliance on fossil and uranium fuels and on large-scale
projects such as the James Bay hydroelectric dams in Quebec.  The
energy chapter of the NAFTA fails to include conservation and
resource efficiency goals and timetables.  Rather, its stated
objective is to "strengthen the important role that trade in energy
and basic petrochemical goods play in the North American
region...through sustained and gradual liberalization" (Article
601).  The NAFTA would prevent the U.S. and Canadian
governments from restricting the import or export of energy
resources from other parties except under conditions of war.  The
NAFTA also sanctions continued direct subsidies to the oil and gas
industries, while making no provision for incentives to promote
energy efficiency projects or the development of renewable
energy programs.


A G R I C U L T U R E

The agriculture provisions of the NAFTA are contrary to the goal
of economically and environmentally sustainable agriculture and
rural development.  It would provide many opportunities for
increased corporate concentration in agriculture through the
elimination of import restrictions, lowered food-safety standards,
and lower world prices for farm products.
    NAFTA, in concert with the Dunkel proposal for renegotiation
of the General Agreement on Tariffs and Trade, would eliminate
the best farm programs in North America.  U.S. farmers could lose
the only programs that have established supply management and
reasonable prices for farmers.  Sugar, dairy, peanuts, cotton, beef,
fruits, and vegetables are the commodities that would be most
negatively affected by NAFTA in the U.S.  Mexican farmers would
also suffer as NAFTA, coupled with changes in the Mexican land
tenure system, places an unprecedented burden on family
farmers to enter the competition in global commodities markets
without the infrastructure, technology, and resources currently
available to their northern neighbors.


L A B O R

Studies show that up to a half million high-wage U.S. jobs could
be lost over the next ten years due to shifts in investment
resulting from the NAFTA.  The NAFTA dramatically alters the
incentives and rules for investors, enhancing corporate mobility
within the North American continent.  If ratified in its current
form, it would significantly increase the shift of productive
investment from the United States to Mexico.  While Mexico
would likely gain some manufacturing jobs due to new
investment, it will also experience significant labor surplus
growth due to the large-scale displacement of small grain farmers
and agricultural workers.
    If ratified in its current form, the NAFTA could cost U.S. workers
up to $320 billion over the next decade in lost jobs and lower
wages.  Liberalizing trade and facilitating the shift of investment
from the United States and Canada to Mexico will put downward
pressure on U.S. and Canadian wages without necessarily pulling
Mexican wages up.  Median wages for U.S. workers, especially
those lacking a high school degree, have fallen dramatically in the
last decade.  This suggests that workers at the bottom of the wage
scale have borne the brunt of the "globalization" of the U.S.
economy, though all workers have felt its impact.  Recent
immigrants, women, and people of color are disproportionately
concentrated in some of the labor-intensive industries that may
be most vulnerable to wage erosion and job loss due to the NAFTA.
    The NAFTA would, if implemented, undermine labor standards.
Any trade agreement among the nations of North America should
integrate basic labor rights and protections to prevent "social
dumping," i.e., violating worker rights to gain an advantage in the
international marketplace.  Several U.S. trade statutes set forth
compliance with basic worker rights as a condition for receiving
trade benefits under programs such as the Generalized System of
Preferences.  Since the NAFTA does not include an equivalent
formulation of basic worker rights in trade, it would actually
displace other U.S. trade statutes, leaving unguarded those
worker rights now protected under U.S. law.


I N V E S T M E N T   AND CORPORATE RIGHTS

The NAFTA gives corporations extensive rights without attendant
responsibilities.  The investment section lays out the framework
for the further liberalization of investment rules for corporations
operating in the three nations.  The basic principle is that a
corporation should be able to operate freely and without
discrimination in any of the three countries.  This includes
freedom from government-imposed performance requirements,
freedom to repatriate profits and freedom to shift top
management from country to country.  At the same time, the
NAFTA draft requires nothing from corporations in terms of
advancing worker rights, community investment, or
environmental health.  A NAFTA under these terms would benefit
a few hundred large corporations at the expense of the vast
majority of the people in all three countries.


A U T O M O B I L E   S E C T O R

The NAFTA would encourage auto plant closures.  The goal of the
NAFTA negotiators was the integration of auto production in the
three countries into a single "rationalized" production system.  For
the companies, this means closing inefficient plants, easing rule-
of-origin requirements, taking advantage of the lowest cost
production site and forcing workers, communities and suppliers
to compete with one another to lower production costs.  The
NAFTA would accomplish these goals for the companies at the
expense of auto workers.
    Under the NAFTA, current Mexican requirements for each auto
assembler to export as much as it imports into Mexico would be
phased out over ten years.  While the Mexican requirement that
foreign investors purchase inputs from domestic parts companies
would also be phased out over the ten-year period, the Mexican
parts industry would still be assured of a large share (declining to
50 percent) of the growth in the Mexican market.  The Canadian
government retains the safeguards of the Auto Pact, but the U.S.
has no comparable protection.  The rule of origin for automotive
vehicles and parts will be gradually raised to 62.5 percent, but
this would allow too much non-North American value to be
incorporated into products that qualify for NAFTA benefits.  The
rapid phase-out of tariffs on light-duty trucks and the negotiated
rules for Corporate Average Fuel Economy (CAFE) would lead to
increased production of trucks and small cars for the North
American market in Mexico without compensating benefits for
U.S. production and employment.


R U L E S   O F   O R I G I N

Loose rules of origin in the NAFTA would favor transnational
corporations over local workers and producers.  The conflict over
rules of origin is essentially a clash between economic forces
anchored geographically in this country or region--such as labor,
small businesses, and resource-based producers (e.g., agriculture
and mining)--and transnational corporations producing outside
North America and still claiming privileges under the NAFTA.
Tight rules favor the former, loose rules the latter.  In this
agreement, the corporations appear to have won.  Regardless of
the social or environmental standards inside the region, the loose
rules of origin in the NAFTA would allow producers to escape
these regulations by conducting labor-repressive or
environmentally damaging aspects of production elsewhere.
    For most goods, "substantial transformation," meaning a change in
tariff classification, is all that is required for materials
originating outside of the region to be considered regional goods and
have the full benefit of the free-trade regime. This makes it possible
for all the raw materials for many goods to come from outside the
region, while the finished product is given totally free treatment.
    Where substantial transformation has not taken place, or where
goods are made up of components from both inside and outside
the region simply assembled into another good, a percentage of
"regional content" was agreed upon for goods to qualify for
regional treatment.  The figure is 60 percent for most goods, 80
percent for most textiles and 62.5 percent for automotive
products.  When up to 40 percent of a product can be shipped
into the region from outside and have the whole treated as a
domestic product, as would be the case for most goods, a strong
incentive is given to nonregional producers to suppress the value
of the nonregional components and to use NAFTA rules as a Trojan
horse to acquire free access to markets in the U.S. and Canada.


D I S P U T E   R E S O L U T I O N

The NAFTA text establishes highly secretive dispute-resolution
procedures that eliminate citizen oversight on vital concerns such
as food safety, consumer-product standards, and environmental
regulations on hazardous substances.  Provisions promoting, or
even recognizing, worker rights as a factor in continental trade
are completely absent from the Agreement.  Provisions treating
panel proceedings as secret must be changed to guarantee public
access to the dispute resolution panel proceedings for private
citizens, as well as governments.
    The NAFTA dispute-resolution procedures permit, but do not
require, advice from outside experts.  Although the agreement
specifies that lists from which consultative or arbitral panels will
be drawn should be comprised of individuals with experience and
expertise in trade law and commercial affairs, it sets no such
requirement for familiarity with labor, environmental, or human
rights matters.


P R E E M P T I O N   O F   S T A T E   L A W

NAFTA clauses that speak to the role of state governments are
cautiously drafted and contain less explicit preemptive language
than did the earlier Dallas draft text.  The NAFTA leaves intact
current law and practice on preemption, whereby Congress can
define the relative power of the states to act on trade-related
issues.  Thus, implementing legislation will effectively determine
the degree of autonomy left to the states under the NAFTA and,
correspondingly, the degree of preemption of states' rights by
the federal government.
    Both the Standards chapter and the subchapter on Sanitary and
Phytosanitary Measures explicitly bind the states to extensive
access, assessment, notification, publication, information,
consultation, and cooperation procedures.  These requirements are
procedural matters, not substantive constraints on state powers
to enact environmental, consumer, or public health provisions.
    The Government Procurement chapter commits the parties to
further negotiations commencing no later than December 31,
1998 "following consultations with state governments."  NAFTA
specifically exempts federal set-aside programs for small and
minority businesses from the Government Procurement
provisions and presumably also leaves state set-aside programs
undisturbed.


I N T E L L E C T U A L   P R O P E R T Y   P R O V I S I O N S

The main beneficiaries of the NAFTA provisions on intellectual
property rights are pharmaceutical and biotechnology companies
and the computer software industry.  The potential losers are the
consumer, the individual inventor or creator or performer, the
indigenous, and the poor.  They are the likely payers of the high
costs implied by the intellectual property protections offered in
the NAFTA.  Clearly, the intellectual property rights proposed in
the NAFTA were designed to support the continued technical and
scientific advantage of transnational corporations.
    In general, the NAFTA has granted corporations the privileges of
intellectual property without recognizing corresponding
obligations to the broader society. It is not so much that Chapter
17 creates new inequities; rather, it endorses and exacerbates
existing inequities.  The NAFTA does not recognize the intellectual
property rights of indigenous peoples; it does not protect the
intellectual property of large numbers of creators and performers
in the entertainment and mass media industries; and, it does not
protect the public's right-to-know.  It does protect industry's
right to keep trade secrets; it endorses the privatization,
commodification, and ownership of life itself by compliance with
the notion of life-form patenting; and it effectively shackles the
use of compulsory licensing, one of the few existing means for
ensuring the public access to new products at affordable prices.


F I N A N C I A L   S E R V I C E S

The NAFTA, unless recast, would allow U.S. banks to gain greater
control of the Mexican financial system.  Limits on foreign
ownership of Mexican banks would be phased out by the year
2000.  If, after that time, the total foreign ownership of the
Mexican banking industry reaches a certain defined limit, Mexico
would have the right to temporarily freeze further foreign
investment in its banking sector once during the four years
following the transition period.  No individual foreign bank would
be allowed to own more than 4 percent of the total commercial
banking sector, although there are no limits on the percentage of
the sector that U.S. banks as a whole may own.  This effectively
protects Mexico's large banks from being taken over directly by
U.S. banks, but would allow the U.S. banking industry to gain
control over many of the smaller banks and over a significant
percentage of the larger banks.


E N T E R P R I S E   F O R   T H E   A M E R I C A S   INITIATIVE

The NAFTA and subsequent free-trade agreements are intended
to reinforce World Bank/IMF structural adjustment programs
throughout the hemisphere and guard against any changes by
future governments.  The Enterprise for the Americas Initiative
(EAI) is President Bush's plan to establish a free-trade zone
stretching from "Anchorage to Tierra del Fuego," expand private
investment and provide limited debt relief for countries in Latin
America and the Caribbean.  Each of these components is
conditioned on or supports the implementation of a structural
adjustment program, programs that have resulted in falling
wages, increased poverty, environmental degradation, and the
weakening of unions and other organizations representing the
interests of working-class people.
    The "accession clause," article 2205 of the NAFTA, specifies that
other countries or groups of countries (not limited to countries in
the Americas) may join the NAFTA, making it the model for any
future trade agreements.  Thus, future negotiations could proceed
much more quickly than the NAFTA, leaving very little time for
informed debate with or within these countries.  The resulting
agreements would severely limit future governments' abilities to
implement industrial policies, sustainable development programs,
or other alternative economic programs.