From: dale@dale.CAM.ORG (Dale Wharton)
Newsgroups: soc.culture.african.american
Subject: NAFTA analysis--investment, corporate rights
Date: 30 Dec 92 22:41:01 GMT
Organization: private


         NAFTA analysis--investment, corporate rights
Date:    15 Dec 92 15:01 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

I N V E S T M E N T   A N D   C O R P O R A T E   R I G H T S

by John Cavanagh, Institute for Policy Studies

A.  CRITIQUE OF NAFTA TEXT (September 6 text)

1.  RIGHTS WITHOUT RESPONSIBILITIES

        The NAFTA draft gives corporations tremendous rights without
asking for any responsibilities in return.  The investment section
lays out the framework for the further liberalization of investment
rules for corporations of the three nations.  The basic principal is
that a corporation should be able to operate freely and without
discrimination in the other two countries.  This includes freedom
from government-imposed performance requirements, freedom to
repatriate profits, freedom to move top management, provisions
ensuring compliance by subnational governments, etc.  This approach
has led President Carter's Labor Secretary, Ray Marshall, to label
NAFTA an "Investment Protection Act," and Maude Barlow of the Council
of Canadians to call it a "Corporate Bill of Rights."
        At the same time, the NAFTA draft requires nothing from
corporations in terms of advancing worker rights, community viability,
environmental health, or the common good.  A NAFTA under these terms
will benefit a few hundred large corporations at the expense of the
vast majority in all three countries.

2.      ENCOURAGING LOW WAGES AND POOR WORKING CONDITIONS

        Such freeing of investment rules without requirements on labor
and environmental standards and community protection will only promote
an acceleration of capital flight from the United States (and to a
lesser degree from Canada) to the border area in Mexico.  As a result,
corporations will be in a position to dictate wage levels in all three
countries leading to a downward push on wages and job security.  In
early June, Ross Perot told a group in Washington, D.C. that he had
phoned the executives of 15 of the largest U.S. corporations and had
asked them where they would build their next plant if NAFTA went
through. According to Perot, they all said Mexico.  A new Roper
Organization poll of 455 senior executives of U.S. manufacturing firms
found that 40 percent said they were likely or somewhat likely to
shift some production to Mexico if NAFTA is ratified.
        The increased mobility for corporations will enhance their
bargaining power vis-a-vis U.S. and Canadian workers to further erode
wages and working conditions in these countries, while failing to
raise them in Mexico.  The same Roper poll found a quarter of U.S.
manufacturing executives were likely or somewhat likely to use NAFTA
as a "bargaining chip" to keep wages down in the United States.
        Whereas protections for investors are enforced by a dispute
resolution mechanism that provides for binding arbitration, violations
of basic worker rights are subject to no channel of appeal and
violations of environmental standards result only in nonbinding
consultations.

3.      EXTENDING DEVELOPMENT THAT EXPLOITS WOMEN AND PEOPLE OF COLOR

        Women in all three countries (but particularly in Mexico and
the United States) have borne the brunt of the current strategy of
economic integration of the three countries.  In the 2,000 maquila
factories on the Mexican side of the border, a workforce that is
predominantly female suffers from low wages, violation of worker
rights, hazardous working conditions, and sexual harassment.  NAFTA
will only expand the border slum further south.
        In the United States, as real wages and working conditions
have eroded over the past decade, women have again borne the brunt of
adjustment as many are forced into low-paying, temporary jobs devoid
of benefits in order to make family ends meet.  The job loss and the
bargaining down of wages from NAFTA will hit workers at all levels,
from highly-skilled technicians to unskilled labor.  But recovery from
job displacement and scaled-down wages in a country where social
services are being eroded will be disproportionately difficult for
poor, poorly educated, minority, migrant, and women workers.

4.      UNDERMINING STATE AND NATIONAL PREROGATIVE ON STANDARDS

        The liberal lists of corporate freedoms enumerated in the
investment chapter of NAFTA (freedom from government-imposed
performance requirements, freedom from rulings by subnational
governments, etc.) undermine governments' ability to protect the basic
rights, health, and safety of their people.  Corporations have used
the weakening of Canada's regulatory structure that accompanied the
U.S.-Canada Free Trade Agreement to gain the authority for two energy
megaprojects--the James Bay Hydroelectric Project and the Arctic Gas
Project--that are having devastating effects on energy conservation,
indigenous peoples, and fragile ecosystems.  NAFTA will accelerate
this erosion.
        Likewise, the agreement prohibits governments' ability to
stimulate economic activity through such techniques as domestic
content rules.  Such limits restrict legitimate government activities
to stimulate local activity.

B.  ALTERNATIVES

        Investment flows are important to development in all three
countries.  Investment flows across borders can enhance the quality
and quantity of jobs, the stability of communities, and a healthy
environment only if they are carried out under conditions that respect
basic rights and standards and that compensate communities that are
dislocated by capital flows.  The Mexican Action Network on Free Trade
suggests that investment meet the following minimum requirements:  be
productive; be nonpolluting; respect national legislation; and
contribute technology in areas required by the national strategy.

1.      INTEGRATED DEVELOPMENT

        U.S. citizen groups and elected local, state, and national
officials need more avenues to discuss the development priorities of
our nation.  NAFTA accelerates the shifting of most key decisions to
unaccountable private corporations.  Our vision of development is
grounded on the notion of basic human rights as enumerated in the
UN Universal Declaration of Human Rights.  Our vision recognizes the
social and economic contribution of women and therefore considers it
necessary to improved the level of protection of basic rights of both
women and men, using the highest existing standards in our societies
as a base for further improvement.  Overall, we insist on development
through democratic means that is based on social participation in
national decisions.  Inasmuch as the future development of the United
States will be closely tied to the development the rest of the region,
we must explore new ways to carry out the dialogue over development in
new hemispheric forums.

2.      CHECKS AND BALANCES

        If trade and foreign investment are to serve the needs of
communities, workers, and the environment, then there must be an
adequate system of citizen and government checks and balances on the
global corporations engaged in trade and investment.  State,
provincial, and federal governments must have the right to pass
standards to protect the health, safety, and environment of their
inhabitants.  Higher standards in one area should not be subject to
"unfair trade practice" complaints.
        In accordance with United Nations principles, the people of
each nation have the right to preserve local efforts at achieving
viable communities, sustainable and subsistence agriculture, and
food security for all citizens.  Indigenous peoples and other
communities should maintain the right to reject corporate incursions
that are destructive of their communities and cultures.
        The NAFTA text does provide certain exemptions to the total
unleashing of investment flows:  Canada and Mexico are allowed to
screen and restrict certain investments, particularly those related to
natural resources and culture.  There should be far greater public
debate on what other areas should be subject to special treatment in
all three countries.  The Action Canada Network argues that each
country should be able to require foreign investors to use local
content, or buy local goods and services, or require transfers of
technology.

3.      CODE OF CONDUCT

        Any firm that desires to reap the benefits of freer trade
should agree to subscribe to the Maquiladora Standards of Conduct,
a set of guidelines that address environmental contamination, unsafe
working conditions, violations of worker rights, and inadequate public
services in border cities.  Recently, Levi Strauss and Sears have
taken steps toward their own codes of conduct; we acknowledge these
first steps but ask that their codes be revised to upgrade the
descriptions of worker rights to be consistent with the Maquiladora
Standards of Conduct and the worker rights enumerated in the U.S.
trade law.
        Any agreement between our countries should also include
mechanisms to ensure that corporations contribute to necessary
infrastructure and social services in those communities in which they
establish operations.

4.      TRAINING AND INVESTMENT

        President-elect Bill Clinton has proposed that firms spend 1.5
percent of payroll for continuing education and training programs.
Clinton has proposed a Rebuild America Fund, with a $20 billion
Federal investment annually leveraged with state, local, private
sector, and pension fund contributions.  Rev. Jesse Jackson has
proposed an American Investment Bank along the same lines financed by
public sector pension funds.  These and similar proposals can be part
of a program to revitalize the U.S. economy and reinvest in
communities.

5.      COMMUNITY NOTIFICATION

        Workers and communities should not have to bear the cost of
economic dislocation and integration.  This is one rationale for
international standards on health, thy and environment.  Likewise,
corporations leaving a community should be forced to give lengthy
advanced notification and should pay for part of the costs for
dislocated workers' training and social support.

6.      CHANGING INCENTIVES ON CORPORATIONS

        At present, the United States has a wide range of incentives
that encourage U.S. firms to invest overseas in ways the exploit
workers and the environment.  These include AID programs that help
U.S. firms set up plants overseas, tariff exemptions, tax deferral on
reinvested foreign income, OPIC insurance, among a host of others.
These should be eliminated and replaced with programs that advance
worker rights and environmental protection globally and that encourage
investment in the United States.  These would include a reorientation
of aid programs to help the poorer majority overseas, the inclusion of
labor and environmental standards in all trade agreements, removing
the tax breaks on overseas investment, among others.
__
NOTE:
I have tried to use the trinational "Final Declaration" from Zacatecas
of October 1991 as a basis for the alternative. I have also drawn from
the April 6 Canadian document, the April 6 US document, August
documents by the various networks, and the September 16 LAC report.
__
John Cavanagh
Institute for Policy Studies
1601 Connecticut Ave. NW
Washington, DC 20009
phone: (202) 234-9382