Re: Musings on the FTAA

[Ed Weick]

Chris Reuss: >Ed Weick mused: > > Politicians appeared to give particular attention to the so-called > > "Democracy Clause", which was intended to establish conditions that would > > exclude non-democratically elected countries from the FTAA. > > Really ironic as the FTAA is all about the abolition of democracy. > (Corporations can sue countries if the latter dare to put enviro/social > regulations in their way.) NAFTA has been in effect since 1994, and I for one don't feel that the democracy I live in now is very different from the democracy I lived in prior to NAFTA. It's about the same, good in many respects, bad in some others, awful in the case of some. I would suspect the impact of the FTAA will be similar. Chapter 11 is probably the most controversial chapter of NAFTA. It permits foreign companies operating in any of the three signatory countries to sue governments if they impose laws that impact negatively a company's operations and profitability. The best known Canadian Chapter 11 case involved the banning of MMT, a gasoline additive. In April 1997 Canada imposed a ban on the import and inter-provincial transport of MMT because a primary ingredient of MMT, manganese, is a known human neurotoxin. The Ethyl Corporation, the plaintiff responded to the ban with a $250 million lawsuit claiming that it violated Ethyl’s investor protections under NAFTA. Ethyl argued that the law was an "expropriation" of its assets or an action "tantamount to expropriation" because it would eliminate profits expected from sales of the additive. Instead of sticking to its guns, the Government of Canada settled with Ethyl agreeing to pay $13 million in damages and legal costs. I’m not suggesting that the inclusion of Chapter 11 in NAFTA, or an equivalent chapter in the FTAA is in the public interest, but what I conclude from the Ethyl case is that the Government of Canada chickened out. Essentially, it settled out of court before the case was heard. If it had lost the case, the worst that could have happened would have been payment to Ethyl of $250 million in compensation. Though I’m not a lawyer, it would seem to me that, having paid compensation, the government could then have maintained its ban on MMT. The Government of Canada, like all governments, has a mixed track record. Sometimes it takes a strong stand, at other times it does not. I don’t personally know why it buckled in the case of MMT. > > Poor countries would benefit and so might the rich. For example, Jamaica > > [...] young people in the vast shanty towns of Kingston can find little > > else to do. Giving them some alternatives and raising the standard of > > living even a little might do something positive in stemming the flow of > > drugs. Providing more jobs at home could also stem the brain-drain which > > Jamaica and other Caribbean countries are experiencing. > > On the contrary, the FTAA would make the poor countries' economy pretty flat. I really don’t follow the logic here. A little over a year ago I spent a month in Jamaica working with an NGO. What I found there was some three million people, a large proportion of them young, living on a mountainous piece of land the size of Prince Edward Island (100,000 people), trying desperately to find something to do or, preferably, leave for the United States or Canada, where they saw a decent chance of making a living. Jamaica has become a major drug transshipment point because repackaging drugs and sending them on the US is, at least, something that young people can do. The year before I spent a month in the slums of Sao Paulo, where the situation was similar and perhaps a little more desperate. These places can’t be more flat than they are now. What they desperately need is capital which provides jobs. I’m pretty sure I know the answer you’d get if you asked a poor Jamaican or Brazilian favelado whether he cares where such capital comes from. > >The FTAA will most certainly not result in anything resembling the European > > Union. Member nations of the EU were originally much closer to enjoying a > > similar standard of living than are countries of the Americas. > > Just wait until the EU-extension to Eastern Europe (and later possibly > to North Africa). With this, the EU will have the "cheapo backyard" just > like the U$ has in South America -- even closer... I don’t think so. The EU is a pretty exclusive club. The kinds of things a country has to do to become part of it are pretty rigorous. I’m not fully current on the situation, but I believe that Poland and Hungary have had to jump through some tough hoops to be considered for membership. The benefits of joining can be very large. Ireland, once one of Europe’s true backwaters, has become transformed. I visited it last year after not having been there for twenty-odd years and came away quite amazed at how progressive and modern it had become. And yes, there still are problems, but some of these have been at least partially resolved by membership in a larger and more diversified capital pool and products market. Ed Weick Visit my website at: http://members.eisa.com/~ec086636/