*{Let's Harness Trade for Development
Why Oxfam Opposes the FTAA
Executive Summary - 2001} 

Oxfam Québec and Oxfam Canada are opposed to the current proposal for a Free Trade Area of the Americas. We believe that substantial and wide-ranging changes are essential if the international trade and investment regime is to promote poverty eradication, respect for human rights and environmental sustainability. These changes will involve radical reform of trade policies, agreements and institutions at national, regional and international levels, moving in a very different direction than what is currently being envisioned for Hemispheric integration. 
Like NAFTA and the Uruguay Round agreements of the World Trade Organization, the FTAA to date has been driven by the narrow commercial self-interest of business elites. The proposed FTAA, based on the extension of NAFTA to the Hemisphere, seeks to free corporations from government regulation, secure expanded markets for exporters and offer new guarantees to foreign investors--goals that more often than not conflict with the interests of the Hemisphere's farmers and workers and their families, and threaten the long-term prospects for poverty eradication and sustainable development. 
We need to radically rethink our approach if trade and investment are to be part of the solution instead of part of the problem. Oxfam believes trade and investment agreements should be devised and judged on the basis of their contribution to poverty eradication, respect for human rights and environmental sustainability. We believe that trade and investment agreements should conform to global and inter-American rights and environmental covenants, and promote the achievement of agreed international human development targets. 
Trade agreements signed in recent years go far beyond the exchange of goods to include rules on investment, services and intellectual property. They have removed conflicts between private and public interests from the political arena, placing them in the hands of unaccountable dispute-resolution panels. As such, they have had an enormous impact on the livelihoods of citizens and on their capacity to exercise their rights. What's more, these agreements have proscribed national policies that might mitigate their negative effects, restricting the ability of government at all levels to pursue sustainable development policies. 

Virtually all the governments of the Americas are seeking trade and investment as ends in themselves, without a sufficiently careful reading of how they might support national development goals. The community organizations who are our overseas partners are particularly critical of their governments' apparent willingness to undercut human rights in order to attract foreign investment, and to forfeit alternative development options in return for possible access to the U.S. market. The United States seems intent on using the FTAA to weaken trade links between the European Union and Latin America, thereby strengthening its hand in any future global trade talks at the World Trade Organization. And Canada appears to be driven solely by the desire to expand exports. None of this will bring the Americas closer to the fulfillment of the human development targets the international community has committed itself to achieving by 2015. 

Oxfam is not against closer trading relations: Trade can contribute to equitable development and can be undertaken so as to enhance respect for human rights and environmental sustainability. We also believe that a rules-based system is the best way to achieve this. Latin America's longstanding dream of integration is worth cultivating. However, an agreement based on blanket liberalization of trade and investment rules, particularly one between countries of vastly different size and clout, will undermine the policy tools governments must have at their disposal for sustainable development. 
This paper outlines key aspects of concern regarding the proposed Free Trade Area of the Americas, and suggests elements that an alternative fair trade agreement might contain. Of the many issues said to be on the negotiating table, five are of particular concern: agriculture, intellectual property, investment, market access, and the processes by which the agreement is being negotiated and would be administered. 
An agreement based on the extension of NAFTA to the rest of the Hemisphere would constitute a setback to efforts to eradicate poverty and to promote equitable and sustainable development. The demands of a globalized world require a process and an agreement more in line with the democratic aspirations of the citizens of the Americas.
 
*partie=titre Key Issues *partie=nil 
•*partie=titre Agriculture and Food Security: *partie=nil  
Trade and investment rules have made it harder for countries to implement national agricultural policies to promote food security and sustainable livelihoods, and to eradicate poverty. Minimum access obligations, for example, created to provide agribusiness with an entry into foreign markets, have facilitated dumping, undermined the livelihoods of small farmers, accelerated urbanization and stymied efforts at rural development. 

•*partie=titre Intellectual Property: *partie=nil  
Over-zealous protection of corporate patent rights has unduly raised the cost of seeds, medicines and other technology-rich products essential to economic development. In the case of knowledge developed by community efforts (such as traditional strains of plants and breeds of animals), unbalanced intellectual property rules have also facilitated the removal of knowledge from the public domain to the detriment of small farmers. 

•*partie=titre Investment: *partie=nil  
Measures to protect and promote investment have infringed on the capacity of government to protect the environment and promote public health and safety. NAFTA's Chapter 11, for example, by granting corporations the power to sue for lost future profits due to public regulation, provides a powerful disincentive to public regulation of investor behaviour. NAFTA also bans performance requirements, a key policy tool to support social and economic development goals. 

•*partie=titre Capital Controls: *partie=nil  
Lax rules on the movement of capital have contributed to devastating financial crises when speculators move vast amounts from country to country. Rather than remove controls, investment rules ought to encourage the channelling of long-term investment toward national development priorities. 

•*partie=titre Market Access: *partie=nil  
Inequitable access to markets in the current trading system has perpetuated poverty. Thanks to IMF and World Bank conditionalities and WTO rules, the poorer countries of Latin America and the Caribbean have been obliged to open their economies to imports, while Canada and the United States have maintained barriers to the exports of their southern neighbours. This imbalance must be redressed. 

•*partie=titre Special and Differential Treatment: *partie=nil 
Because of the vast differences in economic clout wielded by the countries of the Americas, a free trade area only makes sense if it includes significant resources transfers to its poorer members, as in the European Union. In a fair trade agreement, such special and differential treatment would go beyond longer transition periods to ensure poorer countries and regions have the policy tools and assistance to achieve equitable development. 

•*partie=titre Transparency and Public Accountability: *partie=nil  
Because trade agreements have overruled national, provincial and local laws, public debate and parliamentary scrutiny should be an integral part of the negotiation process. The current process offers overwhelming access to business, and minimal access to civil society. Such a lack of transparency tends to favour corporate rights over citizens' rights. Conflicts between private and public interests should be resolved in the political arena, not by unaccountable dispute-resolution panels.  
 
*partie=titre Agriculture *partie=nil 
A large proportion of Latin America and the Caribbean people living in poverty (at least 60%) are rural and derive their livelihood from agriculture. This is especially true in the region's poorest countries. Agriculture not only provides the primary means for survival for the poor, it is the basis for local and regional development in much of the Hemisphere.
The economic dictums of the International Monetary Fund and the rules of the World Trade Organization have forced developing countries to eliminate supports for small farmers (such as public credit, price supports and marketing boards) while reducing tariff barriers on agricultural imports. Simultaneously, WTO's Agreement on Agriculture has allowed industrialized countries to continue their existing systems of agricultural supports.
Small farmers in Latin America and the Caribbean are thus locked into competition with subsidized imports, particularly from the United States, which drive down local prices. This has been the experience of corn farmers in Mexico following liberalisation under NAFTA. Dumping of agricultural goods by the United States in the Caribbean, through loopholes in the WTO's anti-dumping provisions, has been devastating to the region's producers. Small farmers can find it equally difficult to compete with imports of unsubsidized staples from internationally competitive agricultural exporters such as Canada, Argentina, Brazil and Uruguay. 

Agriculture is too important for poverty reduction and environmental sustainability to leave its development to market forces. A fair trade agreement would not undermine the right of developing country governments to devise and implement agricultural policies to improve the lot of small producers --including measures which constitute barriers to international trade--in order to promote food security, rural development, a more equitable distribution of assets and the sustainable use of natural resources. Similarly, government support to farmers in industrialized countries should be carefully targeted to meet social and environmental goals, and not be used as a means to capture overseas markets.
As well as fairer regulation of governmental subsidies, action is needed to regulate the activities of the huge corporations that dominate world trade in agricultural commodities--70 per cent of which is controlled by six or fewer companies. These corporations capture an increasing share of value in international supply chains, keeping poor men and women producing crops for export from escaping from poverty. Measures that effectively defend small farmers, such as farmer-controlled marketing boards, should be explicitly encouraged by trade agreements, rather than proscribed as the United States has proposed. 

The downward trend and increasing volatility in international commodity prices negatively affects the income of small farmers supplying export markets and government revenue in commodity-dependent developing countries, such as the island nations of the Caribbean, thus reducing resources available for essential public investment in health, education and infrastructure. Tariff-escalation policies in Canada and the United States, by which tariffs are higher on processed agricultural products than on raw ones, stifle economic development in Latin America and the Caribbean. 
 
*partie=titre Policy Proposals - Agriculture *partie=nil  
•Trade rules must not undermine the right of developing countries to implement national agricultural policies that promote food security and sustainable livelihoods. In a fair trade agreement, this could be achieved by incorporating a food security clause, which would codify the types of interventions that developing countries could make exempt from trade liberalization commitments. 
•All forms of public support for agricultural exports, including direct export subsidies and export credits provided by industrialized countries should be eliminated. 
•A fair trade agreement would oblige the United States to re-design its domestic support policies so that they effectively promote social and environmental objectives, and no longer have negative impacts on small producers in Latin America and the Caribbean. 
•The United States and Canada should improve market access for agricultural exports from Latin America and the Caribbean by substantially reducing general tariffs, eliminating tariff escalation and reducing non-tariff barriers such as seasonal import restrictions. 
•Latin America and Caribbean countries should be exempt from any minimum access obligations in foodstuffs, especially staple foods. 
•A fair trade agreement should provide a framework for regulating the role of multinational corporations in international agricultural trade to allow for greater competition in international agricultural markets. 
•Fair trade rules should encourage agricultural diversification and the public management of commodity supply and production, with the objective of stabilizing prices. 
 
*partie=titre Intellectual Property *partie=nil 
Rules on intellectual property must strike a balance between rewarding private innovation and promoting broader social objectives. Such rules must also balance the rights of patent holders with their obligations to society. Oxfam is particularly concerned about the potential negative impact of intellectual property rules on technology transfer to developing countries, on public health, and on poor people's ability to buy seeds, medicines, and other technology-rich products. 

Economic development requires the sharing of technology. Current intellectual property rules guarantee monopoly benefits for the corporate owners of technology for periods as long as twenty years. The monopoly rents they collect allow them to control not only the use of technologies, but also the funds available for further research and development. While recognizing that inventors should receive fair compensation, the public interest would be better served by the sharing of technology, and by public control over research and development. 
Access to essential medicines is perhaps the most evident problem in this regard. Key policy measures required by the huge and growing burden of disease among the poorest people of the Americas, such as the manufacture of generic versions of patented medicines or the sourcing of licensed versions on the world market, is severely restricted by current intellectual property rules. Applying NAFTA's patent rules to the Hemisphere, as the United States has suggested, would restrict those options even further. A fair agreement on intellectual property must allow governments the flexibility they need to protect and promote public health. 

To offset the effect of such measures on private corporations' willingness to fund research and development, a fair trade agreement could create new public incentives for research and development on priority medicines and vaccines for diseases affecting the poor, including the creation of a Hemispheric fund financed by donors. 

Proposed intellectual property rules seek to enforce corporate control over plant genetic resources, enabling companies to impose high prices for seeds and related agricultural products. Giving private companies monopoly rights over the production and marketing of important food crops threatens the livelihoods and food security of small farmers. 

What's more, recent trade agreements have applied intellectual property rights originally intended for invented products to those derived from biodiversity and traditionally treated as the common property of local communities. Trade rules should do the opposite: reward community-based and traditional knowledge, and protect the rights and privileges of small farmers who have developed and maintained the plant varieties now being exploited for profit in northern laboratories.

Because patent rules can guarantee corporate control and monopoly rents, they are driving many of the developments in the field of agricultural biotechnology. Canada and the United States are seeking FTAA rules that will help promote their biotechnology exports. In the face of inadequate scientific evidence on the health and environmental risks, intellectual property rules should extend the precautionary principle and secure the rights of governments to restrict and/or require the mandatory labelling of genetically modified food and seed imports. 
Safety and health issues aside, supplanting traditional crops with genetically modified ones that require the annual purchase of seeds and a brand-line of inputs limits poor farmers' access to the means of their survival, and undermines efforts to achieve national food security. 

*partie=titre Policy Proposals - Intellectual Property *partie=nil  
•Fair intellectual property rules should ensure a better balance between the interests of inventors and the public good than currently exists within NAFTA or the WTO. Member governments should be able to reduce the length and scope of patent protection required by the agreement in order to achieve broader social and developmental objectives. (This will require reform of the WTO's TRIPs Agreement.) 
•Fair intellectual property rules should allow developing countries to make or import the cheaper generic medicines they vitally need. This means allowing countries more choice about their patent regime and including strong public health safeguards. 
•To offset the effect of such measures on private pharmaceutical corporations' willingness to fund research and development, a fair trade agreement should create new public incentives for research and development on priority medicines and vaccines for diseases affecting the poor, including the creation of a Hemispheric fund financed by donors. 
•Trade agreements must not undermine the right of developing country governments to determine 'sui generis' (of its own kind) regimes of intellectual property protection for plant varieties, including the option not to allow patents on living organisms and to outlaw contracts that prohibit the saving of seeds. 
•Trade agreements must be consistent with the Convention on Biological Diversity so that patent approval is made conditional on prior informed consent, benefit sharing and the disclosure of the source of genetic material in order to combat biopiracy. 
 
*partie=titre Investment *partie=nil 
Foreign investment is one essential element of national development strategy, but a fair balance must be struck between the guarantees offered to investors and the public's need to orient investment toward national development goals, environmental sustainability and respect for human rights.
Privatization of public services is driving much of foreign investment activities in Latin America, with decidedly mixed results in terms of access. Rules governing investment must not undermine the regulatory capacity of government to restrict monopolistic behaviour by private corporations and ensure equitable and universal provision of essential services.

Interpretations by NAFTA's dispute-resolution panels of that agreement's investor/state provisions have significantly reduced the authority of governments to promote public health, protect the environment and derive benefits from foreign investment. NAFTA's Chapter 11 takes dispute resolution beyond government-to-government disagreements by granting corporations (and not citizens) the power to sue national governments for lost future profits for any measure "tantamount to expropriation." An appointed dispute-resolution panel adjudicates such cases on the basis of trade rules alone, making a mockery of international human rights law and providing a powerful disincentive to public regulation of investor behaviour.
NAFTA also bans performance requirements for foreign corporations, which governments have used to support social and economic development goals. Similarly, lax rules on the movement of capital under NAFTA contributed to Mexico's devastating financial crisis in 1996 when speculators removed vast amounts of money from the country. Rather than remove controls, investment rules ought to encourage the channelling of long-term investment toward national development priorities and away from volatile speculative ventures. 

Government capacities to control capital flows, to regulate corporate behaviour, and to protect vulnerable livelihoods are essential to development. The investor-protections envisioned in the failed Multilateral Agreement on Investment (MAI) or in NAFTA's Chapter 11 do precisely the opposite, effectively placing the rights of corporations above those of citizens. 

Too often increased foreign investment has led to "social dumping"--the spread of dirty industries and the lowering of labour standards. A fair trade agreement must uphold agreed international labour and environmental standards, particularly the right of citizens to organize and advocate for their interests.

*partie=titre Policy Proposals - Investment *partie=nil  
•A fair trade agreement should allow for strict controls on speculative or short-term portfolio investment that makes no contribution to national development goals and increases the risk of economic instability. 
•A fair agreement would establish fair rules on regulation of corporate assets to serve the public good. Such rules must redress the gross imbalance between the public interest and investor profit in NAFTA's Chapter 11. 
•A fair agreement should include safeguards to enhance governments' ability to ensure fair competition and to assist populations disadvantaged by the effects of foreign investment. 
•A fair agreement must uphold internationally recognized human, labour and environmental rights, and ensure that are not undermined by the property rights of private investors. 
 
*partie=titre Market Access *partie=nil 
Trade liberalization has been an unequal bargain, with the greatest gains accruing to wealthy producers and industrialized countries. Most Latin American and Caribbean countries have suffered radical economic restructuring under IMF orders, in exchange for temporary debt relief, resulting in the de-industrialization of the region and a renewed reliance on primary exports. Latin American and Caribbean countries have opened up their economies far more rapidly than their northern neighbours. The results have undermined both livelihoods in poorer regions and the potential for developing new industries. 
The costs of North American protectionism for Latin America and the Caribbean are huge. The sectors of greatest interest to small producers, agriculture and textiles, are subject to the highest trade barriers. Particular problems include escalating tariffs, which rise according to the level of processing, and obstruct developing country efforts to diversify into higher value production as a means of promoting industrialization and employment. 

In the United States and Canada, tariffs on imports of fully processed food products are much higher than those on products in the first stage of processing. In addition, as average tariffs have fallen in most sectors, those countries have erected new, non-tariff, barriers which act to restrict entry to their markets in the same way as tariffs or quantitative restrictions. This includes informal protectionism, for example, through the excessive use of anti-dumping measures. 

The economic benefits obtained by developing country producers from improved access to industrialized country markets may have negative impacts on some low-income people employed in competing sectors in industrialized countries. Industrialized country governments should assist low-income groups to adjust to increased competition from imports through re-training, regional development programs and other targeted policies. 

*partie=titre Policy proposals - Market Access *partie=nil  
•A fair trade agreement should encourage national governments in Latin America and the Caribbean to determine market access for foreign products and investment according to national development plans. 
•A fair agreement should oblige Canada and the United States to make substantial reductions in tariffs applied to exports from developing countries, particularly peak and escalating tariffs. 
•A fair agreement should remove non-tariff barriers applied by Canada and the United States to exports from Latin America and the Caribbean, including the excessive use of anti-dumping and countervailing duty measures. 
•A fair agreement would require Canada and the United States to remove import quotas on textile and clothing products of particular interest to Latin American and Caribbean countries in line with the spirit of the WTO Textiles Agreement. 
•Canada and the United States should assist low-income groups in their own countries that are negatively affected by increased competition resulting from increased market access for Latin America and the Caribbean. 

*partie=titre Rules and Mechanisms *partie=nil 
Strong trade rules are essential if markets are to contribute to poverty eradication and sustainable development. But these rules must be fair and balanced, not tilted in favour of the interests of the rich and powerful at the expense of the poor and vulnerable. Balanced rules require a balanced process, one in which encourages transparency and public accountability in policy-making. 

The FTAA has been negotiated in secret, behind the backs of the societies most concerned with them. Large corporations have enjoyed privileged access to the negotiations through the Business Council of the Americas. Parliaments and civil society organizations have been kept in the dark. Proposals and drafts of a fair trade agreement should be submitted to public scrutiny through debate in the media, national consultations and hearings in national parliaments.
A fair trade agreement would not favour corporate rights over citizens' rights. To ensure this, an explicit reference would be included in the agreement's operating clauses to the pre-eminence of international human rights and environmental covenants. In addition, a fair agreement should include a complaints procedure by which citizens' organizations can challenge any perceived violations. 

A key factor resulting in unfair outcomes is the unequal bargaining power among FTAA countries. Smaller countries have little or no representation in the process, putting them at a major disadvantage in relation to the well-resourced missions of wealthier countries. A fair agreement would minimize such capacity constraints and imbalances in political and economic power.

For this reason, special and differential treatment (SDT) for developing countries, already institutionalized in the WTO, should be a fundamental principle of a fair agreement. However, SDT must offer more than longer transitional periods for implementing the same rules as wealthier countries. Rather, there should be positive discrimination in the rules in favour of small producers and developing countries to ensure that poorer countries and regions have the policy tools and assistance to achieve equitable development. 

A second key factor is the lack of civil society participation in trade policy-making. The current set-up, which offers limited space to a handful of NGOs, is clearly insufficient. Because much of Latin America is engaged in a fragile democratization process, and in all countries private corporations wield considerable clout, the capacity of the Hemisphere's governments to fairly represent the public interest in trade negotiations is questionable. For this reason, citizens' organizations that represent community interests should be at the negotiating table and their proposals should be considered on a par with those of the business community. 

*partie=titre Policy Proposals - Rules and Mechanisms *partie=nil 
•Mechanisms to operationalize special and differential treatment for poorer members should be incorporated into a fair trade agreement. SDT provisions should be reviewed on the basis of their contribution to developmental objectives and in support of the right of governments to devise and implement national strategies for poverty eradication, the promotion of human rights and environmental sustainability. Transition periods for implementing trade agreements should be based on development milestones not arbitrary dates. 
•Fair trade negotiation processes should be designed to increase the capacity of the smaller members and civil society to participate effectively. 
•All trade documents should be made automatically public. There should be greater public scrutiny of trade policy-making through more active involvement of national parliaments and increased opportunities for civil society involvement through regular national consultations. 
•Civil society should be at the negotiating table, and their proposals should be considered on a par with those from the business community. 
•Any dispute settlement system should be made fair and workable for smaller countries, should be based on human rights and environmental considerations, and should be transparent and accountable to the general public. 
Explicit reference to the pre-eminence of international human rights law and environmental covenants should be incorporated into the operational clauses of a fair trade agreement to ensure that trade rules cannot trump the rights of citizens. 
 
*partie=titre Conclusion *partie=nil  
Oxfam Québec and Oxfam Canada have supported community development for over thirty years in Latin America and the Caribbean. We have seen the potential of international trade and investment to help overcome scarcity and create employment opportunities. But we have also seen shortsighted trade and investment policies stymie our efforts and those of our overseas partners. The proposed Free Trade Area of the Americas poses a deadly threat to the livelihoods of the poorest of our neighbours, as well as to the long-term prospects for poverty eradication and sustainable development.

This paper identifies a number of elements that Oxfam believes could form the basis for a different approach, a Fair Trade Agreement. Other civil society organizations have also made cogent arguments for a fundamentally new approach. Trade and investment should be seen not as ends in themselves, but rather as means for achieving equitable and sustainable development. 

The secrecy that characterizes the negotiations thus far is indicative that the public interest does not lie at the heart of the FTAA process. The debate must be brought into the open, and civil society's proposals considered on a par with those of the business community. 
Oxfam believes that strong international rules are needed to manage trade in the interests of poverty eradication and sustainable development. But the FTAA as currently proposed favours only the narrow commercial interests of the most powerful nations and their large corporations. The demands of a globalized world require a process more in line with the democratic aspirations of the citizens of the Americas.