Free trade: The great divide or the common good?

By Karen Van Loon
March 2001

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The third Summit of the Americas is taking place in Quebec City this year, from April 20 to 22, bringing together hemispheric presidents and prime ministers. The proposed plan of action will focus on Strengthening Democracy, Creating Prosperity and Realizing Human Potential.

The leading element of Creating Prosperity is the development of a hemispheric free trade zone by the year 2005 called the Free Trade Area of the Americas or FTAA. Strengthening Democracy in part calls for increased promotion of human rights and informed debate with society. Realizing Human Potential reflects "a commitment to inclusion and greater equity" as well as "quality of life." These themes are reflected in the Summit of the America's Declaration of Principles which include sustainable development, eradication of poverty, improving access to quality education and primary health care, environmental conservation...

So why are some people concerned about the FTAA and the Summit of the Americas?

The social, environmental and economic impact of free trade and related policies in the Americas have mobilized labour, human rights, environmental, church, development, economic and social justice organizations into working together to denounce the negative effects and propose alternatives. Canadian organizations work together through Common Frontiers but also with other similar organizations from around the Americas as part of the Hemispheric Social Alliance. They promote a peoples' agenda for economic integration in the Americas, emphasizing protection of human rights, labour and the environment. ICCHRLA (Inter-Church Committee on Human Rights in Latin America) and ECEJ (Ecumenical Coalition for Economic Justice)-groups supported by the Canadian Churches and others, including Scarboro Missions-work with these organizations on trade issues.

In 1989 the Free Trade Agreement (FTA) between Canada and the U.S. went into effect. This was expanded to include Mexico in 1994 in the North American Free Trade Agreement (NAFTA). In the same year, at the first Summit of the Americas, planning began for the Free Trade Area of the Americas (FTAA) to include all 34 countries in the Americas except Cuba; with the goal of coming into effect in 2005.

ECEJ has often written about free trade in their Economic Justice Report. Those in favour of free trade claim that everyone benefits: 'a rising tide lifts all boats.' Tearing down trade barriers will stimulate growth and increase economic efficiency. Free trade theory predicts that incomes will become more evenly distributed as overall income rises and each country produces according to its comparative advantage. However, in 1997 the United Nations Development Programme pointed out that "the yachts and ocean liners are indeed rising in response to new opportunities, but the rafts and rowboats are taking on water-and some are sinking fast."

ICCHRLA's recent Alerta magazine issue on Latin America's growing gap details how economic growth in the region did not lead to an improved distribution of income, but rather to growing numbers of people who go to bed hungry. One third of the region's population survives on less than US$2 a day. The richest 5 percent receive 25 percent of the wealth while the poorest 30 percent receive only 7.5 percent-less than anywhere else in the world. The number of poor increased from 136 million in 1980 to 204 million in 1997.

ICCHRLA goes on to describe Mexico as a case study for the growing gap, growing protest and growing repression. Between 1989 and 1998 the number of Mexicans living in poverty or extreme poverty increased from 40 to 57 million. In rural areas 58 percent of children under the age of five demonstrate physical and mental problems due to poor nutrition. In Indigenous areas it is 74 percent. Since 1994, social protest actions in Mexico have grown to 18,000 annually. By 1997, more than 75% of civilian police forces had been placed under military command.

These negative impacts have their roots in liberalization policies-such as removing trade barriers, dismantling social programs and cutting back the government's role-implemented during the debt crisis in the 1980s and intensified when NAFTA came into effect in 1994. Concern that the FTAA negotiations do not repeat the same story in other countries of the Americas led ICCHRLA and ECEJ to write the trade minister prior to the FTAA Ministerial Conference in Toronto in November 1999 (see letter on facing page). They also continue to work with the Hemispheric Social Alliance.

The Hemispheric Social Alliance contends that while international trade has an important role in the building of the common good, it does not automatically enhance the common good. Despite nearly a quarter century of privatization, deregulation, elimination of subsidies and tariffs and promises that these changes are good for all-the gap between rich and poor has become wider, job security has declined and social welfare, health care, and environmental protection systems have been under attack.

As a further illustration, the Hemispheric Social Alliance has documented several cases where corporations have used NAFTA rules to challenge government health and environment regulations. In one case the Canadian government banned imports of the toxic gasoline additive, MMT, when research indicated it might be a human health hazard. However, under NAFTA, the US-based Ethyl Corporation, producer of MMT, was able to sue the Canadian government for US$250 million in lost profits. In 1998 the Canadian government used tax dollars to pay US$13 million in a settlement with Ethyl Corporation and withdrew its health protection measure.

The Hemispheric Social Alliance is not opposed to developing rules for trade and investment. However, the proposed FTAA should enhance and not undermine the broad Summit goals of strengthening democracy, eradication of poverty, sustainable development... The integration and expansion of trade and investment are of little value unless they lead to improved living standards and quality of life. They believe there should be no FTAA if it does not include protection of the environment and respect for labour and human rights. They call on governments to reject the 'low road' of everyone competing to sell natural resources and labour power at the lowest possible price; and to take the 'high road' of improving labour standards and living conditions.

ICCHRLA is planning a delegation of Church leaders to visit Mexico prior to the Summit of the Americas to witness the impact of NAFTA on labour rights in the maquila factories, on small farmers, and on Indigenous people. The Church leaders will bring back this witness into the ongoing debate around free trade issues.

Alongside the official Summit, the Second Peoples' Summit of the Americas will be held in Quebec City from April 17 to 21, 2001, organized by the Hemispheric Social Alliance. Thousands of participants from around the Americas are expected to come and work together on developing alternatives.

Trade issues are very complex and have far reaching implications. This article only highlights some basic ideas. How will we know whether the free trade decisions are following the 'high road' of the common good? In the words of the U.S. Bishops, "A fundamental moral measure of any economy is how the poor and vulnerable are faring."

After serving in Brazil in the area of health care, Scarboro lay missioner Karen Van Loon now works in Scarboro's Justice and Peace Office, collaborating with ecumenical Church organizations on issues of justice and peace.

Free Trade Area of the Americas (FTAA)

  • To include all 34 countries in North, Central and South America and the Caribbean, except Cuba
  • Combined population: 800 million
  • Combined Gross Domestic Product (GDP)-the value of the total goods and services produced: around $17 trillion Canadian dollars. (Canada 5.4%; United States 76.4%; Mexico 4.2%; Brazil 6.6%; Other 30 countries combined 7.4%-based on World Bank 1999 statistics)
  • Shows more concern for the rights of business
  • In 1997, led unions, anti-poverty groups, environmentalists and other social sectors to form a Hemispheric Social Alliance to press for fair trade that works in the interests of people.

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