U.S.-CANADA FREE TRADE Latin America is Next
Dillon, John
The Free Trade Agreement (FTA) signed in January by Canada and the United States has profound implications for the entire hemisphere. Due to be implemented January 1, 1989, it goes beyond...
...a way of forcing the government to imitate U.S...
...Brazil, Mexico and Canada have been especially targeted, as they are the hemisphere's three largest economies after the U.S., with the strongest controls on foreign capital, save Cuba...
...be about evenly divided on the FTA, although more voters favor free trade than favor Mulroney's scandal-ridden government...
...With a population of 135 million, Brazil has a larger proportion of people living in poverty (74%), yet its domestic consumer market is still greater...
...corporations view Canada's publicly financed health care and pension programs as unfair subsidies because they lower the costs of the total wage and benefit package paid by employers in Canada...
...They reason that competition from the "right-to-work" states of the U.S...
...Thus if a Canadian province wanted to establish a system of public auto insurance, it might first have to compensate U.S...
...When BCNI members look south they like what they see...
...The United States would have to be notified and "prompt, adequate and effective compensation" provided...
...Export quotas, export taxes and the right to set domestic prices independent of world markets are all ruled out...
...Many of the BCNI's members run subsidiaries of U.S.owned transnationals, such as DuPont, Exxon, IBM and ITT...
...This would mean that the U.S., but not Canada, could change the terms of the agreement in the future by passing overriding legislation...
...Mulroney's reversal was due to pressure from Canada's most powerful corporate lobby, the Business Council on National Issues (BCNI), composed of the chief executive officers of the 150 largest corporations operating in Canada...
...Only in the area of "intellectual property rights" did U.S...
...Also in the club are the chiefs of Canada's powerful chartered banks and Canadian transnationals such as Inco, Stelco and Seagrams...
...These rules are particularly significant in such fields as data processing or insurance where telecommunications would permit the relocation of many jobs, particularly for women, to low wage areas in southern United States...
...Castillo observed that "Although [codes governing intellectual property] apply equally to all nations, one can argue that equal treatment among unequals is profoundly inequitable...
...Public opinion polls show Canadians to AGRPDI CANADA WI ZeRN THk NOrTH AERICAN MARlCTON WAND-!CAA* HAIM AZHF-19 ?I rS AND 4tPtRDX WHILE 7H6 U.SI ONTIOLS OiL...
...The BCNI has regularly campaigned for cutbacks on social spending by Canadian governments and argued for lower corporate taxes like those delivered by the Reaganite supply-siders...
...border...
...Canadian corporations would also be entitled to national treatment in the U.S...
...Trade explains that "The political climate in Mexico is not ready for a market-based energy trade arrangement at this time: The degree of government involvement in Mexico's energy sector is very large and is considered essential by many elements within Mexico...
...as was exported over a recent three-year period...
...For example, a U.S...
...Canada's drug law, which allows domestic companies to produce generic medicines, saves Canadians about $250 million a year...
...Mulroney is counting on the free trade issue to win another term...
...After the U.S...
...Harry L. Freeman, executive vice president of American Express, described the U.S.-Canada talks last year as "a path-breaking exercise" capable of setting "precedents in both traditional and non-traditional areas--precedents that can serve as examples of what we want to achieve in the GATT...
...U.S...
...sunbelt would be more effective in weakening Canadian labor laws than their own lobbying efforts...
...The accord stipulates that even in periods of energy shortages corporations must be allowed to export the same proportion of Canada's energy supply to the U.S...
...interests, as most U.S...
...Millions of dollars are being poured into a public relations campaign to sell free trade as a boon to consumers...
...If the Reagan-Mulroney pact is ratified, Canada will no longer be able to give its own citizens first call on energy produced within its borders...
...The Pro-Canada Network--a broad coalition that includes trade unions, farmers, women's groups, native peoples, certain business sectors and intellectuals--has put forth a vision of their nation's future that rejects the ideology of international competitiveness...
...In November 1987, a coalition of U.S...
...Wary of stirring up nationalism during a presidential election campaign in that country, U.S...
...corporation investing in Canada must be treated exactly the same as a Canadian-owned enterprise...
...With a population of only 25.5 million, one-fifth of whom live in poverty, Canada's domestic market is actually smaller than Brazil's...
...Then in November 1987 the United States and Mexico signed a limited "framework agreement" establishing a consultative mechanism for settling trade disputes and promising to pursue liberalization in the areas of textiles, steel, agriculture, investment, technology transfer, electronic products, services and intellectual property rights...
...Congress would make the accord subordinate to other U.S...
...Even more alarming, this sweeping loss of sovereignty may be rendered permanent...
...industries have objected to in the past...
...Loss of Sovereignty What Mexicans jealously guard, the Mulroney government voluntarily surrendered...
...The next round of negotiations will seek to establish rules for the use of government subsidies...
...quotas for textiles and steel imports from Mexico and opening up the Mexican market to products from the maquiladoras, the in-bond assembly plants established by transnationals south of the U.S...
...Because Mulroney's Progressive Conservative Party controls the Canadian House, he was able to invoke closure in that body, closing off the period of debate to the end of August and thereby ensuring its passage...
...It constitutes a continental charter of rights for private business, which President Reagan called a "new economic constitution for North America...
...In contrast, the legislation introduced into the U.S...
...They envy the business climate in the United States where only 17% of the workforce is unionized as compared to 39% in Canada...
...On December 31 another agreement was signed increasing U.S...
...efforts to impose a strict intellectual property code on all 96 GATT memPrime Minister Brian Mulronev REPORT ON THE AM S bers...
...In Congress, the House approved it without debate in August, and the Senate followed suit in September...
...They have sought to accord transnational corporations the same legal rights given to domestic industries, and to challenge social legislation favorable to workers...
...iLaurent Thibault, currently president of the Canadian Manufacturers Association, told the Canadian Senate: "It is simply a fact that, as we ask our industries to compete toe to toe with American industry...we in Canada are obviously forced to create the same conditions in Canada that exist in the U.S., whether it is the unemployment insurance scheme, Workmens' (sic) Compensation, the cost of government, the level of taxation, or whatever...
...negotiators win less than they bargained for...
...The FTA establishes liberal codes on "trade in services" and corporate investment, as well as greater protection for patents, referred to as "intellectual property rights...
...computer firms successfully persuaded the Reagan Administration to order trade sanctions on the grounds that the Brazilian computer industry had violated their intellectual property rights...
...What opponents regard as the costs of free trade, big business sees as benefits...
...But once corporations have made investment decisions based on the FTA it would be more costly for the smaller Canadian economy to abrogate the pact...
...laws...
...Ironically, the free trade debate has placed before the Canadian people questions about their national development rarely aired in mainstream politics...
...countervailing duty case involving Atlantic ground fish identified over 50 Canadian and provincial programs-ranging from extended unemployment insurance benefits received by Canadian fishermen during the off-season to grants for the construction of wharfs-as unfairly subsidizing Canadian fisheries...
...If no accord is reached, Canada's only choice would be to terminate the entire agreement at some point during the five to seven years that the UJ LY/AUGUST 19 8 negotiations are expected to last...
...Because of strong resistance by the opposition Liberal party to granting transnational pharmaceutical giants greater patent rights, Prime Minister Mulroney only committed Canada to work with the United States within the GATT to improve protection for patent rights...
...The ability to export more products to Canada is of incidental benefit to U.S...
...Control over energy is effectively surrendered to transnational corporations...
...Brazil has been targeted because it is leading the movement against U.S...
...Canada enters these talks from a very weak bargaining position, having conceded so much already...
...If Canada approves the FTA, not only will Latin America's ability to control transnational corporations be further weakened...
...These groups propose a more self-reliant Canada where international trade would be an extension of production for the domestic market rather than the central motor of the economy...
...Consequently the Canada-U.S...
...Sanctions on Brazil Claiming that "the United States cannot tolerate the piracy of its intellectual property," in July of this year the Reagan Administration imposed trade sanctions on Brazil for refusing to rescind its code that classifies pharmaceutical products and processes as "nonpatentable inventions...
...Under the Reagan Administration, business and its Washington allies have waged an aggressive campaign aimed at weakening restrictions on foreign capital throughout Latin America and Canada...
...efforts to introduce such codes into the General Agreement on Tariffs and Trade [GATT] have long been resisted by a coalition of Third World countries that John Dillon is coordinator of GATTFly, a project of Canadian churches mandated to assist popular groups and progressive church organizations working for economic justice . JULY/AUGUST 1988 includes Brazil, Argentina, India, Nicaragua, Nigeria and Peru...
...corporations had already pressured the Mexican Congress to amend its patent laws...
...National treatment means that any U.S...
...The U.S...
...Heberto Castillo, leader of the Mexican Socialist Party, addressing a 1987 conference on free trade held in Canada, recounted how U.S...
...practice of promoting regional development through the allocation of defense contracts, however, is exempt under the FTA's "national security" clause...
...firms operating in any of 296 service industries covered by the agreement to sell their services in Canada even if they do not locate an office in Canada or hire Canadian labor...
...They will undoubtedly become a referendum on the FTA...
...practices of deregulation, privatization and a reduced role for the state in the economy...
...Yet polls also show that the more Canadians learn about the agreement, the more likely they are to oppose it...
...economy...
...industrial exports already enter the country duty-free...
...trade officials did not include petroleum in negotiations with Mexico...
...But Canadian lawmakers remain sharply divided along party lines...
...Movement Against Free Trade The Free Trade Agreement has not yet become law...
...According to the "monopolies clause," any expansion of Canada's system of crown (state-owned) corporations would be considered tantamount to an expropriation...
...Mexico Strategy In the case of Mexico the United States is pursuing a strategy of breaking down its traditional nationalist economic policies piece by piece...
...On the table are a host of social programs, assistance for farmers and regional development programs that U.S...
...Market-reservation policies...have no place among the civilized countries of the world," declared the head of the U.S...
...Under these circumstances, Canadian law compelled Mulroney to call an election before September 1989...
...Canadian nationalists argue that only by becoming less dependent on the United States can Canada stand with the peoples of Latin America and the Caribbean who seek the same goals...
...Trade Ambassador Clayton Yeutter observed: "The Canadians don't understand what they signed...
...However, opposition Liberals hold sway in the Senate and are committed to defeating the accord...
...Pharmaceutical Manufacturers Association claims that the Brazilian laws cost them $100 to $150 million a year...
...threatened to place penalty duties on a range of Brazilian exports, including commercial aircraft, machine tools and footware, Brazilian business leaders pressed the Sarney government to give in...
...Precedents Of major interest to Latin America are two significant precedents: the incorporation of guarantees of "national treatment" and "right of establishment" into codes on investment and trade in services...
...The U.S...
...Canadians fear that their pattern of government assistance to less developed regions will be undermined by this process...
...A confidential 0 E a C) U U S oi 5 P DWL~nD1\n XJ UC A MERICArr cappraisal of the U.S.-Canada trade deal prepared for former Treasury Secretary James Baker and obtained by Inside U.S...
...Furthermore, article 2011 of the agreement gives the United States the right to appeal any measure passed by any level of Canada's government that appears to nullify any direct or indirect benefit expected through the FTA...
...Legislation now before the Canadian Parliament declares that the terms of the agreement take precedence over all other federal laws...
...In 20 years, they will be sucked into the U.S...
...First Mexico was persuaded to join the GATT as one of the conditions for rescheduling its foreign debt...
...insurance companies handsomely for their lost market share...
...Right of establishment allows U.S...
...Reaganizing Canada Canada's Prime Minister Brian Mulroney has been an ideal partner in this strategy, willing to voluntarily surrender extensive areas of national sovereignty despite having been elected on a platform that rejected free trade...
...accord is more than a trade agreement...
...Many U.S...
...Due to be implemented January 1, 1989, it goes beyond mandating free trade in goods...
...In a revealing comment that he later tried to deny, U.S...
...Software Publishers Association...
...Accordingly, his government recently announced that elections will be held on November 21...
...Canada's scope for an independent foreign policy in the hemisphere will be seriously limited...
Vol. 22 • July 1988 • No. 4
