[Congressional Record (Bound Edition), Volume 150 (2004), Part 19]
[Extensions of Remarks]
[Pages 25395-25396]
[From the U.S. Government Publishing Office, www.gpo.gov]




   MULTINATIONALS WILL EMERGE AS MAIN WINNERS FROM CAFTA RATIFICATION

                                 ______
                                 

                          HON. EDOLPHUS TOWNS

                              of new york

                    in the house of representatives

                       Friday, November 19, 2004

  Mr. TOWNS. Mr. Speaker, on May 28, 2004, Costa Rica, El Salvador, 
Guatemala, Honduras, Nicaragua, together with the United States, signed 
a free trade accord whose underlying principle is the aggressive 
protection and expansion of individual and corporate investor rights. 
These privileges come at the expense of environmental protection, 
legislative independence, and a nation's right to autonomously 
determine social and economic policy. Despite the assurances of its 
proponents, the Central America Free Trade Accord (CAFTA) is not likely 
to translate into a significant improvement for the region's atrocious 
labor rights record because it does not institute the fixed penalties 
and incentives required for such a profound change. The absence of such 
provisions is especially distressing in Central American societies 
that, in a twisted and deadly caricature of respectable collective 
bargaining, have historically witnessed hundreds of labor leaders 
gunned down and intimidated by hired hands on the payrolls of land 
owners and factory managers.
  The agreement's limited and unbalanced scope is a result of a heavily 
delimited negotiating process that lacked any sense of transparency and 
only involved government-sponsored experts. Numerous NGO's, civic 
organizations, trade unions groups and political figures in both 
Central America and the U.S. have expressed their opposition to the 
agreement. In its present form, CAFTA represents a very significant 
undermining of the traditional sovereign rights of nations and exposes 
a lamentable deference on the part of Central American governments. 
This clearly demonstrates their intent of mainly serving privileged 
elements of their societies at the expense of the generality of their 
populations. Once implemented, CAFTA will, in fact, likely condemn the 
area's agricultural, service and industrial workers to further 
marginalization, with the accompanying risk that they might fall into 
abject poverty. Most likely, comparable Central American enterprises 
will be hard-pressed to successfully compete with foreign competitors 
because they lack the economies of scale, investor control, access to 
low interest loans, investor pool and an outreach to skilled management 
which is readily available to transnational commercial entities.


                             uneven ground

  If and when CAFTA is ratified, it will represent a momentous victory 
to business sectors in the U.S. and in Central America. The five 
Central American nations that are taking part in the agreement 
constitute a relatively underdeveloped region whose total GDP equals 
only $152 billion, or a negligible fraction of the U.S.'s $11 trillion 
economy. CAFTA fails to adequately consider this facet of the 
signatories' asymmetrical relationship. According to renowned 
Nicaraguan academic Rene Oscar Vargas, ``CAFTA is a vehicle for an 
increase of U.S. exports and an opportunity to maximize the potential 
of its basic industries: information technology, telecommunications, 
the service industry, agriculture and intellectual property.'' On 
another occasion Vargas commented, ``What is CAFTA but an agreement 
between unequal partners.''
  The principle that states that free trade is beneficial to all those 
involved is misleading and simplistic as it disregards the fact that 
with unfettered access, the advantage almost always lies with the 
powerful. In its current format, CAFTA is the economic equivalent of a 
220-pound heavyweight being allowed to step into the ring against a 
112-pound flyweight. Although international trade and foreign 
investment are necessary components of any economy, it is a state's 
responsibility to prioritize the interests of all its citizens, not 
just the privileged few, and certainly not that of transnational 
corporations.
  For the CAFTA agreement to be ratified, it must be approved by the 
legislature and signed by the president of each signatory country. A 
full and transparent reexamination of its costs and benefits, and who 
will be the winners and losers, is imperative because renegotiation of 
contested clauses will be all but impossible once the agreement is 
ratified. A look at Mexico's experience with NAFTA, and its 
unsuccessful attempts to renegotiate agriculture-related provisions, 
underscores the serious implications of ratifying CAFTA. Free-trade 
agreements are not in themselves pernicious instruments. However, they 
must prove beneficial to both parties, and the Central American Free 
Trade Agreement, in its current format, does not satisfy this 
overriding requirement. If this agreement is implemented without 
alterations, it could very well demonstrate that unscrupulousness and 
greed will prevail over the best interests of the citizens directly 
concerned.


                   foreign investment is the panacea

  Behind the rhetoric used to tout CAFTA's virtues--that it promotes a 
win-win scenario--the reality is that it will provide already well-
heeled international and domestic corporations and investors with 
lucrative incentives, protections, and almost plenary immunity from 
prosecution. In Article 10.28 of the agreement, the definition of an 
investor is purposefully vague as it encompasses any individual 
involved or considering participation in a business venture. If CAFTA 
is ratified, any investing individual or corporation will have the 
vested right to challenge a nation's national or local policy, 
regulation, or law which they perceive as an impediment to their 
business dealings, and can call for it to be voided before a 
supranational dispute panel. This ability to circumscribe 
constitutionally enacted national legislation and regulation, or seek 
monetary compensation for their enforcement, gives rise to a new class 
of parties who essentially will be above the rule of local law. Like 
the North American Free Trade Agreement (NAFTA) ratified by Mexico, the 
U.S. and Canada and put into effect in 1994, this accord would provide 
private parties a protection that today is not in conformity with 
existing U.S. law. In addition, CAFTA does not clearly and reciprocally 
address a nation's legitimate course of action when a corporation is 
thought to have participated in unlawful behavior within its 
boundaries.
  To enforce its bylaws, CAFTA will create an unaccountable 
supranational body bestowed with the authority to redress any so-called 
infringement on a foreign corporation's or investor's economic 
interests. Not only is the burden of proof in these cases placed upon 
the respective government, the plaintiffs face little consequence if 
they submit a frivolous complaint. Past experience with NAFTA suggests 
that environmental regulations will be the object of most of the 
infringement suits that will be filed because, despite Central America 
being the second most biodiverse region in the world, sustainable 
development is not a central tenet of CAFTA. In fact, the mere threat 
of legal action, and the accompanying litigation costs, should 
discourage the region's economically-strapped nations from aggressively 
enforcing environmental regulations.
  The optimistic contention made by the Office of the U.S. Trade 
Representative in an August 2003 Interim Environmental Review, that 
``CAFTA may have positive environmental consequences in Central 
America,'' is disputed by Dr. Angel Maria Ibarra, president of the 
Salvadoran Ecological Unit (UNES). He notes that ``a simple reading of 
the text and its relationship to other chapters reveals its essentially 
cosmetic nature. CAFTA is a custom-made agreement for transnational 
corporations.'' This is a thesis that U.S.-based private environmental 
organizations, such as the Center for International Environmental Law 
and the Sierra Club, have consistently reaffirmed.
  In negotiations with the Central American countries, Washington 
pushed for and succeeded in institutionalizing a mechanism that suborns 
the very tenets of a country's sovereignty. There is no doubt that 
CAFTA will hinder the ability of the region's citizens to propose, 
discuss, and implement the rules of conduct which they may consider to 
be desirable and appropriate. The pact, therefore, challenges the very 
essence of using legislative action as a legitimate vehicle to achieve 
economic and social redress. Interestingly, whereas Washington refuses 
to participate in many supranational bodies, like the International 
Criminal Court and the Kyoto Protocol, citing their need to protect 
national interests, such fears are hypocritically brushed aside when 
lucrative private business transactions involving the state are at 
stake and the possibility of unfavorable rulings against enterprises 
are most likely to be minimal.

[[Page 25396]]




                         handcuffing the state

  The restrictions which CAFTA imposes on Central American governments 
will extend well beyond the capacity, or lack thereof, of states to 
bind companies to comply with domestic laws. In simplest terms, CAFTA 
will prohibit states from determining and implementing economic and 
social policies which their branches of government believe are most 
suitable to their developmental needs, thus forcing them to adhere to a 
``one size fits all'' liberalizing recipe that does not account for the 
unique particularities of a given country. Under this system, the 
agreement's provisions substitute for an objective cost-benefit 
analysis of the beneficial or negative impacts a particular policy, 
regulation, or law would have on society. If, for example, Costa Rican 
authorities decide that they wish to encourage an emerging and possibly 
lucrative sector of the economy through tariffs and incentives, as 
Ireland and the much-lauded Asian Tigers most successfully did with 
their information technology and manufacturing industries, 
respectively, CAFTA provisions could be used to prohibit them from 
doing so.
  In addition, the eventual elimination of all tariffs will expose 
essential domestic industries to potentially devastating competition 
from multinational corporations that enjoy a tremendous advantage based 
on their economies of scale or, as is the case with white corn, 
Washington-subsidized production. Even government procurement, a 
mechanism that the U.S. government itself utilizes in certain instances 
to offset market inequities, will not be exempt from CAFTA's strict 
regulations. According to Chapter Ten of the pact's text, foreign 
actors must be guaranteed the same treatment, in both the public and 
private sphere, as a nation's citizens. This begs the question of who 
the Central American negotiators were in fact representing when they 
agreed to these stipulations, because they demonstrably will not 
benefit the majority of their own citizens. In the long term, the 
region's severely underdeveloped economies can be expected to fall prey 
to the natural forces of the market and will undoubtedly incur heavy 
domestic job attrition, the displacement of thousands of small and 
medium scale farmers and a more skewed distribution of wealth to the 
benefit of the nation's privileged capital-holding minority. Salvador 
Arias, a Salvadoran legislator with the Faribundo Marti Liberation 
Front (FMLN), told La Nacion USA, a Washington D.C. area daily, that 
his country alone would likely lose upwards of 54,000 agricultural jobs 
during the first year of CAFTA's implementation.


                        no new labor protections

  CAFTA's proponents assure critics that the agreement will encourage a 
marked improvement in labor rights for Central American workers. The 
chapter in CAFTA that addresses this issue, however, seems much more 
concerned with ensuring a level playing field for U.S.-based 
corporations than protecting the region's workers. The real aim of the 
agreement's provisions appears to be the ability to retain the 
excessively low costs of production that grossly unsatisfactory working 
conditions help maintain without appearing to do so. In this respect, 
even though Article 16.2 states that Central American governments must 
``strive to ensure'' compliance with their domestic labor laws and 
guarantee not to ``encourage trade or investment by weakening or 
reducing the protections'' these laws provide, this, and other passages 
like it, fall far short of constituting a sturdy defense of labor 
rights and make the chapter's overall lackadaisical tone one of the 
agreement's most grievous deficiencies.
  In a March press release, Human Rights Watch (HRW) strongly 
criticized the agreement's glaring reliance on current Central American 
domestic legislation that, until now, has been ineffective in curbing 
labor rights abuses. In addition, that organization maintains that real 
change will not come about unless CAFTA adopts strong ``procedural 
guarantees for [their] enforcement.'' Without clearer mechanisms that 
redress worker abuse (which ideally would be equal to those that CAFTA 
would provide to investors) only blind optimists foresee anything more 
than a marginal improvement of the currently often corrosive, if not 
deplorable and inhumane, labor rights situation in Central America. In 
fact, the question of whether CAFTA, in its current format, will 
improve the overall standard of living of the region's inhabitants is 
highly debatable at best.

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