CAFTA: "Investor rights" trump public health, environment

  • Posted on 28 February 2005
  • By Jim Mays

Chair, Sierra Club's Responsible Trade/Human Rights Campaign

The Bush Administration has completed negotiations for an expansion of the North American Free Trade Agreement (NAFTA) to Central America. In the name of fostering commerce, the Central American Free Trade Agreement (CAFTA) would put communities at risk by setting sharp limits on governments' authority to protect public health and the environment. Furthermore, the removal of investment barriers will open up essential public services to privatization and deregulation. CAFTA will subject the cash-strapped governments of the region to lawsuits by powerful global corporations if those governments were to adopt and enforce adequate environmental safeguards.

Under CAFTA, foreign and multinational global corporations could sue taxpayers for cash damages if public interest laws interfere with profits. Central American communities and pristine natural areas highly prized by eco-tourists would be at increased risk from polluting factories, sprawling resort developments, increased logging of ancient forests, and extractive industries that destroy the land and coastal areas alike. This 'investor-state' lawsuit provision, created under NAFTA, has led to over two dozen cases against the U.S., Mexico, and Canada, with billions of dollars in claims.

Central America is one of the most biologically diverse areas in the world. Laws protecting the environment could be declared an impediment to potential profits earned by foreign corporations. After the implementation of NAFTA, residents in the Mexican state of San Luis Potosi refused to accept a toxic waste site that the U.S. corporation Metalclad planned to establish in their community. Metalclad sued Mexico, using NAFTA's 'investor rights' provisions and won a $16 million judgment.

Similarly, a Canadian Company, Glamis Gold, has filed a claim against the U.S. demanding $50 million in compensation due to restrictions on open pit mining in Imperial County after California passed a law requiring 'clean up' to protect indigenous communities and the environment. If CAFTA becomes law, the Central American countries can expect similar treatment.

CAFTA could also increase food safety risks. If CAFTA comes into force, it would limit the ability of governments to implement policies to ensure that food crossing our borders meet food safety standards. Under the agreement, trade in fresh fruits and vegetables is bound to grow. Imported fresh produce carries four times more disease-causing organisms than domestic produce. Accordingly, food-borne illnesses have increased sharply in recent years, according to a recent report in the New York Times. Yet CAFTA does nothing to ensure adequate safety standards or border inspections.

In addition of threats to food safety, CAFTA poses a danger to small farmers and biodiversity due to the likely increase in imports (and potential contamination) from the U.S. of genetically engineered (GE) foods. In Mexico, GE crops imported from the U.S. without restriction have contaminated local crops and reduced yields.

CAFTA's provisions fail to require governments to maintain and enforce basic environmental law and regulations. Yet, the administration intends CAFTA as a stepping stone to the Free Trade Area of the Americas (FTAA), a trade pact that would cover the entire Western Hemisphere except Cuba. Indigenous groups in the Amazon and Andean regions have been fiercely opposing the destructive oil and mining schemes of North American corporations. Unfortunately, rather than learning from the mistakes of the past, the Bush administration, at the behest of its corporate clients, wants to clear away local environmental and cultural opposition by replicating NAFTA's risky corporate lawsuit provisions in all future trade agreements.

What can we do to stop these destructive trade policies? Contact your member of Congress (202-224-3121) and alert others to do the same. Congress should reject the Bush administration's corporate-style CAFTA agreement and tell our negotiators to bring back trade agreements that uphold, rather than undermine, labor and environmental standards.

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