FREE TRADE AGREEMENT OF THE AMERICAS

SUMMARY

1. INTRODUCTION

The Free Trade Agreement of the Americas was conceived in principle at the inaugural Summit of the Americas in Miami in 1994.  Following several years of preparatory work, Leaders of the 34 participating countries launched the FTAA negotiations at the 1998 Santiago Summit.  The FTAA was initiated in the context of the Summit’s goal to achieve sustainable growth and development through greater economic integration and, as such, is intended to reinforce broader Summit objectives, such as improving human rights, promoting democratic development and eradicating poverty. 

Canada served as the initial chair of the negotiations and wrapped up its tenure with the FTAA Ministerial Meeting in Toronto (Nov. 3-4, 1999). Canada’s chairmanship was marked by establishing the institutional and administrative framework for the negotiations and providing much-needed leadership for the crucial start-up phase. The second phase of FTAA negotiations, chaired by Argentina, concluded with the FTAA Ministerial meeting in Buenos Aires on 7 April, 2001. Ecuador is the current chair and will host the next Ministerial in Quito in October 2002. 

The Buenos Aires Ministerial counted a number of significant achievements, specifically: agreement to conclude negotiations by January 2005 and implement the Agreement by no later than December 2005; consensus to release the draft text of the Agreement to the public; commitment to strengthening the mandate of the FTAA Civil Society Committee; precise negotiating instructions and time lines for the Negotiating Groups for the next phase of negotiations; and a firm commitment to ensuring that the smaller economies received the technical and capacity-building assistance required to ensure their full participation in the negotiation and implementation of the FTAA.

The results of the Ministerial were endorsed by Leaders at the Third Summit of the Americas, held in Quebec City on 20-22 April. 

The Trade Negotiations Committee (TNC), comprised of each country’s Vice-Minister, is responsible for ensuring that the negotiations proceed according to Ministers’ instructions. The TNC has already met once (Managua, Nicaragua, September 26-28) under Ecuador’s chairmanship and will meet twice more before the next Ministerial Meeting.  One of the major outcomes of the Managua TNC meeting was agreement on a non-exhaustive list of guidelines on the treatment of smaller economies in the FTAA. These guidelines will assist negotiators when considering requests from smaller economies for special treatment in the FTAA.

Negotiating Groups and other FTAA entities have been meeting in Panama City, the site of the FTAA Secretariat since May. Canada is the chair of the Joint Government-Private Sector Committee of Experts on Electronic Commerce. Five of the nine Negotiating Groups (market access, agriculture, government procurement, services, and investment) are primarily focussed on developing recommendations on the methods and  modalities for the negotiations -- as mandated by Ministers in Buenos Aires -- which are scheduled to begin no later than May 15, 2002¹.

In Buenos Aires, Ministers also created a new committee to focus on Institutional Issues (TCI). The Technical Committee on Institutional Issues (or TCI) is mandated to study the institutional requirements and the eventual structure of the FTAA agreement. It has also been asked to develop draft text on such issues as, inter alia, transparency, the institutional structure for dispute settlement, and the relationship between the FTAA and other agreements.  The TCI will present a draft text for consideration by Ministers next fall. 

2. MARKET ACCESS

• Tariffs and Non-tariff Measures: This chapter would establish the rules governing trade in goods including the provisions for eliminating tariffs on 'originating' goods. The actual schedule of tariff elimination is still to be negotiated and the final results would likely be "annexed" to this Chapter. This Chapter, depending on the outcome of negotiations, could also cover a range of other measures that affect trade flows. For example, the NGMA is reviewing the operation of special regimes that operate in the hemisphere that may eliminate duties on imports from non-hemispheric suppliers under certain conditions (e.g., foreign trade zones that operate in a number of countries in the hemisphere). This Chapter could also deal with another type of special measure that may apply to goods that are imported by one country from another country in the hemisphere, but that may not otherwise qualify as 'originating goods' under the agreement (e.g., goods temporarily imported for repair, exhibition, commercial samples, etc.). Other issues that could be dealt with include customs processing fees, consular fees, export taxes, import and export prohibitions and licenses to import or export.

• Safeguard Measures: This chapter would contain provisions to allow a country to take temporary measures to increase certain duties up to an agreed level where increased imports at reduced rates of duty under the FTAA were injuring producers in the importing country. It would also set out the minimum administrative procedures required before such an action could be taken. The Chapter would also set out the duration and frequency of such actions. Negotiators are also considering a provision wherein an importing country could take a short-term measure in advance of the required administrative procedures if it believed that its domestic industry would be seriously damaged were action to be delayed. Also being considered for inclusion in this Chapter is compensation for an

• Origin Regime: This Chapter would set out the rules and conditions for determining whether a good has undergone sufficient production in the FTAA region to benefit from the preferential tariffs. While a good that is produced entirely in an FTAA country will obviously be eligible for preferential tariffs under the FTAA, this Chapter will also establish the rules for goods incorporating materials imported from countries that are not part of this Agreement. While general rules will apply, there will also be detailed product-specific rules developed. These rules may require that imported materials used in the production of a good undergo a tariff classification change or a specific production process or that the goods meet a minimum value added requirement. These detailed rules will need to be negotiated over the next four years. Negotiators will also consider whether a certain minimal amount of materials from parties not part of the Agreement can be used in the goods' production (de minimis), and how to treat, for example, fungible (interchangeable) goods and materials, sets of goods, accessories, packaging and packing materials and consumables.

• Customs Procedures: This chapter would establish general principles to improve certainty and transparency in respect of the clearance of goods at the border. It could also set out the procedures related to obtaining advance rulings from a customs authority to ensure consistency of application of the rules related to tariff classification, origin, etc., and provide for the right to appeal such rulings. This chapter could also include other matters not specifically related to administration of preferential trade but to all imported goods, to provide for a more efficient and effective customs service.

• Customs Procedures Related to Rules of Origin: This chapter, which may be integrated with either the origin regime or customs procedures chapters, will set out the requirements that importers and exporters must address to demonstrate that products meet the specific rules of origin. Consequently, this chapter will elaborate on how an importer can claim preferential tariff rates, what records importers and exporters must keep, how authorities will verify origin, and how customs authorities will co-operate on origin issues.

• Standards and Technical Barriers to Trade: This chapter would provide the basis for rules which ensure that regulations, standards, testing and certification procedures do not create unnecessary obstacles to trade. The draft consolidated text entitled "Standards and Technical Barriers to Trade" represents the draft proposals made by individual FTAA countries for provisions that may be included in a standards and technical barriers to trade chapter. These proposals are largely drawn from provisions found in existing trade agreements covering standards and technical barriers to trade, such as the World Trade Organisation Technical Barriers to Trade Agreement (WTO TBT Agreement), the North American Free Trade Agreement (NAFTA Chapter 9) and other regional and bilateral free trade agreements involving FTAA countries. Currently, proposals have been made which seek to: affirm rights and obligations under the WTO Technical Barriers to Trade Agreement (WTO TBT); re-phrase/paraphrase the WTO TBT, largely maintaining consistency with the WTO TBT; subtract from particular rights and obligations under the WTO TBT; and, add certain rights and obligations beyond those contained in the WTO TBT. The issues of technical assistance for smaller economies, as well as capacity building in the region, have also been raised.

3. INVESTMENT

• Scope of application: Provisions proposed under this heading are intended to define the general territorial and temporal scope to which the investment chapter would apply. These provisions could also specify what an investment chapter would not apply to.

• National Treatment: As in other trade agreements, an investment chapter would include a clause requiring non-discriminatory treatment between domestic-owned and foreign-owned investments (subject to country-specific reservations filed by each country and other general exceptions).

• Most-Favoured Nation Treatment: As in other trade agreements and similar to the National Treatment provision, an investment chapter would

• Fair and equitable treatment: Proposals under this heading are generally intended to ensure that governments grant an absolute minimum standard of treatment to foreign investments, i.e., in accordance with minimum standards at customary international law. It is also a common feature of international investment agreements.

• Performance Requirements: Many investment agreements contain provisions on performance requirements which generally aim at prohibiting the imposition on investments of certain trade distorting mandatory requirements.

• Key personnel: Most free trade agreements and many bilateral investment treaties provide for the temporary entry of managers and key personnel relating to an investment. Such agreements also typically contain an obligation aimed at ensuring that enterprise are not required to appoint individuals of particular nationalities to senior management positions.

• Transfers: As in other investment agreements, this chapter would include an obligation with respect to the transfer of funds related to an investment. Proposals under this heading generally aim at ensuring that funds related to an investment can be transferred freely, subject to some general exceptions.

• Expropriation and compensation: It is a common feature of investment agreements to include a provision dealing with the concept of expropriation. It is a general principle of international law that States should meet certain basic conditions when expropriating or nationalizing investments, e.g., the expropriation should be for a public purpose, non-discriminatory,\ in accordance with due process, and compensable.

• Compensation for losses: Proposal under this heading are commonly found in investment agreements and generally aim at ensuring that non-discrimination prevails with respect to compensation for losses flowing from such as armed conflict or civil strife.

• General exceptions and reservations: Proposals under this heading are generally intended to allow countries to file country-specific reservations and exceptions for measures they wish to maintain or for sectors where they wish to maintain policy flexibility, irrespective of the obligations set out in the investment chapter.

• Dispute Settlement: This provision, which is also commonly found in investment agreements, insures that disputes are settled on the basis of mutually agreed rules rather than through unilateral actions and size or political might. Some countries have made proposals for state-to-state and investor-state dispute settlement procedures.

• Basic definitions: Provisions to be developed under this heading are intended to define the specific concepts and terms that would be used throughout this chapter. These definitions would complement the more general definitions that would apply to the entire FTAA agreement and that would be defined elsewhere. For example, the concepts of "investment" and "investor" would need to be defined.

4. AGRICULTURE

• General Provisions: This section includes proposals to deal with overarching issues that effect the entire Chapter, including the scope and coverage of the Chapter, as well as the relation of this Chapter to other Chapters.

• Market Access: This section currently addresses some general principles and specific provisions that will cover the market access elements of the Chapter, such as national treatment, export taxes, etc. Concurrently, parties in the NGAG, in coordination with the NGMA, are discussing the format and methods for the negotiation of tariff concessions. The actual tariff concession negotiations are scheduled to begin in May 2002.

• Export Subsidies: Included under this section are proposals regarding the elimination of export subsidies within the Hemisphere, as well as how such provisions will complement ongoing work in the WTO on the elimination of export subsidies.

• Other Measures and Practices that Distort Trade in Agricultural Products: These include proposals for disciplines for domestic support, export credit, food aid and State Trading Enterprises.

• Sanitary and Phytosanitary (SPS) Measures: The SPS section includes detailed proposals on SPS measures, including how these measures would be applied in relation to the WTO Agreement on SPS Measures.

• Institutional Issues: The section on institutional issues includes proposals on the institutions that would be established to manage the implementation of the Chapter.

5. SERVICES

• Scope: Provisions to be developed under this heading are intended to define the general scope to which services provisions would apply. These provisions would also specify what a services chapter would not apply to (for example, governmental services and other services supplied in the exercise of governmental authority). Related to this would be provisions on country-specific commitments and exceptions that countries would file for measures they wish to maintain or for sectors where they wish to maintain policy flexibility, irrespective of the obligations set out in a services chapter;

• Most-Favoured Nation Treatment: As in other trade agreements, a services chapter would include a clause requiring non-discriminatory treatment among foreign services providers (subject to the country-specific commitments and exceptions filed by each country);

• Transparency: This section would include provisions on the public availability of information regarding measures affecting trade in services, as well as possible notification requirements;

• Denial of Benefits: Trade agreements generally include provisions by which a Party may deny benefits to another Party in very specific circumstances;

• National Treatment: As in other trade agreements, a services chapter would include a clause requiring foreign services and services suppliers to be treated no less favourably than domestic services and services suppliers (subject to country-specific commitments and exceptions filed by each country);

• Market Access: Provisions to be developed under this heading are intended to address specific barriers such as "quantitative restrictions" (e.g., numerical restrictions on the provision of a service, quotas, economic needs tests).

In addition to these six categories of provisions, the draft consolidated services text include proposals on issues that have been identified by one or more delegations as those that might be included in a services chapter. To date, such issues have included "domestic regulation" (i.e., qualification and licensing requirements and procedures, and technical standards), licenses and certificates, professional services, subsidies and institutional matters. One of the basic principles of the FTAA negotiations is that nothing is agreed to until everything is agreed to. FTAA countries remain free, therefore, to amend these proposals or submit new proposals on any issue.

6. GOVERNMENT PROCUREMENT

1. to achieve a framework that ensure openness and transparency of government procurement processes, without necessarily implying the establishment of identical government procurement systems in all countries;
2. to ensure non-discrimination in government procurement within a scope to be negotiated; and
3. to ensure impartial and fair review for the resolution of procurement complaints and appeals by suppliers and the effective implementation of such resolutions.

• general aims
• a framework describing which procurements governments will open to each others suppliers
• non-discriminatory treatment for included procurement
• transparency, including the publication of laws, notices of upcoming procurement and contract awards
• procurement procedures necessary to ensure non-discriminatory treatment
• due process, including bid challenge for suppliers and dispute settlement
• special and differential treatment

7. DISPUTE SETTLEMENT

• Article 3: Parties would endeavour to arrive at a prompt settlement of disputes on the basis of a mutually satisfactory resolution.

• Articles 6 and 7: Dispute settlement would begin with consultations.

• Articles 9 to 19: Recourse to good offices, conciliation or mediation would be possible in order to facilitate efforts to arrive at a mutually satisfactory resolution.

• Articles 20 to 38: Recourse to a neutral panel would be available to adjudicate a dispute when it cannot be resolved through consultations or other procedures. After hearing the parties and considering relevant evidence, a panel would present a report containing its findings of fact, a determination on whether the measures at issue were inconsistent with the Agreement or otherwise nullify or impair benefits, and any recommendations it might have for resolution of the dispute.

• Articles 39 and 46 to 47: Parties to a dispute would be required to implement a panel report that finds that a measure is inconsistent with the FTAA Agreement or otherwise nullifies or impairs benefits under the Agreement. Where a measure is found to be inconsistent with the Agreement, the Party complained against would be required to bring the measure into conformity with the Agreement within a reasonable period of time. If it failed to do so, remedies, such as compensation or suspension of concessions, would be available to the complaining party.

• Articles 40 to 45: Parties would have recourse to an appellate body to review neutral panel decisions.

8. INTELLECTUAL PROPERTY

• General Provisions: This part of the draft Chapter aims to set out some broad obligations and principles, and attempts to clarify its relationship with other international agreements on IP, such as the Berne Convention (copyright), the Paris Convention (primarily patents and trademarks) and the TRIPS. Other notable potential provisions under this heading include:
• National Treatment: Under this provision, FTAA members would not be permitted to discriminate between nationals of other states and their own nationals in affording IP protection. National treatment provisions are included in other international agreements.

• Most Favoured Nation (MFN): Under this provision, IP protection granted by one FTAA member to another would have to be granted

immediately and unconditionally to all other members. This kind of provision is also included in other international agreements.

• Substantive Intellectual Property Rights and Related Issues: This section of the draft IP Chapter sets out the proposed minimum standards which FTAA countries would accord in respect of availability, scope and use of IP rights in each of the areas covered by the draft Chapter. Among the substantive IP rights identified in the draft IP Chapter are:
• Patents: A patent is a government grant which gives its holder - the patentee - monopoly rights over an invention for a fixed period of time. The economic rewards that can flow from the exclusive rights a patent provides encourages investment in both time and money in new areas of scientific research. This, in turn, accelerates public access to newer and better commodities. Similarly, if patents are disclosed to the public, they are a useful tool for the dissemination of new information, thereby furthering society's collective knowledge base.

• Trademarks: A trademark is a word, symbol or design, or a combination of these, used to distinguish the goods or services of one person or organization from those of others in the marketplace. Trademarks come to represent not only actual wares and services, but the reputation of the holder.

• Copyright: Generally speaking, copyright is the exclusive right to copy a creative work or allow someone else to do so. It also includes the sole right to publish, produce or reproduce, to perform in public, to communicate a work to the public by telecommunication, to translate a work, and in some cases, to rent the work. Copyright applies to all original literary, dramatic, musical and artistic works. Examples include books, other writings, music lyrics, sculptures, paintings, photographs, films, plays, television and radio programs, and computer programs. Rights akin to copyright also apply to other subject matter such as sound recordings (e.g. as records, cassettes, and tapes), performers performances and broadcaster's communication signals.

• Enforcement of IP Rights: Broadly speaking enforcement of IP primarily involves private parties pursing their rights through civil actions. The framework for enforcement gives owners of IP, themselves, the tools to confront possible infringers including the ability to seek injunctions and to sue for damages. Supplementing this basic regime are criminal penalties against commercial scale trademark counterfeiting and copyright piracy. Prosecutions for specified criminal offences are initiated by law enforcement authorities and adjudicated by the courts. At the same time, it is important that enforcement procedures be applied in a manner so as to avoid the creation of barriers to legitimate trade and there must have safeguards against their abuse.

9. SUBSIDIES, ANTIDUMPING AND COUNTERVAILING DUTIES

• General Provisions: Article 1 of the draft Chapter would establish the priority of this Chapter over the WTO Agreement where their respective provisions differ;

• Determination of Dumping: Dumping occurs where the "export price" of goods is less than their "normal value", (normally the price at which the goods are sold in the exporter's home market or the full cost of production). Article 2 of the draft Chapter contains several proposals relating to the determination and fair comparison of these two variables in antidumping investigations;

• Determination of Injury: To be able to apply antidumping duties, it must be demonstrated that the dumping of goods has caused, or threatens to cause, material injury to the domestic industry producing like goods. In this regard, Article 3 of the draft Chapter contains proposals relating to various aspects of the injury determination process, (e.g., the period of investigation, and relevant injury factors to be considered). Article 4 contains proposals in respect of the definition of "domestic industry";

• Initiation and Subsequent Investigation: Article 5 of the draft Chapter contains various proposals relating to requirements for initiation and circumstances requiring the mandatory termination of antidumping investigations;

• Remedies: Articles 7, 8 and 9 of the draft Chapter contain proposals in respect of antidumping remedies, i.e., provisional duties, undertakings and definitive antidumping duties. Provisional duties equal to the margin of dumping can be applied where a preliminary investigation establishes a reasonable indication of material injury to the domestic industry caused by dumped imports. Undertakings are agreements by foreign exporters, (or by foreign governments in the case of subsidies), to eliminate dumping practices or the resulting injury to the domestic industry, thereby making the imposition of definitive duties unnecessary. Definitive antidumping duties are assessed after the final investigation has established that the dumping of goods has caused, or threatens to cause, material injury to the domestic industry. Article 11 of the draft Chapter contains proposals pertaining to the periodic review of definitive duties and undertakings to determine whether their continued imposition is warranted;

• Fairness (Due Process): Article 6 of the draft Chapter contains various proposals on the use and disclosure of evidence to interested parties, while Article 12 pertains to public notice and the explanation of determinations in antidumping investigations;

• Consultation and Dispute Settlement: Article 17 of the draft Chapter contains various proposals pertaining to the settlement of disputes arising from a country's allegation that another FTAA country has not fulfilled its obligations under this Chapter;

• Public Interest: While the principal focus of an antidumping investigation is on the injurious effects of dumped imports on the domestic industry producing like goods, Article 18 of the draft Chapter contains proposals to allow the interests of other groups, (e.g., consumers and downstream industries), also to be considered. Among the specific proposals is the establishment of a "lesser duty" option, i.e., the ability to apply a level of duty which, while less than the full margin of dumping or amount of subsidy, is sufficient to eliminate the injurious effects of dumped or subsidized imports;

• Other: The draft Chapter also includes proposals by FTAA countries on the initiation of investigations on behalf of third parties (Article 14), special treatment for developing countries (Article 15), and for the eventual elimination of antidumping measures in the hemisphere (Article 19).

10. COMPETITION POLICY

• Competition Law: Provisions to be developed under this heading are intended to ensure that Parties adopt or maintain a competition law and policy that includes some form of institutional coverage to ensure the effective application and enforcement of a competition law and policy at the national or sub-regional level. This section may identify anti-competitive behaviours most relevant to ensuring that opportunities created by trade liberalization are not undermined by anti-competitive conduct and which should be part of competition policy and law. In addition, the section may set out certain requirements for a competition authority, such that it be independent, authorized to take enforcement action and advocate pro-competitive regulatory reform.

• Regulatory Policies and Practices, Monopolies and State Enterprises: Disciplines on monopolies and state enterprises have been included in the draft negotiating text, essentially reflecting Articles 1502 and 1503 (Competition Policy, Monopolies and State Enterprises) of the NAFTA. These provisions have the purpose of ensuring that nothing in the chapter on competition policy prevents a Party from designating an official monopoly from maintaining or establishing a state enterprise. At the same time, appropriate disciplines should be in place to ensure that monopolies

• Institutional Provisions: Provisions under this section are made to ensure that Parties adopt or maintain a competition law and policy that includes some form of institutional coverage to ensure the effective application and enforcement of a competition law and policy at the national or sub-regional level. The competition policy review mechanism would be a non-binding process for peer review of competition legislation, policies and enforcement actions, aiming to promote the development of competition policy and encourage the appropriate enforcement of regulations on competition within countries of the Hemisphere.

• Mechanisms for Cooperation and for Exchange of Information: This section will provide for mechanisms to facilitate cooperation and exchange of information among competition authorities to address anti-competitive activities which are increasingly transnational.

• Dispute Settlement: This section presents options for ensuring compliance with the provisions on competition policy. Such mechanisms may include consultation, peer review or even some form of dispute settlement procedure.

• Technical Assistance: Negotiations on competition policy are also to include the development of mechanisms to facilitate and promote the development of competition policy and encourage the appropriate enforcement of regulations on competition within countries of the Hemisphere. An essential ingredient for the conclusion and implementation of an FTAA chapter on competition policy will be technical assistance and information dissemination to countries with no or a relatively undeveloped competition policy regime. Provisions under this section could provide for means to facilitate implementation and enhancement of commitments of member countries and to increase and maintain competition policy capacity and expertise of member.

• Transitional Measures: The Chapter may include provisions to define more lenient time frames for members to adopt and implement obligations under the chapter on competition policy.

11. ANNEX

• We are still in the very early stages of these negotiations.
• The elimination of tariffs will be negotiated over the next four years, and implemented with results of this Agreement as a whole.

• A tariff is a tax applied on merchandise imports and, less frequently, on exports. The tax may be levied either on an ad valorem basis (fixed percentage of the value of an imported product) or on a specific basis (fixed levy per unit of imported product).

• A bound tariff is a commitment made at the World Trade Organization (WTO) setting out the maximum tariff rate that a Member will charge on a good.

• An applied tariff is the rate of duty actually charged. This may be lower than or equal to, but not higher than, the bound tariff.

• (Article I of the GATT 1994) requires countries not to discriminate between goods on the basis of country of origin or destination. Free trade agreements, such as NAFTA, and customs unions, such as the EU, are negotiated under a special exemption to the MFN principle (GATT Article XXIV).

• Members of a free trade agreement (FTA) meeting certain WTO rules/specifications (GATT Article XXIV), may agree to charge their FTA partners a rate of duty that is lower than the MFN rate of duty accorded to non-participating countries.

• A tariff rate quota is a two-stage tariff -- imports up to the quota level enter at a lower rate of duty (the in-quota tariff); over-quota imports enter at a higher rate (the over-quota tariff).

• Non-tariff barriers are Government measures or policies, other than tariffs, which restrict or distort international trade. Examples include import quotas, discriminatory government procurement practices, and measures to protect intellectual property. Such measures have become relatively more conspicuous impediments to trade as tariffs have been reduced through successive round of multilateral trade negotiations.

• A quota is an explicit limit on the physical amount of particular products which can be imported or exported during a specified time period, usually measured by volume, but sometimes by value. The quota may be applied on a "selective" basis, with varying limits set according to the country of origin, or on a global basis, with only the total limit specified, which tends to benefit more efficient suppliers.

• Special regimes are programmes that may eliminate duties on imports from non-hemispheric suppliers under specified conditions (e.g., foreign trade zones or goods temporarily imported for repair, exhibition, commercial samples, etc.).

• Rules of origin are laws and regulations that determine the eligibility of a good for preferential access under the terms of a FTA. Rules of origin may also be used to determine the country of origin of a good.

• The Harmonized System is an internationally-agreed system of commodity description and coding in use in most countries of the world as the basis for tariff classification as well as for rules of origin.

• Cumulation is a rule of origin concept that would allow the qualifying production of a good to occur in one or more FTAA countries.

• De minimis is a provision whereby a good need not be disqualified from preferential tariff treatment simply because a small amount of foreign material, that does not satisfy the requirement specified in the rule of origin applicable to the good, has been used in the good's production.

• Fungible goods refer to interchangeable goods.

• The growth of global foreign direct investment (FDI) is faster than that of global production or trade. The global stock of FDI reached US$4,772 billion in 1999. Establishing operations abroad are now an increasingly important part of business strategies for companies, and increasingly for small and medium sized ones for which improvements in information and communication technologies and government efforts to liberalize their economies have made international operations easier.

• International investment fuels economic growth and contributes to creating jobs and raising living standards by encouraging competition, increasing productivity, encouraging the free flow of technology, boosting exports, promoting efficient allocation of resources and providing customers with lower cost goods and services.

• As the economic benefits of international investment have been increasingly recognized in the last decade, countries have reduced restrictions in their investment regimes and actively compete to attract investments. Indeed, the economic benefits brought by international investment provide governments with more resources and capacity to pursue social, developmental, or other economic objectives.

• FDI in less developed countries contributes to their development, thereby raising their standard of living and creating new markets for goods and services - a virtuous upward spiral.

• The countries of the Americas need and want the capital and opportunity that investment brings. They have a stake in ensuring that investment flows predictably throughout the region.

• The investment negotiations are still at an early stage. The draft investment text is merely a compilation of proposals submitted to date by individual countries. There is no consensus to date on any issue or any section of the text.

• If a State chooses to offer compensation for damages from events such as civil strife, war, or natural disasters, then, under such an obligation, it must treat foreign-controlled investors the same as it treats domestic firms.

• The principles upon which investment obligations are based (e.g., non-discrimination, no unlawful expropriation) do not prevent Governments to regulate in the public interest, e.g., to set their own environmental and labour standards/policies.
• Canada will ensure that FTAA investment rules do not prevent governments from setting environmental and labour standards in the public interest.

• A proposal with regard to strive to ensure that environment laws are not relaxed to attract an investment has been made. At this time only one proposal has been made; others may follow.

• A proposal with regard to strive to ensure that labour laws are not relaxed to attract an investment has been made. At this time only one proposal has been made; others may follow.