Globalization Glossary

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Key Terms:

Central American Free Trade Agreement (CAFTA) [Español: Tratado de Libre Comercio Centroamérica - Estados Unidos]: A preferential trading arrangement being negotiated among the countries of Central America (Guatemala, El Salvador, Honduras, Nicaragua, and Costa Rica) and the United States, which contains all the provisions that make NAFTA problematic. President Bush has referred to CAFTA as a top priority for his administration, as it will help move forward the FTAA (Free Trade Area of the Americas). To find out more, go to: http://www.cispes.org/english/Campaign_Against_CAFTA_FTAA/

Chapter 11: In NAFTA, this portion deals with foreign direct investment. Most controversially, it includes a provision for a firm from one member country that has invested in another to bring action against a unit of government in that country if it has acted to reduce the value of its investment. This amounts to allowing corporations to sue governments for loss of projected profits if governments pass labor or environmental laws. Under NAFTA, a Canadian corporation has sued the State of California for banning an additive in gasoline that pollutes groundwater, while a U.S. corporation has sued Canada for banning another gasoline additive that causes cancer and birth defects. See NAFTA below.

“Fair” trade: Fair Trade is an alternative approach to conventional international trade. It is a trading partnership that aims to promote sustainable development for excluded and disadvantaged producers. It includes paying fair prices to producers that reflect the true cost of production; supporting producer organizations in their social and environmental projects, such as developing health facilities and tree planting; promoting gender equality in pay and working conditions to change the traditional low position of women in society; advising on product development to increase access to markets; committing to long term relationships to provide stability and security; and campaigning to highlight the unequal system of world trade which places profit above human rights and threatens our environment.

Fast track: A procedure adopted by the U.S. Congress, at the request of the President, committing Congress to consider trade agreements without amendment. Critics argue that this procedure is undemocratic because congress members cannot discuss or reject objectionable clauses before agreements are passed. Introduced in the Trade Act of 1974. See trade promotion authority.

Foreign Direct Investment (FDI): Acquisition or construction of physical capital by a firm from one (source) country in another (host) country. FDI is the subject of increasing controversy, as the “rights” of investors from foreign countries are given legal precedence in trade agreements over the rights of citizens and governments to decide national labor, environmental, and social policy.

“Free” trade: A situation in which there are no “artificial” barriers to trade, such as tariffs and non-tariff barriers.

Free trade area: A group of countries that adopt free trade (zero tariffs and no other restrictions on trade) on trade among themselves, while not necessarily changing the barriers that each member country has on trade with the countries outside the group.

Free Trade Area of the Americas (FTAA) [Español: Área de Libre Comercio de las Américas (ALCA)]: A preferential trading arrangement being negotiated among most of the countries (all but Cuba) of the western hemisphere. It is strongly supported by business, as it contains all the provisions of NAFTA that allow corporations to make exorbitant profits at the expense of workers, citizens, and the environment. For more readings on the FTAA, see: http://www.globalexchange.org/ftaa/

General Agreement on Trade in Services (GATS) [Español: Acuerdo General Sobre el Comercio de Servicios (AGCS)]: An agreement, negotiated in the Uruguay Round, that brings international trade in services into the WTO. It seeks to phase out governmental “barriers” to international trade and commercial competition in the public services sector, including public education, health care, natural resources, postal delivery, transportation, municipal services, social security, and drinking water. This means that virtually all government measures affecting trade-in-services, from labor laws to consumer protection, can be challenged as illegal barriers to trade. The main beneficiaries of the GATS are corporate service providers determined to expand their global reach and to turn public services into private profit making all over the world. Not only are the services industries the fastest growing sectors of the new global economy, but also health, education, and water are becoming the most lucrative of all “services.” Health care is considered to be a $3.5 trillion market worldwide, while education is a $2 trillion and water a $1 trillion annual market.

General Agreement on Tariffs and Trade (GATT): A multilateral treaty entered into in 1948 by the intended members of the International Trade Organization, the purpose of which was to implement many of the rules and negotiated tariff reductions that would be overseen by the ITO. With the failure of the ITO to be approved, the GATT became the principal institution regulating trade policy until it was subsumed within the WTO in 1995.

Globalization

1. The increasing worldwide integration of markets for goods, services and capital that attracted special attention in the late 1990s.
2. Also used to encompass a variety of other changes that were perceived to occur at about the same time, such as an increased role for large corporations (MNCs) in the world economy and increased intervention into domestic policies and affairs by international institutions such as the IMF, WTO, and World Bank.
3. Among countries outside the United States, especially developing countries, the term often refers to the domination of world economic affairs and commerce by the United States.

Intellectual property rights (IPRs): The right to control and derive the benefits from something one has invented, discovered, or created. Often used by multinationals as a way to exploit natural resources that have been used by indigenous populations for generations, preventing these populations from continuing to utilize the “discoveries” without paying a fee.

Inter-American Development Bank (IDB) [Español: Banco Interamericano de Desarrollo (BID)]: with headquarters in Washington DC, the IDB is part of the family of international financial institutions that are dominated by the interests of private banks from the US and other rich countries. The Bank has 26 borrowing members and 20 non-borrowing members. Its cumulative lending and technical co-operation programs reached $104 billion at the start of 2000, and thus it owns one seventh of all Latin America's foreign debt. Alongside the IMF and World Bank, the IDB has played a key role in promoting, imposing and consolidating neo-liberalism in Latin America. The IDB has made the ruling elites and international banks richer while impoverishing the vast majority.

International Monetary Fund (IMF) [Español: Fondo Monetario Internacional (FMI)]: The IMF is not a bank, but it operates somewhat like a bank. Most countries in the world belong to the IMF, which sets policy for the way in which finance, including the exchange of money, takes place between nations. In recent years the IMF has taken a leading role in setting the rules for lending money to poorer countries, and is well known for its imposition of Structural Adjustment Programs (SAPs – see below). This has given the IMF great power, as its rules determine what poorer countries must do in order to get money they need.

Multilateral Agreement on Investment (MAI): An agreement to liberalize rules on international direct investment that would give great power to investors. The preliminary text of the agreement was leaked to the Internet in April 1997, where many groups opposed it. It was negotiated in the OECD but never completed or adopted because of adverse public reaction to it, yet it is still being promoted by big business.

Multinational corporation (MNC) [Español: empresa multinacional]: A corporation that operates in two or more countries. Since it is headquartered in only one country but has production or marketing facilities in others, it is the result of previous FDI. (Similar to transnational corporation – TNC)

Neo-liberalism: A view of the world that believes that the optimal economic system is achieved by giving free reign to market participants, privatization, free trade, and the shrinking of government intervention in the economy. Critics argue that neo-liberal policies prioritize corporate profits over the welfare of the working majority and society at large.

North American Free Trade Agreement (NAFTA) [Español: Tratado de Libre Comercio de América del Norte]: The agreement to form a free trade area among the United States, Canada, and Mexico that went into effect January 1, 1994. It was accompanied by “side agreements” on labor and the environment, both of which have been ineffective. The U.S. has lost over half a million manufacturing jobs since its passage. Its impact on the indigenous communities of Mexico has been devastating, as it allows the U.S. to dump cheap products on the market that undercut the traditional agriculture of indigenous communities. Displaced farm workers migrate to the border, which became militarized even before 9/11/01, and which has been heavily contaminated under NAFTA. Despite numerous complaints, no company has yet been sanctioned for violating environmental laws. Worse, for the first time in history, individual corporations are given the right under “Chapter 11” to sue governments for policies that interfere with expected profits, even if those policies are designed to protect workers and the environment. See also Chapter 11.

People’s Consultation [Español: Consulta del Pueblo]: the U.S. component of a hemisphere-wide campaign against the Free Trade Area of the Americas. The campaign includes workshops, public hearings, resolutions, and a national survey. It poses key questions regarding “free” trade: Who benefits? Who loses? and Who decides? It is part of an inclusive movement for global justice and equality that addresses the increasing marginalization of people throughout the hemisphere, especially immigrants, the poor, women and people of color, and demands that – as corporations and governments negotiate a trade agreement that will affect 800 million people – all people’s voices be heard. To find out more, check out: http://www.peoplesconsultation.org/index.html

Plan Puebla Panama (PPP): A mega-development project that aims to create a free trade zone throughout the Mesoamerican region -- from southern Mexico to the Panama-Colombian border. It is touted as a plan for infrastructure modernization -- with interconnected hydroelectric dams; super-railways and highways linked to seaports and dry canals and lined with maquiladora zones; gas and petrol extraction linked to expansive pipelines; massive plantation agriculture and exploitation of biodiversity; eco-tourism and military intervention and occupation. PPP is also a critical part of US foreign and commercial policy, as it is strategic to the implementation of the Free Trade Area of the Americas (FTAA). To find out more, see the ACERCA website: http://www.asej.org/ACERCA/ppp/ppp.html. Also see, “Plan Puebla-Panama: The Next Step in Corporate Globalization” at: http://www.labornotes.org/archives/2002/04/a.html

Referendum: See People’s Consultation.

School of the Americas (SOA): Now known as the “Western Hemisphere Institute for Security Cooperation” (WHISC), the SOA is a combat training school for Latin American soldiers, located at Fort Benning, Georgia. Initially established in Panama in 1946, it was expelled from that country in 1984 under the terms of the Panama Canal Treaty. Former Panamanian President, Jorge Illueca, stated that the School of the Americas was the “biggest base for destabilization in Latin America.” Over its 56 years, the SOA has trained over 60,000 Latin American soldiers in counterinsurgency techniques, sniper training, commando and psychological warfare, military intelligence and interrogation tactics. These graduates have consistently used their skills to wage a war against their own people. Hundreds of thousands of Latin Americans have been tortured, raped, assassinated, “disappeared,” massacred, and forced into refugee by those trained at the School of Assassins. To find out more, see the SOAW website: http://www.soaw.org/new/index.php

Stabilization policy: The use of monetary and fiscal policies to stabilize GDP, aggregate employment, and prices.

Structural adjustment: The reallocation of resources (labor and capital) among sectors of the economy in response to changing economic circumstances, including trading conditions, or changes in policy.

Structural Adjustment Program (SAP) [Español: Programas de Ajuste Estructural (PAE)]: The list of budgetary and policy changes required by the IMF and World Bank in order for a poor countries to qualify for a loan. This “conditionality” typically includes reducing barriers to trade and capital flows, tax increases, and cuts in government spending. Through SAPs, the IMF and World Bank can force poorer countries to prioritize macroeconomic stability over programs for public well-being. The IMF claims that this is important since countries cannot afford to spend as much money as they were spending. The result has been that governments have greatly cut the amount of money they spend on education, health care and other basic social services. The U.N. estimates that six million children a year die because of policies imposed by the IMF and World Bank.

Sustainable development: Economic development that is achieved without undermining the incomes, resources, or environment of future generations.

Tariff: A tax on trade, usually an import tariff but sometimes used to denote an export tax.

Trade dispute: Any disagreement between nations involving their international trade or trade policies. Today, most such disputes appear as cases before the WTO dispute settlement mechanism.

Trade liberalization: Reduction of tariffs and removal or relaxation of non-tariff barriers.

Trade Promotion Authority: New (in 2000) name being used for Fast Track (see above).

Transnational corporation (TNC) [Español: empresa transnacional]: A corporation that operates in two or more countries, but whose national identity is a matter of convenience only, and which will move its headquarters readily in response to incentives. (Similar to multinational corporation – MNC).

Unfair trade: Under the GATT this refers only to exports that are subsidized or dumped, but under U.S. law, this also includes various actions that interfere with U.S. exports. It is used by activist groups to refer to trade that is objectionable by social standards, sometimes including that based on low wages or weak environmental or social regulations.

United States Agency for International Development (USAID): a United States government agency that provides foreign assistance and humanitarian aid. It has been accused of pushing its policy goals in places where it is not really wanted, while ignoring local expertise and shunning government decision-makers and citizens in the process of developing programs.

World Bank (WB) [Español: Banco Mundial]: The World Bank, based in Washington D.C. is associated with the United Nations, and serves as major lender to poor and moderately poor countries. Like a regular bank the World Bank receives deposits, but these deposits come from countries and not individuals. The World Bank uses these deposits to loan money to other countries. While World Bank loans have been used to build needed infrastructure and to develop industries in poorer countries, it has also become notorious for making loans for huge, environmentally destructive projects that primarily benefit large transnational corporations. Over the last decades, it has refused to lend money to countries unless they agree, often against their will, to change domestic economic policy through privatization, removal of subsidies and protections, and reduced government expenditures.

World Trade Organization (WTO) [Español: Organización Mundial del Comercio (OMC)]: A global international organization that specifies and enforces rules for the conduct of international trade policies and serves as a forum for negotiations to reduce barriers to trade. Formed in 1995 under the Uruguay Round as the successor to the GATT, it had 136 member countries as of April 2000. Under its auspices, member countries can sue other countries for laws and regulations that “restrict trade,” for example, by imposing environmental or labor standards. Disputes are settled by secret tribunals presided over by three judges who are not elected, named, or accountable to the public, usually from the world of business and finance. Proceedings are secret, and their judgments can override laws passed by citizens of the countries involved. For example, the WTO has disallowed laws that would have protected endangered sea turtles from being killed in shrimping nets and laws that would have banned products made with child labor.

United States Trade Representative (USTR): The cabinet-level official of the U.S. government “responsible for developing and coordinating U.S. international trade, commodity, and direct investment policy, and leading or directing negotiations with other countries on such matters.”