Focus-on- is a regular electronic bulletin providing updates and analysis of trends in regional and world trade and Focus on Trade , with an emphasis on analysis of these trends from an integrative, interdisci- plinary viewpoint that is sensitive not only to economic issues, but also to ecological, political, gender and social issues. Your contributions and comments are welcome. Number 101, July 2004

THE OTHER RECONSTRUCTION: THIS issue of Focus on Trade marks the meaningless How private contractors are trans- “handover of sovereignty” by the US to their handpicked forming Iraq’s society “interim government” in Baghdad. The Financial Times called By Herbert Docena the ceremony an “embarrassing last act by a departing US authority and an unfortunate reflection of the troubles it WHAT TO EXPECT FROM US leaves behind.” Far from being the last act, however, the “DEMOCRACY PROMOTION” IN handover simply marks another phase in the US’ overall IRAQ* strategy to gain political and economic domination of Iraq By William I. Robinson and the whole region. The secrecy in which the ceremony took place was an inauspicious — but fitting — start to the NICARAGUA´S AND LATIN new era sham sovereignty. AMERICA´S “LESSONS” FOR IRAQ By Alejandro Bendaña

THE FINAL UN RESOLUTION ON IRAQ’S INTERIM GOVERNMENT By Phyllis Bennis

WAR: TRADE BY OTHER MEANS: How the US is getting a agreement minus the negotiations By Marylou Malig

THE US’ STRATEGY OF DESPERA- TION By Walden Bello

Please contact us c/o CUSRI, Wisit Prachuabmoh Building, Chulalongkorn University, Bangkok 10330 Thailand. Tel: (66 2) 218 7363/7364/7365, Fax: (66 2) 255 9976, E-Mail: [email protected], Website: http://focusweb.org. Focus on the Global South is an autonomous programme of policy research and action of the Chulalongkorn University Social Research Institute (CUSRI) based in Bangkok. THE OTHER RECONSTRUCTION: How with the US-led rebuilding of Iraq’s bridges and private contractors are transforming Iraq’s power plants is the construction and transfor- mation of the economic, political, and social state and civil society institutions that will make up the new Iraqi By Herbert Docena state and civil society.

After the transfer of ‘sovereignty’ in Iraq, Assuming that the war on Iraq was waged for among those staying behind - aside from oil, for opening domestic markets, for main- 160,000 coalition troops - is a battalion of taining military presence in a strategic region, private contractors attempting to construct or for promoting a certain ideology, then it economic and political structures most condu- would be safe to conclude that the cive to US and transnational corporate interests would - given the choice - prefer not to “cut even after direct occupation ends. Their mission and run” without first getting what it invaded is crucial for the “exit plan”: these contractors Iraq for. are trying to make sure that that the US still gets what it went to war for before it recedes The US could have ensured securing its objec- from the scene. Working silently in the back- tives by keeping Iraq under direct occupation ground, their impact on Iraq’s future may be indefinitely through a colonial government run more significant than that of the more contro- by the US, but this was out of the question versial reconstruction contractors such as from the outset. First, the US was fully aware Bechtel or Halliburton. that this arrangement would not be sustainable for the -term because it would only fuel the SHEIK MAJID AL-AZAWI was one proud and resistance and it would most likely be resisted happy Iraqi. His office might look more like a by the international community. Second, it military base than an administrative building, would be unstable because such an exercise of with sandbags, barbed wire, and tall concrete power would rest only on coercion, not on walls surrounding it. It might be pitch-black consent. Finally, the US has no interest in dark in the corridors most of the day. But that running the affairs of government other than did not dampen the sheik. “We are very happy those in which it has a stake. to be part of this council even if we have simple equipment,” says Al-Azawi, one of the mem- Hence, in order to secure what its soldiers are bers of the Rusafa District Council in central dying for, the US is trying something more Baghdad. “It’s the first time for all the members subtle and more sophisticated: It is attempting of the government because it was impossible to erect Iraq’s legal, economic, political, and before.” [1] social institutions according to its own specifi- cations in order to ensure that they will be The Rusafa District Council is one of hundreds conducive to US interests even after the occupa- of local proto-governing political entities which tion authority formally withdraws from the the US military and the United States Agency scene and hands over power to a new govern- for International Development (USAID) - ment. At the same time, the US is also recruit- through its private contractor Research Triangle ing, mobilizing, and building the capacity of Institute (RTI) - have been painstakingly setting Iraqis who will push for, implement, and defend up all over Iraq since the end of “major com- its preferred policies - both within the state and bat” last year. RTI’s role in Iraq came to light in in civil society - in the new sovereign Iraq. One November last year when Coalition Provisional of them was Sheik Azawi. Authority (CPA) head L. Paul Bremer unveiled his original plan - since scrapped - for transferring Contracted mostly by the USAID but also by the “sovereignty” back to Iraqis: the interim National Endowment for Democracy (NED), and government would be chosen through complex the State Department, these contractors’ efforts caucuses in local councils whose members were are funded as foreign aid - and, as the USAID constituted and vetted by RTI. In effect, Iraq’s is first to admit, “all aid is political.”[2] It has government would have been chosen by an been and will continue to be “a key instrument American contractor. of foreign policy in the coming decades,” declares its aptly titled report Foreign Aid in the The incident drew attention to a battalion of National Interest. US foreign aid, says the private contractors hired by the US government USAID, will continue to have a two-fold pur- for Iraq’s other reconstruction: Side by side pose: “furthering America’s foreign policy interests in expanding democracy and free the final say.[8] markets while improving the lives of citizens of the developing world.”[3] The military can kick out anyone for whatever unstated and unverified reason. In a number of Working quietly in the background - though not cases, “Baathists,” “criminals,” or “terrorists” in secret, the role of each of these contractors have been shown the door. Given how such in the division of labor in Iraq reveals the terms have been loosely used to refer to anyone components of the US’ comprehensive, system- opposed to the occupation, it is difficult to atic, and highly evolved strategy for an “exit ascertain whether or not those that have been plan.” The broad strokes may be coming from kicked out simply did not meet RTI’s criteria for the higher-ups, but it is these private contrac- “legitimate” leaders. At the Baghdad City tors working to achieve US foreign aid’s larger Council, RTI instructed council members to kick objectives that are drawing the finer details. out the “terrorists” through “democracy” by voting them out.[9]

As the would-be behind-the-scenes king-maker Prior to RTI’s selection process, the CPA in Bremer’s aborted plan, RTI’s work in Iraq is actually abolished all councils that had been illustrative. formed by the Iraqis after the war without any interference from RTI. “I’m not opposed to Among the first batch of contractors to arrive [elections], but I want to do it in a way that after the invasion, RTI employees have been takes care of our concerns,” Bremer said. “In a roaming around the country searching for what situation like this, if you start holding elections, its contract with USAID calls, “the most the people who are rejectionists tend to win,” he appropriate ‘legitimate’ and functional lead- explained.[10] Another CPA official was more ers.”[4] (Quotes around ‘legitimate’ in original direct when asked why elections couldn’t be contract.) Aside from setting up a five-level held soon enough: “There’s not enough time for system of local councils all over the country, the moderates to organize.”[11] RTI is also creating, funding, and supporting dozens of civil society organizations and NGOs Under the plan, RTI’s task is to make sure the that are sprouting-up across the country. How “legitimate” leaders - and not the rejectionists RTI - and its employer, the US government - and the non-moderates - prevail. Its mission is defines “legitimate” is evident in the way it went part of a bigger goal to build a social base of about constituting these councils and determin- Iraqis that will stand up for the occupation - or ing what types of NGOs get supported. “What at least passively bear with it - in order to we are trying to do,” said Fritz Wenden of the offset those other bases that are hostile to or USAID Office of Transition Initiatives, “is to uncooperative with the occupation authorities identify those groups, those leaders that you and its plans. “Beneath the new interest of the can work with.”[5] United States in bringing democracy to the Middle East,” points out Thomas Carothers, It was not a simple case of RTI knocking on the director of the Democracy Project at the doors of all pro-occupation Iraqis willing to Carnegie Endowment for International Peace, serve the occupiers. But RTI’s process of “is the central dilemma that the most powerful, establishing the councils ensured that it would popular movements are the ones that we are be self-selecting and self-eliminating: only those deeply uncomfortable with.”[12] who are willing to cooperate - or those who have other plans in mind - would be willing to In answer to its dilemma, the US is attempting sit in the councils. These councils were not to build up its own movement - one with which directly elected by the locals in a one-person, it would be more comfortable. If the way to one-vote system. “We didn’t know anything make the occupation more acceptable is to put about these elections. We just suddenly heard “Americans out back and more Iraqis out about them,” attested one tribe leader from front,” as influential New York Times columnist Sadr City.[6] As RTI employee Christian counseled [13], then the US, Arandel, pointed out: “Let us be clear. These are through RTI, is on the look-out for Iraqis to put not elections. There are all processes of selec- in front. tions.”[7] And in these selections, even as some local leaders were consulted and in some cases balloting actually took place, it was the military as guided by RTI - and not the Iraqis - that had their memberships.[20] At least one of the parties, the Free Republican Party, has openly Complementing RTI’s work is the quasi- packaged itself as the Iraqi version of the US’ governmental organization National Endow- Republican Party.[21] ment for Democracy. “There is a lot of change taking place [in the Middle East],” NED Presi- Meanwhile, the US government has allotted dent Carl Gershman remarked. “We know how funding to the usual NED conduits — American to get to the right people.”[14] Federation of Labor - Congress of Industrial Organizations (AFL-CIO) and the US Chamber In Nicaragua in 1990, the right people were of Commerce— to build employers’ groups and from the opposition party-led by conservative trade unions in Iraq. The latter is clear about candidate Violeta Chamorro who ran against what sort of business associations it plans to the Sandinista President Daniel Ortega and who set up in Iraq and what role they will have. “By was documented to have received campaign serving as a platform to voice the business funding from the NED.[15] In Haiti last Febru- community’s needs and interests to political ary, the right ones were those who were decision-makers, business associations contrib- agitating against popularly elected Jean ute to the growth of a participatory civil society Bertrand Aristide.[16] In Venezuela, the NED felt and the development of a regulatory and policy it made the right choice by supporting those environment conducive to private enterprise,” who organized the coup d’etat against Hugo reads its report. One of the organizations they Chavez in April 2002.[17] are founding, the Iraqi American Chamber of Commerce and Industry, is bent on “promoting In Iraq, the NED is once again busy searching an open market economy and a democratic for the right people and making sure they get political system.” [22] adequate support. While RTI recruits people at the grassroots, the NED and its affiliates have been going around Iraq developing the machin- For now, the Rusafa district council members ery for scores of newly emerging homegrown hang out doing nothing much in their RTI- political formations expected to contest the renovated offices - and for the coalition forces, planned national elections or crowd the sched- they are doing an excellent job. With no real uled Constitutional Assembly before that. power at all - not over budgets and not even on their meeting schedules [23] — the local In Baghdad, scores of houses have been refitted council’s main use to the occupation forces is to and renovated to be the headquarters of new deflect criticism, to transmit the CPA’s policies political parties - many of them furnished by to the communities, and to placate the popula- the NED. But it’s not just a simple case of the tion and channel their political energies towards NED dispensing . Since the occupation non-threatening actions. In Sadr City, for began, the NED’s affiliates, the International instance, the neighborhood council was de- Republican Institute (IRI) and the National ployed to calm down the people after a military Democratic Institute (NDI), have been going helicopter knocked down a religious flag.[24] In around Iraq holding political party development Abu Nawas neighborhood, the council members workshops, seminars, and focus group discus- were tasked to go from door to door to collect sions. As with USAID sponsored “political party guns from their neighbors.[25] development” programs, they train Iraqis on the techniques of strategic planning, building up After - or if ever - the bombs stop exploding, the party’s local and regional structures, however, the US would like to see the layer of recruiting members, fund-raising and media Iraqis they are creating as a social base to be relations. More advanced levels take up elec- calling the shots in the future Iraq. The “Iraqis toral communication strategies, campaign out front” are being trained and honed to planning, and candidate recruitment.[18] understand, defend, and implement the policies that the US wants Iraq to put in place for the The NDI has been holding sessions for assess- long-term. USAID has learned that “legitimate” ing party strengths and weaknesses and leaders are not just found, they’re made. Before evaluating their potential for participating in the US withdraws from the scene, it first has to elections.[19] The IRI, for its part, has gone as ensure that its Iraqis will know what to do. far as producing a database of parties, with information on each group’s characteristics, For this, Iraq has become a massive country- their regions of operations, and estimates of wide teach-in where hundreds of conferences, seminars, forums, and workshops are being conducted by the CPA to teach the Iraqis the “We don’t present ourselves as we have advice different components that make up “democ- to offer to you, or we don’t present ourselves racy”- many of them organized by RTI and as here’s the best way to do something... [W]e other contractors and attended by local council have experience in a lot of countries in doing members and NGO leaders. In Najaf, there was similar kinds of work, and so we do try to say, a workshop on “Constitutional Democracy: ‘In our experience, here are some best prac- Rebuilding Society in a Democratic Age.”[26] tices’,” explains Johnson, as though the Iraqis Across Iraq, “Tribal Democracy Centers” have are given choices.[33] RTI’s record in dozens of been set up to encourage sheikhs and tribal other countries, as gathered from various leaders to take the required classses.[27] Even USAID and RTI documents, shows what’s best. elementary and high school students are starting young: every week, after flag ceremo- In Central and Eastern Europe, RTI was in- nies in their schools, teachers of “democracy” volved in administering “shock therapy” to are given five minutes to expound on various former Soviet Bloc states, moving the local concepts.[28] In the northern city of Arbil, governments toward open market economies. where the lessons are far more advanced, In Russia, Ukraine, Kazakhstan, Kyrgyztan, it Iraqis from the government, civil society, media, took part in the massive privatization program and the business community are undergoing a of over 150,000 state-owned enterprises. In six-part series of “economic development Ukraine, RTI set up regional offices for dissemi- clinics” for diagnosing the “potential role of nating “best practices” and its “advisors” Arbil in the global economy.”[29] developed the policy for setting the prices of local services. In Romania, where it prides itself Among the most important lessons that the in securing the enactment of a new municipal Iraqi trainees have to master is that the kind of finance law, RTI created an association of “democracy” that the US is giving them is municipal civil servants and “guided” them in distinctive. It is no coincidence that Larry lobbying for a new national legislative structure Diamond, one of the leading theorists on this for local governments by teaching them the type of democracy and a co-director of the “best practices.” NED, was appointed a senior advisor to the CPA. At a lecture in Hilla University last Providing what it described as “high impact January, Diamond told his audience that a basic assistance” to national ministries and municipal element of “democracy” is a “market economy” associations setting Bulgaria’s fiscal decentrali- and among the most fundamental rights is the zation policies, RTI pushed for the passage of a right to own property[30] - a view affirmed and “Municipal Budget Act” and a “Municipal advanced by the USAID. Borrowing Act.” Claiming to be giving “objective non-partisan assistance,” RTI was proud to This, in turn, calls for a kind of democracy in report that it worked - on a daily basis - with which social equality is not a necessary aim officials from the Bulgarian Ministry of Finance and in which inequalities may in fact be neces- drafting two policy papers on decentralization. sary. As Samuel Huntington, another scholar In pushing for the privatization of its educa- who supports this view of “democracy,” puts it: tional system, it also claims to have helped set “Political democracy is clearly compatible with what standard of education each pupil will get inequality in both wealth and income, and in given the maintenance costs. In Poland, it some measure, it may be dependent upon such developed training programs on the manage- inequality...Defining democracy in terms of ment of water and wastewater utilities. In goals such as economic well-being, social privatizing and restructuring the housing justice, and overall economic equity is not, we agency of one city, RTI went so far as to have argued, very useful.” [31] provide samples of company charters as well as procedures for the meeting of shareholders While they imbibe these fundamental lessons to the newly privatized company. about the kind of democracy that they’re expected to put in place in the “new Iraq”, In Indonesia, RTI trained bureaucrats to Iraqis would then be taught the operational “restructure local water utilities into profit details. RTI, for its part, is required by contract making entities”[34] by obliging Indonesian to “identify, prepare, and disseminate best city-dwellers to pay for urban services. In practices in local governance.”[32] Pakistan, RTI was recently contracted by USAID to privatize the country’s educational sys- tem.[35] In South Africa, RTI boasts of drafting When the Iraqis eventually begin to roll up their the constitutional amendment signed by sleeves and work on the nuts and bolts of their President Thabo Mbeki in 2001 allowing political system, RTI will be there every single municipalities to make . The South African step of the way - providing “technical assis- government claimed that the Municipal Infra- tance” in drafting the necessary laws, helping structure Investment Unit, which assisted ministries understand and relay complex municipalities in getting financing for their local regulations to their constituencies, supplying infrastructure through public-private partner- them with “model” constitutional provisions, ships, was part of a government agency. It giving them access to the advise of “consult- was, in fact, created, run, and staffed by people ants” free of charge, handing them “technical” from RTI. [36] To show how it’s actually done, studies and background papers, doing PR RTI conducted pilot demonstrations of how to work, etc. - all as part of an effort to “promote privatize solid waste management in Tunisia. techniques for ‘reinventing’ local government,” as the USAID puts it.[41] RTI performed similar work throughout the “As the CPA and the Iraqi Governing Council Carribean and Central America, including advance in their efforts to strengthen national Guatemala and El Salvador, as well as in institutions, adopt and implement national Ghana, Haiti, Honduras, Swaziland, Korea, and policies, and design a political system for a Portugal. This long and broad range of experi- future Iraq,” notes the contractor, “RTI and our ence has given RTI reason to advertise its partners are working to ensure that the knowl- market niche. “We have particular expertise in edge base generated by our field activities helping prepare - and long-term public- informs key decisions.” [42] RTI’s contract private partnerships for the financing and specifically spells out that they will “strengthen management of municipal services such as the capacities of NGOs...to advocate on behalf water supply, sanitation, waste management, of preferred local policies.”[43] The use of the energy, and transportation,” RTI’s website passive tense is instructive because even as the proudly notes.[37] contract avoids the question, it reveals who made the choice. Given its background, its track record, and its self-avowed expertise, what constitutes RTI’s While RTI is out in the streets rounding up “best practices” is obvious. Paid by the USAID, “legitimate” leaders, Bearing Point is working RTI has no choice but to follow the directives inside the offices of the Ministry of Finance or which USAID itself has made clear: “The the Central Bank erecting Iraq’s economic safeguarding and protection of economic infrastructure - as designed and envisioned by freedom lies at the heart of USAID’s legal and the occupiers. It has taken to heart another institutional reform activities.”[38] In its con- important lesson USAID has learned: if reform tracts with the USAID, RTI invariably works is susceptible to being blocked by politicians towards overhauling local governments in order and organized labor, then the solution is to to make them more market-oriented and keep key ministries like that of Finance and the friendlier to the private sector. Central Bank insulated.[44] In Iraq, if the pieces fall into place, the council members and the NGOs will soon be sitting “We are now overhauling the functions of and through lessons on the “best practices” of local building the institutional capacity of the entire governance and directed, as RTI’s previous ministry,” Iraq’s US-appointed Finance Ministry students from other countries have been, to Kamal Gailani announced last February.[45] reading materials such as The Tool One of his first public appearances was to for Private Sector Participation in Water and unveil possibly the most investor-friendly Sanitation.[39] If its previous use is any indica- investment laws ever conjured. The CPA enacted tion, even the financial spreadsheet software Order 39 gives foreign investors rights equal to they will be tasked to master will fill a specific Iraqis in exploiting Iraq’s domestic market and purpose: that of assessing the creditworthiness allows them full repatriation of profits.[46] The of their municipality. Already in Kerbala, local Economist heralded this a “capitalist dream” council members and bureaucrats have taken and a wire agency called it a “free market workshops in “Management Accounting and manifesto.”[47] Not even the interim govern- Reporting for Efficient and Effective Service ment, according to the US-IGC written transi- Delivery.”[40] tional constitution, can overturn this order. By “we,” Gailani would have included all the So unsparing is USAID’s plan for Iraq that even “technical advisors” hired by Bearing Point, the educational system is being geared towards another USAID contractor, who report to the the global marketplace by another contractor, “macroeconomic analysis unit” in his ministry. Creative Associates. Its task is to “coordinate” Bearing Point’s contract is very detailed - with other agencies in supervising textbook complete with schedules and benchmarks, and production, training teachers, and school kits. leaves no doubt as to what the US intends to Among its targets, as listed in its $62 million- do. It is chilling in its comprehensiveness and contract, is “enhanced public-private partner- brazen in its wording. “The new government ships for education service delivery.”[50] While will seek to open up its trade and investment Bearing Point acts as Iraq’s unseen de facto linkages and to put into place the institutions legislature, Creative Associates acts as its promoting democracy, free enterprise and thought police in determining what Iraqi reliance on a market-driven private sector as students should and should not learn. In a the engine of economic recovery and growth,” telling sign of who will set Iraq’s educational the contract reads, preempting anything the policy - and possibly shape the minds of new government might want or not want to generations of students and re-write Iraqi do.[48] history — the contract explicitly states that “USAID shall review the contents of all teaching Instructed to coordinate with the US Treasury materials before they are published.”[51] Department, the World Bank, the IMF and other donors, Bearing Point is mandated to ensure In assessing these teaching materials, USAID that Iraq’s investment policies conform to the will be guided by its own pedagogical philoso- over-all economic thrust put forward by the phy. According to its report, educational policies CPA as well as with all the WTO requirements must respond to the shift in global markets and other multilateral financial institutions. from low-cost labor to high-end manufactur- With the help of Bearing Point, an offshoot of ing. USAID administrator Andrew Natsios KPMG, one of the Big Five auditing firms, Iraq thereby recommends that “education systems had granted “observer” status in the WTO - the in developing countries must broaden their first non-sovereign country to be admitted as sights - and US foreign assistance must offer such in the organization. The CPA-enacted more support for secondary education for the Central Bank Law as well as its Company Law, global marketplace.”[52] Learning must be which eliminates the previous requirement to based on demand so they can meet the needs have trade union representatives on the board of the global market. It’s no longer enough to of private companies, had been penned - or count on primary education to prepare young lifted from existing templates - by Bearing Point people for employment. Hence, “[s]econdary as though they were Iraq’s unelected legisla- education and skills-based learning must now tors. be considered as essential elements in tapping into the global economy - and in building On the massive privatization program, over democratic institutions.”[53] which Bearing Point is in charge, the contractor is told that “if changes to legislation are The USAID takes pains to convince Iraqis that required, contractor will assist legislative reform all these measures are in their best interests specifically to allow for the privatization of because they supposedly ensure that the new State-owned industries and firms and/or Iraq succeeds in the global economy. “Global- establishing a privatization entity.” Not only will ization and regional integration have benefited Bearing Point decide which state owned enter- countries regardless of their stage of develop- prises (SOEs) are up for bidding, it will also ment,” the USAID maintains.[54] At the same determine their prices and set up the secondary time, USAID is quick to point out, this success trading system for re-selling these companies. will also rebound to the US. “Successful It is at this secondary market that the windfall development abroad generates diffuse benefits. profits would be made when the SOEs, having It opens new, more dynamic markets for US been bought at dirt-cheap prices, are re-sold. goods and services. It generates more secure The profiles of the SOEs to be put on the and promising environments for US invest- bidding block have already been compiled and ment.”[55] posted in the CPA website. It is an inventory of what calls a “yard sale.”[49] If Iraq is “today’s California Gold Rush,” as former CPA director of private sector Tom Foley calls it,[56] then the silent battalion of private hoping is... that there will be this moderating contractors exemplified by RTI, Bearing Point, influence that will have an effect on the way and Creative Associates, is erecting the legal that people at the national level choose to and institutional structures for ensuring that the behave,” a USAID official said. “Now we occupiers get the most gold in that rush. know... that we stand a better-than-even “Business conditions are improving everyday in chance of moderating some of the extreme Iraq, creating a greater opportunity for US behavior at the top.”[60] Controlling the $18.4 business to explore virtually an untapped billion dollar reconstruction fund as a lever of market,” cheerfully noted US Commerce power, the US is blunt about what it should do Secretary Don Evans. From laying the founda- in case the future government does not take up tions through to choosing the colour scheme, its recommended reforms: “If there is no the US is attempting to transform Iraq along political commitment to democratic and gover- free market lines and to install one of the most nance reforms, the United States should radical sets of neo-liberal economic policies suspend government assistance and work only ever dreamed up.[57] with non-government actors.”[61] USAID calls this “tough love.”[62] If Iraq is to be the “capitalist dream,” then these private contractors are the ones making According to the USAID’s review, “reforms” these dreams come true. don’t succeed because of the failure to organize wider constituencies among “stakeholders.” This is where foreign aid comes in. “Where In this complex and ambitious plan, RTI, political will for systemic reform is lacking,” Bearing Point, and Creative Associates, and the says the report, “the main thing that foreign other contractors in Iraq are applying what the assistance can do is to strengthen the constitu- US government has learned from decades of encies for reform in civil society...”[63] Foreign using foreign aid to push for “policy reforms” in aid will be used to educate them about the scores of countries around the world.[58] preferred policies and learn about the experi- According to USAID, the successful adoption of ence of other countries, improve their coordina- US-backed policies requires “political will” tion with each other, enhance their ability to which can come from three sources: from the lobby and to project themselves as experts, and state, the ruling elites, or government bureau- campaign for support from more people. crats; from civil society; and from foreign Interest groups such as trade unions, chambers governments and civil society. of commerce, think tanks and the mass media should be specifically targeted. Focusing on only either the state or the ruling elites, USAID learned, is not enough. “Even if A crucial element for the “reforms” to succeed, state elites propose reforms - for example, to the USAID points out, is the perception of privatize state industries, improve the “ownership.” The adoption of “reforms” must system, or crack down on and not be seen as externally imposed, the way the bribery - these reforms may not be sustainable IMF’s structural adjustment policies were or unless society is educated about the need for those of a direct colonial authority would be, them and mobilized to support them,” the for example. It is important that the “best report Foreign Policy in the National Interest practices” that the RTI is teaching Iraqis will, in points out. This explains why the US - as seen the end, be seen as proposed by the Iraqis by the proliferation of USAID-funded NGOs and themselves - and not rammed down the Iraqis’ other organizations - is also very hot on “civil throats by RTI. society.” “Organized pressure from below, in civil society, plays an essential role in persuad- ‘POLICY CHAMPIONS’ ing ruling elites of the need for institutional Guided by these realizations, USAID has reforms to improve governance,” the report developed a step-by-step list of tasks to notes.[59] improve the likelihood of “reforms” being successfully embraced. In Iraq, the US-sponsored civil society is intended to function as a back-up in case the The first among these tasks is what USAID subsequent government - despite all the calls “legitimation” or the means for getting safeguards to retain influence that the US is “buy-in” from the people who should be seen attempting to lock-in - still refuses to pursue as owning the policies. In this stage, USAID “reforms” after the US leaves. “What we are should single out what it calls “policy champi- ons” who could be relied on to act as the main and conferences that the USAID is organizing proponents of the policy. Drawing from its become useful not just as educational sessions “Policy Implementation Toolkit,” USAID con- but also for building consensus and developing tractors are expected to carry out “stakeholder common plans of actions among “policy analysis” because this “helps managers to champions.” “It is of vital importance to set up identify individuals and groups that have an groups of activists in every locality,” RTI noted interest, or stake, in the outcome of a policy from its experience in Ukraine.[69] Building decision.”[64] consensus is key because, as USAID points out, “The broader and more sustained elite consen- To carry out this analysis, USAID contractors sus in favor of governance reforms, the greater must create and maintain a catalog of stake- the impact of democracy and governance holders and classify them either as “support- programs tend to have.”[70] ers,” “opponents” or “neutral parties. They should also be able to prioritize “which groups are the most important ones for managers to In a sense, the USAID and its contractors are seek to influence.”[65] A more advanced version having it easier in Iraq. In most of the other of the analysis is what USAID calls “political countries where it has projects in, USAID has mapping” which should provide a graphic guide no choice but to work through existing institu- to the political landscape facing a certain policy. tions and work with people that are already in This tool “permits a finer grained assessment of power to implement its “reform” programs. the support and opposition facing policy Confronting circumstances that are often implementation and allows implementers to beyond its control, USAID had to seize on track how various implementation strategies opportunities such as constitutional reforms, might rearrange coalitions of supporters and the passage of bills or the implementation of opponents.”[66] administrative regulations to push for its preferred policies. In the jargon of USAID, these Somewhere at the USAID headquarters in are the “entry points”.[71] To increase its Baghdad’s heavily fortified Green Zone presum- chances of succeeding, USAID contractors are ably hang these political maps. What better instructed to look for “sympathetic” ministers in way to gather data for “stakeholder analysis” the national administration or a chairperson of and for “political mapping” than to sit through a strategic parliamentary commission in the all of the local council meetings or be planted in legislature, as well as to set up and support the ministries, observe the members and associations of elected officials or bureaucrats. bureaucrats, and take notes? RTI is incidentally USAID calls this “capitalizing on national under contract to “develop a body of knowledge opening.”[72] that is essential to effective program implemen- tation” by making reports on various aspects of In Iraq, the “entry point” was the invasion. The Iraqi society, including “appropriate and “national opening” was the collapsed state left legitimate leadership” and the “status of local in its wake. There are no existing institutions to governance.”[67] At a time when Iraq’s gover- work through; the US is attempting to create nors are selected by “screening committees” them from the ground up. From the rubble of rather than the people at large, the information the bombed-out ministry buildings scattered all that RTI gathers on the ground should be useful over Baghdad new government agencies are not only for getting the pulse of the people but rising, designed and constructed by the occupa- also for identifying “policy champions” to be tion authorities from the bottom-up . The endorsed to higher ranking positions in govern- “legitimate leaders” are not to be identified and ment or “opponents” to be marginalized and co-opted, they have to be groomed and primed. countered. No need for deep penetration agents; In other countries, USAID operators have to RTI’s immersion in the local communities is a cajole, intimidate, threaten, or effectively coerce perfect method for surveillance. governments to submit to its “reforms”. In Iraq, they are the government. There is no need to The second task is “Constituency Building” or tweak or tinker with Iraq’s laws because they “gaining active support from groups that see are being written on a blank slate. All this is the proposed reform as desirable or beneficial” possible because of the rare opportunity offered and which is intended to “reduce or deflect the by the war. In Iraq, the first step was not opposition of groups who consider the pro- “legitimation” or “constituency-building.” It posed reform measure to be harmful or threat- was dropping bombs. ening.”[68] Here, the plethora of workshops Because of the size of their contracts and the Iraqis Out Front,” International Herald Tribune, August allegations of involved, other recon- 21, 2003 [14] See William Robinson, A Faustian Bargain: US struction contractors like Halliburton and Intervention in the Nicaraguan Elections and American Bechtel have been more controversial. In their Foreign Policy in the Post-Cold War Era (Boulder: attempt to fundamentally alter Iraq’s economic, Westview, 1992) political and social landscape, the impact of less [15] John Stauber and Sheldon Rampton, Toxic Sludge is well-known contractors such as RTI, Bearing Good for You, (Monroe, Maine: Common Courage Press, 1995), 166. Pont and Creative Associates, may be more [16] Thomas Monnay, “Anti-Aristide Groups Split Threat to profound, more far-reaching, and more lasting. Future,” Sun-Sentinel.com, February 14, 2004 Halliburton is merely repairing the oil wells; [17] Duncan Campbell, “American Navy ‘helped Venezu- Bechtel is merely building schools. In a way, elan coup’,” Guardian, April 22, 2002, Bearing Point is going to determine the future of [18] Ronald Shaiko, “Political Party Development and USAID,” Democracy Dialogue, December 1999. Iraq’s oil industry; Creative Associates is going [19] CPA Administrators Weekly Governance Report, March to decide what will be taught inside the schools 13-19, 2004. that Bechtel is building. [20] CPA Administrators Weekly Governance Report, February 7-13, 2004 By having the power to plan Iraq’s economic [21] CPA Administrators Weekly Governance Report, various dates. institutions, Bearing Point’s success or failure [22] Raad Ommar and Sabah Khesbak, “Conditions and will affect the fortunes not just of Bearing Point Expectation for Private Enterprise in Iraq,” Iraqi American but of all the corporate interests who hope to Chamber of Commerce and Industry, undated report; Nick benefit from Iraq’s new economic policies. The Nadal and Zaid Abdul Hamid Abdul Moneim, “Iraq Trip amount of money spent on these efforts may be Report,” Center for International Private Enterprise, internal memo, August 23-31, 2003. small relative to other aspects of the war. But [23] Baghdad Citizen Advisory Council Handbook. as the USAID noted, in the long run, the [24] USAID Local Governance Consultation transcript, “influence potential” of the kind of work it is September 30, 2003, USAID website. doing in Iraq is much more important than its [25] Interview, 29 March 2004. “resource contribution.”[73] The NED may not [26] CPA Administrators’ Weekly Governance Report, January 31- February 6, 2004. be killing Iraqis but, as Heritage Foundation [27] “Democracy Building in South Central Iraq,” CPA analyst said, it is “an important weapon in the Press release, January 21, 2004. war of ideas.”[74] [28] Coalition Provisional Authority Administrators Weekly Governance Report, February 28- March 5 2004. A few weeks after the interview at the Rusafa [29] CPA Administrator’s Weekly Governance Report, March 6 - 12, 2004. district council, one of its members, al-Azawi, 30 “Democracy Building in South Central Iraq,” CPA Press the one who was very happy to see the end of Release, January 21, 2004. the dictatorship and who was very eager to be [31] Samuel P. Huntington, “The Modest Meaning of part of RTI’s “new Iraq,” was killed by the Democracy,” in Robert A. Pastor, Democracy in the resistance. Ironically, despite the relative ease Americas: Stopping the Pendulum, New York: Holmes and Meier, 1989, p. 12-13, cited in Robinson, 55. with which USAID’s programs are being [32] USAID contract with RTI, C-2. implemented in Iraq, Sheik al-Azawi’s death [33] USAID Local Governance Consultation transcript, underscore why it may not all be that easy. September 30, 2003, USAID website [34] USAID data sheet. [35] “USAID allocates $60 million for educational reforms [1] Interview, 27 March 2004 in Pakistan,” Daily Times, February 19, 2004. [2] United States Agency for International Development, [36] Public Services International, August 20, 2002. Foreign Aid in the National Interest, 23 [37] RTI website, www.rti.org [3] USAID website, www.usaid.gov [38] USAID website. [4] USAID contract with RTI, C-1. [39] USAID Making Cities Work website. [5] USAID Local Governance Consultation transcript, 30 [40] CPA Administrator’s Weekly Governance Report, September 2004, USAID website January 31- Febuary 6, 2004, CPA website. [6] Interview, 29 March 2004 [41] Center for Democracy and Governance, Decentraliza- [7] Chris Kromm, Rania Masri, and Tara Purohit, “Why No tion and Democractic Local Governance Programming Democracy in Iraq?,” Counterpunch, February 23, 2004 Handbook, (Washington: USAID, 2000) 45, 49. [8] Ariana Eunjung Cha, “Iraq Has Lessons in Democracy,” [42] “The Local Governance Project in Iraq,” RTI website, Asian Wall Street Journal, November 25, 2003 www.rti.org. [9] Interview, 23 March 2004. [43] USAID contract with RTI, C-2. [10] William Booth and Rajiv Chandrasekaran, “Occupa- [44] David Sogge, Give and Take: What’s the Matter with tion Forces Halt Elections Throughout Iraq,” Washington Foreign Aid, (London: Zed Books, 2002), 189. Post, June 28, 2003 [45] Kamal Gailani, opening statement during press [11] Edward Wong, “US tries to give moderates an edge in conference, February 6,2004. Iraqi elections,” New York Times, January 18, 2004 [46] Coalition Provisional Authority Order Number 39 [12] Alissa Rubin, “Suging Shiite Demands Put US in a [47] “Let’s All Go to the Yard Sale,” Economist, September Bind,” Los Angeles Times, January 18, 2004 25, 2003; Reuters, September 21, 2003 [13] Thomas Friedman, “More Americans Out Back, More [48] USAID contract with Bearing Point, 77 WHAT TO EXPECT FROM US “DEMOC- [49] “Let’s All Go to the Yard Sale,” Economist, September 25, 2003[ RACY PROMOTION” IN IRAQ* [50] USAID contract with Creative Associates, 4 By William I. Robinson* [51] USAID contract with Creative Associates, 3 [52] Foreign Aid in the National Interest, iii [53] Foreign Aid in the National Interest, 18 [54] Foreign Aid in the National Interest, 13 The US plan for “promoting democracy” in Iraq [55] Foreign Aid in the National Interest, 2 [56] CPA Press Release, “Commerce Secretary Evans Urges is an integral component of its overall interven- US Business to Deal with Iraq,” February 12, 2004 tionist project in the Middle East. US rulers are [57] Iraq is only the jump-off point, however. Bush has deeply divided over the invasion and occupation struggled to launch the Broader Middle East and North of Iraq and they face an expanding foreign Africa Initiative as a “forward strategy of freedom” for policy crisis. Nonetheless, there is consensus promoting “democratization” and “free markets” in the strategic region. Among the components of this initiative among them, and among transnational elites include the launch of the Middle East Free Trade Area more generally, on political intervention under shortly after the invasion last year, the accession of the the rubric of “democracy promotion.” Such various “reformed” countries to the World Trade political intervention is not just a Republican, Organization, and the signing of Status-of-Forces type much less a Bush regime policy, and as such it military agreements with the US (Robin Wright and Glen Kessler, “Bush Aims for ‘Greater Mideast Plan,’ Washington plays a key legitimating function. Post, February 9, 2004). USAID, the NED, and their private contractors - backed by The June 30 “restoration” of Iraqi sovereignty the US military housed in the planned permanent bases in will presumably be followed by elections in Iraq - are expected to take the lead. NED has already early 2005 or thereabouts. The US government requested for a budget increase while USAID has singled out the region for having “strongest obstacles to has already allocated $458 million dollars for a democracy and the greatest near term dangers for US program to “promote democracy” in Iraq. The national security.”(Foreign Aid in the National Interest, contours of this program are not yet clear. But 38) By obstacles, it meant not only the presence of judging by the general pattern of US “democ- authoritarian regimes but of encumbrances to trade. “A racy promotion” around the world, we can recent survey of nine ME countries concluded that a lack of trade openness and significant barriers to private expect that this program will involve funding by sector development limit potential for foreign trade,” the Washington through numerous channels – both USAID took note. (Foreign Aid in the National Interest, 62) overt and covert – of political parties and other [58] For more on this, see William Robinson, Promoting elite forums in Iraq, as well as a series of Polyarchy: , US Intervention, and Hegemony, organizations in Iraqi civil society, among them, (Cambridge: Cambridge University Press, 1996), pp. 48-56. [59] Foreign Aid in the National Interest, 48 trade unions, business councils, media outlets, [60] USAID Local Governance Consultation transcript, June student groups, and professional associations. 19, 2003 [61] Foreign Aid in the National Interest, 10 These “democracy promotion programs” are [62] Foreign Aid in the National Interest, 50, 51 part of a larger “four step” plan for the entire [63] Foreign Aid in the National Interest, 48 [64] Policy Implementation: What USAID has Learned, 11. Middle East, announced by Washington in [65] USAID Center for Democracy and Governance, Policy 2003, using its occupation of Iraq as leverage. Implementation: What USAID has Learned, (Washington First was a resolution of the Palestinian-Israeli D.C. USAID, 2001), 11. conflict (the “road map” has, of course, since [66] Policy Implementation: What USAID has Learned, 12. collapsed). Second was a “Middle East Partner- [67] USAID contract with RTI, C-1. [68] Policy Implementation: What USAID has Learned, 5 ship” to “build a civil society” in the region. [69] RTI Ukraine project website. Such “civil society” programs typically attempt [70] Foreign Aid in the National Interest, 48 to groom new transnationally-oriented elites, [71] Decentralization and Democratic Local Governance and in this case, to incorporate the Arab Programming Handbook, 35. masses into a civil society under the hegemony [72] Decentralization and Democratic Local Governance Programming Handbook, 33. of these elites. Third was the region’s further [73] Nelson, J. and G. Ranis, “Measures to ensure the integration into the global economy through effective use of aid,” USAID discussion paper, 1966, quoted liberalization and structural adjustment. And in Wood, R.E., From Marshall Plan to Crisis: Foreign fourth was preventing the rise of any regional Aid and Development Choices in the World Economy, military challenge to the emerging US/ Berkeley: University of California Press, 1986 [74] cited in Barbara Conry, “Loose Cannon: the National transnational domination. The overall objective Endowment for Democracy,” Cato Foreign Policy Briefing was to force on the region a more complete No. 27, November 8, 1993 integration into global capitalism.

The US has three goals for the political system it will attempt to put into place in Iraq. The first is to cultivate transnationally-oriented elites control exercised by authoritarian and dictato- who share Washington’s interest in integrated rial regimes to more consensually-based Iraq into the global capitalist system and who systems of based on polyarchy. Transnational can administer the local state being constructed elites hope that the demands, grievances and under the tutelage of the occupation force. The aspirations of the popular classes will become second is to isolate those counter-elites who are neutralized less through direct repression than not amenable to the US project, such as through ideological mechanisms, political nationally (as opposed to transnationally) cooptation and disorganization, and the limits oriented elites and others in a of imposed by the global economy. Polyarchy has leadership, authority and influence, who do not been promoted by the transnational elite as the share US goals. The third is establish the political counterpart to the promotion of neo- hegemony of this elite over the Iraqi masses, to liberalism, structural adjustment, and unfettered prevent the mass of Iraqis from becoming transnational corporate plunder. US “democ- politicized and mobilized on their own indepen- racy promotion” intervention, in this regard, dent of or in opposition to the US project, by generally facilitates a shift in power from locally incorporating them “consensually” into the and regionally-oriented elites to new groups political order the US wishes to establish. more favorable to the transnational agenda.

The type of political system Washington will The countries most often targeting for US attempt to establish in Iraq has little to do with political intervention under the rubric of “de- democracy and should not be referred to as mocracy promotion” are: such, as the terminology itself is ideological and intended to give an aura of legitimacy to US 1) Those Washington wishes to destabilize, intervention. It does did not involve power such as, in recent years, Venezuela and Haiti, (cratos) of the people (demos), much less an and earlier in Nicaragua. The groups and end to class and foreign domination or to individuals that participated in the destabiliza- substantive inequality. This political system is tion of the Aristide government and that are more accurately termed polyarchy - a system now in power were precisely those groomed in which a small group actually rules on behalf and cultivated by US “democracy promotion” of (transnational) capital and mass participation programs dating back to the late 1980s and in decision-making is limited to choosing undertaken continuously right up to the March among competing elites in tightly controlled 2004 US coup d’etat. And in Venezuela, the electoral processes. opposition to the government of Hugo Chavez has been working closely with the US “democ- US policymakers began to abandon the dicta- racy promotion” network. torships that they had relied on in the post- 2 period to assure social control 2) Those where popular, nationalist, revolution- and political influence in the former colonial ary and other progressive forces pose a threat world. It began instead to promote polyarchy to the rule of local pro-US elites or neo-liberal in the 1980s and 1990s through novel mecha- regimes. These elites are bolstered through nisms of political intervention, in the context of political intervention programs, such as those globalization and in response to the crisis of conducted in El Salvadaor, where the ARENA elite rule that had developed in much of the party was supported and the FMLN Third World in the 1970s. The change in policy marginalized through “democracy promotion” was an effort to hijack and redirect mass leading up to the March 20, 2004 elections. democratization struggles, to undercut popular These types of programs have been conducted demands for more fundamental change in the in dozens of countries. social order, and to help emerging transnationally-oriented elites secure state 3) Those targeted for a “transition,” that is, a power through highly-contested transitions, US supported and often orchestrated and to use that power to integrate (or reinte- changeover in government and state structures. grate) their countries into the new global South Africa and Eastern European countries capitalism. fell into this category, as does currently Iraq.

The policy shift represents an effort by It is worth noting that the US and other West- transnational elites to reconstitute hegemony ern powers since the 1980s have been promot- through a change in the mode of political ing polyarchy in Latin America (the original domination, from the coercive systems of social testing ground for the strategy), Eastern Europe, Africa and some of Asia, but until now and organic intellectuals may also be tapped. have preferred to see the sheiks, monarchies For instance, the Los Angeles Times of March and authoritarian regimes remain in power in 20, 2004, reported that Larry Diamond of much of the Middle East. Stanford University, a leading intellectual associated with the new political intervention, “Democracy promotion” programs involve was brought into Iraq in January to lecture on several tiers of policy design, funding, opera- “democracy” to “700 Iraqi tribal leaders, many tional activity, and influence. The first involves of them wearing Western business suits the highest levels of the US state apparatus - underneath their robes.” While these “private” the White House, the State Department, the organizations are likely to become involved in Pentagon, the CIA, and certain other state Iraq, the Pentagon will surely continue its own branches. It is at this level that the overall need political operations inside the country, such as to undertake political intervention through its sponsorship of the Iraqi Media Network, “democracy promotion” in particular countries launched by Pentagon contractors with some and regions is identified as one component of $200 million. overall policy towards the country or region in question. Such “democracy promotion” In the third tier, these US organizations provide programs never stand on their own; they are “grants” – that is funding, guidance and always just one aspect of larger US foreign political sponsorship– to a host of organiza- policy operations, and are synchronized with tions in the intervened country itself. These military, economic, and other dimensions. organizations may have previously existing and are penetrated through “democracy promotion” In the second tier, the US Agency for Interna- programs in new ways into US foreign policy tional Development (USAID) is allocated hun- designs, or they may be created entirely from dreds of millions of dollars, which it doles out, scratch. These organizations include local either directly or via the National Endowment political parties and coalitions, trade unions, for Democracy (NED), and occasionally other business councils, media outlets, professional agencies such as the US Institute for Peace and civic associations, student groups, peasant (USIP), to a series of ostensibly “private” US leagues, and so on. Many of these groups may organizations that are in reality closely tied to tout themselves as “non-partisan.” They may the policymaking establishment and aligned well be with regard to local political currents with US foreign policy. The NED was created in but not with regard to the overall objectives of 1983 as a central organ, or clearinghouse, for US policy. When elections are held the inter- new forms of “democratic” political intervention ventionist network invariably funds or creates abroad. Prior to the creation of the NED, the electoral monitoring and “get out the vote” CIA had routinely provided funding and guid- groups that appear as local “non-partisan” ance for political parties, business councils, democratic civic groups but in practice play a trade unions, student and civic groups in the central facilitating and legitimating role in the countries in which the US intervened. In the program. 1980s a significant portion of these programs were shifted from the CIA to the AID and the NED and made many times more sophisticated We may see in Iraq another modus operandi of than the often-crude operations of the CIA. US political intervention, in which US operatives chose for strategic reasons to work through The organizations that receive AID and NED third-country groups. For instance, in its funds include, among others (the list is exten- extensive political intervention activities in sive): the National Republican Institute for Nicaragua in the 1980s the US “democracy International Affairs (NRI, also known as the promotion” apparatus worked through a International Republican Institute, or IRI) and number of Venezuelan political and civic the National Democractic Institute for Interna- organizations. Proxy Venezuelan operatives tional Affairs (NDI), which are officially the actually conducted programs on the ground in “foreign policy arms” of the US Republican and Nicaragua. As Spanish-speaking Latin Ameri- the Democratic parties, respectively; the cans, these operatives were able to achieve a International Federation for Electoral Systems level of legitimacy, penetration and influence (IFES); the Center for Democracy (CFD), the impossible for gringos. In Iraq, therefore, the Center for International Private Enterprise US may choose at some point to mount political (CIPE); and the Free Trade Union Institute intervention programs via Jordanian, Egyptian, (FTUI). US universities, private contractors, and other Middle Eastern-based groups. Those monitoring political intervention in Iraq will become the most immediate targets of “democ- want to look out for the creation of NGOs in the racy promotion,” to be won over and converted country (we are likely to see a dramatic NGO- into a social base for the transnational elite ization). While many of these may be authentic agenda. Iraqi and foreign groups, others will undoubt- edly be part of the US-mounted political Hence, promoting polyarchy in Iraq, as else- intervention network. where, will be more than just theatrical activity to gain international legitimacy for a regime Washington hopes to create through its “de- brought into being by foreign occupation. mocracy promotion” programs “agents of Washington hopes it can bring together a influence” - local political and civic leaders who national elite that can act as effective intermedi- are expected to generate ideological conformity aries between the Iraqi masses and the US/ with the elite social order under construction, to transnational project for the country. This elite promote the neo-liberal outlook, and to advo- is expected to establish its effective control over cate for policies that integrate the intervened the political society between created by the US country into global capitalism. These agents occupation force and its ideological hegemony are further expected to compete with, and over the country’s fragmented and unruly civil eclipse, more popular-oriented, independent, society. The objective is to bring about a progressive or radical groups and individuals political order that can achieve internal stability who may have a distinct agenda for their as the necessary condition for the country to country. function as a reliable supplier of oil, an invest- ment outlet for transnational capital, and a The US goal is to make the conquest of Iraq a platform for further transnational economic and Janus-faced project of consent and coercion, or political penetration of the Middle East. more aptly, consent backed up by coercion. “Democracy promotion” programs are not The US program will likely seek to privatise intended, as a matter of course, to replace everything as it integrates Iraq into global military intervention but to complement it. US capitalism and opens up the country’s re- and international operatives hope that political sources and labor force to transnational intervention will lead to the establishment of . But here it must count on local internal consensual mechanisms of domination political, business, and civic intermediaries that as the flip side of direct coercive domination by will be cultivated by US “democracy promotion” US armed force. The operation of local para- programs and brought together into a function- military forces and even death squads is not ing network attuned to the US/transnational necessarily anathema to US-sponsored political program. These elites will pursue their own transitions in intervened countries. Such forces interests within the broader project and as a may well develop in Iraq in some sort of a matter of course there will be multiple points of synergic relation with the civic and political friction among them, and between them and network that US political intervention will their US overlords. cultivate. The “democracy promotion” program in Iraq It is important to emphasize that many indi- will involve the older generation of “jackals” viduals brought into US “democracy promo- (the Chalabis, Pachachis, and so on) and their tion” programs are not simple puppets of US organizations – indeed, they are already deeply policy and their organizations are not necessar- implicated in the US occupation - but it will also ily “fronts” (or in CIA jargon, “cut-outs”). Very attempt to identify new leaders and prominent often they involve genuine local leaders seeking figures among diverse sectors and communi- to further their own interests and projects in the ties, and to bring them into the dominant context of internal political competition and project. Washington knows that it cannot conflict and of heavy US influence over the local count alone on the old class of exiles and scene. Moreover, old and new middle classes, assorted jackals as internal representatives of professional and bureaucratic strata may the transnational project. It must be able to identify their interests with the integration or identify and cultivate leaders that can garner a reintegration of their countries into global minimum of legitimacy among the country’s capitalism under a US canopy. These classes diverse and fractious ethnic and religious may be politically disorganized or under the communities and social sectors. sway of counter-elites and of nationalist, popular, or radical ideologies. They often To this end, Washington will sponsor numerous consensus-building processes and forums in colonized and restive population. If the Iraq and outside of Iraq, with the participation of a invasion and occupation is the most massive US broad range of groups and individuals from intervention since Vietnam, it is also the most Iraq and from third countries. These forums stunning – indeed, insurmountable – chasm will include Iraq-wide and international confer- that we have seen since Washington’s ences on “promoting democracy.” US opera- Indochina quagmire between US intent, on the tives will identify hundreds, perhaps thousands, one hand, and the actual US ability, on the of individuals it believes can be brought into the other hand, to control events and outcomes. program. They will be invited to these confer- ences and to numerous gatherings in and * For more detailed history and analysis on US “democ- outside of Iraq for “democracy training.” Local racy promotion,” see two earlier books on the subject by media outlets funding by the program will give William I. Robinson: “Promoting Polyarchy: Globaliza- constant coverage and propaganda to those tion, US Intervention, and Hegemony” (Cambridge University Press, 1996), and “A Faustian Bargain: US organizations and individuals drawn into the Intervention in the Nicaraguan Elections and American “democracy promotion” network, and will Foreign Policy in the Post-Cold War Era” (Westview Press, ignore, sideline, or malign independent organi- 1992). [email protected]. Bill Robinson … zations that compete with the US/transnational agenda.

What is crucial to reiterate is that weaving together a pro-Western elite capable of assum- ing the reigns of local power (no matter how limited, fragmented and controlled by Washing- ton) is only half the US strategy. The other half is to try to control and suppress alternative political initiatives within civil society and prevent popular or independent political voices from emerging. As the US moves forward with plans to turn over “sovereignty” to a hand- picked and unrepresentative body “democracy promotion” programs will have the twin objectives of: 1) fostering political and civic organizations in civil society that can build a social base for a new Iraqi government; 2) suppressing and isolating those organizations and social movements that oppose the US program and put forward an alternative. In this regard, “democracy promotion” will seek to politically incorporate mass resistance by safely channeling it into formal, sanitized, and bureaucratized “politics” managed by the string of political, business, and civic organizations propped up by political intervention. This is how polyarchy is supposed to function: to absorb threats and to reproduce the social order.

The Bush regime (along with other US and transnational elites) hopes a “transition to democracy” will provide a viable “exit” strat- egy. But this is close to impossible, a veritable imperial pipedream. Establishing a functioning polyarchy is a near impossibility, given the rivalries, petty ambitions, and struggles for the spoils of local power among the jackals, the political, ethnic and religious splits among them, the rise of counter-elites, the expanding resistance, and the dim prospects of pacifying a NICARAGUA´S AND LATIN AMERICA´S “LESSONS” FOR IRAQ Oil wealth makes it difficult for the US to By Alejandro Bendaña* employ economic intervention as effectively in Venezuela, as it has in the cases of Nicaragua and Haiti. Washington exploits and expands existing social-cultural contradictions in order An analytical distinction should be made to further its interests, creating, if need be, its between US political interventions employing own social base. primarily economic weapons in order to destabilize a popular or nationalistic govern- During the 1980s the Sandinista Government ment, AND a US military intervention employing resisted US military pressure and an economic (subsequently) political and economic means in embargo. The government overcame the order to “stabilize” an implanted regime. Most military (contra) pressure, but lost control of interventions US interventions in Latin America the economy. In 1990, the government was took the form of the first, albeit indirect proxy forced to call elections in which the Sandinista military pressure was placed on Nicaragua. Party (FSLN) lost to a US-organized and However, the 2004 intervention in Haiti, as with financed legal opposition coalition, while Iraq and Afghanistan, belong to the second holding the contra army in reserve in case the category. The strategies and the stakes are FSLN won at the polls as was expected. The different, but the end goal is the same: control. US would support the results of a “free” election only if its own side won. The US and Traditionally the US will act against elected the right wing in Central America have made governments in Latin America that show extensive use of scare tactics to influence the inclinations to redistribute wealth and challenge electoral results, most recently in El Salvador in imperial/corporate hegemony. Aside from the March 21, 2004 elections. destabilization as was the case against the Allende government in Chile in 1973 utilizing Regime imposition as the product of military covert operations. Additionally, in recent times, intervention introduces new variables, although interventions make use of political and electoral other elements remain constant. The objective mechanisms to help insure the victory of pro- is sustaining a regime created by the US and US candidates and/or denying legitimacy to which it must uphold at almost any cost. Haiti independently elected official, particularly those (following the overthrow of Aristide), Kosovo, that refuse to undergo privatization and Afghanistan and Iraq may be examples. liberalization. In Venezuela, the United States is making use, through the pro-US opposition, of the Electoral Council and the Judiciary, along What the imperialist’s call “nation-building” or with the principal press organs, to force “peace-building” refers to the need to construct President Chávez out of office. Coup makers and uphold a political and social regime in the one year ago proved to be funded by the “post-war” or, more accurately, post-military National Endowment for Democracy, whose intervention scenario. It entails a qualitatively mandate in general is to “strengthen” democ- more intensive modality of engagement charac- racy. terized by acute micro-management of the proxy government. According to the influen- In Nicaragua and elsewhere, the National tial right wing think tank Rand ’s Democratic Institute and especially the Interna- best practices study, “nation-building” is not tional Republican Institute—congressionally primarily about rebuilding a country’s funded foreign policy wings of the Democratic economy, but about transforming its political and Republican parties respectively —engage institutions. directly with pro-US oppositions, including media and labor unions. At the same time the Washington assigns some of the task to the US government and the international financial European Union or NATO in the case of the institutions will cut off loans, and aid Balkans and Afghanistan, but this has not been pushing third country donors to freeze coop- the case so far in Iraq. East Timor represents a eration, as was the case in Haiti and Nicara- different situation where the UN was told to re- gua. The political interventions do not shy assume trusteeships of the new nation. It is away from violence, fomenting provocation and with Afghanistan and particularly Iraq that the confrontations with authorities: All in the name United States has assumed the full-fledged of democracy. responsibility for “nation-building” (absent in Somalia and experimented with in Bosnia and Sandinistas from coming back to power and Kosovo) and with it a long term commitment to reducing its influence in political institutions and maintain its presence in all forms. societal organizations. USAID went to work in creating parallel non-Sandinista civil society Massive US occupation carries its dynamics (unions, farmers, NGOs, community-based extending far and deep into the post-war organisations) that could rival the strong “reconstruction” and characterized by an Sandinista influence of the established organi- enduring US military presence including perma- zations. Particular pressures—through the new nent bases. The historical precedents are President— were placed on the Army and Police Germany and Japan following the Second World to strip themselves of Sandinista influence. A War. As in Iraq, the goal was to eradicate a series of NGOs came into being with a “pro- regime, including the dismantling of its military, democracy” agenda. ensuring the re-orientation of its politics and educational systems. Direct assumption of police and security by US troops is a crucial Where the two interventionary processes meet differentiation where the emphasis is on is at the level of “democracy building” also “stabilization” not de-stabilization. termed the promotion of “good governance”. The United States and its myriad entities, An influential Rand Corporation study insists including NGOs and contractors, work directly this is the essential policy and historical frame- with civil society to create new structures in a work that is—or should be—the one guiding way that will reinforce macro-level stability and present US policy and planning for the period above all does not challenge the Western following the alleged military withdrawal. political and security presence, nor the funda- has referred glowingly to the mentals of neoliberal economics. Priority is report and its recommendations. According to giving to the establishment of a legal frame- that study, “early elections [Bosnia] driven by a work protecting property and capital rights. desire to fulfil departure deadlines and exit strategies, can entrench spoilers and impede the From contemporary Nicaragua (but also in the process of democratization.” South and East) we find the Unites States requires not only an “enabling government” but Lagging far behind the US in terms of military also an “enabling civil society”, even if it has to capacity, the Europeans and the multilateral be created, divorcing popular movements from institutions including the UN and the World the possibilities of democratic local and national Bank, are more focused on insuring the eco- political participation. Providing the semblance nomic “fundamentals” and the involvement of of “democracy” is crucial to assure that the “aid” agencies in reconstruction and “nation- “free market” prevails and upholds the reality building”. Rationalizations abound: some of a legal and ideological regime subservient to would highlight the advantages of a division of corporate capital, the international financial reconstruction labor while others try to put on institutions along with the strategic needs of the the best face on submission, particularly after US military. Hence the political necessity of the invasion of Iraq. In Kosovo the US called the ensuring the appearance of “consultation”, shots but paid only 16% of the reconstruction “participation” and even “national ownership”. costs and fielding only 16% of the peacekeep- ing troops. In effect, the ousting of Hussein * Alejandro Bendana is director of the Centro de Estudios gave new impetus to the debate over the role of Internacionales in Managua and was representative of the United Nations in “post-conflict” countries. the Sandanista Government to the UN in New York. According to the Rand Corporation study, similar successes depended on “the ability of the US and its principal allies to attain a common vision of the enterprise’s objectives and then to shape the response of the relevant institutions, principally NATO, the EU and the UN, to the agreed purposes.”

Political intervention in post-Sandinista proved massive and open. Nicaragua received the highest per-capita assistance of any country in the world. The strategy was to prevent the THE FINAL UN RESOLUTION ON IRAQ’S controlled multinational force is given “the INTERIM GOVERNMENT authority to take all necessary measures” in by Phyllis Bennis* carrying out the military occupation. The resolution “welcomes” the letters from Colin Powell and interim Iraqi Prime Minister Ayad Allawi annexed to the resolution, describ- The new US-UK draft resolution endorses ing the letters as establishing a “security Iraq’s interim government as “sovereign” and partnership” between the interim government credentials the US-dominated occupation forces and the “multinational force.” Allawi’s letter as a UN-mandated “multinational force.” It is speaks only of “coordination,” “partnership,” designed to provide international legitimacy for and “consultation” between the interim govern- the continuation of the US occupation and ment and the multinational force. Powell’s control of Iraq, while stating that “the occupa- letter, on the other hand, states categorically tion will end” by June 30, 2004. that “the contributing states have responsibility for exercising jurisdiction over their personnel.” In fact, Iraq remains an occupied country and That means that the US will deploy their troops will continue to be occupied on and after June to carry out whatever operations are ordered 30th. The new Security Council resolution does by the Pentagon, whether or not the Iraqi nothing to change the reality of 138,000 US and government agrees. 20,000+ “coalition” troops occupying the country and US economic and political forces The final resolution does reflect US agreement maintaining control of Iraq’s economic and to demands from France, Germany and political life. regarding how the UN mandate for the “Multi- national Force” could be ended. While the The interim government recognized by the UN, resolution states in Article 12 only that the like the Governing Council before it, is a mandate will be “reviewed” after one year or if creature of the United States, not the United the Government of Iraq requests such a review, Nations. By giving a UN “bluewash” imprima- and would only expire “upon the completion of tur, the Security Council has undermined the the political process” which might mean credibility and legitimacy of the United Nations January 1, 2006, the Council “declares that it as a whole. It will be difficult to reclaim that will terminate this mandate earlier if requested credibility after such abject submission to US by the Government of Iraq.” Unlike some of the power. earlier references in the resolution, however, Article 12 (and some others) does not refer The resolution states that the “sovereign Interim specifically to the “Interim Government of Iraq” Government of Iraq” will assume “full responsi- (which is to take power on June 30th) but rather bility and authority by 30 June 2004.” But in the only to the “Government of Iraq.” That more same article it adds (new in the final draft) the limited designation may portend a US intention restriction that it will have authority “while to challenge the “Interim” government’s rights if refraining from taking any actions affecting it exercised them, claiming that the reference is Iraq’s destiny beyond the limited interim period only to the later “Transitional Government” until an elected Transitional Government of Iraq instead. But it is more likely that the “conces- assumes office” - which, according to article sion” to Iraq’s government reflects US confi- 4(a), will only happen “by 31 December 2005.” dence that that government will remain ac- countable to the needs of the US occupation There had been a sharp dispute between the US forces. In any event, in the context of a Security and several Council members regarding Council “review,” an affirmative Council vote to whether the Iraqi military or government would cancel the mandate would be required, which have any control over operations by the US the US could veto, giving Washington continu- occupation forces. France, China and Algeria ing control over maintaining its occupation of wanted Iraq to be able to block major military Iraq. missions. But Washington rejected that out of hand. Secretary of State Colin Powell said, “You The resolution “reaffirms its intention to revisit can’t use the word ‘veto.’ There could be a the mandates” of the two UN arms monitoring situation where we have to act and there may teams (UNMOVIC and IAEA) that had been be a disagreement and we have to act to carrying out the WMD and nuclear inspections protect ourselves or to accomplish a mission.” in Iraq. But UNMOVIC has been excluded from In the final resolution (Article 10), the US- Iraq since the US invasion and occupation of our global mobilization against war and began when the Pentagon’s own inspection occupation, challenging the legitimacy of the teams took over, and the new resolution says Council resolution will be a necessary step. nothing about allowing UNMOVIC to return to Iraq. With a few more Iraqi and now United Nations faces supporting it, the US occupation remains. Article 27 of the new resolution, deliberately written in a particularly opaque manner by * Phyllis Bennis works for the Institute for Policy Studies referring only to provisions of numbered (IPS), based in Washington DC, USA and is an activist with paragraphs in earlier resolutions, makes a clear United for Peace and Justice. move to continue the privileges granted to oil companies by the US occupation forces. Specifically, it continues last year’s grant of immunity to all oil-related companies involved with Iraq (meaning Iraqi oil cannot be seized in a court suit), while cancelling that privilege for all contracts signed after June 30th when Iraq’s “interim government” takes over oil authority from the US

While details are emerging only very slowly, it is likely that the US, committed to obtaining a UN figleaf before the G-8 summit, engaged in heavier than normal bribes and threats against Council members. All that is known so far is that German officials openly briefed journalists a week or so ago regarding their intention in the fall of this year to re-raise their longstanding campaign for a permanent Security Council seat. The officials stated that they have support from four of the five perma- nent members, all except the US, as well as the necessary 2/3 vote of the General Assembly. It is virtually certain that they would not have gone public with such a high-profile announce- ment without a back-channel US guarantee of support. While there is no new evidence yet, it is likely that France and perhaps Russia were promised renewed access to Iraqi oil contracts in return for their Council votes supporting the US-UK resolution.

It is likely to become more difficult to challenge the legitimacy of the new UN resolution and its authorization particularly of the US occupation forces. That is because the “interim prime minister” of Iraq, Ayyad Allawi, in his letter to the Council, specifically requests “a new resolution on the Multinational Force (MNF) mandate to contribute to maintaining security in Iraq, including through the tasks and arrange- ments set out in the letter from Secretary of State Colin Powell to the President of the United Nations Security Council.” But only international pressure on governments around the world will make it possible to begin to undermine the UN bluewashing of the US occupation. If global civil society is to be able to reclaim the UN as part WAR: TRADE BY OTHER MEANS: How the North America Free (NAFTA), US is getting a free trade agreement minus the Free Trade Area of the Americas (FTAA), the General Agreement on Trade in Services (GATS) the negotiations under the World Trade Organization (WTO) and By Mary Lou Malig the Free Trade Agreement between the US and Chile.

There are key areas where all these agreements On June 28, two days before the announced show coherence, and in most cases, show date of handover of power, the United States exact wording. (See Table 1 in PDF format to transferred political authority in Iraq, in a see exact wording used in these provisions, meeting so secret only six people partici- http://www.focusweb.org/pdf/ml-matrix.pdf) pated.(1) This was the much talked about Order no. 39 may not have the exact wording, handover of sovereignty to the Iraqi people that albeit because it is at least a hundred pages would effectively “end” the occupation of Iraq shorter than these agreements, but it still says by the US. the same thing. It is important to note that these agreements are all different types: the MAI was a proposed treaty between 29 coun- Before it handed over “sovereignty” to Iraq, the tries on investment but was stopped in 1998 by US has done the humanitarian task of installing civil society opposition. The NAFTA is a trilat- peace and order. This they did by issuing eral agreement between Mexico, and orders – called the Coalition Provisional Author- the US on trade and trade related issues. The ity (CPA) Orders or Bremer Orders for short. FTAA is a hemispheric-wide free trade agree- These orders covered almost everything from ment covering 34 countries in North America, de-Baathification of Iraqi society to weapons Central America, South America and the control to management and use of Iraqi public Caribbean (excluding Cuba). The GATS is an property to new Iraqi Dinar banknotes. The existing agreement under the WTO and the Free CPA was impressively efficient in issuing orders Trade Agreement between the US and Chile is a compared to the haphazard way they have bilateral agreement on trade. The common been repairing basic infrastructure in the factor of these agreements, aside from the country. ubiquitous presence of the US as the main driver in all of them, is their rules on invest- A rather harmless looking CPA order number 39 ment. (3) on Foreign Investment was issued as part of this laundry list last September 19, 2003. Not These agreements are still being fiercely more than six pages long, it disguises its true opposed by social movements and people’s weight, for it carries with it the same impact of organizations around the world because they a 100-page free trade agreement andcovers all give disproportionate protection to the investor essential elements of an investment agreement at the expense of the state and citizens. The that usually take years for countries to agree MAI, a treaty that was being secretly negotiated upon. in the Organization for Economic Cooperation and Development (OECD) created an uproar In one swift move, the US installed a market when the draft document was leaked in 1998. economy geared towards “promoting foreign Civil society opposition was so intense that the investment through the protection of the rights OECD was forced to shelve it. The FTAA, called and property of foreign investors in Iraq.” (2) “NAFTA plus” by US negotiators is opposed by These investor rights are not new. In fact its a hemispheric wide coalition of social move- similarity to other investment agreements is a ments, non-governmental organizations, trade little too uncanny to be coincidental. unions and activists. Meetings of FTAA negotia- tors are regularly met by massive. The WTO’s latest Ministerial held in Cancun, Mexico, ended in disarray as protests combined with develop- Order no. 39 was written following a blueprint. ing countries’ efforts to stick together effectively It is no accident that it reads exactly like blocked negotiations and further agreements. various agreements involving the US - from a proposed treaty to a trilateral agreement to a Order no. 39, which contains all the controver- multilateral agreement. And it is not a sweeping sial investment provisions of these hotly generalization to state that it reads like the contested agreements has, in contrast, had an Multilateral Agreement on Investment (MAI), the easy passage: it was simply imposed on the especially in the case of Iraq, carries with it a Iraqis before they could even realize what was tremendous amount of capital compared to the happening. domestic investor. In developing countries, governments realize this disparity between big The main provisions of Order no. 39 are: capital and small capital, as represented by local initiatives or entrepreneurs, and have tried to “level the playing field” by providing incen- “Foreign investment means investment by a tives or benefits to the local producers. Under foreign investor in any kind of asset in Iraq, this national treatment provision, it will no including tangible and intangible property, and longer be possible to implement such local related property rights, shares and other forms developmental policies and the government will of participation in a business entity, and have to extend the same tax break it would give rights and technical to an local producer, to a multi-million dollar expertise, except as limited by Section 8 of this corporation. Order” Many governments who have enshrined this This is a very broad definition of investment. policy of building the domestic and national Like in the MAI, the NAFTA, FTAA and US-Chile capacity by writing this into their constitutions FTA, investment can cover almost anything now have to re-write their laws to adhere to from the traditional form of foreign direct this National Treatment provision. Under investment through to portfolio investment. In NAFTA, national treatment means better the FTAA, it extends this coverage to “to include treatment for foreign investors as it “establishes market share and access to markets, whether new rights applicable only to foreign investors or not the investor has a physical presence.” (4) claiming compensation from taxpayers for the This is dangerous as the agreement affords the costs of complying with the same domestic same privileges and protection to an investor policies that all domestic companies must that brings in capital and contributes to the follow.” (5) Order no. 39 cuts to the chase and domestic economy to a fly-by-night portfolio decrees 100 percent ownership of investment by investor that can flee the country at first sight foreigners and national treatment before the of crisis. Iraqis can write their constitution.

In the US-Chile FTA, it even includes in its A policy like this will wipe out whatever domes- definition investors who are intending to invest. tic capacity or investment that still exists in This broad scope of investment has been Iraq. abused, as will be shown later, by corporations under the NAFTA. Related to the provision on national treatment is the provision on performance requirements. “(1) A foreign investor shall be entitled to make Performance requirements are measures that foreign investments in Iraq on terms no less governments impose on foreign investors to favorable than those applicable to an Iraqi ensure that the country benefits from the investor, unless otherwise provided herein. investment. Traditionally, governments have required foreign investors to utilize a certain (2) The amount of foreign participation in newly percentage of domestic content in goods, or formed or existing business entities in Iraq shall technology transfer so as to build the domestic not be limited, unless otherwise expressly capacity or even just hiring locals. Measures provided herein.” like these aim to help the local economy and to spread the benefits of the investment to the National Treatment basically means that a communities. foreign investor will be treated at least as favorably as the domestic investor. This But because under the National Treatment provision has traditionally applied to goods – foreign investors are to be treated like domestic countries all set tariffs and quotas but once the investors, it is “unfair” to impose performance foreign goods have entered the country, they requirements on them unless a government are treated the same way as local goods. imposes the same requirements on domestic investors. The MAI, NAFTA, FTAA and US-Chile National Treatment for a foreign investor FTA put an absolute ban on performance however, is not so simple. A foreign investor requirements. And although Order no. 39 does not ban it, one can safely assume it will use the or natural person, shall be resolved in accor- provision on national treatment to ensure no dance with the dispute resolution provisions performance requirements are imposed on contained in any applicable written agreement foreign investors. As it states in Section 2: “This governing the relationship between the parties. Order specifies the terms and procedures for The parties may elect in any agreement to making foreign investments and is intended to utilize the arbitration mechanisms outlined in attract new foreign investment to Iraq.” Iraqi law.”

Of all the provisions, dispute settlement is “Transfer abroad without delay all funds probably the most controversial. The concept of associated with its foreign investment, includ- binding, rules based dispute settlement mecha- ing: nism in trade agreements was introduced in the i) shares or profits and dividends; World Trade Organization. In fact, this is what ii) proceeds from the sale or other disposition of made it unique. As leading activists have said it, its foreign investment or a portion thereof; “The WTO is a global trade institution with iii) interest, royalty payments, management teeth.” (8) This is because, with the dispute fees, other fees and payments made under a settlement mechanism, the WTO can sanction contract; and countries for not following the trade rules. The iv) other transfers approved by the Ministry of state-state dispute settlement process of the Trade;” WTO means that a government can sue another government for actions that can be deemed Capital controls allow governments to manage discriminatory or implementing measures that exchange and interest rates, and thereby can be equated as “trade barriers.” Once found provide some protection against financial crisis. “guilty” by the dispute settlement body “the The most vivid example of the absence of losing country has three choices: change its law capital controls was the Asian economic crisis to conform to the WTO ruling; face harsh, where the massive flight of capital from the permanent economic sanctions; or pay perma- region triggered a domino effect of instability nent compensation to the winning country.” (9) and left the countries in ruin. Countries have shown the effective implementation of capital NAFTA on the other hand, goes a step further controls. In Chile, it is called “encaje” and the than the WTO by adding an “investor to state” use of these measures from the period of 1991 dispute settlement mechanism. In the WTO, to 1998 allowed the country to avoid the only governments can sue other governments. financial crises that rocked many of its In the NAFTA however, a foreign corporation neighbours. (6) can directly sue a government for impeding its right to profit in that country. This provision The US-Chile FTA targets the use of encaje and has been the target of international opposition specifies that its use is to be limited and if it is as it allows foreign investors to challenge utilized, Chile must pay compensation to democratically written national and domestic foreign investors. The proposed FTAA does not policies and even stop in mid-track policies that limit the use of capital controls, but rather bans governments are about to implement. “In the it: “Article 9 of the draft FTAA Investment very first NAFTA investor-to-state case ever Chapter, even more clearly than Article 1109 of litigated, which involved US Ethyl Corporation, NAFTA, would prevent sovereign states from Canada moved to rescind its environmental and using this type of capital controls.” (7) Order public health measure regulating a gasoline no. 39 repeats this language and bans any kind additive developed by Ethyl even before the final of capital control on foreign investment. This NAFTA tribunal ruling in an effort to avoid a means that a foreign investor can rake in large damage reward.” (10) profits from Iraqis and then send all those profits back to their home country. There is no Canada had good reason to want to avoid a need to reinvest it in Iraq or to ensure that at large damage reward. Since the implementation least a portion of the profits get recycled into of NAFTA, the total amount of damages the Iraqi economy. claimed by foreign investors has been a total of 13 billion USD - USD1.8 billion from US taxpayers, USD249 million from Mexican “Disputes between a foreign investor and an taxpayers and a USD11 billion from Canadian Iraqi investor pertaining to investment in Iraq, taxpayers.” (11) or between a foreign investor and an Iraqi legal These disputes are filed, heard and judged in mount to expropriation” that require compen- dispute settlement courts outside of national sation. This means that a wide range of jurisdiction and outside the reach of people. The government policies, laws or administrative NAFTA decrees that these disputes be settled by measures can be treated as having a similar only two courts: the World Bank’s International effect as expropriation. (14) Center for Settlement of Investment Disputes (ICSID) or the United Nations Commission on What this expanded definition means in International Trade Law (UNCITRAL). The ICSID layman’s terms is that a foreign corporation was used primarily for private disputes between can sue the government for almost anything so corporations and therefore it made sense that it long as it impedes in any way its right to profit, was not accessible to the public. However, at in real terms or in theory. A well-known case is present, the ICSID is being used to settle Metalclad, a US firm, which sued Mexico disputes that involve corporations and govern- because the government imposed environmental ments and the money used to pay the damages measures, citing that this impeded Metalclad’s claimed by foreign corporations are the losing right to profit. country’s taxpayers’ money. The UNCITRAL is even worse as its rulings, like the ICSID’s, are It is interesting to note why the US just did not binding but it “does not collect (12) and there- add this expanded definition of expropriation in fore does not make public even basic informa- Order no. 39 since it put all the key provisions, tion about pending and concluded cases, in from national treatment to dispute settlement, fact, the history of cases brought under its rules of the investment agreements already. A theory is not known.” (13) These hearings, both under could be that if stated in Order no. 39, it can ICSID and UNCITRAL are closed to the public, benefit non-US foreign investors, specifically have no appeals process and are binding. European investors whose governments did not aid the US in its invasion of Iraq. This investor to state provision together with the state-to-state dispute settlement provision are present in all these agreements. The “Where an international agreement to which authors of Order no. 39 anticipated this need Iraq is a party provides for more favorable for dispute settlement in the future and covered terms with respect to foreign investors under- all bases by specifying that disputes in Iraq taking investment activities in Iraq, the more pertaining to foreign investment will be settled favorable terms under the international agree- using whatever arbitration procedures are ment shall apply.” present in applicable agreements. As stated earlier, Order no. 39 anticipates the It is not only the fact that foreign corporations entry of Iraq into other international agree- are given the right to sue governments that is ments like the WTO and bilateral agreements. It contestable, it is the actual cases they file. All therefore adds, almost as a footnote at the end the cases filed under NAFTA and one anticipates of the order, a provision that ensures that in FTAA and other agreements, have used the whatever agreements Iraq joins later, will still argument of expropriation. Expropriation has be beneficial to foreign investors. traditionally meant an action of a government that takes away the right of an investor to Order no. 39 ties in with the other orders issued profit, for example, when a government by the CPA – a Banking Law, the Company Law, reclaims the foreign investors’ property to use Trade Liberalization and an order on . All as a public road. Expropriation, however, under of them complement each other in establishing these investment laws has an expanded mean- the Iraqi economy as a . As the ing: Iraqi Minister of Finance Kamel Al-Gailani 1) Private property not only refers to land and explained, these measures are all part of the physical assets, but the market-determined plan to reconstruct Iraq. “The reforms will commercial value of property, including a significantly advance efforts to build a free and company’s asset value and future profit open market economy in Iraq.” (15) earnings. 2) Traditionally compensation was awarded only when the whole value of property was lost. In the end, Order no. 39 encapsulates all key Under the new definition it applies when any provisions of trade and investment agreements part of its commercial value is lost. that took months, if not years to pass, in other 3) It is not only expropriation but acts “tanta- countries and in other multilateral fora. These agreements were negotiated and with the case 5. Public Citizen, “NAFTA Chapter 11 Investor-to-State of the FTAA is still being negotiated in highly Cases: Bankrupting Democracy Lessons for Fast Track and the Free Trade Area of the Americas” Washington DC, secretive meetings. The MAI would not have September 2001, p. iv been opposed if its draft document had not 6. Allianza Social Continental, “The FTAA Unveiled: A been leaked out into the internet by activists. Citizens’ Critique of the November 2002 Draft of the Free The NAFTA was passed with many legislators Trade Area of the Americas” January 2003. p. 51 not knowing what they agreed to. President 7. Article 9 of the draft FTAA Investment Chapter, even more clearly than Article 1109 of NAFTA, would prevent George W. Bush used the fast track privilege sovereign states from using this type of capital where congress’ participation is limited to a controls.”p. 51 vote of yes or no to the whole agreement. The 8. Barlow, Maude and Clarke, Tony. “Making the Links: A US-Chile FTA was so secret that two months People’s Guide to the WTO and the FTAA” Council of after it was signed, Chilean social movements Canadians and Polaris Institute 2003. p.5 9. Barlow, Maude and Clarke, Tony. “Making the Links: A still could not get a copy of the agreement. This People’s Guide to the WTO and the FTAA” Council of is because if the public were allowed to partici- Canadians and Polaris Institute 2003. p.6 pate, provisions that privilege foreign investors 10. Public Citizen, “NAFTA Chapter 11 Investor-to-State over the people and public interests would never Cases: Bankrupting Democracy Lessons for Fast Track and go through. Even now, many developing the Free Trade Area of the Americas” Washington DC, September 2001, p. 4 country governments are fighting to defend 11. Public Citizen, “NAFTA Chapter 11 Investor-to-State their own national interests, albeit domestic Cases: Bankrupting Democracy Lessons for Fast Track and corporate interests. The FTAA for example has the Free Trade Area of the Americas” Washington DC, eight definitions of investment and the text itself September 2001, p.vi is heavily bracketed, indicating the high level of 12. This inability to document cases of the UNCITRAL is attributed to a lack of administrative staff, which takes a disagreement between negotiators. In the WTO, stretch of imagination to believe the US and its cohorts have to resort to arm- 13. Public Citizen, “NAFTA Chapter 11 Investor-to-State twisting or threats of military or economic Cases: Bankrupting Democracy Lessons for Fast Track and sanctions to get agreements passed. the Free Trade Area of the Americas” Washington DC, September 2001, p.7 14. Greenfield, Gerard. “The NAFTA ruling on Metalclad vs. Order no. 39 was met with no such resistance Mexico – The Broader Context – September 2000 simply because the people of Iraq were not 15. Press Statement: Iraqi Minister of Finance Kamel Al- asked if they agreed to it or not. While the Gailani, September 21,2003 people of Iraq are busy defending their lives and 16. Top US military official quoted resisting the occupation, the US slipped in an order that effectively binds the Iraqis to a trade agreement that enshrines the rights of foreign investors, and as detailed above, surpasses many exisitng agreements. Besides, as a top US military official best explains, there was no need for negotiations as the US is in control of Iraq, “At this point we’d be negotiating with ourselves because we are the government.” (16)

* Marylou Malig is a research associate with Focus on the Global South.

1. Coalition Provisional Authority Administrator Paul Bremer, Iraq interim Prime Minister Ayad Allawi, Iraq interim President Ghazi Yawar, Chief Justice Mehdad Mahmoudi, Deputy Prime Minister Barham Salih and British envoy David Richmond. 2. Section 2 of CPA Order no. 39 3. The GATS is an agreement on trade in services not investment. But since in its four “modes of supply” in trade in services, it covers foreign direct investment in services (“by a service supplier of one Member, through commercial presence in the territory of any other Member;”) GATS can then be said to have rules on investment and is thus called by some as the first multilateral investment agreement under the WTO. 4. Allianza Social Continental, “The FTAA Unveiled: A Citizens’ Critique of the November 2002 Draft of the Free Trade Area of the Americas” January 2003. p. 56 THE US’ STRATEGY OF DESPERATION including drawing additional troops from the US By Walden Bello* forces in South Korea.

In so far as the Democrats can be said to have an approach, it approximates the Times’ quibbling, with John Kerry, the Democrats’ presidential candidate, making the key issue not This is an excerpt from the Chancellor’s substantive differences with the Bush plan but Distinguished Fellow speech, University of management of the process: he would manage California at Irvine, June 8, 2004. The full text is the Iraq intervention better than Bush. In what available at http://www.focusweb.org/main/ was touted as the defining speech of his policy html/Article319.html on national security on May 27, 2004, Kerry said NATO should be asked to provide troops, “The crisis of the empire is not only good for the training of Iraq’s security forces should be the world. It is good for the people of the United “internationalized,” and an “International High States as well…” Commissioner” be appointed to organize elections, draft a constitution, and coordinate reconstruction. Despite the fact that the situation in Iraq has spun out of its control, the Bush administration All this is well within the Bush agenda, as was hangs on, pushing through a so-called “trans- Kerry’s call to increase the US military by fer of sovereignty” to people associated with the 40,000 troops. Noting that Bush had already US-controlled “Interim Governing Council” that issued orders to increase the military by 30,000 enjoyed little popular legitimacy. by January 2005, a spokesman for the Bush campaign noted, “John Kerry is playing follow- To whom will “sovereignty” be handed over? ing the leader.” What exactly will sovereignty consist of? Where will the legitimacy of the government come None of the Democratic candidates during the from? What exactly is the relationship of the primary except perhaps Dennis Kucinich dared coming government to the United Nations? The to say the utter the five words that constituted United States reserves the right to control its the only viable strategy: “Immediate withdrawal military forces in Iraq and to maintain them of US troops.” A key consideration before there indefinitely. A qualification from Secretary Falluja and Abu Ghraib was that this stance of State Powell that the US would leave if the could harm them in the November elections— incoming government asked it to is disingenu- despite the fact that even before the uprising in ous since that regime would never ask for the Fallujah and the Abu Ghraib scandal, according elimination of the military might on which its to the Pew Research Center, 44 per cent of own existence depended. These are unresolved Americans now say that troops should be issues that lend substance to the New York brought home as soon as possible, up from 32 Times’ charge that “the only unifying these for per cent last September. But by late May, there Washington’s policies seems to be despera- was no longer any excuse for timidity: 52 per tion.” The United Nations Security Council cent of those surveyed in a May 2004 Gallup recent endorsement of the post-June 30 ar- Poll said the war in Iraq was not worth it and rangements will not make this US-imposed only 45 said it was, compared to 29 per cent solution any more acceptable to the Iraqi people and 68 per cent a year earlier. or to the world. Yet this is not just a tactical issue. According to the liberal Financial Times columnist Gerard But neither does the Times and the liberal Baker, “Whether or not you believe Iraq was a opposition to Bush have any answers. The real threat under Saddam Hussein, you cannot Times itself, while attacking Bush for inept deny that a US defeat there will make it one management of the occupation, endorsed giving now.” This is a non-sequitur, but it illustrates the United Nations “real… authority over the fact that both liberals and conservatives are transition political arrangements,” bringing in still operating within the American imperial more foreign contingents to participate in paradigm. While liberals and the Democrats providing security, and increasing the number may have come to the conclusion that the of US troops in Iraq in the short run.” But all invasion had not been justified, they dare not the elements were already in the Bush plan, call for a unilateral withdrawal since this will be an incalculable blow to American prestige and for national liberation or independence. Many leadership. In other words, the “demonstration Western progressives were also repelled by effect” of an America leaving Iraq with its tail some of the methods of the “Mau Mau” between its legs would be disastrous for the movement in Kenya, the FLN in Algeria, the NLF credibility of US power in the future. in Vietnam. What western progressives forget is that national liberation movements are not No easy exit seems possible from Iraq as moral asking them mainly for ideological or political failure of the highest degree engulfs the ruling support. What they really want from the regime in Washington and the loyal opposition. outside is international pressure for the with- What seems to be in the making is the continu- drawal of an illegitimate occupying power so ation of an occupation with no viable political that internal forces can have the space to forge rationale and military rationale and bereft of a truly national government based on their any moral legitimacy. unique processes. Until they give up this dream of having an ideal liberation movement tailored to their values and discourse, US peace activists The paralysis that has gripped the Democrats will, like the Democrats they often criticize, on Iraq can only be broken by one thing: a continue to be trapped within a paradigm of strong anti-war movement such as that which imposing terms for other people. took to the streets daily and in the thousands before and after the Tet Offensive in 1968. So far that had not materialized, though disillu- Let me conclude by saying that things can only sionment with US policy in Iraq had spread to a get worse for the US in Iraq. Moreover, the majority of the US public, especially after Abu Iraqi resistance has transformed the global Ghraib. equation. The US is weaker today than it was before May 1, 2003. The Atlantic Alliance that Indeed, at the very time that it is most needed won the Cold War no longer functions. The by the people of Iraq, the international peace situation in Afghanistan is more unstable now movement has had trouble getting into gear. than last year, and US troops are also pinned The demonstrations on March 20, 2004, were down there. Islamic revivalism, against which significantly smaller than the Feb.15, 2003, the US has ranged itself, is now more vigor- when tens of millions marched throughout the ously spreading. In Latin America, we now have world against the projected invasion of Iraq. governments in Brazil, Argentina, Venezuela, The kind of international mass pressure that and Bolivia that are avowedly against the old makes an impact on policymakers—the daily neo-liberal economic policies imposed by staging of demonstration after demonstration in Washington. The World Trade Organization is the hundreds of thousands in city after city—is in serious trouble after the collapse of its simply not in evidence, at least not yet. ministerial in Cancun last September, and Washington’s vision of the Free Trade of the Perhaps a major part of the reason is that a Americas failed to materialize owing to Latin significant part of the international peace American opposition during the FTAA Ministe- movement, particularly in the United States, rial in Miami last November. hesitates to legitimize the Iraqi resistance. Who are they? Can we really support them? These Owing to its hubris, the US is suffering from questions have increasingly been flung at me that fatal disease of all empires—imperial and other advocates of an unconditional overstretch. And its threat to institute regime military and political withdrawal from Iraq. The change in other countries, such as Iran, Syria, use of suicide as a political weapon continues to and North Korea is no longer credible. bother many US activists who were repelled by statements such as that of the Palestinian I think that the crisis of the empire is not only leaders who proudly assert that suicide bomb- good for the world. It is good for the people of ers were the oppressed people’s equivalent of the United States as well, for it opens up the the F-16. The role of Islamic fundamentalists possibility of Americans relating to other and the possibility that, on account of the peoples as equals and not as masters, really presence of a majority Shiite population, a learning from them, and really respecting and post-US Iraq could turn into an Islamic state a appreciating them. Failure of the empire is, la Iran is also a matter of great concern. moreover, a precondition for the emergence of the truly democratic republic that the United Yet there has never been any pretty movement States was intended to be before it was hijacked to be an imperial democracy.

*Walden Bello is executive director of the Bangkok-based Focus on the Global South and professor of sociology and public administration at the University of the Philippines. He is the recipient of the Right Livelihood Award (Alternative Nobel Prize) for 2003 and is a Chancellor’s Distinguished Fellow of the University of California at Irvine for 2004. Table1: Comparison of trade and investment agreements

MAI NAFTA FTAA WTO - GATS FTA: US-Chile CPA Order no.39 Multilateral Agreeement on North America Free Trade Free Trade Area of the World Trade Organization – Free Trade Agreement Iraq Coalition Provisional Investment Agreement Americas General Agreement on Trade Authority in Services Type of Proposed treaty between 29 Trilateral agreement (Mexico, Hemispheric-wide free trade Agreement in the WTO, gives Bilateral Free Trade Order on Foreign Investment Agreement countries only on investment US and Canada) on trade and zone covering 34 countries in a set of multilateral rules for Agreement between the US issued by the CPA in Iraq related issues North America, Central international trade in services and Chile America, South America and the Caribbean (minus Cuba) Status Proposal stopped by civil Currently being implemented Currently under negotiation* The GATS is an existing Currently being implemented Currently being implemented society protests agreement in the WTO Definition of Means Means Means: There is no explicit definition Means: (Foreign investment) Investment (a) every kind of asset owned (a) an enterprise; Every kind of asset and rights of investment in the GATS Every asset that an investor Means investment by a foreign or controlled directly or (b) an equity security of an of any nature acquired with because it is an agreement on owns or controls, directly or investor in any kind of asset in indirectly by an investor, enterprise; resources transferred to the trade in services not indirectly, that has the Iraq, including tangible and including: (i) an enterprise (c) a debt security of an territory of a Party or investment. But since in its characteristics as the intangible property, and (being a legal person or any enterprise (i) where the reinvested therein by investors four “modes of supply” in trade commitment of capital or other related property rights, shares other entity constituted or enterprise is an affiliate of the of another Party, and shall in services, it covers foreign resources, the expectations of and other forms of organised under the applicable investor, or (ii) where the include, in particular, although direct investment in services gain or profit, or the participation in a business law of the Contracting Party, original maturity of the debt not exclusively: (by a service supplier of one assumption of risk. Forms that entity, and intellectual property whether or not for profit, and security is at least three years, (a) an enterprise Member, through commercial an investment may take rights and technical expertise, whether private or but does not include a debt (b) the shares of an enterprise presence in the territory of any include: except as limited by Section 8 government owned or security, regardless of original (c) the debt instruments of an other Member;) GATS can (a) an enterprise of this Order controlled, and includes a maturity, of a state enterprise; enterprise (i) where the then be said to have rules on (b) shares, stock, and other corporation, trust, partnership, (d) a to an enterprise (i) enterprise is an affiliate of the investment and is thus called forms of equity participation in sole proprietorship, branch, where the enterprise is an investor, or (ii) where the by some as the first an enterprise; joint venture, association or affiliate of the investor, or (ii) original maturity of the debt multilateral investment (c) bonds, , loans organisation); where the original maturity of instrument is at least 3 years, agreement under the WTO. and other debt instruments; the loan is at least 3 years, but but does not include a debt (d) futures, options, and other (ii) shares, stocks or other does not include a loan, instrument of a State There has been a proposal for derivatives; forms of equity participation in regardless of original maturity, enterprise, regardless of a comprehensive agreement (e) rights under contract, an enterprise, and rights to a state enterprise; original maturity; on investment in the WTO including turnkey, derived therefrom; (e) an interest in an enterprise (d) a loan to an enterprise: (i) under the so-called construction, management, that entitles the owner to share where the enterprise is an Issues or New Issues but it production, concession, or (iii) bonds, debentures, loans in the assets of that enterprise affiliate of the investor, or (ii) has since been put on hold revenue-sharing contracts; to and other form of debt [of on dissolution, other than a where the original maturity of since the collapse of the 5th (f) intellectual property rights; an enterprise]; and rights debt security or a loan the loan is at least 3 years, but Ministerial in Cancun, Mexico. (g) rights conferred pursuant derived therefrom; (iv) rights excluded from subparagraph c does not include a loan, to domestic law, such as under contracts, including or d regardless of original maturity, concessions, licenses, turnkey, construction, (g) real estate or other to a State enterprise; authorizations, and permits; & management, production or property, tangible or (e) an interest in an enterprise (h) other tangible or intangible, revenue sharing contracts; intangible, acquired in the that entitles the owner to share movable or immovable expectation or used for the in income or profits of the property, and related property (v) claims to money and purpose of economic benefit enterprise rights, such as leases, claims to performance; or other business purposes, & (f) an interest in an enterprise mortgages, liens, and pledges; (h) interests arising from the that entitles the owner to a but investment does not mean (vi) intellectual property rights; commitment of capital or other share in the assets of that an order or judgement entered resources in the territory of a enterprise on dissolution, other in a judicial or administrative (vii) rights conferred pursuant party to economic activity in than a debt instrument or a action to law or contract [such as] or such territory, loan excluded under [by virtue of] concessions, but investment does not mean: subparagraphs c or d licenses, authorisations, and (a) claims to money that arise (g) real estate or other permits. solely from (i) commercial property, tangible or contracts for the sale of goods intangible, acquired or used (viii) any other tangible and or services by a national or for the purpose of economic intangible, movable and enterprise in the territory of a benefit or other business immovable property, and any Party to an enterprise in the purposes; and related property rights, such territory of another Party, or (ii) (h) interests arising from the as leases, mortgages, liens the extension of in commitment of capital or other and pledges, [unless such connection with a commercial resources to the development assets lack the characteristics transaction, such as trade of economic activity in the of an investment.] financing, other than a loan territory of another Party, such covered by subparagraph d or as under: (i) contracts (b) "Investment" does not any other claims to money that involving the presence of an include: do not involve the kinds of investors property in the interests set out in territory of another Party, [(i) public debt;] [debt subparagraphs a through h including concessions, or securities of and loans to a construction or turnkey state enterprise or contracts, or (ii) contracts Contracting Party;] where renumeration depends substantially on the production, revenues or profits of an enterprise; National (1) Each Contracting Party (1) Each Party shall accord to (1) Each Party shall accord to (1) In the sectors inscribed in (1) Each Party shall accord to (1) A foreign investor shall be Treatment shall accord to investors of investors of another Party investors of another Party its Schedule, and subject to investors of the other Party entitled to make foreign another Contracting Party and treatment no less favorable treatment no less favorable any conditions and treatment no less favorable investments in Iraq on terms to their investments, treatment that that it accords, in like than that it accords, in like qualifications set out therein, that that it accords, in like no less favorable than those no less favourable than the circumstances, to its own circumstances, to its own each Member shall accord to circumstances, to its own applicable to an Iraqi investor, treatment it accords [in like investors with respect to the investors with respect to the services and service suppliers investors with respect to the unless otherwise provided

2 circumstances] to its own establishment, acquisition, establishment, acquisition, of any other Member, in establishment, acquisition, herein. investors and their expansion, management, expansion, management, respect of all measures expansion, management, (2) The amount of foreign investments with respect to conduct, operation, and sale conduct, operation, and sale affecting the supply of conduct, operation, and sale participation in newly formed the establishment, acquisition, or other disposition of or other disposition of services, treatment no less or other disposition of or existing business entities in expansion, operation, investments. investments in its territory. favourable than that it accords investments in its territory Iraq shall not be limited, management, maintenance; (2) Each Party shall accord to Each Party shall accord to to its own like services and (2) Each Party shall accord to unless otherwise expressly use, enjoyment and sale or investments of investors of [covered investments] service suppliers. covered investments treatment provided herein. other disposition of another Party treatment no [investments of investors of (2) A Member may meet the no less favorable than that it investments. less favorable that that it another Party] treatment no requirement of paragraph 1 by accords, in like circumstances, (2) Each Contracting Party accords, in like circumstances, less favorable than that it according to services and to investments in its territory of shall accord to investors of to its own investors with accords, in like circumstances, service suppliers of any other its own investors with respect another Contracting Party and respect to the establishment, to investments in its territory of Member, either formally to the establishment, to their investments, treatment acquisition, expansion, its own investors with respect identical treatment or formally acquisition, expansion, no less favourable than the management, conduct, to the establishment, different treatment to that it management, conduct, treatment it accords [in like operation, and sale or other acquisition, expansion, accords to its own like operation, and sale or other circumstances] to investors of disposition of investments. management, conduct, services and service suppliers. disposition of investments. any other Contracting Party or (3) The treatment accorded by operation and sale or other (3) Formally identical or (3) The treatment to be of a non-Contracting Party, a Party under paragraphs 1 & disposition of investments.] formally different treatment accorded to a Party under and to the investments of 2 means, with respect to a (1.1) Each Party shall accord shall be considered to be less paragraphs 1 & 2 means, with investors of any other state or province, treatment no to the investments of the favourable if it modifies the respect to a regional level of Contracting Party or of a non- less favorable than the most investors of other Parties conditions of competition in government, treatment no less Contracting Party, with favorable treatment accorded, made in its territory treatment favour of services or service favorable than the most respect to the establishment, in like circumstances, by that no less favorable than that suppliers of the Member favorable treatment accorded, acquisition, expansion, state or province to investors, accorded[, in like compared to like services or in like circumstances, by that operation, management, and to investments of circumstances,] to investments service suppliers of any other regional level of government to maintenance, use, enjoyment, investors, of the Party which it by its own investors. [National Member. investors, and to investments and sale or other disposition forms a part. treatment shall be granted in of investors, of the Party of of investments. (4) For greater certainty, no accordance with the laws of which it forms a part. (3) Each Contracting Party Party may: the host State].] shall accord to investors of (a) impose on an investor of (2) The treatment accorded by another Contracting Party and another Party a requirement a Party, under paragraph 4.1 to their investments the better that a minimum level of equity above, means, with respect to of the treatment required by in an enterprise in the territory a [state or province] [regional Articles 1.1 and 1.2, whichever of the Party to be held by its level of government], is the more favourable to nationals, other than nominal treatment no less favorable those investors or qualifying shares for directors than the most favorable investments. or incorporators of treatment accorded by that corporations; or [state or province] [regional (b) require an investor of level of government], in like another Party, by reason of its circumstances, to the nationality, to sell or otherwise investors and investments of

3 dispose of an investment in investors of the Party to which the territory of another Party it belongs.] (2.1) The treatment to be accorded by a Party under paragraph 4.1 means, with respect to a regional level of government, treatment no less favorable than the treatment accorded, in like circumstances, by that regional level of government to natural persons resident in and enterprises constituted under the laws of other regional levels of government of the Party of which it forms a part, and to their respective investments. Performance No Contracting Party may (1) No Party may impose or (1) No Party shall establish -No performance requirements Mandatory Performance -No performance requirements Require- impose, enforce or maintain enforce any of the following performance requirements specified- Requirements specified- ments any of the following requirements, or enforce any through the adoption of (1) Neither Party may impose requirements, or enforce any of the following requirements, investment-related measures or enforce any of the following commitment or undertaking, or enforce any commitment or that are incompatible with the requirements, or enforce any in connection with the undertaking in connection with prevailing disciplines in the commitment or undertaking, in establishment, acquisition, the establishment, acquisition, framework of the WTO connection with the expansion, management, expansion, management, Agreement on Trade-Related establishment, acquisition, operation, or conduct of an conduct or operation of an Investment Measures and any expansion, management, investment of an investor of a investment of an investor of a subsequent developments of conduct, operation, or sale or Contracting Party or of a non- Party or of a non-Party in its those disciplines.] other disposition of an Contracting Party in its territory: (2) [Mandatory] Performance investment of an investor of a territory: (a) to a given level or Requirements: Party or of a non-Party in its (a) to export a given level or percentage of goods or No Party may impose or territory: percentage of goods or services; enforce any of the following (a) to export a given level or services; (b) to achieve a given level or requirements or [enforce any] percentage of goods or (b) to achieve a given level or percentage of domestic commitments [or undertaking], services; percentage of domestic content; in connection with the (b) to achieve a given level or content; (c) to purchase, use or accord establishment, acquisition, percentage of domestic (c) to purchase, use or accord a preference to goods expansion, management, content; a preference to goods produced or services provided conduct or operation [or sale (c) to purchase, use or accord produced or services provided in its territory, or to purchase or other disposition] of an a preference to goods in its territory, or to purchase goods or services from investment of an investor of a produced in its territory, or to

4 goods or services from persons in its territory; Party [or of a non Party] in its purchase goods from persons persons in its territory; (d) to relate in any way the territory:] [None of the Parties in its territory; (d) to relate in any way the volume or value of to shall impose, or demand, (d) to relate in any way the volume or value of imports to the volume or value of unless otherwise provided for volume or value of exports or the volume or value of exports or to the amount of foreign in that Party’s legislation, any to the amount of foreign or to the amount of foreign exchange inflows associated of the following requirements, exchange inflows associated exchange inflows associated with such investment; with respect to permission to with such investment; with such investment; (e) to restrict sales of goods establish, expand, maintain or (e) to restrict sales of goods or (e) to restrict sales of goods or services in its territory that acquire an investment:] services in its territory that or services in its territory that such investment produces or a) to export a given level or such investment produces or such investment produces or provides by relating such sales percentage of goods [or supplies by relating such sales provides by relating such sales in any way to the volume or services]; in any way to the volume or in any way to the volume or value of its exports or foreign b)to achieve a given level or value of its exports or foreign value of its exports or foreign exchange earnings; percentage of domestic exchange earnings; exchange earnings; (f) to transfer technology, a content; (f) to transfer a particular (f) to transfer technology, a production process or other c) to purchase, use or accord technology, a production production process or other proprietary knowledge to a a preference to goods process, or other proprietary proprietary knowledge to a person in its territory, except produced [or services knowledge to a person in its natural or legal person in its when the requirement is provided] in its territory, or to territory; or territory [except when the imposed or the commitment or purchase goods from (g) to supply exclusively from requirement is imposed or the undertaking is enforced by a [producers] [persons] [or the territory of the Party the commitment or undertaking is court, administrative tribunal or services from service goods that it produces or the enforced by a court, competition authority to providers] in its territory; services that it supplies to a administrative tribunal or remedy an alleged violation of d) to relate in any way the specific regional market or to competition authority to competition laws or to act in a volume or value of imports to the world market. remedy an alleged violation of manner not inconsistent with the volume or value of exports, Advantages Subject to competition laws or to act in a other provisions of this or to the amount of foreign Performance Requirements: manner not inconsistent with Agreement; or exchange inflows associated (2) Neither Party may other provisions of the (g) to act as the exclusive with such investment; condition the receipt or Agreement]; supplier of the goods it e) [to restrict sales of goods or continued receipt of an (g) to locate its headquarters produces or services it services in its territory that advantage, in connection with for a specific region or the provides to a specific region or such investment produces or the establishment, acquisition, world market in that world market [provides] [supplies] by expansion, management, Contracting Party; (2) A measure that requires an relating such sales in any way conduct, operation, or sale or (h) to supply one or more of investment to use a to the volume or value of its other disposition of an the goods that it produces or technology to meet generally exports or foreign exchange investment in its territory of an the services that it provides to applicable health, safety or earnings;] investor of a Party or of a non- a specific region or world environmental requirements f) [to transfer [a particular] Party, on compliance with any market exclusively from the shall not be construed to be technology, [a] production of the following requirements: territory of that Contracting inconsistent with paragraph 1 process[,] or other proprietary (a) to achieve a given level or Party; (f). knowledge to a person in its percentage of domestic

5 [(i) to achieve a given level or (3) No Party may condition the territory [, except when the content; value of production, receipt or continued receipt of requirement is imposed [or the (b) to purchase, use or accord investment, manufacturing, an advantage, in connection commitment is enforced] by a a preference to goods sales, employment, research with an investment in its court, administrative tribunal or produced in its territory, or to and development in its territory of an investor of a [competent] [competition] purchase goods from persons territory;] Party or of a non-Party, on authority to remedy an alleged in its territory; [(j) to hire a given level or type compliance with any of the violation of competition laws or (c) to relate in any way the of local personnel; ] following requirements: to act in a manner not volume or value of imports to (k) to establish a joint venture; (a) to achieve a given level or inconsistent with other the volume or value of exports or percentage of domestic provisions of this Agreement]; or to the amount of foreign [(l) to achieve a minimum level content; or] exchange inflows associated of local equity participation.] (b) to purchase, use or accord g) [[to act as the exclusive with such investment; or [A measure that requires an a preference to goods supplier of] [to supply (d) to restrict sales of goods or investment to use a produced in its territory, or to exclusively from the territory of services in its territory that technology to meet generally purchase goods from the Party] the goods that it such investment produces or applicable health, safety or producers in its territory; produces or the services that it supplies by relating such sales environmental requirements (c) to relate in any way the [provides] [supplies] to a in any way to the volume or shall not be construed to be volume or value of imports to specific regional market or to value of its exports or foreign inconsistent with paragraph 1 the volume or value of exports the world market.]] exchange earnings. (f). For greater certainty, or to the amount of foreign (2) [A measure of general Exceptions and Exclusions Articles XXX on National exchange inflows associated application which requires an (3) (a) Nothing in paragraph 2 Treatment and MFN apply to with such investment, or investment to use a shall be construed to prevent a the measure.] (d) to restrict sales of good or technology to meet health, Party from conditioning the No Contracting Party may services in its territory that environment and safety receipt or continued receipt of condition the receipt or such investment produces or requirements shall not be an advantage, in connection continued receipt of an provides by relating such sales inconsistent with with an investment in its advantage, in connection with in any way to the volume or subparagraph 1.f).] [A territory of an investor of a an investment in its territory of value of its exports or foreign measure that requires an Party or of a non-Party, on an investor of a Contracting exchange earnings. investment to use a compliance with a requirement Party or of a non-Contracting (4) Nothing in paragraph 3 technology to meet generally to locate production, supply a Party, on compliance with any shall be construed to prevent a applicable health, service, train or employ of the following requirements: Party from conditioning the environmental, or safety workers, construct or expand [(a) to export a given level or receipt or continued receipt of requirements shall not be particular facilities, or carry out percentage of goods or an advantage, in connection construed to be inconsistent research and development, in services]; with an investment in its with subparagraph 1.f).] For its territory. (b) Paragraph 1(f) (b) to achieve a given level or territory of an investor of a greater certainty, Articles 4 does not apply: (i) when a percentage of domestic Party or a non-Party, on (National Treatment) and 5 Party authorizes use of an content; compliance with a requirement (Most-Favored-Nation intellectual property right in (c) to purchase, use or accord to locate production, provide a Treatment) shall apply to the accordance with Article 31 of a preference to goods and service, train or employ measure.] the TRIPS Agreement, or to services produced in its workers, construct or expand measures requiring the

6 territory; particular facilities, or carry out disclosure of proprietary (d) to relate in any way the research and development in information that fall within the volume or value of imports to its territory. scope of, and are consistent the volume or value of exports (5) Paragraphs 1 & 3 do not with, Article 39 of the TRIPS or to the amount of foreign apply to any requirement other Agreement; or (ii) when the exchange inflows associated than the requirements set out requirement is imposed or the with such an investment; in those paragraphs. commitment or undertaking is (e) to restrict sales of goods (6) Provided that such enforced by a court, or services in its territory that measures are not applied in administrative tribunal, or such investment produces or an arbitrary or unjustifiable competition authority to provides by relating such sales manner, or do not constitute a remedy a practice determined in any way to the volume or disguised restriction on after judicial or administrative value of its exports or foreign international trade or process to be anticompetitive exchange earnings; or investment, nothing in under the Party’s competition [(f) others to be defined.] paragraph 1(b) or (c) or 3(a) or laws. Paragraph 1 shall not apply (b) shall be construed to (c) Provided that such insofar as a Contracting Party prevent any Party from measures are not applied in conditions the receipt or adopting or maintaining an arbitrary or unjustifiable continued receipt of an measures, including manner, or do not constitute a advantage on compliance environmental measures: disguised restriction on with requirement other than (a) necessary to secure international trade or those set out above. compliance with laws and investment, paragraphs 1(b), Nothing in paragraph 3 shall regulations that are not (c), and (f), and 2(a) and (b), be construed to prevent a inconsistent with the shall not be construed to Contracting Party from provisions of this Agreement prevent a Party from adopting conditioning the receipt or (b) necessary to protect or maintaining measures, continued receipt of an human, animal or plant life or including environmental advantage, in connection with health; or measures: (i) necessary to an investment in its territory of (c) necessary for the secure compliance with laws an investor of a Contracting conservation of living or non- and regulations that are not Party or of a non-Contracting living exhaustible natural inconsistent with this Party, on compliance with a resources. Agreement; (ii) necessary to requirement to locate protect human, animal, or production, provide a service, plant life or health; or (iii) train or employ workers, related to the conservation of construct or expand particular living or non-living exhaustible facilities, or carry out research natural resources. and development, in its (d) Paragraphs 1(a), (b), and territory.] (c), and 2(a) and (b), do not Provided that such measures apply to qualification are not applied in an arbitrary requirements for goods or

7 or unjustifiable manner, or do services with respect to export not constitute a disguised promotion and foreign aid restriction on international programs. trade or investment, nothing in (e) Paragraphs 1(b), (c), (f) paragraph l(b) or (c) or 3(b) or and (g) and 2(a) and (b), do (c) shall be construed to not apply to procurement. prevent any Contracting Party (f) Paragraphs 2(a) and (b) do from adopting or maintaining not apply requirements measures, including imposed by an importing Party environmental measures: relating to the content of (a) necessary to secure goods necessary to qualify for compliance with laws and preferential tariffs or regulations that are not preferential quotas. inconsistent with the (4) For greater certainty, provisions of this Agreement; paragraphs 1&2 do not apply (b) necessary to protect to any requirement other than human, animal or plant life or the requirements set out in health; or these paragraphs. (c) necessary for the (5) This Article does not conservation of living or non- preclude enforcement of any living exhaustible natural commitment, undertaking, or resources.] requirement between private parties, where a Party did not impose or require the commitment, undertaking or requirement. Dispute (1) State-State dispute Settlement of Disputes State-to-State Disputes WTO - Dispute Settlement Investor-State Dispute Disputes between a foreign Settlement The rules and procedures set between a Party and an Understanding Settlement investor and an Iraqi investor out in Articles A-C shall apply Investor of Another Party (1) Disputes which may arise pertaining to investment in to the avoidance of conflicts between Parties regarding the (1) If any Member should In the event of an investment Iraq, or between a foreign and the resolution of disputes Without prejudice to the rights interpretation or application of consider that any other dispute , the claimant and the investor and an Iraqi legal or between Contracting Parties and obligations of the Parties the Agreement shall, to the Member fails to carry out its respondent should initially natural person, shall be regarding the interpretation or under Chapter 20, this Section extent possible, be settled by obligations or specific seek to resolve the dispute resolved in accordance with application of the Agreement establishes a mechanism for diplomatic channels. (2) If a commitments under this through consultation and the dispute resolution unless the disputing parties the settlement of investment dispute cannot be settled Agreement, it may with a view negotiation, which may include provisions contained in any agree to apply other rules or disputes that assures both through diplomatic channels to reaching a mutually the use of non-binding, third applicable written agreement procedures. However, the equal treatment among within a reasonable period of satisfactory resolution of the party procedures. governing the relationship disputing parties may not investors of the Parties in time, of no less than six (6) matter have recourse to the (1) In the event that a between the parties. The depart from any obligation accordance with the principle months, the matter shall be DSU. disputing party considers that parties may elect in any regarding notification of the of international reciprocity and submitted to the general (2) If the DSB considers that an investment dispute cannot agreement to utilize the Parties Group and the right of due process before an dispute settlement mechanism the circumstances are serious be settled by consultation and arbitration mechanisms

8 Parties to present views, impartial tribunal. to be established in the enough to justify such action, it negotiation: outlined in Iraqi law. under Article B, paragraph[s framework of the FTAA.] (3) may authorize a Member or (a) the claimant on its own l.a and] 3.c, and Article C, Where a large or developed Members to suspend the behalf , may submit to paragraphs l.a, 3.c, and 4.e. State submits a dispute to the application to any other arbitration under this Section a generalsettlement mechanism, Member or Members of claim (i) that the respondent (2) Investor-State dispute at least half of the legal costs obligations and specific has breached (A) an obligation This article applies to disputes, incurred by the smaller commitments in accordance under Section A, or Annex 10- between a Contracting Party economy State should be with Article 22 of the DSU. F (B) an investment and an investor of another borne by a Regional (3) If any Member considers authorization, or (C) an Contracting Party concerning Integration Fund or some that any benefit it could investment agreement; and (ii) an alleged breach of an other hemispheric technical reasonably have expected to that the claimant has incurred obligation of the former under assistance/cooperation accrue to it under a specific loss or damage by reason of, this Agreement [or under an scheme.]] commitment of another or arising out of, that breach; & investment agreement with or Member under Part III of this (b) the claimant, on behalf of authorisation to the investor] Dispute Settlement between a Agreement is being nullified or an enterprise of the which causes[, or is likely to Party and an Investor of impaired as a result of the respondent that is a juridicial cause,] loss or damage to the Another Party: application of any measure person that the claimant owns investor or his investment. Investor-State Disputes which does not conflict with or controls directly or (1) For purposes of this the provisions of this indirectly, may submit to Agreement, an investment Agreement, it may have arbitration under this Section dispute is a dispute between a recourse to the DSU. If the a claim (i) that the respondent Party and a national or measure is determined by the has breached (A) an obligation company of the other Party DSB to have nullified or under Section A, or Annex 10- arising out of or relating to impaired such a benefit, the F (B) an investment investment agreement or Member affected shall be authorization, or (C) an alleged breach of any right entitled to a mutually investment agreement; and (ii) conferred, created or satisfactory adjustment on the that the enterprise has recognized by this Treaty with basis of paragraph 2 of Article incurred loss or damage by respect to a covered XXI, which may include the reason of, or arising out of, investment.] (2) Where an modification or withdrawal of that breach investor of a large or the measure. In the event an developed economy is agreement cannot be reached involved in a dispute with a between the Members smaller economy State and concerned, Article 22 of the the matter is submitted to DSU shall apply. arbitration, at least half of the legal costs incurred by the State should be borne out of a Regional Integration Fund.] * The FTAA is still being negotiated, this is based on the most current draft text. The brackets indicate where there is disagreement among negotiators.

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