4. Frenzy of Increasingly Destructive Trade Agreements

Sources:

Oxfam International, March 2007
Title: “Singing Away The Future”
http://www.oxfam.org/en/policy/briefingpapers/bp101_regional_trade_agreements_0703

IPS coverage of Oxfam Report March 20, 2007
Title: “Free Trade Enslaving Poor Countries”
Author: Sanjay Suri
http://ipsnews.org/news.asp?idnews=37008

Student Researcher: Ann Marie O’Toole
Faculty Evaluator: Peter Phillips, Ph.D.

The Oxfam report, “Signing Away the Future,” reveals that the US and European Union (EU) are vigorously pursuing increasingly destructive regional and bilateral trade and investment agreements outside the auspices of the WTO. These agreements are requiring enormous irreversible concessions from developing countries, while offering almost nothing in return. Faster and deeper, the US and EU are demanding unprecedented tariff reductions, sometimes to nothing, as the US and EU dump subsidized agricultural goods on undeveloped countries (see story #21), plunging local farmers into desperate poverty. Meanwhile the US and EU provide themselves with high tariffs and stringent import quotas to protect their own producers. Unprecedented loss of livelihood, displacement, slave labor, along with spiraling degradation of human rights and environments are resulting as economic governance is forced from governments of developing countries, and taken over by unaccountable multinational firms.

During 2006, more than one hundred developing countries were involved in FTA or Bilateral Investment Treaty (BIT) negotiations. “An average of two treaties are signed every week,” the report says, “Virtually no country, however poor, has been left out.”

Much of the recent debate and controversy over trade negotiations has revolved around the increasingly devastating trade-distorting practices of rich countries versus the developing countries’ needs for food security and industrial development. The new generation of agreements, however, extends far beyond this traditional area of trade policy—imposing a damaging set of binding rules in intellectual property, services, and investment with much deeper consequences for development and impacts on the poor.

Double standards in the intellectual-property rights chapters of most trade agreements are glaring. As new agreements limit developing countries’ access to patented technology and medicines—while failing to protect traditional knowledge—the public-health consequences are staggering. The US-Colombia FTA is expected to reduce access to medicines by 40 percent and the US-Peru FTA is expected to leave 700,000 to 900,000 Peruvians without access to affordable medicines.

US and EU FTAs also require the adoption of plant-breeder rights that remove the right to share seeds among indigenous farmers. The livelihood of the world’s poorest farmers is thus made even more vulnerable, while profit margins of the world’s largest agribusinesses continue to climb. US FTAs are now pushing for patents on plants, which will not only limit the rights of farmers to exchange or sell seeds, but also forbid them to save and reuse seed they have grown themselves for generations. Under US FTAs including DR-CAFTA, US–Peru and US–Colombia FTAs, developing-country governments will no longer be able to reject a patent application because a firm fails to indicate the origin of a plant or show proof of consent for its use from a local community. As a result, communities could find themselves forced to pay for patented plant varieties based on genetic resources from their own soil.

New rules also pose a threat to essential services as FTAs allow foreign investors to take ownership of healthcare, education, water, and public utilities.

Investment chapters of new FTAs and BITs allow foreign investors to sue for lost profits, including anticipated future profits, if governments change regulations, even when such reforms are in the public interest. These rules undermine the sovereignty of developing nations, transferring power from governments to largely unaccountable multinational firms. A growing number of investment chapters and treaties further tip the scales of justice by preventing governments from screening or regulating foreign investment—banning the use of all ‘performance requirements’ in all sectors including mining, manufacturing, and services.

More than 170 countries have signed international investment agreements that provide foreign investors with the right to turn immediately to international investor-state arbitration to settle disputes, without first trying to resolve the matter in national courts. Such arbitration fails to consider public interest, basing decisions exclusively on commercial law.

Not only is the legal basis for investment arbitration loaded against public interest, so are the proceedings. Despite the fact that many arbitration panels are hosted at the World Bank and the United Nations, the investment arbitration system is shrouded in secrecy. It is virtually impossible to find out what cases are being heard, let alone the outcome or rationale for decisions. As a result, there is no body of case decisions to inform governments of developing countries when drafting investments agreements.

Oxfam notes that the only group privy to this information is an increasingly powerful select group of commercial lawyers, whose fees often place them out of reach of developing-country governments. These lawyers, according to the Oxfam report, are eager to advise foreign investors regarding opportunities to claim compensation from developing countries under international investment agreements.

Strong opposition is growing to the political asymmetry inherent in these bilateral trade and investment agreements (see stories #8, #19, and #21). As Oxfam notes, “It is in nobody’s long-term interest to have a global economy that perpetuates social, economic, and environmental injustice.”

UPDATE BY LAURA RUSU OF OXFAM INTERNATIONAL

While real progress toward achieving a development-friendly outcome in the World Trade Organization’s Doha Round is still quite elusive, the negotiation of bilateral and regional free trade agreements (FTAs) that would undermine development continues at an unabated pace.
In the United States, the new Democratic leadership in Congress recently negotiated changes in the areas of labor, environment, and intellectual property in regard to access to medicines that are to be incorporated into the completed FTAs awaiting Congressional ratification. If implemented as agreed, these changes would mean important progress in enforcing core International Labor Organization standards and multilateral environmental agreements, and in promoting public health over private profits by reducing onerous protections for pharmaceutical monopolies. Still, more must be done in these areas, and harmful provisions remain in several other areas that will adversely affect developing countries, particularly the poor.

Without further changes, the FTAs create a profoundly unfair situation in which the US provides massive domestic agricultural supports and subsidies that allow products to be exported below their cost of production, while developing country trading partners are left with no means of protection. With large portions of their populations dependent upon agriculture for their livelihoods, the FTAs provide no effective safeguard to protect poor farmers from unfair competition. In addition, investment rules in the FTAs will hinder local and national governments from directing foreign investment so that it contributes to sustainable development. The investment chapter will give foreign companies leeway to challenge investment regulations, such as laws to protect the environment and public health. These and other provisions would deny developing countries the policy space needed to further their own development.

The US Administration hopes to bring FTAs with Peru, Panama, Colombia and Korea to a vote this year, although it remains doubtful whether there would be sufficient Congressional support to move the latter two. Congressional leadership is insisting that Colombia must also address its serious problems of violence and impunity, particularly as suffered by trade unionists, and has raised market-access concerns with regard to South Korea.

In a similar vein, the European Union has proceeded with FTA negotiations with African, Caribbean, and Pacific countries by pushing forward negotiating texts that will undermine the ability of poor countries to effectively govern their economies, protect their poorest people, improve livelihoods, and create new jobs. Going beyond the provisions negotiated at a multilateral level, the EU is making requests that would impose far-reaching, hard-to-reverse rules in the areas of market access, agriculture, services and intellectual property. At the same time, the EU is proceeding to open formal negotiations with Central American countries for an FTA that would impose similar rules that undermine development. A similar agreement with Andean countries is expected to follow, and plans have been announced to open negotiations with ASEAN, India, and South Korea. In all of these negotiations, the EU, like the US, is failing to put development first.
For more information, please see http://www.oxfamamerica.org.