US and EU "Free Trade Agreements" Threaten Developing Countries

According to a forty-six page briefing by Oxfam International, the United States and European Union are leading the way in pursuit of "free trade agreements," which generally isn't a problem when made between equally powerful nations; however, it seems that poor and/or developing countries are likewise targets of these agreements.

Free trade agreements (FTAs) allow certain concessions that are otherwise unavailable through the World Trade Organization (WTO), which is not favourable to developing countries that could otherwise stick together and wield at least some sort of leverage under the rules of the WTO. The negative impact that these FTAs have on such countries is staggering. Consider the following:

The proposed trade deal between the USA and Colombia, for example, would increase medicine costs by $919m by the year 2020, enough to provide health care for 5.2 million people under the public-health system. Under the US–Dominican Republic–Central America Free Trade Agreement (DR-CAFTA ) the prices of agrochemicals are expected to rise several-fold.

In some US FTAs, developing countries are committing themselves to let foreign investors into public utilities if the sector is opened up to domestic private companies. A leaked version of the EU’s draft negotiating mandates for FTAs with ASEAN, India, Central America, the Andean countries, and South Korea show that the EU is seeking similar provisions for water and other utilities.

New investment rules in many agreements prevent developing-country governments from requiring foreign companies to transfer technology, train local workers, or source inputs locally. Under such conditions, foreign investment fails to build national linkages, create decent employment, or increase wages, and instead exacerbates inequality.

The investment chapters of FTAs and bilateral investment agreements make governments vulnerable to being sued by foreign investors if a new regulation is perceived as damaging the investor’s profits, even when such reforms are in the public interest. Current claims against Argentina for emergency measures adopted during the financial crisis in 2001/2002 are estimated at $18bn.

For example, through its Economic Partnership Agreements (EPAs), Europe proposes to oblige the poorest countries in the world to reduce a very large part of their tariffs to zero. At the same time FTAs do not address the adverse impacts of rich-country subsidies on poor countries through dumping, or the plethora of non-tariff barriers that continue to impede access to rich-country markets.

The full briefing (PDF) provides a much more in-depth analysis with further examples of why these FTAs between rich and poor countries are not beneficial to the latter. Oxfam suggests that any FTAs should adhere to the following:

Recognize the special and differential treatment that developing countries require in order to move up the development ladder.

Enable developing countries to adopt flexible intellectual-property legislation to ensure the primacy of public health and agricultural livelihoods and protect traditional knowledge and biodiversity.

Exclude essential public services such as education, health, water and sanitation from liberalization commitments.

Recognize the right of governments to regulate the entry of foreign investors to promote development and the creation of decent employment, and include commitments to enforce core labour standards for all workers.

Ensure mechanisms for extensive participation of all stakeholders in the negotiating process, with full disclosure of information to the public, including the findings of independent impact assessments.