A new report by Oxfam International titled “Signing Away the Future: How Trade and Investment Agreements between Rich and Poor Countries Undermine Development” has found that the rapid increase in regional and bilateral free trade agreements (FTAs) between rich and poor nations are threatening to deny developing countries a foothold in the global economy. The report describes how the United States and the European Union are pursuing these trade agreements as a way of winning concessions that they are unable to win at the World Trade Organization (WTO) where developing countries are able to band together and negotiate for more favorable rules. At the present time, more than 25 countries have signed agreements while more than 100 are engaged in negotiations. These agreements are being negotiated behind closed doors without scrutiny and rarely receive press coverage.
However, these trade agreements are frequently going far beyond what is achievable in multilateral trade agreements and are imposing “far-reaching, hard-to-reverse rules that dismantle national policies designed to promote development.” For example, the United States and the European Union are pushing through intellectual property rules that restrict poor people’s access to medicine, increase the price of seeds, and make it difficult for developing nations to access new technologies. In the proposed trade agreement between the United States and Colombia, medicine costs would increase by $919 million by the year 2020, enough to provide healthcare for 5.2 million people under the public health system. Under DR-CAFTA, the prices of agrochemicals are expected to rise several-fold. Rules on the liberalization of services in FTAs “threaten to drive local firms out of business, reduce competition, and extend the monopoly power of large companies.” For example, when Mexico liberalized financial services in 1993 in preparation for the North American Free Trade Agreement (NAFTA), foreign ownership of the banking system increased to 85% in seven years while lending to Mexican businesses dropped from 10% of gross domestic product (GDP) to 0.3%. These new rules pose a potential threat to poor people’s access to essential services as well. 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. Investment rules in many agreements also prevent developing-country governments from requiring foreign companies to transfer technology, train local workers, or source inputs locally, while investment chapters in many FTAs make governments vulnerable to being sued by foreign investors if a new regulation is perceived as damaging an investor’s profits.
In order to reverse a balance of power that favors rich countries and large, politically influential corporations, Oxfam asserts that trade agreements must:
- 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 labor 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.