Song of the Sirens

Why the US–Andean FTAs undermine sustainable development and regional integration

US free trade agreements with Peru and Colombia, as well as the possible agreement with Ecuador, were negotiated under the promise of great opportunities in the world’s richest market, but the truth is that these agreements will have a devastating impact on the livelihoods of small farmers, public health, and the regulation of investment to protect the public interest. Furthermore, they will weaken existing regional processes of integration and co-operation. Trade rules with the Andean region need to be substantially modified in order for development to become a priority once again.

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Summary

Deadlock in the Doha Development Round negotiations at the World Trade Organization (WTO) and stalled talks on the Free Trade Area of the Americas Agreement (FTAA) prompted the development of bilateral trade agreements with an agenda which seeks to progress quickly and unhindered towards the liberalisation of developing country markets, consolidating trade and investment rules which benefit rich countries and transnational companies (TNCs).

The US Free Trade Agreements (FTAs) with Peru, Colombia, and Ecuador are a step further in this direction. A key reason for these Andean countries to enter into such agreements was to maintain the trade benefits granted to them by the USA on a temporary basis since 1991, as part of its drug eradication policy.

In order to make such concessions permanent, these Andean countries have agreed to significant concessions which could affect the sustainability of their development policies and weaken the ongoing process of integration with neighbouring countries.

Having analysed the text of the Peru and Colombia FTAs, Oxfam believes that the agreements on agriculture, intellectual property, and investment would have serious consequences for small farmers, public health, and regulation of investment.

In agriculture, the FTAs dismantle mechanisms for the protection of agricultural products which are vital for food security and the livelihoods of small farmers. Without the price band system and the power to apply agricultural safeguards, the agricultural sector is left vulnerable to fluctuations in the international market and to unfair competition from subsidised US products.

Regarding intellectual property, the USA has succeeded in imposing new, harsh protection measures, such as extending the life of a patent and exclusive use of test data. These measures would increase the monopoly rights of transnational pharmaceutical companies and limit competition and access to affordable generic medicines in the Andean countries.

Likewise, the chapter on investment curtails the powers of Andean governments to regulate foreign investment through the inclusion of harmful provisions, such as the principle of non-discrimination, prohibitions on performance requirements, the recognition of indirect expropriation, and the acceptance of dispute settlement through international arbitration.

The Andean FTAs are thus not mere trade agreements with the United States: they set down trade rules that threaten long-term national development policies and undermine existing frameworks for co-operation within the region. Therefore there is an urgent need to counter their impact and to change substantially the direction they seek to impose on trade rules within the region.

With regard to the effects on agriculture, the Andean countries must maintain the right to decide whether or not to impose tariffs on products which are of particular importance to food security, and when and how they do so. Furthermore, given the unfair competition generated by US subsidies, they must preserve their right to maintain and enforce mechanisms for protecting their most vulnerable domestic sectors.

Regarding the extension of intellectual property rights, the Andean countries must maintain their right to apply the flexibilities provided by the WTO (Trade-Related Aspects of Intellectual Property Rights, TRIPS). No FTA should limit the right to public health and access to affordable medicines for all.

On the treatment of investment, Andean governments must preserve the right to regulate and maintain oversight of foreign investment. This includes the right to enforce local content requirements on foreign investment, exclude the concept of indirect expropriation, and limit the possibility for investors to bypass the laws and regulations of the recipient country.

As for the process of regional integration, regional governments and civil society movements want to see fairer trade rules within more equitable integration frameworks to allow the Andean countries to counter existing asymmetries in their relations with developed countries and set development priorities without endangering their future.

Date of publication: June 2006