Free Trade Agreement for Africa
Free Trade Agreement for Africa - A compendium of articles
Last week the US Trade Representative, Robert Zoellick, visited Africa to
start the ball rolling for a new Free Trade Agreement (FTA) for
Africa. As is typical for US-style "Free Trade", the deal is painfully
unfair to African countries and will, at the very least, serve to lower
living standards for the rural poor should the proposals come into effect.
While the Southern Africa Customs Union (SACU) countries are encouraged to
reduce subsidies, the US government will do no such thing after increasing
their own farm subsidies to an annual $20 billion last year. SACU
countries will be flooded with cheap US goods, prices will drop and farmers
will be unable to compete, losing their livelihoods. Domestic agriculture
will suffer.
While SACU countries are permitted increased access to US markets with
textiles, this is only on the condition that the cotton originates in the US.
US corporations will have increased investment, so expect McDonalds and
Walmart etc to disrupt regional markets.
Intellectual Property Rights will be enforced, almost certainly making
access to cheap generic drugs for AIDS and other diseases more difficult.
And there are also implications here for African countries' ability to
reject GE imports from the US. We have already seen how the EU are
continuously being threatened with WTO legal action, for considering health
and environmental issues over Free Trade doctrine. The likelihood is that
stronger IPRs would serve to strengthen the US corporate grip over African
agriculture.
In the attached letter, Zoellick explains to the US Senate how such a move
would serve to benefit US trading power in Africa.
The myth that poverty alleviation is dependent on economic growth which is
dependent on free trade and foreign direct investment, still pervades
development policy. A few years ago, the reason given was "the
trickle-down effect." If corporations got rich, then the people of the
countries they invest in would also claim their share of the
spoils. No-one bothers to talk about the "trickle-down effect" any more,
because it obviously never worked. But the policy is still in place.
One of the major concerns is that if the SACU countries (South Africa,
Botswana, Lesotho, Namibia and Swaziland) agree to the FTA, this will cause
a division within the Southern Africa Development Community (SADC)
countries which are trying to increase self-reliance and reduce unfair
trading practices. The last thing Africa needs is damage to its growing
sense of unity.
Best wishes,
Teresa
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1. US Missionary's Arrival Still Bodes Ill For Africa
Article in the Guardian. Date: 20 January 2003
Charlotte Denny
http://www.guardian.co.uk/business/story/0,3604,878208,00.html
2. Free Trade Agreement Spells Disaster for Southern African Nations
Article from Institute for Trade and Agriculture Policy (IATP). Date:
18 December 2002
Neil Sorensen
3. U.S. Official to Discuss Trade as Africa Hopes to Talk AIDS
Article from The New York Times. Date: 10 January 2003
http://www.tradeobservatory.org/news/index.cfm?ID=4046
4. Note on FTA Relevance to GMOs and Trade for Africa
Africa Faith and Justice Network. Date: 7 November 2003
Larry J. Goodwin
5. Letter to Ambassador Robert B. Zoellick
Africa Faith and Justice Network. Date: 17 December 2002
6. Trade Hypocrisy: the Problem With Robert Zoellick
Article from Oxfam. Date: 20 December 2002
Kevin Watkins
http://www.opendemocracy.net/debates/article.jsp?id=6&debateId=30&articleId=
860
7. Foreign Direct Investment is Impoverishing the South
Article from AllAfrica.com. Date: December 4 2002
Yash Tandon
http://allafrica.com/stories/200212040462.html
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1. US Missionary's Arrival Still Bodes Ill For Africa
Article in the Guardian. Date: 20 January 2003
Charlotte Denny
http://www.guardian.co.uk/business/story/0,3604,878208,00.html
America's top trade official, Robert Zoellick, went to Africa last week to
preach the new gospel. Free trade is good for your economies, he told
representatives of 31 countries assembled in Mauritius to mark the second
anniversary of the US African growth and opportunity act, a regional trade
pact allowing them special access to America's markets.
Africa would "benefit greatly" from reducing or even eliminating subsidies
and other barriers to trade, Mr Zoellick told the meeting.
Pity then, that the message doesn't seem to have got through to America's
farmers - who received an 10% increase in subsidies last year - or for that
matter the American steel industry, which George Bush protected from
foreign competition with punitive tariffs on imports.
America may spend more subsidising the 25,000 farmers employed in its
cotton industry than the gross national product of many sub-Saharan African
countries, but Mr Zoellick doesn't let a few inconvenient facts get in the
way of a good story.
The pact's story is supposed to be about how America is helping the
desperately poor countries of Africa trade their way out of poverty. Rather
than a missionary for free trade however, Mr Zoellick is more like one of
the commercially minded explorers who carved up Africa for the great powers
in the late 19th century. David Livingstone dreamed of commerce ridding the
continent of poverty, but his successors came armed with one-sided treaties
which kept the economies of Africa locked in unequal relationships with
their new colonial masters.
"All over Africa, in those heady years of the scramble, the blank treaty
form and the national flag had become part of the explorers' stock in
trade, like their barter goods of Venetian beads and their bales of
American cloth," writes Thomas Pakenham in The Scramble for Africa,
describing how in 1885 the young German explorer, Carl Peters, claimed for
Bismark the region that is now Tanzania.
In Mauritius last week, Tanzania became the latest country to sign up for
the pact. Dar Es Salaam will now be able to export a limited range of
textile goods to the US, duty free. But there's a catch - the bales of
American cloth Pakenham writes about are still a feature of trade
diplomacy. To maximise their zero tariff access, Tanzania's firms must make
their goods from American fabric - if they use cotton from Africa there is
a strict quota on how much of the market they can gain.
The IMF has estimated that by removing the rules of origin conditions,
Washington could multiply the pact's benefits fivefold. But this is a trade
policy designed for Lubbock County, Texas, not for Tanzania. The heart of
America's subsidy-bloated cotton industry is Texas, and Mr Bush knows all
about keeping the boys in Lubbock County happy.
To gain even this limited access, Tanzania and the 12 other participating
countries have to give sweeping concessions to US investors and agree to
strict patent laws which are likely to push up the prices of essential
medicines.
The problem Tanzania faces is the same for any small economy negotiating
with a large market. Even a tiny reduction in tariffs by the bigger player
is worth it for the smaller player because of the size of prize. But to
gain access, the concessions they must make at home are far larger. That's
the real reason why so many poor countries are desperate to join the World
Trade Organisation, even though they may be suspicious of its agenda. Only
by clubbing together can they wield enough negotiating clout to redress the
balance.
Alarmingly though, despite the west's promise to make the next round of a
global trade talks a development round, the multilateral route appears to
be running into the sand. Reducing agricultural subsidies will once again
be the key to progress, but the stitch-up between Germany and France over
the common agricultural policy has set back the chances of significant
reform in Europe by almost a decade and given the US an excuse to keep its
own equally wasteful system in place.
With progress at the WTO minimal, African countries have no choice but to
sign regional and bilateral deals, no matter how unattractive. Future deals
are likely to be even more heavily stacked against them. If the US, or for
that matter Europe, were serious about making free trade work for Africa,
they would start by liberalising agriculture and textiles. Don't expect
that to feature when the next western negotiator comes to Africa to preach
about free trade.
charlotte.denny@guardian.co.uk
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2. Free Trade Agreement Spells Disaster for Southern African Nations
Article from Institute for Trade and Agriculture Policy (IATP). Date: 18
December 2002
Neil Sorensen
> The US government is rapidly advancing negotiations to establish a Free
Trade
> Agreement with the five member countries of the Southern African Customs
> Union (SACU). In a letter from US Ambassador Robert Zoellick to
President Pro
> Tempore Senator Robert Byrd on November 4, Zoellick writes that its strategy
> with the SACU will "address barriers in these countries to U.S. exports -
> including high tariffs on certain goods, overly restrictive licensing
> measures, inadequate protection of intellectual property rights, and
> restrictions the SACU governments impose that make it difficult for our
> services firms to do business in these markets," which is in direct conflict
> with ongoing local economic development and policy initiatives and will
> undermine regional and other international markets for Southern African
goods
> and services. The intention of the US government in establishing the a Free
> Trade Agreement with the SACU is not increasing regional stability and
> prosperity, which Zoellick clearly elucidates at the end of his letter. The
> goal is to conclude "these negotiations with timely and substantive results
> for U.S. workers, ranchers, farmers, businesses, and families," not Southern
> African nations.
>
> The Southern African Development Community (SADC), which includes all
the SACU
> countries, is working to pool its resources to achieve collective
> self-reliance and improve living conditions in the region. One of its main
> concerns is that unfair trade practices of developed countries deprive
> developing countries potential export revenues. Protectionist measures and
> subsidies in industrialized countries cost developing countries US$40
billion
> a year in lost export earnings, more than they receive in official
development
> aid. Agricultural exports, in particular, will be greatly affected, because
> prices for commodities from the US are far below the cost of production.
> Further, requiring access to SACU markets by US-based transnational service
> industries, will similarly supplant markets for local products and services,
> thereby decreasing regional stability. Not coincidentally, the FTA will also
> create division within the SADC.
>
> A Free Trade Agreement will also require that the SACU countries abide
by the
> intellectual property regulations of the US and force the elimination export
> subsidies, but this relationship will not be reciprocal. Southern African
> markets will be flooded with highly subsidized products, and local producers
> will not be able to compete. The burden of debt to developed countries will
> swell dramatically, and resources will increasingly be diverted from
programs
> integral to improving food security, education, health care and social
> welfare, and thus jeopardize appropriate social and economic development.
>
> Increasing access to US products in Sub-Saharan Africa will not ameliorate
> poverty, combat AIDS, increase literacy or advance women's rights.
Promises to
> assist countries with the development and enforcement of labor and
> environmental laws and anti-corruption measures should not be tied to the
> enrichment of US citizens, as have been clearly outlined in the negotiating
> positions of the US government.
*******************************
3. U.S. Official to Discuss Trade as Africa Hopes to Talk AIDS
Article from The New York Times. Date: 10 January 2003
http://www.tradeobservatory.org/news/index.cfm?ID=4046
WASHINGTON, Jan. 10 - When Ambassador Robert B. Zoellick, the United States
trade representative, travels to southern Africa next week, new free trade
agreements will take up most of his agenda.
But he will be met by activists in street protests and officials in
conference rooms who will be asking tough questions about American policies
on AIDS and farm subsidies.
Specifically, African countries are concerned that the United States
blocked a trade deal last month that would have allowed poor countries to
import generic versions of patented medicines, and they question why
American farmers continue to receive huge subsidies.
African officials quietly say they are insulted that Mr. Zoellick, a junior
member of the Bush cabinet, is representing the United States rather than
the president, who was scheduled to attend the Africa Trade and Economic
Cooperation Forum in Mauritius. President Bush scrapped the trip last month
as the administration appeared to step up preparations for a possible war
in Iraq.
"We were very sad when we learned that President Bush wouldn't travel to
Africa and witness the devastation wrought by AIDS-related illness," said
Zackie Achmant, president of the Treatment Action Campaign of South Africa.
At his first stop, in Pretoria, South Africa, Mr. Zoellick will meet with
trade ministers of Botswana, Lesotho, Namibia, South Africa and Swaziland
in advance of formal talks in February to create a free trade zone in
southern Africa with the United States.
Mr. Zoellick said in a statement that a future free trade zone would "give
new hope and economic opportunity to the people of southern Africa by
increasing trade, creating new jobs, boosting economic growth and development."
Absent from Mr. Zoellick's list of goals for his trip was any mention of
the H.I.V.-AIDS pandemic. "Free trade doesn't work for the dead," said Asia
Russell, director of international policy of the nonprofit Health Global
Access Project. "A modest expansion of trade will be of little comfort to
millions of Africans who will die of treatable illnesses."
Ministers at the World Trade Organization failed to resolve the dispute
over providing impoverished countries with access to life-saving medicine
in talks last month when the United States insisted on limiting access to
medicines that treat malaria, tuberculosis and H.I.V./AIDS and a restricted
list of other infectious diseases.
At issue is a draft agreement that would allow pharmaceutical companies in
developing nations to export generic versions of patented drugs to
countries too poor to make the medicine themselves. The corporations
holding the patents would not be consulted. The European Union suggested on
Thursday that the draft agreement would expand the list of diseases to at
least 22 diseases.
NOTICE: In accordance with Title 17 U.S.C. Section 107, this material is
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receiving this information for research and educational purposes.
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4. Note on FTA Relevance to GMOs and Trade for Africa
Africa Faith and Justice Network. Date: 7 November 2003
Larry J. Goodwin
Hello --
Attached is a letter from USA Trade Representative Robert Zoellick, sent on
or about 04 November 02 to leaders in the USA House and Senate. It is
official notification of the Bush Administration's intent to engage in
negotiations
for a free trade agreement (FTA) with the Southern African Customs Union
(SACU) - RSA, Botswana, Lesotho, Namibia & Swaziland. While it relates only
to
the SACU, it has implications for all of Africa, laying out the USA's trade
objectives.
The letter makes clear the USA's intention to advance its own trade
interests, offset EU trade advantages with Africa, link trade to SACU
development
strategies, promote regional integration, push IPRs, combat restrictions on
USA
services firms, and augment TRIPS!
There is language that, to me, clearly includes a GMO push, viz: "eliminate
... unjustified trade restrictions that affect new USA technologies" and
"seek to eliminate SACU country practices that adversely affect USA exports
of perishable or cyclical agricultural products."
USA ag subsidies will be protected, while subsidies by others are rejected,
viz: "pursue a mechanism with SACU that will support achieving the USA
objective in WTO negotiations of eliminating export subsidies on
agricultural
products, while maintaining the right to provide bona fide food aid and
preserving
USA agricultural market development & export credit programs." (Also a
likely GMO reference in "bona fide food aid").
Zoellick makes clear the USA intent to use FTA negotiations to advance its
objectives in multi-lateral negotiations at the WTO. Tellingly, the USA will
use ongoing bilateral and multilateral development assistance and
trade-related technical assistance to get SACU countries to support an FTA.
For those who have followed the Africa Growth & Opportunity Act (AGOA) with
its central promise of opening USA markets to African textiles & apparel,
it's interesting that in these negotiations the USA will also "pursue fully
reciprocal access to the SACU market for USA textile & apparel products."
Please take Zoellick's letter seriously as you track, and influence in any
way possible, African governments' positions in these negotiations with the
USA.
Larry J. Goodwin
Africa Faith & Justice Network
3035 Fourth Street, NE
Washington, DC 20017
ph.+1-202 832 3412
fx. +1-202 832 9051
http://afjn.cua.edu
**************************
5. Letter to Ambassador Robert B. Zoellick
Africa Faith and Justice Network. Date: 17 December 2002
Ambassador Robert B. Zoellick
Office of the U.S. Trade Representative
600 17th Street, NW
Washington, DC 20508
_______________________________
17 December 2002
Dear Ambassador Zoellick:
As part of the Advocacy Network for Africa, a coalition of over 200 member
and affiliate organizations throughout the country that focus on USA policy
toward Africa, in particular how it affects Africa's poor majority, the
Africa Trade Policy Working Group (ATPWG) welcomes the opportunity to offer
comments on the proposed FTA with southern African countries.
First, we strongly contend that USA trade policy should flow from the
following principles developed by our colleagues at the Interfaith Working
Group on Trade and Investment:
· Trade and investment should respect and support the dignity of the
human
person, the integrity of creation and our common humanity.
· Trade and investment should advance the common good and be evaluated in
the light of its impact on the most vulnerable.
· Trade and investment policies and decisions should be transparent,
involve
the participation of all stakeholders, and empower the most vulnerable.
· Trade and investment should respect the legitimate role of
government, in
collaboration with civil society, to set policies regarding the development
and welfare of its people.
· Trade and investment should safeguard the global commons and
respect the
rights of local communities to protect and sustainably develop their natural
resources.
Second, we would like to bring to your attention once again our deeply felt
conviction that the rights of African smallholder farmers to their
agricultural genetic resources be upheld and respected. We join with NGOs in
Africa and around the world in advocating the freedom of farmers to access,
use, save, exchange, sell and breed seeds, plants, food crops and other
agro-genetic resources that form part of our global human and planetary
heritage. With our African partners, we oppose the patenting of living
organisms.
Third, we applaud Rep. Maxine Waters and other members of Congress for
introducing and supporting the AFRICA Resolution (H. Con. Res. 260) in the
107th Congress. Based on the African Model Law initiative of the African
Union, it is an excellent formulation of the principles necessary for
upholding community and farmer rights, food security and sovereignty,
biodiversity and traditional knowledge.
Current global trade practices enable non-African individuals and
corporations to patent and profit from Africa's agricultural and biological
resources, traditional knowledge and technologies. In contrast, the AFRICA
Resolution signals a USA commitment to fair economic policies for Africa's
smallholder farmers. It demonstrates that the USA is listening to the
legitimate concerns raised by African governments and civil societies when
it comes to principles that should guide the emerging global economy.
Therefore we urge you to respect the African Model Law as negotiations
proceed.
Fourth, we also call upon the USA to predicate its negotiating positions on
the principle that water is a basic human right, which the UN Committee on
Economic, Social and Cultural Rights (Twenty-Ninth Session, Geneva, 11-29
November 2002, Agenda Item 3) recently asserted. In a General Comment on
the International Covenant on Economic, Social and Cultural Rights, the
committee stated that: "Water is fundamental for life and health. The human
right to water is indispensable for leading a healthy life in human dignity.
It is a pre-requisite to the realization of all other human rights."
Likewise, the committee declared that: "Water should be treated as a social
and cultural good, and not primarily as an economic commodity."
Therefore, with respect to any and all negotiations with the countries of
the Southern African Customs Union, we call upon the USA to unambiguously
uphold the principles that agro-genetic resources remain in the public
domain, free from privatization by individual and corporate interests, and
that safe water is a basic human right that should also stay in the public
domain and not be privatized.
Fifth, members of the Africa Trade Policy Working Group have followed with
interest the USA negotiating position around access to medicines. For some
time African nations have asked for clarification about how they can best
use the flexibilities afforded to them in the TRIPS agreement to ensure that
affordable life-saving and life-prolonging drugs can be made more available.
The Doha Declaration on the TRIPS Agreement and Public Health seemed to be a
step in that direction, but the debate at the TRIPS Council to decide the
fate of countries with little or no manufacturing broke down with no
decision made.
When looking at the USA role at the TRIPS Council and its negotiating
positions in bi-lateral trade agreements in this hemisphere, it becomes
clear that the USA is moving in a direction of strengthening protection for
patent holders. When looking specifically at the bi-lateral agreement just
struck in Chile, we fear that the USA aim in negotiating a southern African
Free Trade Agreement will force nations to enhance WTO obligations within
the TRIPS agreement to favor patent holders. We are particularly concerned
that, like the Chile agreement, an African FTA would include:
· Extension of patent terms to compensate for up-front administrative or
regulatory delays in granting the original patent;
· Setting a protection period of five years for pharmaceuticals and ten
years for agricultural chemicals on data submitted to a government for the
purpose of product approval; (We feel this could complicate efforts to use
generic versions under compulsory licensing agreements);
· A provision that prohibits government marketing-approval agencies
to grant
approval to patent violating products
Thank you for the opportunity to express our views to you. We hold them as
necessary elements to any just and fair trade agreement. We trust that you
will take them into serious consideration.
Respectfully,
Larry J. Goodwin
Convener, Africa Trade Policy Working Group
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6. Trade Hypocrisy: the Problem With Robert Zoellick
Article from Oxfam. Date: 20 December 2002
Kevin Watkins
http://www.opendemocracy.net/debates/article.jsp?id=6&debateId=30&articleId=
860
The chief ideologist of US trade policy defends its free trade
impulse in The Economist as a route to global prosperity. In
reality, responds Oxfams head of research, the US increasingly
pursues trade policies that undermine the life-chances of poor
people in poor countries.
Robert Zoellick, the US Trade Representative, is a man with a mission
backed by a sense of history. Writing in the 7 - 13 December edition of The
Economist, he sketched
the battle plan for an American crusade to promote global free trade,
tracing the roots of the Bush administrations policies back to the
protestors who dumped English tea
in Boston harbour.
The analogy was apt - but inadvertently so. After all, the dumping of
agricultural produce is one area in which the United States retains a
powerful comparative advantage,
spending billions of dollars each year disposing of American farm surpluses
in developing countries. Another area of trade policy in which the Bush
administration exercises
global leadership, superbly captured by the Zoellick manifesto, can be
summarised in a single word, hypocrisy. Like the British colonialists
that attracted the ire of the
Boston tea party fraternity, the United States is a good old-fashioned
mercantilist power, combining protectionism at home with a commitment to
free trade overseas.
Of course, there are differences. In the 19th century, Britain opened
markets through gunboat diplomacy and occupation. These days the preferred
instruments for
Americas crusade are the World Trade Organisation (WTO), regional trade
pacts and bilateral agreements on open markets.
The road to Illsville
Nothing better illustrates the double standard of current US trade policy
than agriculture. Consider the case of cotton. In 2001, the US Commodity
Credit Corporation spent
$4bn subsidising the income of cotton producers, a fraternity comprising
some 25,000 corporate farms in California, Texas, Mississippi and elsewhere.
Given that the world market value of the cotton crop was slightly over
$3bn, one might question whether the Bush administrations farm policies
owe more to the principles
of Bolshevik state planning or the market principles espoused by Zoellick.
But as the worlds largest cotton exporter, domestic subsidies in America
have global
consequences. According to the International Cotton Advisory Committee,
they lowered world prices by around one-quarter, reinforcing the deepest
and most protracted
depression in world cotton markets since the Great Depression.
Skip from the subsidy fest in Texas to West Africa and you can see the
results. The latter is a region where some 11 million households depend on
cotton cultivation for
their livelihoods, and where cotton is a crucial source of foreign exchange
and government revenue. At a conservative estimate, it lost some $200m in
2001 as a direct
consequence of American farm subsidies.
To put this figure in context, it dwarfs the amount that governments in the
region receive in the form of US aid or debt relief under the Heavily
Indebted Poor Countries (HIPC)
Initiative. And behind the number there are real people, agricultural
labourers who get lower wages, small farmers who have less to spend on food
and health, and children
being taken out of school because their parents can no longer afford the
fees.
Like his illustrious predecessors, Robert Zoellick likes to wax lyrical
about the merits of a level playing fieldin agriculture. No doubt
President Bush himself will waste no
opportunity to press on African producers the benefits of open markets when
he visits the region in January. But what sort of level playing field is it
when the subsidies given
to corporate cotton farms in America are bigger than the entire national
income of cotton-producing countries such as Burkina Faso and Mali? This is
a level playing field
that slopes all the way downhill from Texas.
US farm policy and world poverty
The case of cotton is a particularly dramatic example of how American
agricultural policies destroy markets for vulnerable people in the
developing world. Sadly, it is not an
isolated example. Currently, Mexico is lowering tariffs on imports of maize
as part of the final phase of market liberalisation under the North
American Free Trade
Agreement.
The domestic maize economy is already in a state of crisis. Domestic
producers, especially those in the southern poverty-belt states, cannot
compete against American
imports, which have risen fourfold in the last seven years. And why should
they? According to the Organisation for Economic Cooperation and
Development (OECD), the US
maize sector receives some $8bn a year in subsidies.
Zoellick claims that farm policy is one area in which the Bush
administration has started to introduce market-based principles. There are
two possible explanations for this
view. Either the current US trade representative has a sense of humour to
match his sense of history or he has lost touch with reality.
Under the 2002 Farm Security and Rural Investment Act, the administration
is committed to spending up to $20bn a year in farm subsidies, an increase
of around 10% over
the last farm bill. Moreover, the new legislation introduces elements that
will be deeply damaging to developing countries. It reinforces the link
between subsidies and
output, raising the spectre of an expanded surplus to be dumped on world
markets. And by shifting the burden of supporting farm incomes away from
the market and on to
taxpayers, it enables agribusiness exporters such as Cargill and Archer
Daniels to get access to produce at prices far below costs of production.
The upshot is relatively straightforward. Smallholder farmers in developing
countries - a group that accounts for three-quarters of all people living
below the extreme poverty
line of less than $1 a day- will continue to face grossly unfair
competition in local and global markets.
Protectionism in the guise of free trade
For those clinging to the hope that the Doha development roundwill help
resolve the problems in world agricultural markets caused by northern
government subsidies, here
is some simple advice: forget it.
True, Zoellick can point to an apparently bold US proposal that would cut
support to agriculture in rich countries by about one-third. But ask
yourself if the same Congress
that just contrived the new farm bill is really likely to go down this road.
The most likely outcome from the current round of WTO talks is a repeat
performance of the US-EU deal that marked the culmination of the Uruguay
round. Under that
deal, the worlds two agricultural superpowers sank their differences and
agreed to cut subsidies, having first redefined what constitutes a subsidy
to accommodate their
own programmes.
Just in case you missed the subtle courting ritual on agricultural trade
now underway between Robert Zoellick and his European Union (EU)
counterpart, Pascal Lamy, their
proposals call for a reduction in trade distorting subsidies. This
definition excludes around two-thirds of current US payments to farmers,
not to mention the huge disguised
subsidies provided through assorted food aid and export credit programmes.
Looking beyond agriculture, it is difficult to avoid being struck by the
discrepancy between the picture of US trade policy painted by Zoellick and
the realities facing
developing countries.
To take one example, much has been made of Americas generosity towards
Africa under the Africa Growth and Opportunity Act (AGOA). This provides
what, on the
surface, looks like free market access for a range of textile, garment and
footwear products. Scratch the surface and you get a different picture.
Under AGOAs so-called
rules-of-origin provisions, the yarn and fabric used to make apparel
exports must be made either in the United States or an eligible African
country. If they are made in
Africa, there is a ceiling of 1.5 per cent on the share of the US market
that the products in question can account for. Moreover, the AGOAs
coverage is less than
comprehensive. There are some 900 tariff lines not covered, for which
average tariffs exceed 11%.
According to the International Monetary Fund (IMF), the benefits accruing
to Africa from the AGOA would be some $420m, or five times, greater if the
US removed the rules-
of-origin restrictions. But these restrictions reflect the realities of
mercantilist trade policy. The underlying principle is that you can export
to America, provided that the
export in question uses American products rather than those of competitors.
For a country supposedly leading a crusade for open, non-discriminatory
global markets, its a
curiously anachronistic approach to trade policy.
Africas experience under the AGOA reflects a deeper problem in US trade
policy which, as a seasoned user of selective data, Zoellick is adept at
obscuring. As he rightly
told readers of The Economist, America has the rich worlds lowest
trade-weighted tariff barriers. The average level is around 1.5%. But
averages obscure wide variations,
including the far higher levels of tariff facing many of the worlds
poorest countries.
In fact, the US places far higher tariffs on the least developed countries
than the EU, with an average of 13% compared to 2%. In the case of
agriculture, the average tariff on
imports from the same countries is 28%. Moreover, America subjects a far
higher share of manufactured imports from poor countries to tariff peaks in
excess of 15%,
principally because of the high level of import taxes applied to textiles
and garments. This helps to explain why revenues collected by the United
States on imports from
Bangladesh are roughly equivalent to those collected on imports from
France, even though the latter are some twelve times larger.
One of the problems with debates on trade barriers is that their technical
bias obscures the human consequences. Estimates by the World Bank suggest
that northern
protectionism in textiles and garments may cost as many as 27 million jobs
in developing countries. For many of the worlds poorest households, these
jobs represent a
possible escape route from poverty. True, labour conditions in many export
industries are appallingly bad, with women workers in particular facing
systematic violation of
their labour rights. Yet these conditions are probably worsened by
protectionist policies that serve to exercise a downward pressure on wages.
The USs regional route around the WTO
It is not just with respect to average tariff data that Zoellick is
economical with the truth. Like the EU and Japan, the US imposes higher
tariffs on processed goods, in
effect, taxing local value added. To take one example, it is far easier for
a poor country to export textiles and yarn to America than it is to export
clothes. This tariff
escalation, as it is known, has the pernicious effect of keeping developing
countries trapped in low value-added ghettoes, with attendant consequences
for investment,
economic growth and employment.
Like an iceberg, only a small proportion of US trade barriers are visible.
In addition to tariffs, developing country exporters face a bewildering
array of prohibitions, seasonal
restriction and technical barriers, not to mention potential legal hurdles.
Between 1995 and 2001, the US launched 255 anti-dumping cases following
complaints from
American industry about unfair competition. Almost two-thirds of the total
were directed against exporters in developing countries. In many more
cases, the mere threat of
an anti-dumping action with its implied legal cost is more effective than
any trade barrier.
Looking beyond issues of agriculture and market access, some of the claims
made by Zoellick simply defy credibility. Take, for example, his suggestion
that the US is
leading the way in implementing the Doha public health declaration.
This was a commitment undertaken by northern governments at the start of
the WTO round to ensure that trade-related intellectual property rules
(TRIPs) do not
compromise public health in developing countries by raising the costs of
medicines. The US has in fact comprehensively reneged on this commitment.
For all the complexities involved, the issues at stake are relatively
simple. The application of twenty-year patents to drugs, as required under
TRIPs, will have the effect of
raising prices, unless countries are allowed to produce and import generic
copies. For countries lacking strong domestic generic industries, including
sub-Saharan Africa,
the right to import from countries with such industries such as Brazil and
Indiais critical.
Far from seeking to enshrine this right in WTO rules by allowing a general
waiver from TRIPs for public health purposes, the US is insisting that the
claims of developing
country governments should be considered on a case-by-case basis, and that
both the importing country and the country exporting the generic drug
should be required to
seek authorisation.
This will open the door to endless litigation, which is presumably what is
intended. The US pharmaceuticals industry, architect of the TRIPs agreement
and author of
Zoellicks negotiating scripts, is well placed to contest claims against
financially-strapped third-world governments, few of which will contemplate
legal action. The losers, of
course, will be the millions of poor households who will face higher costs
for the treatment, and the prospect of increased vulnerability to ill
health.
The focal point for the debate on TRIPs is the WTO. But there is growing
evidence, reinforced by Zoellicks article in The Economist, that this may
be misplaced. The locus
of US policy has shifted strongly towards regional agreements, spearheaded
by negotiations on the Free Trade Agreement for the Americas (FTAA), and
bilateral deals
such as that recently concluded with Singapore.
One of the attractions of these arrangements for the US is that the
provisions go far beyond what it has been possible to negotiate in the WTO.
For example, the agreement
with Singapore provides far stronger protection to US patent holders and
investors than offered through the WTO, and the US strategy for the FTAA is
to build on this model.
Free trade or blackmail?
It is increasingly clear that regionalism and bilateralism, rather than
multilateralism, is the preferred instrument for driving global
liberalisation in US trade policy. To a lesser
degree, this is also true for the EU. One of the important implications for
developing countries is that they will be negotiating future trade deals in
an environment where the
balance of power is even more heavily stacked against them.
Another important trend, accelerated by the shift away from
multilateralism, is the emergence of a new form of mercantilism in trade
policy. Under the old General
Agreement on Tariffs and Trade (GATT) regime, countries negotiated on a
relatively limited agenda dominated by tariff reductions and market access.
Developing countries
were granted special and differential treatment under this system in
recognition of the fact that their lower level of economic development
meant that they should not have to
reciprocate liberalisation by rich countries.
Under the new regime, the rules of the game have changed in two respects
especially for developing countries. First, access to northern markets for
manufactured and
agricultural goods, is increasingly contingent on developing countries
acceding to northern demands in other areas.
Eligibility for the AGOA, to take but one example, is conditional on
African governments extending rights for US investors in their local
economies, and enforcing the patent
claims of American companies. At the WTO, both the US and the EU have made
it clear that any concessions on market access for poor countries will
require developing
countries to accept a radical agenda for extending and deepening market
liberalisation across a broad swathe of areas, including investment,
financial services, and public
utilities such as water. In short, the message is this: if you want us to
buy your shirts and agricultural produce, you open your door to our
corporations.
The second change is the erosion of the principle of special and
differential treatment. When Zoellick recently tabled his proposal for zero
tariffs on manufactured goods, he
was including developing countries. It is worth reflecting for a moment on
the sheer scale of the inequity implied by this approach. Because average
tariffs in developing
countries are far higher than in America, they would have to make far
deeper cuts and absorb far higher adjustment costs than the worlds richest
country - a novel
approach to special treatment.
More importantly, the Zoellick zero-option reflects an approach to the
relationship between trade policy and poverty reminiscent of the most crass
thinking in the IMF and
the World Bank twenty years ago. There is no question that carefully
designed and properly sequenced trade liberalisation can be good for growth
and for poverty reduction.
But the big bangliberalisation model envisaged under the US proposal is a
prescription for de-industrialisation, rising inequality and poverty.
Countries such as China and
Vietnam have succeeded in capturing the benefits of integration into global
markets in part by doing the opposite of what Zoellick advocates,
liberalising imports slowly as
part of a broader domestic reform programme.
At one point in his article, Robert Zoellick berates anti-globalisation
nihilistsand special interest groups for seeking to obstruct his free
trade mission. He might want to
reflect on whether his brand of nihilism and blind pursuit of US economic
and corporate special interest represents an obstacle to the creation of an
international trading
system capable of extending the benefits of globalisation to the worlds
poor.
*******************************
7. Foreign Direct Investment is Impoverishing the South
Article from AllAfrica.com. Date: December 4 2002
Yash Tandon
http://allafrica.com/stories/200212040462.html
One of the central assumptions of neo-liberal economics is that the
liberalisation of the investment regime is a necessary condition for
growth. But is this really true? Does investment liberalisation really
bring growth and development?
Investment, to be sure, is an essential ingredient of growth. That is a
truism as old as the mountains. One does not have to be an economist to
know this. As soon as agriculture became the basis for human development
around 800 BC, the homo erectus knew that she had to save the seeds from
the previous season as investment for the next. That is age-old
conventional wisdom.
But can we say that investment from outside, foreign investment, is an
essential ingredient of growth? Is there really a good case for opening up
the doors to foreign capital without controls? Is there an unqualified case
for the liberalisation of the investment regime? Indeed, to be even more
challenging, might foreign investment not be the cause of the opposite of
growth? Might it not be a cause of lack of growth, or what some have
described as "mal-development"?
The World Council of Churches (WCC) has issued a publication recently
titled "An Ecumenical Approach to Financing for Development" prepared by
the Ecumenical Coalition of Economic Justice, a project of the Canadian
churches. It raises similar questions about FDIs, and advocates a
self-reliant method of financing development.
There is much reflective wisdom in what the WCC says: "Where development
can be financed at the local community level, without dependence on
external funds, it should be. What can be financed nationally should be
funded nationally. Over-reliance on external financing leads to dependence
and to types of 'mal-development'. Mal-development is characterised by
ecologically destructive overconsumption by the wealthy minority and the
concentration of power in the hands of private transnational corporations
and international financial institutions which exclude the majority of people."
Where, then, did the proposition that FDIs are a necessary ingredient of
growth gain such widespread currency in modern times? What is the basis of
such a belief? Like most belief systems, is it also not a matter of blind
faith? For indeed there is no evidence that FDIs have helped the countries
of the South. Gertrude Takawira, writing in a recent issue of SEATINI
Bulletin (November 15 2003), takes us back to the history of Zimbabwe.
Where is the evidence to show that since 1892 foreign investments have
helped the people of Zimbabwe?". . . how much has changed since 1892?" she
asks.
Yes, the injection of foreign capital did help the company of Cecil John
Rhodes to exploit Rhodesia's mineral wealth. It made England rich. But did
it make the people of Zimbabwe rich? This is not just a rhetorical
question. After a hundred years of colonialism, the people of Zimbabwe are
poorer than their ancestors. The ancestors had at least land and cattle.
After the injection of FDIs since 1892, the people lost both. And the
attempt to get back the land has got the present rulers of Zimbabwe into
conflict with the historical owners of the FDIs, the British. A hundred
years of the injection of FDIs into Rhodesia/Zimbabwe has only enslaved the
people of the country.
The country is now in a trap. Without FDIs, say the IMF experts, the
country cannot grow. Zimbabwe, so goes the IMF orthodoxy, must create
renewed conditions for FDIs to flow into the country for "growth". Out of
this growth would "trickle" development for the people of Zimbabwe. But
where is the evidence for that?
It is the same old swan song of Cecil John Rhodes. But history is witness
to the reality of FDIs. Bring in more FDIs, and England will become richer
and Zimbabwe poorer. Bring in more FDIs and America will become richer and
Argentina poorer. Argentina once used to be one of the most developed
countries of the world, at par almost with England. Today, its people
cannot even get access to their own savings in the banks in order to buy
the basic wherewithal for life. Where is justice in the system?
Justice, says the WCC document cited above, is the central issue of
development, not growth. "By asserting justice, ecological sustainability
and the creation of viable communities as our goals, the ecumenical
community's emphasis differs from the dominant approach, which focuses on
fostering economic growth." On this basis, the ecumenical community
"expressly rejects neo-liberal economics" based on the Washington Consensus
and the trickle-down assumptions of "growth" strategies.
"The Washington Consensus policies," says the WCC, "have weakened
democratic states, and thereby weakened citizens' rights. International
financial institutions must be transformed so that bodies like the IMF and
the World Bank cannot impose neo-liberal policies of financial
liberalisation on sovereign states."
In the article on "The crisis in Multilateral Trading System", in the same
issue of SEATINI Bulletin as cited above, S. P. Shukla, a former ambassador
of India to GATT and to Geneva, says more or less the same thing on the
international trading regime as what the WCC and Takawira say on the
international investment regime. Where is the evidence that trade
liberalisation has brought "growth" or "development"? Citing the authority
of the Trade and Development Report of UNCTAD for this year, Shukla gives
five "downside" aspects of liberalisation of trade. These are:
- Most developing countries are still exporting resource and labour
intensive products and have not yet been able to establish a dynamic nexus
between exports and income growth;
l. Statistics showing a considerable expansion of exports of manufacturers
from developing countries are misleading in that those exports relate to
products of labour-intensive, assembly-type process with little or low
value added. The result is that while developing countries' share in world
manufacturing exports has risen, their share of income from such exports
has declined.
2. Most of the value added is appropriated by the producers of imported
components and parts embodying high technology and by transnational
corporations (TNCs) organising the international chains of production. In
an environment of deregulation and liberalisation of trade and fierce
competition among developing countries for attracting TNC investment, the
former have very little bargaining power to set the terms and conditions
for the latter to ensure indigenisation of the production processes. This
gives rise to the danger of enclave economies with high persistent
dependence on imported capital and intermediate goods.
- With a simultaneous export drive by developing countries in
labour-intensive manufacturers or increased competition among them to
attract TNCs for location of labour-intensive processes of international
production chains, the fallacy of composition problem surfaces, leading to
non-realisation or low realisation of intended gains. The competition gets
transformed into a competition among labour of different countries,
resulting in a downward pressure on wages.
- A few countries have seen sharp increases in their world manufacturing
value-added; however, none of the countries which have rapidly liberalised
trade and investment in the last two decades is in this category.
Shukla goes on to take the authors of the TDR to task for not following
their own analysis, and for ignoring the lesson of history. The authors, he
argues, have forgotten the essentially political economy approach of the
Havana Charter, and have degenerated into banalities when it comes to the
prescriptive part of the TDR. They are lost in a technicist jargon-laden
approach to issues of development, issues that require an understanding of
both power and economics.
So what is the way forward? The WCC suggests that alternative approaches to
the reigning neo-liberal orthodoxy are required such that they allow
"righteous" relations with neighbours, which is what the Washington
Consensus has undermined. Takawira, for her part, has raised the question
of "withdrawal from the global system" as an "imperative".
But she has wisely asked us to do our homework first before we venture into
something as radical as withdrawal from the system. "It is not an easy
option," she says, "but any decision should be an informed one. We need a
phased, gradual and systematic withdrawal from the global system within a
regional framework (SADC). For this to be successful what is needed is:
- Up-to-date and reliable data;
- Strengthen our business sector;
- Revise the meaning of what is formal and what is informal (white =
formal, black = informal?);
- Revise on what are core businesses for local consumption and what are
those for export purpose;
- Define our competition policies;
- Know ourselves better and not rely on what other people from the North
call us.
There is much room for original thinking in our part of the world. The
Washington Consensus is dead. Much thought is needed to find alternatives
to the neo-liberal agenda that our rulers are foisting on us at the behest
of the IMF, the WTO and the World Bank.
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