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US FTA fever may be
overrated
By Chee Yoke Heong
KUALA LUMPUR - The trade-pact fever seems to be
in full swing around the world, and Asia is in the thick
of it. Across Asia, regional and subregional free-trade
agreements (FTAs), as well as bilateral ones, are
proliferating as countries seem to be racing with one
another to sign FTAs among themselves and with others
outside the region, such as the United States and the
European Union.
The US is aggressively striking
simultaneous FTAs, or their precursors, trade and
investment framework agreements (TIFAs), with countries
in Latin and South America, the Middle East and Asia.
Hot on the heels of its FTA with Singapore, the US is
negotiating an FTA with Thailand, with an eye on
clinching more agreements with other Asian countries
such as Malaysia to follow the signing of a TIFA there
in early June.
But before countries begin
jumping on to the FTA bandwagon, some reports that have
emerged recently deserve a bit of scrutiny, as they
suggest that countries should look carefully before they
leap.
While lowering trade tariffs is considered
a good thing because it allows a greater flow of goods
and products across borders, the FTAs that the United
States are signing go beyond trade and enter into realms
such as law and public policy, causing concern in some
quarters that such pacts encroach on other nations'
sovereignty. Many countries view access to the US market
for their exports as the key to their development, but
one study has found that the much-sought-after US market
could remain a mirage, as it is questionable that such
access will be of much significance in the coming years.
Reports of this nature suggest that an FTA with the
world's largest economy is not necessarily a good thing.
According to a report by the Center for Economic
and Policy Research (CEPR), a Washington-based
think-tank, "If countries enter into trade agreements
with the US under the assumption that the import growth
of the last dozen years will continue, then they will be
seriously disappointed."
There is no doubt that
the US market has expanded over the past dozen years,
which is why developing countries sign trade pacts such
as the Central American Free Trade Agreement (CAFTA) and
the Free Trade Area of the Americas (FTAA). Annual
imports to the United States during this period have
increased by nearly US$780 billion, measured in terms of
2003 dollars. Since the real value of the US dollar has
appreciated against other currencies over this period,
the increase in the value of US imports measured in
other currencies would be even larger, at more than 860
billion 2003 dollars.
But according to the CEPR
report, it is questionable whether access to the US
import market will turn out to be of much value in the
coming years since it is not possible for the
extraordinary growth seen over the past decade to
continue. It pointed out that this exceptional growth -
which has turned the United States into the world's
biggest debtor nation, with a negative net asset
position that is likely to exceed $3 trillion - cannot
possibly be repeated, and hence the growth seen in the
past decade will certainly shrink in the coming years.
The report added that the current level of the
US trade deficit is highly unsustainable, and since
there will be no opportunity to gain market access in
the United States at the expense of domestic production,
any adjustment will require a sharp drop in imports.
Using a series of projections, it said increased access
to the US import market is not likely to be of great
value over the next decade and instead will decline,
even given optimistic assumptions.
"This means
that efforts by most developing countries to gain access
to the US import market - if they involve important
concessions in other areas (eg on intellectual property
rights, investment or government procurement rules) -
are likely to prove misguided," the report concluded,
adding that except for the few countries that can
increase their exports substantially to the United
States by displacing other exporters, any significant
concessions made to gain access to US markets would lead
to a net loss for the countries that make them.
These findings are particularly pertinent as the
United States embarks on its mission to engage countries
around the world to sign on to trade agreements, not
least in Asia, where the US government has declared its
intention to pursue countries, particularly in the
Association of Southeast Asian Nations under President
George W Bush's Enterprise for ASEAN Initiative that was
announced in 2002.
In a recently released
report, GRAIN, a non-governmental organization based in
Spain, pointed out that the rush by the United States to
sign FTAs with countries across the globe - from
Thailand to Bahrain to Ecuador - is an attempt to speed
through liberalization measures via bilateral or
subregional negotiations under the explicit strategy of
"competitive liberalization", and not because of the
slow progress in the World Trade Organization (WTO). By
first targeting weaker countries to sign on, the United
States hopes subsequently to rope in other countries
that, to avoid being isolated, will agree to sign
agreements with the US.
The group also dispelled
a number of myths about US FTAs in its report. The
United States has explicitly said the pattern it wants
to follow in creating these agreements is that of the
text signed with Chile, and it is expected that future
negotiations will be based on this text with minor
modifications. Based on past efforts and texts that have
already been signed and published, GRAIN said it is a
myth that the agreements are exclusively about economic
matters. In the case of Thailand, for instance, the
political intent is clear, as the United States presents
the agreement as a method for reinforcing military ties
and cooperation in the "war against terrorism". It is
feared that this intent will put countries in a position
of extreme political subordination whereby they will be
subjected to mandatory conditions, requirements and
sanctions that infringe on their sovereignty.
"Whether they like it or not, governments,
parliaments and judiciary branches of the signatory
nations cannot adopt and implement certain laws and
legislative changes that criminalize many of our daily
activities, to such an extent that even the supposed
intent to commit certain offenses could be penalized,"
the GRAIN report said.
If a country or its
citizens decide to act differently from what is
stipulated, or contrary to what is considered correct by
the United States, they risk serious penalties such as
enormous fines, direct or indirect economic blockages or
embargoes, or even political sanctions, the GRAIN report
explained.
A number of clauses in the agreements
also suggest that much power is given to US businesses
and the US government at the expense of the people and
the governments in the signatory countries.
In
the name of "transparency", governments and legislature
are obliged to consult with and take into consideration
proposals from the business community and the government
of the United States about any future changes - legal or
political - that may affect their interests. This is
tantamount to giving carte blanche to stamp on the
sovereignty and rights of countries and their people,
the report said.
But at the heart of the
agreements are investment and the protection of US
investments and their profits in other countries that at
times goes beyond normal business practices. For
instance, the expected earnings by US businesses must be
guaranteed, and any shortfalls will have to be
compensated. The United States also wants privileges
such as "national treatment" for its companies, which
means that US businesses should be given the same rights
and privileges as local persons, and this includes the
privileges that are extended to other countries.
Similar freedoms are also expected in services
and intellectual property rights, areas that the United
States has also pushed for hard in WTO negotiations but
which have met much resistance from other countries.
Definitions of terms are often so broad that they could
include almost anything, as is the case in the
privatization of "environmental services", which could
possibly include privatizing the atmosphere or
biodiversity.
In the case of intellectual
property rights, there are concerns of what this could
mean, ranging from worries that it might include the
appropriation and monopolization of living beings to the
monopolizing of the manufacturing and sale of medicines,
including the power to block others from producing
inexpensive drugs to prevent such illnesses as AIDS or
tuberculosis.
It is clear that the "free trade"
in these free-trade agreements is no longer just about
lowering tariffs on goods and products. An FTA with the
United States encompasses a whole gamut of issues that
go beyond the traditional definition of trade and
includes vast political, legal and social implications.
While the attraction remains great, governments should
be vigilant as to the downsides of these trade pacts and
should even review some of the supposed benefits of
trade agreements so they can make choices that will
bring about a net gain rather than a net loss for their
country and their people.
(Copyright 2004 Asia
Times Online Ltd. All rights reserved. Please contact content@atimes.com for
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