ASEAN framework deal with US may be disastrous to economy, warns IBON

IBON Foundation (Manila)

ASEAN framework deal with U.S. may be disastrous to economy, warns IBON

August 29. 2006

The recently-signed trade and investment framework agreement (TIFA) between the US and the Association of Southeast Asian Nations (ASEAN) will sooner or later lead to a free trade agreement (FTA), and this will prove disastrous to the vulnerable sectors of the region, according to independent think-tank IBON Foundation.

According to IBON research head Sonny Africa, underdeveloped countries entering into an FTA with industrial powers such as the US and Japan virtually surrender national development policy-making to the interests of transnational capital. “Governments that forsake control over the domestic economy betray their poor farmers, workers and small and medium businesses,” Africa said.

Africa pointed out that FTAs benefit only exporters who are competitive to begin with, and only the biggest investors who can overwhelm small domestic capital in other countries. Backward countries like the Philippines must first achieve a minimum of economic development and strength to be able to gain net benefits from surrendering controls on foreign trade and investment.

He cited the experience of other Third World countries that suffered after entering into FTAs with Washington. Some 1.3 million Mexican corn farmers were displaced by the North American Free Trade Agreement (NAFTA) because of US dumping of heavily subsidized corn. Over a million Colombian consumers will be excluded from access to essential medicines and the country will face an additional US$5 billion in health costs over the next ten years because of intellectual property rights provisions in the Central American Free Trade Agreement (CAFTA).

Highlights of the TIFA

- ASEAN and the US will establish a formal dialogue to coordinate on regional and multilateral trade issues
- ASEAN and the US will undertake a Work Plan that will support regional integration and help expand the already strong trade and investment ties between ASEAN and the US
- The Work Plan will include initiatives to support the development of the ASEAN Single Window, which will facilitate the flow of goods within ASEAN and between ASEAN and the US
- It will include cooperation on sanitary and phytosanitary (SPS) issues to foster additional trade in specific agricultural goods as well as cooperation on pharmaceutical regulatory issues
- A Joint Council on Trade and Investment will be formed under the TIFA to provide directions on the implementation of the TIFA and the Work Plan.

The Philippines itself will lose more than it gains from liberalization of the economy through FTAs, Africa said. The economy has very narrow export interests restricted largely to electronics and cash-crop agriculture which are dominated by big foreign transnational corporations, so the real gains for the domestic economy from these will even be minimal.

The domestic economy remains underdeveloped from being open to cheap foreign goods for decades, especially since the 1980s. These have brought unemployment and underemployment to their record-high levels today. Under an FTA, the pressure to deploy even more overseas workers and to allow foreign corporations to exploit the country’s natural resources would intensify, Africa said.

Africa pointed out that rich countries such as the US, Japan, and South Korea developed their economies not through free trade but through a period of sustained, substantial and far-reaching state intervention and protection. The Philippines will only benefit from foreign investment if it has the power to direct it to areas of national benefit, to control capital repatriation and to require real technology transfer, he said. (end)

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source: IBON