Reasons to worry about bilateral trade pacts
The Nation, Bangkok, 7 April 2006
Reasons to worry about bilateral trade pacts
Bruce Keele
Special to The Nation
According to a recent article in the International Herald Tribune, the United States remains committed to new rounds of talks on the Thai-US bilateral free trade agreement (FTA).
According to protocol, the talks will move to the US. This means there will not be protests against unfair aspects of the deal as experienced in Chiang Mai, where protesters were successful in ending the talks without a deal because of the concern over the extension of drug patents. This extension means a longer period before generic drugs enter the market, the ones that less affluent folk can afford. As Medicines Sans Frontieres stated, "... doctors in Thailand will face substantial obstacles in providing treatment to their patients living with HIV/Aids".
We all should be concerned with the rush to sign bilateral FTAs and what this really means for less developed countries (LDCs) and developing countries such as Thailand. Pierre Sauve, consultant to the World Bank and formerly the lead negotiator for Canada’s entry into the North America Free Trade Area (Nafta), in a recent speech in Japan on "Investment and Trade in Services", stated that in the years between the early 1990s and 2003, bilateral FTAs went from 400 to almost 2,300. In a paper titled "A Global Race for Free Trade Agreements", Norwegian Arne Melchior clearly identifies that this expansion has moved from regional agreements to global ones and that the targeted countries are the developing nations where good economic activity already exists, and it is likely that the least developed will be lost to the development process all together.
Sauve identified the conflict between bilateral agreements and the multilateral agreements for which the World Trade Organisation is responsible. The multilateral WTO agreements are intended to ensure symmetrical policies applying equally to all members to ensure a fair deal. While the WTO’s performance in extending fair development to LDCs and developing countries has been atrocious, an examination of the global FTAs shows that they are asymmetrical in nature: that is, they favour the countries from the global north who engage in negotiations with developing countries from the global south. In the Chiang Mai negotiations last year, for example, in exchange for the US getting entry into the financial services sector plus the extension of pharmaceutical patents, Thailand would get to identify its rice as Thai rice in the USA. Is this equal?
It is interesting to take a look at some background to this phenomenal growth of FTAs, especially in relation to the WTO. The WTO continues to fail to get any substantive agreement because they have been unable to get over the first hurdle, agriculture. The two main blocks to an agreement remain the European Union (France) and the US. All nations begin with agriculture and, as they move through the stages of industrial development, become service and then finally knowledge economies. Most nations never forget their agrarian roots and many romanticise them in the myth of the family farm.
This is true of the US, where President Bush vacations at his ranch and spends his holiday in rural pursuits. The truth is that the pressure to maintain farm subsidies comes from something Samuel Berger calls "The Farm Lobby Colossus". This is an organisation called the American Farm Bureau Federation (AFBF) that is supposedly devoted to the interests of the farmer but which is an investment monolith worth billions that controls numerous financial firms, either directly or through shares, including ones that sell insurance to farmers. The ABFB claims 4.9 million members in a country where the census identifies a total of just over one million full-time farmers.
In France, President Jacques Chirac was first elected from a rural riding and his first cabinet post was as agriculture minister. His commitment to maintaining financial support for his rural constituency has never been questioned since the farm vote can guarantee an election. France continues to receive support from Germany and the UK in blocking an agricultural agreement at the WTO, so any further progress in the other three areas is restricted.
An examination of the globalised approach by both EU countries and the US to bilateral FTAs shows that acceleration has occurred as the WTO has lost its effect. While it is easy to rationalise that the global north is acting independently because the WTO is failing, it is more fun to speculate that the global north is acting to stall the WTO since they get much better terms on a one-to-one basis in their agreements with developing countries.
During the Hong Kong ministerial meeting, the US guaranteed it would follow the cap on drug patents negotiated at the WTO, but two months later in Chiang Mai it demanded an additional five-year extension. When questioned about this, the US negotiator said this was what they asked for and got in every FTA. Shortly afterwards, President Chirac visited Thailand stating that he wanted Thailand to become the gateway to Asia for French products, while France would become the gateway to the EU for Thai products. Has anyone noticed that in the past two months both the French and US governments have made unprecedented interventions to keep foreign companies from buying into their sovereign space?
The US has demanded access to the Thai services sector, especially finance and insurance. The leaders of both sectors have stated that they are not yet ready for international competition. Such access would remove the cap on ownership, allowing a foreign majority stake in a bank or insurance company. Over the past years, the Thai banking sector has taken commendable if painful action through mergers and closures to get its house in order. It must be doing something right as it is now deemed fair game for quick profit by global north investors eager to take advantage of the growing economy of a developing country.
Many academics criticised caretaker Prime Minister Thaksin Shinawatra for selling off the telecommunications industry to foreign companies. There should be an equally strong outcry if the US is allowed access to the financial services sector through an FTA that removes foreign ownership limits. As with the telecommunications industry, the financial sector is an integral aspect of the sovereign infrastructure and is of even greater importance to national security. It is inconceivable that it too should be allowed to fall into foreign hands.
The government is aware that any FTA between the US and Thailand requires US Congressional approval. But Thaksin is on record as stating that such approval is not necessary in Thailand, and so the rush to finalise the agreement. The UN Economic and Social Commission for Asia and the Pacific (UNESCAP) is on record as stating that bilateral trade deals are not good for developing Asia. We should listen and be worried about the lack of transparency in the negotiations and about just what such asymmetrical free trade agreements mean when big brother from the global north comes knocking on the bamboo door.
Bruce Keele is a faculty member of the School of Business and Management at Webster University in Thailand.
