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The Difference between the FTAs and the Trade Treaty for the People – TCP

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Freely translated by Anoosha Boralessa (October 2015). Not reviewed by or any other organization or person

Pablo Solón, an expert on trade and integration, identifies at least four differences between the FTA and the TCP. The TCP commits to purchasing Bolivian products and to deregulating government procurements in Venezuela.

At the end of April 2006, the meat was put onto the bones of the Trade Treaty of the People (TCP) proposed by the Bolivian government. Following this, Presidents Evo Morales, Hugo Chávez and Fidel Castro will sign an agreement to launch the construction of a Bolivarian Alternative for the Peoples of Our America (ALBA). In contrast to the free trade treaties (FTAs) promoted by Northern powers, the TCPs concluded with Venezuela and Cuba assure markets for all Bolivian products that could be prejudiced by the Free Trade Treaties and strengthen the role of the State as the key player in trade by encouraging participating nations to complement their production in this new experience; an experience that transcends trade and transforms into a seed for a new kind of Latin American integration.

Pablo Solón, a member of the Movimiento Boliviano por la Soberanía y la Integración Solidaria de los Pueblos, identifies at least four aspects of the TCP that are not mentioned in the trade-driven FTAs promoted by the United States and the European Union:
a guarantee of a market for Bolivian products;
recognition that the state is the legislator and for the main part is a link in trade;
manufacturing complementarity of participating nations; and
the search for benefits for small producers.

Question (Q). What is the difference between the FTA and the TCP?
Pablo Solón (PS). The only thing that FTAs seek to do is to reduce and/or abolish customs. However, they don’t guarantee that these preferences will guarantee a market because they encourage competition between producers with diametrically opposed manufacturing capabilities. Where the FTA is concerned, the preference is for sardines (small companies) to compete among themselves and be set against the sharks (the big companies). Not only does the TCP include preferential customs but it also contains an undertaking to purchase. In this case, Venezuela commits not only to lower customs for all custom certificates, but also to buy 200,000 tonnes of soya and other products that will be harmed by the FTAs with the United States and the European Union.

Art 1 of the agreement signed with Venezuela is typical of trade agreements: the governments of both countries [must] abolish customs and all trade barriers. The difference is that the FTA format never provides that a country abolishes customs for all products. For example, the United States only proposes to cancel customs for exactly six thousand products, although there are more than eleven thousand products on custom certificates.

But this is not the main issue; the important issue is the commitment to purchase agricultural and industrial products, “quinua”, birds, timber, textiles and oil products as well as other products. Thus the TCP not only opens markets but also guarantees them for developing countries.

Q. What does manufacturing complementarity mean for the countries that sign up to a TCP?
PS. The countries that sign up to a bilateral TCP not only reduce their customs but also commit themselves to drafting a strategic plan for complementary manufacturing, mindful of the needs of both parties. This means that they plan trade, bearing in mind our markets, government procurements and credit capacities. The idea is to establish transactions, projects and/or bi-national businesses in both countries.
Linking manufacturing in this way does not form part of the FTA because it’s based on a different logic: FTAs only pave the way for competition between businesses. The TCP promotes the active participation of States in trade whereas FTAs push for the State to gradually reduce its participation. The entire TCP talks of State intervention, of coupling and marketing, because there cannot be productive complementarity if the State does not resume a central role in international trade.

Q: Does this signify that the TCP recognizes the independence of the State on sensitive issues, such as legislating on intellectual property or agriculture?
PS. The scope of the TCP is reduced because it omits all the topics that the FTA tries to regulate such as laws on intellectual property, services, competition policies, etc. In this sense, the TCP is a trade treaty for manufacturing complementarity that empowers States to regulate other issues unconditionally. The TCP recognizes that the responsibility for these issues is one of a State’s sovereign powers and that issues like health, education and financial services or drinking water, cannot be or do not have to be regulated by a Trade Treaty that obliges them to liberalize and therefore to privatize.

Q. In this entire scheme, where is the component for cooperation in the TCP?
PS. The TCP articulates trade and productive complementarity with unconditional cooperation. In principle, Venezuela is creating a 100 million dollars fund for manufacturing activities and infrastructure. Furthermore it is donating 30 million dollars to Bolivia. Venezuela undertakes to collaborate in the energy and mining sectors. This component of cooperation is accompanied by social programmes that go from five thousand scholarships for Bolivian students, “carnetización” and the Milagro Plan which consists of eye care delivered by Cuban specialists.

Q. Why is it said that the TCP gives preferential treatment to small producers?
PS. A FTA deals with trade rules that in theory can be taken advantage of “by all” but which in fact are taken advantage of only by transnational businesses. In contrast, the TCP establishes specific rules to benefit the smaller manufacturing sectors. For example, in the case of oil products, the State purchases products from small producers of soya and then markets them in Venezuela.
P. At its core, the TCP appears to be more a political than an economic agreement…
PS. Not quite: in the case of the TCP, the big country grants privileges to the smallest nation. In this case, Venezuela opens its public procurement to Bolivian providers whereas Bolivia does not do the same; Venezuela lowers its customs to zero, but we do not. Really, we speak of trade agreements to eliminate poverty as currently is announced, this is in truth an asymmetric agreement. In the WTO, the special and differential treatment for the smaller economies consists only of marginally longer time limits for implementing the same measures that bigger economies apply. After 5, 10 or 15 years all must compete on the same rules. This lacks the essence of genuine, asymmetric treatment.

Qu. How are the TCP and ALBA structured?
PS. Both have the same principles, are proposals for relationships and integration. However, the TCP is conceived an instrument of bilateral relations. It is possible to sign a TCP with India, China or with European states but ALBA is for the people of [Latin] America. Both ALBA and the TCP are under construction but ALBA will have a broader nature. Bolivia wanted TCPs with all countries including the United States and Europe. If these countries would manage to understand that it is not enough to reduce customs: markets must be guaranteed; that there is no duty to include issues of services and intellectual property within trade agreements; that the State has to recover a central role in trade and this must be backed up by unconditional cooperation. Only then would it be possible to speak meaningfully about trade agreements that reduce poverty.