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TIFA to undermine political authority

New Age, Dhaka, Bangladesh

TIFA to undermine political authority


18 February 2004

The proposed trade and investment framework agreement between Dhaka and Washington aims to establish a joint council on trade and investment by passing the political process and entrusting the fate of trade negotiations with bureaucrats.

A close reading of portions of the text of the draft agreement, touted as a route towards preferential trade deals with the United States, shows it could potentially weaken Bangladeshs negotiating position in multilateral forums.

The agreement could be used to arm-twist Bangladesh to agree on certain issues that it might oppose at a multilateral forum in a joint stand with other countries.

The agreement also stipulates that the investment agreement would prevail in case of any conflicts with any WTO agreement, stripping Bangladesh of the privilege of taking refuge in the usually softer terms of the multilateral forum.

According to the sixth paragraph of the TIFA preamble, both parties recognise that trade distorting investment measures and protectionist trade barriers would deprive the Parties of benefits from international trade and investment. It paves the way for US interests to pressure Bangladesh to remove all measures employed by the government to protect local industries.

The seventh paragraph takes into account that the agreement is without prejudice to each partys rights and obligations under any WTO agreements, while paragraph 18 desires that the agreement reinforce the multilateral trading system World Trade Organisation by strengthening cooperative efforts to successfully complete the Doha Development Agenda.

A number of countries, especially the developing and least developed countries, are opposed to a number of provisions of the Doha declaration since they would benefit the developed countries more than that of the poor ones. Bangladesh, in such a situation, would be pressured to cooperate with the US as far as negotiations in the WTO are concerned.

Furthermore, as far as US investment is concerned, Bangladesh would not be able to resort to any of the special and differential treatments accorded to it as a least development country in the WTO.

Therefore, on the one hand the treaty ensures Bangladesh is deprived of its privileges in the multilateral forum and on the other ensures that the US may further its own interests in the same forum by way of bilateral negotiations.

The 11th paragraph of the preamble acknowledges the bilateral investment treaty between Bangladesh and the United States signed in 1986.

That agreement ensures that all US investment is accorded with national treatment or most-favoured nation treatment no less favourable than that accorded to any Bangladeshi investment.

On the other hand, the treaty ensures that Bangladeshi investment in the US, in case there are any, would not be accorded that same treatment in sectors including air transport, shipping, banking, telecommunications, energy and power production, and insurance.

In a letter of transmittal to the US Senate addressed to the president of the United States, dated May 30, 1986, Michael H Armacost, retired as the president of the Brookings Institute, states that the treaty ensures that free transfers shall be afforded to funds associated with an investment into and out of the host country.

Acknowledging the treaty also rules out any scope of resorting to a more flexible dispute resolution system that might come to fruition under the auspices of the WTO. But the investment treaty stipulates that disputes will be settled by the International Centre for the Settlement of Investment Disputes.

The 14th paragraph of the preamble takes into account the need to eliminate non-tariff barriers to facilitate greater access to markets of both countries.

Once the trade barriers are done away with, the only hindrance a foreign company may face are performance requirements or satisfying certain standards to enter the market. Such policies are often put in place for the welfare of the public would have to be eliminated with the ratification of the agreement.

The 15th paragraph of the preamble recognises the importance of providing an effective enforcement of intellectual property rights the WTO agreement, TRIPs and other such conventions.

Bangladesh, as an LDC, has been exempted up to 2016 to fully implement an intellectual property rights regime. It is widely believed that the exemption would greatly increase Bangladeshs prospects to earn foreign currency in the pharmaceuticals sector once an appropriate drug policy is in place. But US interests, especially software applications, might pressure the government by way of the agreement to fully implement property rights laws with the same extent as in the United States much before 2016.

The first article of the agreement gives a cursory mention to what is touted to be the objective of the agreement promote attractive investment climate and expand trade in goods and services.

Articles two through four stipulate the constitution of a joint council and outlines its functions.

According to the agreement, the councils Bangladesh side will be chaired by the secretary for the commerce ministry, while the US side will be chaired by a delegate of the US trade representative.

The councils objectives would be to monitor trade and investment relations, to identify opportunities for expanding trade that may be appropriate for negotiation, to hold consultations on specific trade matters, and those investment matters not arising under the relevant Bilateral Investment Treaty, to identify and work toward the removal of impediments to trade and investment flows and seek advice from the private sector when deemed appropriate.

The council is scheduled to meet at least once a year, or may meet at the request of either party to consider any trade matter or investment issue not arising under the Bilateral Investment Treatyand to attempt to resolve differences through consultations before taking actions that could adversely affect trade or investment.

It becomes rather obvious that a group of bureaucrats without any notable political supervision would have to be charged with negotiating trade and investment matters. The fact that the other party happens to be the most powerful country in the world, not alien to exercising and exerting pressures on negotiators across the table, only evinces the dire implications even more.

The fifth article stipulates that the agreement shall be without prejudice to the domestic law of either Party or the rights and obligations of either Party under any other agreement to which it is a party.

It means that the provisions of the investment agreement will prevail over Bangladeshs domestic laws or any other agreements Bangladesh might be a party to.

Article six mentions that the agreement must be terminated with the mutual consent of both Bangladesh and more importantly the United States or six months from a written notice from the other party.

Anannya Raihan, a research fellow of the Centre for Policy Dialogue, told New Age on Thursday, The agreement does in fact limit Bangladeshs negotiating stand at the multilateral level.

He said Bangladesh having conceded to certain provisions regarding investment may later on be pressured to agree to similar provisions at the multilateral level. The agreement could be construed as a means of arm twisting by the US.

However, the joint secretary to the commerce ministry, Elias Ahmad, who led the Bangladesh delegation during the latest round of trade talks with the US, told New Age on Thursday that the agreement would in no way limit Bangladeshs negotiations at the multilateral forums. We may very well have different stands at two different levels.

Elias said there was no scope to interpret the agreement as a form of arm twisting by the US and that it was fully compliant with the WTO regulations and agreements.

Ziaul Hoque Mukta, theme leader for natural resources and services of ActionAid Bangladesh, told New Age, The main objective of the agreement is to set up a joint council, completely bypassing the political authority of the government.

He also said the agreements short term objective is to ensure that Bangladesh remains in the same camp as the US during the Hong Kong ministerial conference of the World Trade Organisation. The agreement not only undermines Bangladeshs leverages in the WTO, but also ensures that Bangladesh agrees to US interests at the multilateral level.