Analysis : Why say no to FTAA
Znet
Why Say No to FTAA
by Jorge Robledo
December 17, 2004
“For centuries England has relied on protection, has carried it to extremes, and has obtained satisfactory results from it. There is no doubt that it is to this system that it owes its present strength. After two centuries, England has found it convenient to adopt free trade because it thinks that protection can no longer offer it anything. Very well then, gentlemen, my knowledge of our country leads me to believe that within two hundred years, when America has gotten out of protection all that it can offer, it too will adopt free trade.”Ulysses Grant, president of the United States, (1868-1876)
As unlikely as it may seem, the very same people who defended and applied policies that led Colombia to an unparalleled crisis are still leading the country. And, as if it were of little importance, they insist that their agenda should be expanded ; and so, they claim, it is necessary, as part of their ongoing policies to sign the Free Trade Area of the Americas (FTAA) and the Free Trade Agreement (FTA) with the United States.
Therefore, any analysis about what will happen to Colombians as a result of the next step of neoliberal globalization should begin with an examination of what has happened since 1990, when presidents Barco and Gaviria, without consulting the people, decided to apply the so-called “Washington Consensus”, as defined by American strategists.
What Experience Tells Us
In the 1990’s, after decades of scarce and limited economic and social progress, -but some advances nonetheless-, Colombia, as well as the rest of the Latin American countries that applied neoliberal formulae, entered into a deep economic crisis, the worst crisis ever according to all the analysts. The suffering it has inflicted upon poor people, a significant number of the middle class and many entrepreneurs as well, is so severe that it is beyond description ; it is a painful situation about which the brevity of this text does not allow to provide details. It is a condition that is not denied by anybody in the country -not even by those who engineered the crisis. There is a contrast, though : not all the people are impoverished, because the concentration of wealth has increased among the insignificant minority that obtained profits out of this disaster, in what was already one of the most economically unequal nations of the world.
What were the fundamental causes of this economic and social catastrophe ? The end of this crisis depends on the appropriate identification of the causes, so that the right steps to solve it can be taken. The main policies promulgated by the United States government and its hatchet men, the International Monetary Fund (IMF) -the power centers that designed the ideas that Colombian neoliberals offer as their own, posing as original thinkers- fall under three categories. First, reduced protection of industry and farming in the face of foreign competition. Second, total or partial privatization of the State’s main assets and those services considered until then as a state responsibility toward the citizens. And third, the increase of advantages granted to national and foreign financial capital.
Since 1990, as some of us have warned, the so-called “opening” -of the Colombian economy to international competition- made imports larger than exports by far. Thus, it turned the national trade accounts -that had been balanced for decades- negative to the tune of $3.098 billion annually from 1993 to 1998, totaling a $18.587 billion loss, an amount very similar to the increment of the national external debt during the same period. Besides, the main Colombian exports continued to be -by far, and as they have always been- coffee, banana, flowers, oil, gold, nickel and coal, products that are exported with little, if any, processing and shipments of which have nothing to do with the introduction of the neoliberal model.
Consequently, an avalanche of agricultural imports climbed from 700,000 tons in 1990 to 7 million tons today and the agricultural sector lost 880,000 hectares of seasonal crops and 150,000 jobs. In addition the coffee crisis erupted, during which the coffee-planted area was reduced in 200,000 hectares, and production slashed by 6,000,000 coffee sacks. This crisis originates in the imposition of neoliberalism globally, which in this case handed the coffee transnational companies the power to reduce purchase prices as they deemed necessary. For its part, manufacturing industry indicators dropped at even higher rates. This is a reality unknown to many people -though it is an indisputable fact- because it has been covered up by those whose obligation is to make it known. From 1993 to 1999, the sum of percentages of the yearly Gross Domestic Product of the farming sector reached a very mediocre growth of 7.35% (+1.05 yearly average), while that of the manufacturing industry showe ! d a reduction of minus 5.9% (-0.84% yearly average). This means a notable difference between these two sectors, 13.25%, which would be larger in relative terms if the figures were given without including the contribution of transnational companies based in Colombia, since it is obvious that the hardest-hit were the locally-owned non-monopolistic factories. It is not generally known that, if the industrial and agricultural disaster did not reach higher rates it was because the lifting of protections did not reach 100%. That is to say, the average tariff of farming and livestock imports did not drop below 60%, and industry has even higher real protections.
As a consequence of the above, and as urban and rural production decreased -as did the profits of people who did not actually go bankrupt-trade and transport sectors and the rest of the economy were affected with drops in the number of companies, profits, employment and wages. Simultaneously, with the aim of extending an economic model that by 1993 had already shown that it would lead to significant social and economic regression, the neoliberals devoted themselves to collaborating with foreigners to raise dollars -unobtainable in sufficient quantity from exports- in order to pay for imports. To that end, they turned the country into the paradise for investors, bankers and common foreign speculators, who were attracted by the only thing that attracts them : profit rates higher than the ones they could obtain in their homeland. Investors were granted access to cheap natural resources and to the public services and financial sectors among other areas.
Meanwhile the public and private external debt, which had taken a century to reach $17.278 billion, more than doubled in only six years, from 1992 to 1998, when it reached $36.682 billion. The rush to stanch the collapse of the economy’s real sector collapse was carried out by inflating the purchasing power of individuals and the State by authorizing all kinds of access to irresponsible indebtedness, which fueled a great real estate speculation. Once foreign moneylenders began to resist lending more because it was obvious that commercial and payment balances were not sustainable, domestic lending rates were increased up to shocking usury levels. That was the coup de grâce for production. Unemployment skyrocketed and upset debtors’ payment capacity. Bankers themselves were swept along by the crisis ; this precipitated the 1999 economic collapse, the worst ever, according to Colombian statistics. And since none of this caused the neoliberals to modify their strategy, the commer ! cial deficit increased an additional $1.723 million more from 1999 to 2002, for a total of a $20.310 billion deficit since the beginning of the “opening” in the early 1990s. The external debt reached $39.038 billion in 2001, and the economy’s performance remains so mediocre that another terrible crisis is a definite possibility.
As the neoliberals had previously estimated, at the same time that the non-monopolistic economy was failing, the concentration of property was growing -especially that of foreign enterprises-. This happened because transnational companies made their entry into new areas of the economy, e.g. the commercial sector ; or because of the privatization of public monopolies, for example, in public services ; or because the State sold its share to its partners, as in the case of coal and nickel ; or because even the “cacaos” ( the nickname for local Colombian monopolists) had to sell several of their companies and lose some their share in some sectors, such as finance, communications and aviation.
This catastrophic picture is complete when you realize that the national saving rate, the main indicator to measure if a country’s economy is healthy or not, since productive investment depends on it, dropped to half of its 1990 level. Besides, the State is so indebted that for several years now the new loans obtained are used to pay its old debts. The State acquires those credits under the condition of expanding the neoliberal model -which constitutes the main drag on the economy. Eventually, it could happen that those loans cannot be paid off, not even by increasing taxes to the highest level for the lower and middle classes, and by reducing public expenses to almost nothing.
In a display of typical cleverness, neoliberals argue that what struck industry and agriculture was not the economic "opening" but, rather, the revaluation of the Colombian peso. Meanwhile, they conveniently forget to note that, if (a) billions of US dollars had entered the Colombian economy, and (b) if it was decided that the “market” -as the adventures of a handful of speculators are called- would have the right to set the price for foreign currencies and interest rates -as confirmed by what has happened during 2003 and 2004-, then the Colombian currency would experience a rise in its value relative to the US dollar. They also argue that it was not their neoliberal policies that caused the catastrophe, but that it was due to the high public expense and the fiscal deficit that came along. But those problems stem from the strategy of maintaining, by means of debts, an economy succumbing to the onslaught of imports, from the State redemption of banker’s debts whose holders we ! re unable to pay, and from the meager increase in tax revenues -impacted by tariffs reduction and the economic crisis- , even though a tax reform is approved every 18 months and the share of taxes in the Gross Domestic Product (GDP) increased from 7.85% to 13.36% from 1990 to 1992.
Additionally, the neoliberals claim that the crisis is also due to the payment of pensions is not valid -pensions being an issue they strain to separate from their policies- since the shortfall is due to the economic downturn which reduced wages, formal employment and tax revenues. In addition, neoliberal policies privatized social security funds, which today amount to 22 trillion pesos used for financial speculation, while the State was left the responsibility of paying pensioners.
It is worth mentioning the painful situation of millions of fellow Colombians who have had to emigrate under the worst conditions, because they found no jobs in the country. Without such huge migrations, how high would the unemployment rate acknowledged by the DANE (Colombian National Administrative Department for Statistics) be ? How much has Colombia lost by educating people that then are taken advantage of by the United States and other countries ? Yet, this is the most outrageous fact : it is the dollar remittances from these Colombians -which have reached 3 billion dollars annually- that now allow to pay the imports and the external debt that otherwise could not be paid. What a painful paradox for those fellow Colombians : it is their double sacrifice -to leave their country and transfer remittances each month- which allows Colombian neoliberals to pose as statesmen for keeping an economic model that mistreats those Colombians to the limit of their capacity.
It is quite evident that this situation originated from the main measures taken since 1999 aimed at resolving the foreign trade imbalance. The Colombian peso devaluated because of the imposition of economic realities that let the “market” set its price. Also by the decision to reduce imports and increase exports by increasing the price of the former and reducing the price of the latter, in order to balance the trade account, or at least reduce the deficit. Though not admitted, it is a known fact that the decision to make Colombians poor via devaluation, besides improving the exporting capacity by means of competing with low wages, is aimed at reducing domestic consumption in order to reduce imports, and thus avoid another crisis of the balance of payments. Thus, the Colombian economy is in a vicious circle from which it cannot escape without breaking the rules of the International Monetary Fund. If Colombia improves its overall economic situation, imports increase relative to exports, and if foreign investment in the country were increased so as to compensate for higher purchases from other countries, then the Colombian currency would revaluate. Both situations lead to a deficit in the balance of trade.
These stubborn facts confirmed what was already known : destroying national production, labor and savings and replacing them with foreign imports, credit and investments does not lead to the development of a country. Colombia, like the whole continent, has never received so much money for credit or investment from abroad, yet neither has it ever been in worse conditions. But the situation will worsen, for certain, if the FTAA or a “free trade” agreement with the United States is imposed, because these treaties tread the same road that led the country into the present absolute chaos.
The domination of the United States over Colombia which up to 1990, when the International Monetary Fund also defined Colombian economic policy, underwent a transformation after 1990. Francisco Mosquera aptly summarized the change : “(In the past) it was a cleverly disguised plundering that allowed us to have a certain degree of development, simultaneous with the pillage of the wealth of our country. Let’s say that the U.S. sucked the nectar with a certain consideration. Yet, after the "opening," the extortion became shameless, crude, lacking any consideration.”
Things being what they are, the question many have asked as to why the International Monetary Fund insists in applying a “failed” model is readily answered. As a matter of fact, a failure is taking place only if neoliberalism is deemed as set of ideas aimed at developing Colombia and Latin America. But if it is seen for what it really is, as a policy for the benefit of transnational companies and the United States, then it is a complete success. Is it not a victory for the U.S. banks and investors to have doubled Colombian external debt in such a short time ? What about increasing their own agricultural and all kinds of others exports ? Or what about buying the best of Colombia’s economic assets at a bargain price ? As we can see, everyone evaluates things from his/her own point of view. Why would former Colombian President César Gaviria criticize the very ideas and (neoliberal) deeds that changed him from a third-rate politician forgotten in the town of Pereira, into something ! of a prince in Washington, D.C.?
Why There Is No Place for Competition
The country was not able to compete against imports, neither in industry or agriculture, the same as it was not able to increase exports at sufficient rates so as to compensate for the trade deficit, just because the United States and other countries make cheaper products in many sectors. Also, the export products in which Colombia may have better chances to compete do not have markets big enough or they are saturated, which prevents them from being sold, or reduces the sale price. Other nations produce at lower prices, not because they have more intelligent or hard-working people ; rather, for decades they have developed macro-economic policies that have allowed them to attain higher levels of capital accumulation, better technologies and more productivity for manufacturers. Those producers have counted on subsidies and the support of state resources, besides multiple protection measures against competing imports considered damaging to their interests. It is no exaggeration ! to say that producers in those (developed) countries have been fed by hand by the State.
Agriculture is a well-known case. According to a recent study conducted by Luis Jorge Garay for the Colombian Ministry of Agriculture, total governmental contributions from the United States to farm producers reached $71.269 billion yearly (on average) between 2000 and 2002, while Colombian government monetary transfers to its own agricultural sector amounted to only $1.142 billion. That is to say, 62 times less, a disproportion that has lasted for decades and that accounts for the high productivity and lower costs in U.S. agriculture. That disproportion will not be reduced because, among other things, the U.S. government has already announced, with the acceptance of its Colombian counterpart, that in the FTAA and FTA negotiations its agricultural “domestic subsidies” will not be mentioned, let alone modified. These subsidies account for $54.977 billion of state contributions. According to Carlos Gustavo Cano, Colombian Minister of Agriculture, “out of the three columns that ! make up the free trade negotiations -free access to markets, elimination of export subsidies, and suppression of domestic subsidies for farmers-, only the first two points are susceptible of an agreement.” (Speech presented at the 32nd National Agrarian Congress, November 27th, 2003). Neither is there any place for illusions regarding what may happen with the rest of the U.S. supports for its agricultural products. The White House has said in every possible way that the U.S. would only negotiate agricultural supports -which is yet to be seen-, under the framework of the World Trade Organization (WTO), as long as the European Union agrees to reduce its own support for agriculture. Undoubtedly, the United States will manipulate its clever health and sanitary restrictions to block the entrance into their country of many foreign farm products deemed undesirable.
The differences regarding industrial capacity are even bigger because, in order to successfully operate and compete, that sector requires much larger investments of capital, requirements which developed countries have always supported with countless direct State subsidies. By way of illustration, suffice it to say that in 1990 the U.S. invested $510.000 billion in plant and equipment. That occurred just shortly before the year when president Gaviria was unable to raise a mere 1 billion to support the industrial reconversion with which local industry could supposedly compete in the face of the “opening” of the economy to foreign competition. If the attacks against Colombian industry were not so serious, especially since industrial advance defines the development of a country, it would be ridiculous to propose such a comparison. For instance, when you compare the evolution of the technological capacity of the United States and Colombia from 1900 to 2000, one finds that the Uni ! ted States went from making cars to making vehicles that move over the surface of Mars. Meanwhile, here in Colombia, we do not manufacture automobiles, since they are merely assembled with imported parts. Let no one be confused by appearances : the much mentioned transition from the mule to the jet airplane has been done using imported airplanes.
The truth is that to compete, Colombian producers only have two comparative advantages against foreign producers : climate and cheap labor. In agriculture climate is an advantage since neither the United States nor the other powers located in temperate zones are able to grow tropical products, which does not keep us from facing tough competition from 50 other tropical, impoverished countries. In all sectors, the minimal level of national labor costs constitutes an advantage that is sometimes not enough compared to other countries as poor as Colombia or even poorer. In addition to that, transnational companies rely on enormous technological and productive developments which allow them to seize the opportunity that neoliberal globalization offers to transfer their business to any location with wages equal or lower than in Colombia.
More of the Same Poison
For those Colombians who don’t want to deceive themselves, what the U.S. is seeking with “free trade” has been explained with exceptional frankness by its strategists. Thus, according to Robert Zoellick, (U.S. Trade Representative in the negotiations), the "FTAA will help open Latin American and Caribbean markets to U.S. businesses and farmers by eliminating barriers to trade, investment, and services, and by reducing tariffs on U.S. exports which are much higher in these markets than those applied by the United States.” And the Secretary of State, Colin Powell, stated : “Our objective with FTAA is to guarantee North American companies the control of a territory that goes from the Arctic Pole all the way to Antarctica, free access to the whole hemisphere without difficulties or obstacles for our products, services, technology, and capital.”
Thus, not unexpectedly, the decision to create the FTAA was made in 1994 by the only one in a position to make it, then President George H. Bush, a man loyal to a Henry Kissinger dictum that is truer in the Americas than anywhere else : “Globalization is nothing but a euphemism for American domination." And the Colombian government pledged to join such agreement without consulting Colombia’s people and without any analysis of its consequences. That decision was made even though it involved, and for worse, such profound changes that they can only be compared to the two main dates in the history of the continent : the conquest by European empires and the independence from their oppressive power ; this leads us to conclude that this agreement represents the biggest threat faced by the Colombian nation since 1819 when we obtained our national independence. It was almost one decade ago that it was established that the agreement is to be signed before the end of 2004 and that its app ! lication will begin in 2006. Once the respective Congresses approve it, in a permanent process of expansion, it will come into full force some ten years later, when in all American countries, (excepting Cuba), capital and goods, but not people, will be able to move as “equals and with complete freedom.”
But since during the meeting held in Miami at the end of 2003 the U.S. could not impose its most shamelessly unfair conditions on Brazil and other nations united in Mercosur, it is conceivable that, in the end, an "FTAA light "is agreed upon. That is to say, a softened FTAA that does not completely fulfill U.S. aspirations regarding the agricultural sector, intellectual property, investment, and state sector purchases. In view of this fact, the government of Álvaro Uribe Vélez -as always, a champion among Latin American submissive leaders- decided to accept from the US whatever form of FTAA Washington manages to impose. It also agreed to a separate Free Trade Agreement with the U.S. without any exceptions or limitations ; all this means that Colombia is preparing to sign agreements that exceed, in terms of potential damage to the country’s economy, the policies of the World Trade Organization (WTO). What is not lost with one treaty, will be lost with the other one, since it is provincial naiveté to affirm that with the separate Free Trade Agreement the country will do better because it will receive a privileged treatment from the White House relative to other Latin American countries.
It is well known that the pace at which tariffs on industrial and agricultural and cattle imports will be reduced until they reach 0% is being negotiated. But it is little known that the negotiations cover nine topics. Every aspect of our national life will be modified, to the point that, in practice and given the level of weight given to international agreements, what is agreed upon either with the FTAA, or the FTA with the U.S., will in effect substitute our country’s very Constitution.
In the Colombian agricultural sector, the production of cotton, beans, barley, corn, and other cereals weakened by the economic "opening" will disappear once and for all. Or will be reduced to the point of insignificance. And the same will happen with the production of rice, which up to the present has suffered less, thanks to the brave struggle of its producers. All or many local producers of sugar, potato, pork, chicken, beef, milk, eggs and African palm tree will also suffer until they are completely ruined. This is so simply because the survival of production in those branches is predicated on the existence of significant protection (such as import tariffs, import quotas and other mechanisms) that they still have but that will disappear in the time limit agreed upon. And with regards to coffee, Colombia could also suffer because of competition from imports originating in other American countries, because of the complete takeover of the marketing of Colombian coffee by transnational companies, and because of the elimination of support prices for local producers. Then, the “best possible negotiation” that the neoliberal demagogy offers to attain consists merely in providing a sequence to the bankruptcies : who will go bankrupt in 2006, who in 2009, and so the “winners” will be those who disappear around 2015. Furthermore, it would be very strange if the criteria for the negotiation did not include the immediate elimination from protection of rural production and that of small and medium entrepreneurs, leaving for later large production sectors and monopolies, a form of privileged treatment already used during the "opening" of 1990.
It is not too much to add that the echeloning of the bankruptcies is not due to an act of U.S. generosity act. Rather, it only shows that even such a powerful nation needs some time to adapt its productive apparatus to increase exports and, second, that by the sequencing of bankruptcies, the U.S. is dividing the forces of those sentenced, thus complicating the formation of a large and strong general movement of civil resistance that could spoil the game for the U.S.
As if it were a great opportunity for the farming-and-cattle sector, domestic neoliberals offer to compensate the serious losses that these agreements will cause by recommending that the agricultural sector should specialize in tropical products, i.e. coffee, banana, cocoa beans and, lately, pitahaya, uchuva, chontaduro and borojo. This suggestion attempts to take advantage of the ignorance and naiveté of people. In the case of products that have external markets of some importance, like coffee, such markets are saturated ; and for other products the number of buyers turns out to be insignificant considering what meaningful export levels would need to be ; we have to add that such markets would have to be fought over, by means of low prices, with many countries, including Mexico and Central America, which have the advantage of being thousands of miles closer to the North American market. This anti national proposal -even if it were feasible in the amounts sufficient to make up ! for losses and if we ignore the economic and social devastation that even in such circumstances will accompany it- will also affect industry and the other economic sectors. It will leave Colombia unable to provide for its national food security, exposing the nation to blackmail by transnational companies and those countries from which the food would have to be bought to cover the basic diet of the nation.
Even the aggressive chief of the fashionable globalization admits that food security (i.e. that the basic diet of a nation should be produced in the respective nation) is not a worthless idea as domestic neoliberals say. In fact, George Bush Jr. once said : "It’s important for our nation to grow foodstuffs, to feed our people. Can you imagine a country that was unable to grow enough food to feed the people ? It would be a nation that would be subject to international pressure. It would be a nation at risk. That is why when we talk about American agriculture, in fact we are talking about a national security issue." And, if this is said by the one who has more than enough weapons to go and get food or whatever he wants from anywhere in our planet, what should Colombia say ? Besides, it is obvious that U.S. official thinking is not limited to the defensive attitude expressed in the quote, since they are aware that food can also be an instrument of aggression, even military, as it ! has been used in no small number of occasions since ancient times. According to Jacqueline Roddick, in her book The External Debt Deal, a U.S. Associate Secretary of Treasure explained that to attain certain goals of the empire, “in many countries, even food imports would be restricted.”
For those who think that, on account of its monstrosity, this cannot be the future that is being planned for Colombia’s agriculture, it would suffice to read what is written about it in Plan Colombia[2]. Or what Rudolf Hommes Rodríguez wrote in the Colombian newspaper El Tiempo on October 18th, 2002. In his statement this consultant-for-hire -and Álvaro Uribe Vélez’s main economic advisor- pointed out that “subsidies given by rich countries should be taken advantage of to better feed the local population, increasing by means of imports” the purchasing power of Colombian people. That it does not make sense to produce wheat because it is better to buy the one that Americans sell with the help of subsidies. That "the same is true for most cereals and grains”. That “we should let the country import what we do not produce at a reasonable price”. And that “the greatest profit of trade comes from imports and not exports, as domestic mercantilists have mistakenly accustomed us to th ! ink.” In the same article he did not hesitate to write that the loss of some crops will be replaced with “other crops that do not grow in rich countries with temperate climate", e.g. crops such as asparagus, palmetto, yams, vegetables, fruits, rubber, plantain and casaba, plus some farm stock items.
Ruin is also around the corner for what is left of Colombian industry, because it has even more effective protections than the agricultural sector. For instance, the main automotive imports must pay, at the lowest, tariffs at a significant 35%, which is like advertising that with such agreements auto assembly plants and automotive-part factories that provide them with low-technology parts will be shut down, since, as mentioned above, the purpose is to reduce tariffs to 0%. That this is not an exaggeration of those of us who oppose the FTAA and a Free Trade Agreement with the U.S. was confirmed in El Tiempo on December 1st, 2003 by the very Colombian Minister of Trade, Jorge Humberto Botero Angulo, the only spokesman of Uribe’s government in the negotiations, when he categorically stated : “It is senseless that we continue making cars.” And if this boldness is expressed with regard to a sector in which strong investments of local monopolists are involved, what does he think ab ! out small producers, whose interests lack representation in the Colombian State ?
Those Colombian industrialists that are currently exporting should not entertain false hopes. The FTAA, or the FTA, implies that they will lose the advantages that make their sales possible within the Andean Community, where 49% of the shipments of local manufactures exported to the hemisphere went in 2002, that is, two and a half times more than those shipped to the U.S. They will also lose the advantages given by the ATPDEA (special treatment to Andean countries) in the U.S. market, since the U.S has already granted similar ease of access to Central American countries, China and other Eastern countries. These countries of course are formidable competitors to Colombia on account of their powerful factories and labor costs so low as we cannot possibly match. And the few industrial firms who will manage to survive by turning themselves into subcontractors of the transnational companies that come to Colombia cannot dream of a better future, either. Those transnationals usually ! require their maquila ’partners’, at the time they choose them, to agree to accept meager profits and short-term contracts, as well as to subjecting their workers to iniquitous labor relations. So iniquitous that frequently they can only manage to impose them on single women head of households, which constitute the weakest sector of the working population.
And the so-called services—economic sectors that should be wholly or partly generated where they are consumed, reason why they cannot be imported in the same way as farming and industrial goods- will be increasingly taken over by foreign capital, as shown by the 14-year experience of neoliberalism in Colombia. To know that will happen, we only have to remember what happened with the financial sector, trade, telecommunications, infrastructure construction, and health, for instance.
Thus, it is not surprising that according to the first study on the impact of a greater "opening" carried out by the Colombian National Department of Planning -at a late date, July 2003, which also shows the irresponsibility with which decisions are made in the country-, “among the sectors in which the U.S. has competitive advantages that very likely, with the elimination of the tariff protection, would affect domestic production we find those involving the making of machinery and equipment, wood, some food, textile threads and fibers, some chemical products, oil and coal sub products, rubber and plastics, as well as metal manufacturing in general.”
So clear are the dangers, that the same study acknowledges that imports will grow more than exports : with the FTAA, imports will increase 10.07%, while exports will increase 6.30% ; and with the FTA the rate will be 11.92% against 6.44% respectively.
But since the study carried out by the National Department of Planning also shows that, despite the increase of imports relative to exports, the ’welfare’ of Colombian people will increase a ridiculous 0.79% or 0.23%, depending on which agreement is signed, an explanation becomes necessary. And they do so by means of a statement that unmasks them because it shows that all the strategy, no matter how you look at it, points to foreign capital as the main beneficiary. In the same study, they state that “when we consider the effects of the larger foreign investment attracted by the "opening" of the service sector, profits arising from the bilateral agreement (FTA) and the FTAA are evident”, which amounts to acknowledging that losses for national industry and agriculture will also be ’evident’, to use their words, and that foreign capital will take over the businesses not ruined by imports, in other words, health, education, trade, construction of infrastructure, telecommunicatio ! ns, public services, and finances. It is so true that American financiers will receive the benefits of the deepening of the "opening" planned by the neoliberals, that even the expected increase in Colombian exports would originate in their businesses. In this respect, Jorge Humberto Botero Angulo himself explained that the greatest advantages that will be given to foreign investment aim at “generating exports mainly to the U.S., and at generating structural changes in the export basket” (El Tiempo, November 23rd, 2003).
Of course foreign capitalists will invest - although perhaps no in the amounts domestic neoliberals are dreaming of : international capital scarcely places in Colombia less than 0.4% of the foreign direct investment annually made in the world, so that the owners of foreign capital may have other ideas of their own-, provided the government guarantees investors more acquisitions of national wealth at a lower price, very cheap natural resources, lower or non-existent taxes, private courts outside Colombia to solve conflicts with the State and individuals and, specially, low labor costs (in wages and benefits, health, and pensions). Otherwise foreign capital will not stoop to investing in Colombia. What the U.S. is seeking in the Americas, then, is no less than snatching the national productive apparatuses from 33 countries and selecting, in every branch of business, the one willing to accept the worst conditions, in exchange for the ’benefit’ of the investments of U.S. monopoly ! giants.
Once the idea that Colombia could compete if producers’ creativity and self esteem were improved, as suggested in the 90’s, proved to be ridiculous, neoliberals moved from demagogy to insolence. Now, as pointed out by Mr. Hommes, they justify the FTAA or the FTA with the U.S. by stating that greater imports benefit ’poor’ people because they cheapen their purchases and that those defending protection are the ’rich’ people of the country, who want to continue abusing of its ’inefficiency’. They intend to hide that the increase in imports will hit first the small and medium producers, both rural and urban, who by definition are in worse shape than large producers when foreign monopoly competition. They do not say that when an entrepreneur is ruined those who suffer the most are his workers, who become unemployed. They deny the general truth that the purchasing power of a nation depends on the amount of wealth and well-paid employment it can generate. They do not mention that d ! ecreases in imported-goods’ prices will ruin national production but they will not benefit buyers, since such decreases will depend on the free will of the monopolists controlling the imports. And they rarely mention that the elimination of tariffs on foreign products -whence supposedly goods’ lower costs originate- will be accompanied by a similar increase in taxes for Colombian people -higher Value Added Taxes. This increase the government, according to the National Planning study cited earlier, estimates at $806.5 or $590.6 million dollars per year, depending on the agreement signed ; this means that current taxes that benefit national production will be eliminated and replaces with taxes that favor foreign production.
The Greatest Deceit
The greatest lie of neoliberal theories is the suggestion that “countries develop by exporting”. If that were the case, Colombia would be more developed than the U.S. and Japan, given that their exports as share in the GDP- which is the relevant statistic— amount to 18% (Colombia), 10%(U.S.) and 11%(Japan). Other figures show that some of the greatest exporters in the world, relative to their GDP, are poor African countries, like Angola and Equatorial Guinea, whose sales to other countries represent 93% and 97% of their GDP, respectively. Indeed, the very history of Colombia shows that there is no automatic relation between greater relative exports and greater economic and social progress. Or, in any event, it is the opposite of what neoliberals argue. As José Antonio Ocampo states in his book La historia económica de Colombia (The Economic History of Colombia), between 1945 and 1949 Colombian exports represented 21.6% of the total GDP, percentage higher than the current on ! e, and it is obvious that all economic the indicators at that time were worse than the current ones. In fact, if someone took the trouble of going further back he would undoubtedly find that during Spanish colonial times exports of precious stones and metals came to represent about one hundred percent of the GDP of the New Granada. The above shows that the statement “welcome to the [neoliberal] future”, pronounced by César Gaviria, represents in reality a regression to a our past -something which is really old news by now.
And what happened in Mexico, whose exports after the FTA with the Americans and Canadians increased substantially from $51.900 billion in 1994 to$160.700 billion in 2002, also shows the feebleness of this theory.
When looking at the entirety of Mexico’s economic and social indicators, Mexico’s performance is clearly as mediocre as that of countries where some people dream of "pie-in-the-sky" while using Mexico as example of success. It also well to remember that Mexico is better located than anyone else in the world in terms of potential success via with the neoliberal model of exportation, given its proximity to the U.S.
A single economic indicator is enough to illustrate the complete failure of globalization in Mexico as strategy favorable to authentic progress : the average rate of growth of the GDP per inhabitant during NAFTA (1994-2002) has been of just 0.96%, the lowest one reached when compared to all the strategies of growth followed by that country in the 20th century.
The experience of Mexico shows why neoliberal globalization does not develop the underdeveloped countries of the world. Available figures help explain that the increase in Mexican exports is largely the consequence of oil price increase (oil that for decades Mexico has been selling in abundance to the United States), and of the export business of manufacturing plants from American transnational companies located on the U.S.-Mexico border. In terms of the latter 97% of inputs other than labor costs that the so-called “maquila industry” uses are imported from the United States, and to the U.S. go most of its exports. Mexico’s wide "opening", too, destroyed a considerable portion of its productive apparatus, and at the same time replaced it with foreign investment using only very low paid labor as the only significant domestic input. It will not be possible to increase such low wages (given the pressure exerted by the similarly low wages of other countries) as long as the Ameri ! cans sign new “free trade” treaties and install more of their factories in other latitudes, as has been occurring and will continue to occur.
Thus, it is evident and not only in Mexico, that the exporting strategy imposed on the neocolonies of neoliberal globalization consists, on the one hand and as supposedly a novelty, of assembling manufactures for transnational companies and, on the other hand, continuing with the old colonialist strategy of specializing in agricultural products and mining raw materials which are sold overseas with very little or no national added value. These raw materials, in addition, are completely or partly marketed and even produced by the monopoly corporations of the powerful countries. This can be confirmed in Colombia by looking at the numbers that show the increase, since the "opening", of the industrial exports made by the multinational companies installed in the country. The same goes for the cases of the coal, nickel, flower and banana sectors, in which the weight of foreign capital in production and trade has increased. The greatest profits of those businesses are made by adding ! value to them and by retail sales, which inevitably happen in the metropolises.
In addition, the supposed notion of reciprocity is absolutely unacceptable since such a concept entails U.S. devastation of a large part of national agriculture and industry, in exchange for having Colombian coffee and bananas or its coal and oil bought by the United States. Obviously those American imports do not cause any damage to the U.S. economy and, as everybody knows, they rather generate big benefits to their monopolies. Unless one accepts the logic of the coarsest imperialist blackmail, there is no place for a proposal that to be able to sell them, for example, coffee, it is necessary to eliminate corn cultivation. Or that if Colombia wants to sell coal, it is necessary to sacrifice the Colombian pharmaceutical industry. If the FTAA and the Free Trade Agreement are about converting the extortion of the powerful countries against the weak ones into international law, why doesn’t the Colombian government denounce it publicly ? How to explain that such treatment is tota ! lly rejected when it happens at the interpersonal level but quite proper when it happens among countries ? Because it is one thing is to be forced to do something under the threat of a gun and something very different to accept undesirable things with complete meekness. In addition, it is very important to distinguish between the victims of dispossession and the accomplices in the act of dispossession.
It is evident that, unless theories and facts used to justify the neoliberal globalization are manipulated, the only true common denominator, the key to progress, in all countries with levels of natural resources and population like Colombia that have managed to develop has been the development of a strong internal market -regardless of the level of exports. That is to say, they have increased in a significant way the purchasing power of their population so that it supports a powerful productive apparatus dedicated to meet national consumption, which in addition creates conditions for an export surplus. Does anyone deny that the main foundation for the enormous productive and competitive capacity of the United States is also based on the immense purchasing power, bordering on waste, of its citizens ? In addition, an exporting strategy as a supposed key for progress does not only not lead to development but also implies the most backward relations between capital and labor tha ! t can be imagined in a country. Since foreign businesses, not national capitalists, are the ones who buy from exporters, the former are only interested in relating to the local population through the misery wages that support their external sales. Because if they cannot realize their sales by relying on starvation wages, they will be displaced by producers from other countries who can. This leads to a global competition through hunger wages and to a world in which informal employment is imposed on the legions that will not be able to join the import and export businesses and the so-called services that the monopolies offer. To those who say that the external market should be more important because the domestic one is very weak, we say : stop importing what can be produced in Colombia, and a market will be created ! Raise the purchasing power of the thirty million Colombians who languish in poverty and misery, and a market will be appear !
The emphasis on the importance of the domestic market as the key to the development of Colombia must not be understood as a search for an autarkic development that rejects international economic relationships. Not at all. It is obvious that what Colombia does not produce, and is needed for national development, must be imported. Likewise, exports and even foreign investments are welcomed. But any relationship, of any type, with foreign capital must be based on mutual respect and reciprocal benefit, starting from a very strict requirement of respect for national sovereignty, so that things are beneficial for the development of each nation, or what is the same, allow the possibility of building a strong domestic market —a notion that must also be the basis on which to carry out any economic integration project among the nations.
The FTAA and the FTA with the United States go beyond opening doors wide to imports. It also includes another series of objectives, all of them beneficial to the US and against the possibility that the Colombian State, by means of its policies, may support the development of the national production. One objective is to reform the intellectual property system, so that transnational companies can consolidate their monopoly and monopolistic prices adversely affecting national entrepreneurs and workers. It would mean higher prices to the consumers, which, in the case of pharmaceuticals, could reach 770 million dollars annually, according to studies by Fedesarrollo (Colombian Foundation for Higher Education and Development). The chapter (of the treaties) on public sector purchases aims to prevent governments, by means of guidelines, from establishing preferences for national companies in terms of large governmental purchases and contracts. With this, an instrument that has been o ! f common use throughout the world to the benefit of national producers in their competition with foreign firms, would be lost. A similar purpose -the elimination of an instrument of local economy policy- can be found in the chapter that deals with investments, access to markets and services. It is well-known that a key instrument in countries that have been successful in economic development has been to reserve certain sectors of their economies for local investors, as well as to impose conditions on foreign investment. Not any more if these treaties are agreed to. With regard to the resolution of disputes between individuals and the State vs foreign capital, it is sought that they not resolved by the judicial systems of each country, but by international arbitration courts, designed for the obvious benefit of transnational companies. Regarding competition policy, the Americans want absolute equal terms between national and foreign capital, which implies an extraordinary disadvantag ! e for Colombian capital, considering the likewise extraordinary inequality between the parties. And the chapter on subsidies, antidumping and compensatory rights seeks -although the United States already warned that it reserves the right to maintain enormous support to its producers- weakening even more the capacity of already weak nations to defend their internal markets.
As that is how things are, Colombia will also suffer the same fate with either the FTAA or the FTA, since it is clear that it is the same policy initiated in 1990, but elevated to the nth power. This implies the complete privatization of education, health and public services, sectors that, once and for all, will be converted into common businesses to satisfy with voracity of foreign capital. In addition, it is necessary to warn that the Uribe Vélez government is anticipating the agreements it has decided to sign, by making changes to present internal norms. Uribe already announced that he will present again to Congress the bill denied in the 2003 legislature, which established international arbitration courts to settle conflicts with transnational companies. And as a part of the same policy, Uribe also wants to divide the Empresa Colombiana de Petróleos (Ecopetrol) (Colombian State Oil Company) into three parts, extend association contracts until wells are fully depleted, an ! d return the country to the old business of colonial concessions to foreign oil companies.
Recolonization and its Beneficiaries
What we are witness to is not a project designed to integrate the economies of the hemisphere. Rather it is a plan for the annexation of the weak Latin American economies by the very powerful American economy. This process has been going on for about a century, and the relationship of Colombia and other Latin American countries with the United States looks more and more like that which our countries had with Spain and points toward a complete recolonization of the continent. When we compare the FTAA and the FTA with the European Union -although the latter is not exempt from criticism- we note three enormous differences in the integration agreements. The Europeans took fifty years in negotiations and changes before concluding it, even though there were smaller relative differences between the countries involved. Whereas in the Americas, the United States wants to impose an agreement in much less time. In the European Union, one common currency for all the countries was create ! d. But in the Americas, the agreements will be based on the dollar, which increases the advantages for the large American multinational monopolies. In Europe, they agreed to the free flow of people which demands a certain economic balance between the members in order to prevent massive migrations from some countries to others. But the FTAA and the FTA exclude that possibility, meaning that wealth will concentrate in the United States, and poverty will concentrate south of the “Rio Grande”. The only Latin American people able to migrate to the empire will be those the US needs who, made desperate by the conditions caused by neoliberalism, accept the worst jobs and lowest wages, effectively pushing downward labor conditions and wages in the U.S., and thus also contributing to the success of U.S. multinationals.
It is so evident why the US decided to impose the FTAA and the FTA that little explanation is required. Suffice it to add that its instinct for overpowering rivals is accentuated by the serious economic difficulties it confronts. Also by the paradox that the globalization it has forced upon the world sinks its own economy even deeper into the same crisis in which, with interruptions, it finds itself for decades by now. The reasons Latin American governments that have decided to sign on to these agreements, without taking into account the obvious disadvantages they entail, are also discernable. The secret is revealed when it becomes clear that the social classes that control economic and political power in these countries are the same that have always benefited from the unequal relationships with the North American finance capital . Or that at least managed to distance themselves from the worst outcomes of that relationship. Such sectors, however, are increasingly smaller as a consequence of the new situation that emerged with the changes occurred in the last years. At this juncture, many of those who enjoyed favorable conditions in the previous period are being hit or eliminated. The same is especially true for all those who did not manage to amass fortunes of monopolistic level, though big dangers also lie ahead even for those who did manage to.
Letting euphemisms or timidities aside, it is necessary to denounce that in Colombia there are social sectors that managed to separate their fate from the nation’s fate. For example, people associated with foreign capital, Colombians who work as high representatives of about fifty transnational companies that operate in the country, or the technocrats of the international financial organisms. People who live "high on the hog" although the country suffers huge problems or, even better put, folks who do better when the nation is worse off. As Mariano Ospina Hernández (well-known leader of the Colombian Conservative Party) explained, what the Americans want is equivalent to a fight between a bird and a ripe guava, in which, “to make the situation worse, the ripe guava has in its interior bird’s friends who surely hope to gain the benevolence -and perhaps some consultantships- from the USA-bird.”
Neoliberal globalization represents a further step in the evolution of capitalism including the relationships among the entrepreneurs, a system of ferocious competition that seeks to eliminate competitors thereby reaching a monopoly status that generates the highest possible profit. From this, it can be deduced that relations among the capitalist countries also have competition as their main aspect. For that reason, there cannot be a worse spokesman for a nation than a person who negotiates in its name but represents foreign interests or is subjected to them. This is what has happened in the meetings where Colombia has defined its position regarding the FTAA or the Free Trade Agreement. Here, national and foreign capital is not even distinguishable, as representatives of transnational corporations that operate in Colombia attend these meetings on equal terms, as if they were spokesmen of the Colombians.
Eugenio Marulanda, president of Confecámaras (Colombian Confederation of Chambers of Commerce), who was present at Uribe Vélez’s meeting with Robert Zoellick, U.S. Trade Representative, in which it was decided to sign the FTA, correctly summarized the attitude of pathetic submission that characterizes the negotiations between Colombia and the United States. Recalled Marulanda : "Whoever has the gold sets the conditions... That was what Zoellick did. To say : OK, the agreement is signed, but we set the conditions. Take it or leave it" (Colombian newspaper : El Espectador, August 10th, 2003).
Well, then, minor or major partners of foreign capital, as well astheiremployees and commission agents —or to those who hope to become one of them -because of their inability to defend the neoliberal economic model as a strategy for progress, were left with its presumed "inevitability" as their most forceful argument. In so doing, they fulfill the mission of repeating the same old story introduced by U.S. ideologues. The latter know that this new step in the building of their empire will be fought out, first of all, in the field of ideas, because nobody is more defeated than whoever refuses to start out by saying No ! Meanwhile official spokesmen chime in about "inevitabilty" in an effort to fool unwary people. They proclaim that "it is necessary to enter[into the agreements]", without being able to show what the benefits might be. There are also those who think that "they may get a good deal", an idea that originates from the knowledge or supposition that it will be other ! s who will suffer the worst consequences. And there are some wimps that do not say anything about the disaster that they know to be impending, with the dream of getting a space in the bus of imperialism though it may be by hanging on to the license plate in the rear.
The entire Colombian nation -workers and employees of all kinds, peasants, indigenous peoples, craftsmen and rural and urban entrepreneurs affected in a direct way by the neoliberal globalization, or other people with patriotic feelings- must reject with a single voice the FTAA and the FTA with the United States, because such policy, as we have seen, can only aggravate the lot of suffering of Colombians and move away the moment in which, with a different economic vision, an authentically democratic and prosperous country could be built.
Now more than ever it is very important to understand that the main lever of economic development has always been politics, in this case understood as the importance that nations must give to the full application of their sovereignty over their the territories, as well as in their international relationships. Sovereignty is the only thing that, by means of a multiplicity of decisions, can prevent the huge economic power of empires and their monopolies from devastating production in weak countries and their development and progress possibilities. Without independence from Spain, Colombians would have little or nothing today. The relative development that Colombia has attained from that time on is explained by the fact that the State, by means of tariffs and many other protection measures and stimuli for development, facilitated the growth of national production. Let nobody get his/her hopes up : if there is to be a country without future, it will be a country that ties its des ! tiny to the tricks and misdeeds of transnational corporations and their empires.
Bogotá, March 15th, 2004.
[1] Jorge Enrique Robledo Castillo, Senator for Unidad Cívica y Agraria-MOIR (Civic and Agrarian Unit-MOIR), holds a degree in Architecture from the Universidad de los Andes. He was a professor at the Universidad Nacional for many years. This institution granted him the Orden Gerardo Molina, the highest prize awarded to its faculty. Mr. Robledo also won the Prize of the 17th Biennial of Architecture in Theory, History and Criticism.
He has published several books including, El drama de la vivienda en Colombia (The drama of housing in Colombia), La ciudad en la colonización antioqueña : Manizales (The city in the Antioquenian colonization : Manizales), Lo que oculta la privatización (What privatization hides), El café en Colombia (Coffee in Colombia) and www.neoliberalismo.com.co. In addition, he writes articles for several Colombian newspapers : La Patria (Manizales), La Tarde (Pereira), El Nuevo Día (Ibagué), Tribuna Roja and El Usuario.
Senator Robledo was the founder and coordinator of Unidad Cafetera (Coffee Alliance), Executive Secretary of the Asociación Nacional por la Salvación Agropecuaria (National Association for Agricultural Salvation) and Advisor to the Liga de Usuarios de Servicios Públicos of Caldas (League of Caldas Department of Domiciliary Public Services Users).
[2] The Plan Colombia states : "In the last ten years, Colombia has opened its economy, traditionally closed... The agricultural sector has undergone serious impacts since the production of some cereals such as wheat, corn, barley, and other basic products like soy, cotton and sorghum have been less than competitive in the international markets. As a result of this process - which is continuing- 700 thousand hectares of agricultural production have disappeared due to the increase in imports during the 90’s. This has had, as well, a dramatic impact upon employment in the rural areas". And it concludes : "the dream of a modern agriculture in Colombia has progressed at a very slow pace, since the permanent crops, in which Colombia is competitive as a tropical country, require of investments and substantial credits since they are late yield crops." (Italics in the text).
