From Fumigation to Free Trade The U S Andean Free Trade Agreement Chokes Along By Todd Tucker and Daniel McCarthy November 2 2004 In May 2003 the U S Trade Representative s USTR Office launched negotiations with Colombia Ecuador and Peru to establish a U S Andean Free Trade Agreement AFTA Bolivia is participating as an observer in the negotiations At the press conference announcing the launch the USTR claimed that the deal would lock in these countries access to U S markets and help them attract foreign investment 1 Unlike other trade agreements that have taken years and even decades to negotiate the USTR has announced that it plans to conclude AFTA by the end of January 2005 2 The date coincides with the initiation of a new Bush or Kerry administration It is also only a few months before the expiration of fast track negotiating authority a big reason for the rush Fast track authority allows the Executive Branch to negotiate most details of trade agreements with minimal input from Congress 3 The only Andean country not involved in AFTA is Venezuela The Ch vez government has been vocally skeptical of U S sponsored trade agreements 4 The country s exclusion makes it less likely that the Andean Community will be able to forge a common negotiating position on future trade agreements effectively reducing the leverage of developing countries opposed to these agreements Lost Decades Lost Opportunities The USTR s promises of increased foreign investment and market access are unlikely to materialize for the Andean countries given the playing field at the moment The past 25 years in Latin America have been an economic disaster marked by low rates of income growth and reduced progress on social indicators While income per person in Latin America grew 80 from 1960 to 1979 it grew a paltry 11 in the subsequent twenty years The first half decade of the 21st century seems even worse with income per person of about 1 for the whole five years 5 The vast majority of developing countries have done badly as measured by major social indicators Progress on extending life expectancy reducing infant mortality and increasing literacy rates and education spending have slowed significantly for most of these countries since the 1970s 6 The story is particularly stark for the Andean countries Bolivia Colombia and Ecuador have experienced slow or negative growth in each decade since the 1970s for Peru since the 1960s The U S proposal for AFTA is unlikely to do much to improve this situation Like most free trade agreements the most economically important elements of the proposal have little to do with the exchange of goods According to documents leaked to the Colombian media some of its main provisions would extend the period of patent protection beyond current WTO requirements and make it more difficult for governments to import generic drugs produced in third countries 7 Both measures are in essence costly forms of protectionism 8 Public health expert Jamie Brielh predicts that poverty related illnesses could well worsen if the agreement is signed which would be the the final blow of a neoliberal process that has led to the progressive deterioration of public health 9 Agriculture is also a major concern for these countries given that it accounts for much of their employment and anywhere from a quarter to half of the value of their export earnings 10 AFTA offers few benefits for the Andean countries agricultural sectors Even Peru s internationally competitive sugar industry fears that the national market will be flooded by cheap and highly subsidized high fructose corn syrup from the United States Indeed U S sugar subsidies have been a major sticking point in U S trade negotiations with Mexico and the Dominican Republic in the past 11 Americas Program Interhemispheric Resource Center w w w a m e r i c a s p o l i c y o r g A New World of Analysis Ideas and Policy Options So why then are the negotiators for the Andean countries continuing with these negotiations Rodrigo Lasso Ecuadorian milk baron and official negotiator in charge of market access expressed the objective from his point of view We will not bend or break We will force the U S to negotiate down its lavish farm subsidies because they not us are the inefficient producers Then our products will flood their markets overnight 12 This however is an extremely unlikely scenario given the power that big agribusiness has in these negotiations The general feeling among small holder groups is that their interests are not represented by large landowners like Lasso As the Venezuelan trade negotiators among the principal opponents to U S free trade agreements emphasized in their official WTO position to Indeed the contradictions within U S Andean policy have not gone unnoticed by policymakers In a letter to the U S Trade Representative congressional Republican leaders expressed concern that the proposed AFTA might detract from the war on drugs or undermine the creation of Washington s desire new non narcotics related jobs gain market access and in the region investor rights in AFTA countries may be in conflict with drug eradication goals Even if wealthy nations were to eliminate such agricultural subsidies and other aid to producers the playing field would not be leveled For this reason it cannot be demanded that developing countries do the same 13 Moreover the import market of the U S is expected to shrink over the coming decade by 90 to 375 billion 14 Countries wishing to increase their exports to the U S will on average have to displace other countries such as China or Mexico The Road Ahead U S economic policy with respect to the Andean countries faces a number of roadblocks including contradictions between different policy goals in the region For example Washington s desire to gain market access and investor rights in AFTA countries may be in conflict with the drug eradication goals of the more long standing Plan Colombia This is evident in Washington s insistence that Colombia get rid of its practice of automatically raising tariffs when the international prices of corn and rice fall a policy that affects 75 of U S agricultural exports to the country according to Reuters Nobel Prize Winner Joseph Stiglitz has argued that Colombian negotiators are right to defend their domestic producers with this policy p 2 These are poor farmers who do not have any savings If their income from corn and rice and other legitimate crops goes down they will switch to
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