Trade at any price?

A short insight in the EU - Latin America Agreements

In the coming days, the European Parliament will decide to ratify, or not, the controversial Trade Agreements subscribed with several Latin American countries. A large proportion of civil society has expressed its concerns about these agreements arguing that they could represent a danger for local economy, sustainable development, food sovereignty and access to water and other essential resources for Latin America.

By Jürgen Klute* and Viviana Viera**

While Trade between nations can offer benefits to its respective populations, the Free Trade Agreement (FTA) between the European Union (EU) and Colombia and Peru and the Association Agreement (AA) between the EU and Central America[1] (CA) elicit strong criticism from NGOs, European and Latin American (LA) Trade Unions, indigenous communities and several political groups in the European Parliament.

These organizations denounce the fact that the agreements were negotiated without any previous consultation of civil society and in a difficult context of Human rights violations. For example, Colombia is the deadliest country in the world for union activists and, in post coup Honduras, murders and death threats against HR defenders are now common place. Perhaps this could explain why the LA governments have accepted to sign such asymmetric agreements (by signing partnerships with the EU, some governments may have been looking to "acquire" respectability in spite of their dire Human rights record) as if the fact that the size of their economies being many times smaller than that of the EU (150 times in the case of some CA countries) almost didn't matter.

With such different economy development levels between the two regions, and in order to guarantee a balanced trade, the only logical way would have been to regulate trade. But the trade agreements plan the exact opposite: the "liberalization" of the markets. With the removal of the "technical obstacles to trade", opening of public procurement markets, the EU services suppliers, which have a large competitive advantage, will have access to LA markets on the same terms as local services suppliers, blocking the policy options of these countries to support local services suppliers and promote their participation in domestic and intra-regional trade[2]. The Trade Sustainability Impact Assessments[3] showed that the AA/ FTA will bring about negative effects for Central America, Colombia and Peru in terms of output and employment in the services sector and the economy could be widely affected.

Moreover, the AA/FTA also affects the financial sector in a way that the agreements could export the crisis to the other side of the Atlantic. The AA/FTA were negotiated before the financial crisis occurred, and the inclusion of rules that aim to ensure free movement of capital and liberalization of investments, transfer and payments without restriction, tend to show that the roots of the financial crisis are absolutely not addressed. It's very contradictory indeed to see that while in the EU we are fighting against financial speculation, at the same time the EU Commission is promoting agreements which prohibit maintaining or adopting measures and domestic regulations in the financial sector. A new report[4] on the financial chapter of the FTA with Colombia and Peru concludes that the FTA gives no assurances on fiscal control, such as mutual cooperation in monitoring capital flows, which could reveal the impact of these new liberalization measures or detect flows of illicit money. In fact, there is a great risk for Europe that the criminal capital will not help to solve the European crisis, but will most probably make it worse.

Instead of diversifying the exportation of manufactured products from the region, the removal of restrictions on Foreign Direct Investment will undoubtedly lead to further increases in production of profitable and often polluting sectors such as mining, energy and agrofuels[5]. This could bring about important changes in land use patterns and increase pressure on land and water resources while limiting the possibility to diversify the food production and therefore putting food security even more in danger than it currently is. To sum up, it is an understatement to say that we cannot assure that the AA/FTA will contribute to the priorities for EU development cooperation or the Millennium Development Goals or any kind of sustainable development. To the contrary, the agreements promote the very same liberalization model that has been the root cause of recent and past crises, putting in danger not only the economy but also the access to essentials resources for local populations. And as we know, scarcity of resources is an important source of social conflicts and of the repression and human rights violations that follow them.

As was the case with the recently rejected international trade agreement "ACTA", the ratification process by the European Parliament of those two new Agreements with LA does not allow MEPs to change or amend the agreements; they can only give their consent by simple majority on a "take it or leave it" basis.

* Jürgen Klute: German member of the European Parliament for the party Die Linke, which is part of the group European United Left / Nordic Green Left (GUE/NGL). Jürgen Klute is the coordinator for his group in the Committee on Economic and Monetary Affairs and member in the Euro-Latin American Parliamentary Assembly.

** Viviana Viera-Giraldo: Advisor of MEP Jürgen Klute in Latin-American and Development issues. Viviana Viera is a Colombian economist graduated from the University of Sorbonne in Paris, with a specialization in cooperation and development.

[1] The Association Agreement was signed between EU and Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama

[2] Analysis report from NGOs: EU Trade Agreements with Central America, Colombia and Peru: Roadblocks for sustainable development. 2011

[3] Commission services position papers on the Trade Sustainability Impact Assessment of the Association Agreement between EU-Central America and EU-Andean Community.

[4] Study "Free Trade Agreement EU – Colombia & Peru: Deregulation, illicit financial flows and money laundering" by the Center for Research on Multinational Corporations: http://www.guengl.eu/upload//FINAL_CETA illicit financial flows for KLUTE 5 12 -3(1).pdf

[5] Study: Biofuels mandate could increase EU CO2 emissions. ICCT report 2012.