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What’s wrong with free trade agreements

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Free trade agreements (FTAs) and bilateral investment treaties (BITs) are often described as instruments to promote international trade and foreign direct investment. More precisely, they can be seen as tools for transnational corporations to push their interests at the expense of people and the environment.

From the late 1950s into the 1970s, a wave of BITs were signed to protect the property of businesses in the former colonial powers from the governments of newly independent states. Companies argued that investment protection was needed because the rule of law was weak in many of these territories. They wanted protection against expropriation – that is to say, the taking of their private property by the government for any purpose, including the public interest. Another major wave of BITs was signed in the late 1980s and 1990s around the time of the demise of the Soviet bloc, and the dominance of free market capitalism across the world. Today, there are more than 3000 BITs in force.

With expansive definitions of “investment” and wide-ranging provisions to protect foreign capital, BITs help to protect and promote hazardous mining projects, land and water grabs and infrastructure development which wreak havoc on local communities and the environment. BITs usually include the controversial investor-state dispute settlement (ISDS) mechanism. This enables companies from one party to sue the government of the other party, if they deem that new laws or regulations negatively affect their expected profits. The mechanism relies on arbitration rather than public courts. About 1000 investor-state disputes have been brought against governments by corporations around the world.

FTAs are much broader agreements. They aim to promote global trade not only by lowering tariffs but also by addressing so-called non tariff barriers (i.e. norms and regulations), in order to boost trade in goods and services. These may be rules around workers rights, competition policy, public procurement regulations or patent laws. They also incorporate rules on investment, like BITs. The first modern comprehensive FTA was the North American Free Trade Agreement (NAFTA) which took effect in January 1994. Since then, FTAs have taken off as key tools to make business more profitable for transnational capital and to build political and economic coalitions among states. Today, there more than 250 comprehensive FTAs, locking countries into broad commitments that go far beyond what is agreed to at multilateral fora such as the World Trade Organisation.

Social movements have been resisting and fighting both FTAs and BITs since NAFTA. Because they are so broad in scope, they tend to threaten and mobilise a wide range of communities from teachers or farmers to students or union workers or environmentalists. In some countries, social movements against FTAs have nearly brought governments down.

Key concerns that mobilise people include :

  • FTAs are negotiated in secrecy away from public scrutiny, even though they affect broad domains of people’s lives such as food, health, labour and the environment.
  • FTAs are often used by corporate agribusiness to force open markets for their agricultural products and to target non-tariff barriers like product standards that relate to food, which seriously impacts the lives of smaller farmers and consumers. For example, trade deals are often used to try to open countries to GMOs.
  • Major powers such as the US and the European Union push other countries to adopt their own standards of intellectual property, which have been largely written by corporate lobbies. Hence FTAs force countries to : extend protection for branded drugs, hampering the availability of affordable generic medicines ; draft laws granting monopoly rights over seeds to transnational corporations and other institutional plant breeders, as well as industry-friendly animal and fish breeding regulations, effectively forbidding farmers to save seeds or reproduce fish breeds or livestock ; patent computer software, to the detriment of local programmers and the creative open source movements ; or clamp down on alleged piracy of popular consumer goods, even when no copyright infringement is committed
  • FTAs further undermine labour rights, social welfare, healthcare and education by targeting social standards and market regulations that have traditionally served to limit the power of transnational corporations.
  • FTAs lower governments’ regulating capacities, thus affecting national sovereignty. So-called regulatory cooperation, included in many deals, grants corporate lobbies extended powers to influence policy making by providing their input when a government intends to strengthen public policies. Governments might also have to conduct regulatory impact assessments, justifying the “need for a regulation” and exploring “feasible alternatives” before proceeding. Signatory states are often required to inform each other of policy changes and give each other a right of regard into each other’s policy-making processes. This is frequently done through specialised committees, not open to the public. “Standstill” and “ratchet” clauses prohibit re-regulating a sector once it has been liberalized.
  • Investment protection provisions further expand the ability of foreign investors (especially transnational corporations) to challenge any public policies related to health, the environment or labour, for instance. The growing number of ISDS claims against sovereign states challenging a wide array of public policy decisions and regulatory measures highlights the dominance of private rights and interests over people’s lives and livelihoods.
  • FTAs are tools of foreign policy and geopolitical power struggle. They have often been dangled like carrots on sticks to draw countries into commitments that go beyond trade. For example, FTA partners may be expected to support each others’ political agendas in terms of territorial disputes or at multilateral fora. FTAs are also presented by some powers as rewards that can be reaped upon good behaviour.
  • Free trade agreements trade away women’s rights. They undermine women’s ability to access land and decent work. They also deepen gender inequality and the already heavy burden of unpaid care and domestic work, which is disproportionately borne by women. The privatisation and liberalisation of public services make them less accessible to more families, which women tend to compensate for, while also sacrificing their own access to medicine, water, education, etc. in order to provide for their families.

Decades of debate have resulted in a better understanding and higher public scrutiny of these deals. But they continue to be pushed, as markets and political openings shift.

September 2023

See also : Acronyms