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By Mohammad Tanzimuddin Khan
27 November, 2013
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The US
government first proposed signing the Trade and Investment Framework
Agreement (TIFA) with Bangladesh in 2001. The first draft included nine
articles and 13 paragraphs on trade and investment related issues
between the two countries. Critics of the TIFA warned that signing the
agreement would not serve the economic and development interests of an
economically weak country like Bangladesh. Rather it would allow the
economically powerful US further opportunities to pressure its
counterpart so as to further its economic and trade ends. Against a
background of public criticism the two governments revised the draft in
2005 to incorporate seven articles and 19 paragraphs, though this
revisions did little to address the critics grievances.
Now, after a decade of negotiation, and a
series of name changes in other cases with four other countries – Trade
and Investment Cooperation Forum (TICF), Trade and Investment
Development Cooperation Agreement (TIDCA), Framework Agreement for
Trade, Economic, Investment, Technical Cooperation (FATEITC) – TIFA has
become Trade and Investment Cooperation Forum Agreement (TICFA) for
Bangladesh, and was jointly signed on the 25th of November, 2013.
Those who advocate, or at least do not
oppose, TICFA vindicate it exclusively from an economic point of view,
disregarding the political economy context of the USA’s recent
predilection towards BTI agreements and the obvious and
multi-dimensional power asymmetry of the signees.
However any comprehensive understanding
must consider (a) the political economy of the US preference for BTI;
(b) the implications of TICFA for Bangladesh; (c) the experiences of the
countries already in such agreements with the USA.
The Political Economy of the US Preference for BTI
Throughout the post-war period the
foreign economic policies of the USA were generally multilateralist,
promoting a (neo-)liberal world order. The establishment of the General
Agreement on Tariffs and Trade (GATT), the World Bank, and the
International Monetary Fund (IMF) were central to this project. What
bilateralism there was, was limited to certain trade instruments, like
voluntary export restraints (VERs), and trade remedies like Section 301
and later Super 301, and did not involve bilateral or regional trade
agreements.
While this multilateralist approach
initially served the US well, over time its effectiveness at ensuring
continuing US predominance came under pressure as the US share of world
exports of manufactures declined from 29 percent in 1953 to 13 percent
in 1976, and the weighted real exchange rate of the United States (in
index terms, 1975 = 100) depreciated from around 83 in 1961 to 106 in
1978.
By the 1980s, US economic dominance
deteriorated to a position of equality or symmetry with other industrial
countries like Japan and Germany. This symmetric interdependence saw
the US government turn to promoting regional trade blocs in the late
1980s and early 1990s. This trade policy change coincided with the
demise of the ideologically bipolar world, and was realized through the
US participation in the North American Free Trade Agreement (NAFTA), the
Enterprise for the Americas Initiative (EAI), the Asia-Pacific Economic
Cooperation (APEC) forum, and the ASEAN Regional Forum (ARF).
At the same time various types of
alliance building in terms of regional identity, development level,
trade, economic, environmental issues (Cairns Group; ACP, friends of
fish, G-90, small and vulnerable economies, Africa Group etc.) emerged
in multilateral trade negotiations. This trend in alliance building
acted to offset the political clout of the USA in multilateral
negotiations, particularly after the World Trade Organization (WTO)
replaced the GATT in 1994. In this new context the US government was no
longer able to successfully pursue its agenda of coercing the small
countries to embrace US defined legal standards of trade and investment
regime.
The declining effectiveness, for the US,
of the multilateralist approach is tied up with – and partially
reflected in – its economically "falling behind" syndrome when compared
to its major trading partners and competitors. The US economy is
currently in a decidedly precarious condition, with a GDP growth of 1.6%
compared to the robust 7.8% of the world’s second largest economy,
China. In 2001, Robert Zoellick, the US trade representative, explaining
the reason for this comparative economic decline, blamed US
sluggishness in signing bilateral trade agreements.
. . . While the United States stepped
aside, others moved ahead. The European Union now has 27 bilateral free
trade and customs agreements, 20 of which it negotiated in the course of
the 1990s, and the EU is in the process of negotiating 15 more. After
NAFTA, Mexico sped past the United States to negotiate eight free trade
agreements with 32 countries… There are over 130 free trade agreements
in the world; the United States is party to only two. There are 30 free
trade agreements in the Western hemisphere; the United States belongs to
only one.
Even before Zoellick’s diagnosis,
competitive and strategic concerns had seen the US begun to retreat from
its multilateralist commitments, at first by the signing of a TIFA with
its strategic ally Taiwan in 1994, with the objective of entering later
into a full-fledged bilateral trade agreement in future. Since then,
according the Office of the US Trade Representative (USTR), the US has
signed such forerunner agreements with more than 50 countries, most of
which are strategic allies. Through these bilateral agreements, the US
seeks to ensure advantages it cannot achieve in a multilateralist
negotiation forum. As USTR says: "TIFAs can help focus attention on
trade issues which often include barriers that the US faces, and,
therefore, can help expand US access".
Implications for Bangladesh
It should come as no surprise then that
TICFA is not really an economic cooperation or development agreement. On
the contrary, the agreement is devoid of sector-driven or market
access-centric elements for bilateral cooperation over trade and trade
plus issues, being essentially a US initiated platform platform, outside
the WTO framework, for bilateral negotiation over trade, investment
facilitation, intellectual property rights (IPR), and other trade plus
issues (labour standard, environment, corruption, transparency etc.). It
does not contain anything that addresses those market access and
development issues essential if Bangladesh is to develop its trade and
economy.
In the context of the recent cancellation
of Generalized System of Preference (GSP) by the US government, issues
of market access demand more policy attention than ever from Bangladesh,
especially given that the apparels exporters of Bangladesh must pay a
15.3% duty to enter US markets. However, the TICFA has no authority to
go beyond issues that are of special concern to US policy makers.
The forum agreement reiterates the
bilateral commitment of the parties to the Bilateral Investment Treaty,
signed in 1986 during the autocratic Ershad regime, and before the
establishment of the WTO. In fact, rather than being a genuinely
bilateral, this initial agreement was little more than a unilateral
commitment on the part of an LDC, struggling hard to attract foreign
investment for its economic prosperity. Current U.S. direct investment
in Bangladesh is second only to that of the UK, and now stands at USD 1
billion. More importantly, it has significant investments in the
environmentally and locally sensitive energy and power sectors, with
Chevron the major US investor in Bangladesh, and more than $2 billion in
the pipeline for the development of power plants, coal mines and
fertilizer plants.
Obviously, bilateralism under such a
strategically motivated agreement, sidelining the already existing
multilateral platform of the WTO, holds a potential risk for a country
like Bangladesh. It can be expected that the gradual relative economic
decline of the US will see it become diplomatically more aggressive in
its bilateralist efforts, with no assurance at all that the weaker
partner to such agreements may not accede – willingly or not – to the
wishes of its globally powerful ‘partner’. This is particularly the case
when the ruling party of the weaker power has a performance deficit or
legitimacy crisis on domestic front. In such cases the ruling elites of
the weaker country may seek external support by giving the stronger
party what it wants. The signing of the TICFA by the Bangladesh
government on the eve of the chief election commissioner announcing the
national polling date strongly hints that vulnerability. Predictably, at
this critical juncture at the domestic political level, the major
opposition party of Bangladesh has also welcomed inking of the TICFA,
expecting this to help them earn the political "confidence" of the
global superpower.
Nor, if we are to appreciate the
implications for Bangladesh of signing up to TICFA, can we ignore the
fact that Bangladesh has been one of the most influential and vocal WTO
members in multilateral trade negotiations in upholding the interests of
the LDCs. In many cases Bangladesh has operated as a leader on behalf
of the LDCs at the WTO. However, by signing this bilateral forum
agreement Bangladesh has weakened is position in this arena. For it has
incurred an expectation that it will not harm the trade and economic
interests of the US and its allies, thus undermining its capacity and
will to stand up for the interests of other LDCs; and especially
important development at a time when many of these countries – having
already signed bilateral framework/forum agreements – have now started
to feel the pinch of one-on-one approach based trade negotiations with
the USA.
Experiences of the signatory countries
Evaluating the experiences of the
southern countries' bilateral agreements with the US and the EU, Saman
Kelegama, executive director of the Institute of Policy Studies of Sri
Lanka, observed that "southern countries most often ignore the details
of the trade arrangement at the start and thereby undermine the cost of
market access".1
He explained how US policy makers had
imposed conditionality on Sri Lanka a pre-condition for its readymade
garment products to access US markets. The conditions imposed by the USA
included fulfilling the stipulated rules of origin with a provision of
reverse purchase of US fabrics; amending IPR laws to remove obligations
for compulsory licensing and withdraw the competition policy
legislation; and liberalization of the capital account for trade
exchanges with the US. The same conditionally story holds for Chile and
Singapore. After signing bilateral trade agreements they have lost the
authority to exercise control over capital outflows to the USA.
In most cases the inclusion of such
controversial and sovereignty compromising issues in US bilateral trade
agreements is the outcome of multinational corporations lobbying
centered on the drive for profit maximization and monopoly control. For
instance, the Intellectual Property Committee, a coalition of the 13
largest US-based multinational corporations, worked with the office of
the US Trade Representatives to propose imposing US legal standards on
global IPR and making those rights enforceable under WTO agreements.
(Ninety-six of the 111 members of the US delegation negotiating on IPRs
during the Uruguay Round were from the private sector.)
US multinationals seek to force US trade
partners to commit to obligations that go even further than those in the
WTO Agreement on Trade Related Intellectual Property Rights (TRIPS).
They have been lobbying for the patenting of biotechnological innovation
to be included in bilateral trade negotiations not covered under the
original TRIPS. This venture is now known as 'TRIPS-plus'. The Industry
Trade Advisory Committee-15 (ITAC-15) on IPR – comprised of chief
executives of certain multinational companies from different sectors –
has been insisting on the incorporation of TRIPS-plus measures in BTI
agreements.2
Under the impact of ITAC-15's policy
advocacy, the TIFA signatory countries, including Laos, Vietnam, Morocco
and Singapore, incorporated domestic plant variety protection laws
based on the TRIPS-plus model of the International Union for the
Protection of New Varieties of Plants (UPOV). The UPOV provides for
patenting plants, animals, and even 'essential' biological processes,
for the production of plants and animals. The advisory committee in its
report on the US-Oman free trade agreement also advised the US
government that they maintain "a strong bilateral program to deal with
IPR deficiencies in non-FTA countries, many of which are critical
markets…. It is therefore essential that traditional trade tools such as
Special 301, Section 301, the unilateral trade preference programs and
WTO dispute settlement be aggressively employed to lift levels of
intellectual property protection in those countries.'
TIFA/TICFA is not only a corporate
lobbying-driven trade and investment framework. It is also broadly
related to US foreign policy objectives and geopolitical goals. The US
manipulates these agreements to ensure politico-economic and military
gains from its weaker trade partners. The US government brought its
partners of "war on terror" – including Australia, Thailand, Pakistan
and the Middle Eastern countries – under BTI immediately after the
events of 9/11. A 2004 statement by the US trade representative Robert
Zoellick during US-Pakistan bilateral investment talks reveals BTIs
security implications. He emphasized that: "Pakistan and the United
States are partners in combating global terrorism. A BIT [bilateral
investment treaty] based on the high standards contained in our model
text can play an important role in strengthening Pakistan's economy, so
as to create new opportunities for exporters and investors in both
economies and assist in meeting the economic conditions to counter
terrorism" [emphasis given]. He expressed similar sentiments while
signing the TIFA with the United Arab Emirates (UAE) and Qatar in the
same year.
The Last Words
The US is not the only country that
pushes for bilateral agreements. The European Union, Japan, and even
India, do the same. There is no harm in it as long as these agreements
serve the trade and economic purposed of the two countries. But when
bilateral agreements like TIFA/TICFA are the results of the strategic
and security concerns of a globally powerful actors, aimed at sidelining
the WTO and imposing more radical and stringent obligations on trade
and investment and IPR on the economically weak partners, one should
question the wisdom of signing up to such agreements.
As the ruling regime in Bangladesh has
signed the TICFA, it is to be expected that the US will seek further
gains in bilateral trade negotiation. It will be a constant challenge
for the party/alliance in power – whoever it is – to make sure that
Bangladesh gains or at least does lose from its bilateral reciprocity
with the US.
Should we be hopeful? Well, in theory, of
course, but present practice is not encouraging. The last moment
signing of TICFA by the government is itself disappointing. Especially
so in the absence of real effort to understand and address the issues I
have raised in this document. The fear is that the agreement, and its
bipartisan support by the mainstream major parties, reveals that the
urge to curry favour with external powers trumps a considered concern
for the best interests of Bangladesh and its peoples, leaving them
behind to suffer and struggle.
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Mohammad Tanzimuddin Khan is Assistant Professor, Department of International Relations, University of Dhaka
(I express my gratitude to Dr. Tony Lynch, University of New England, Australia for editing this version)
1 In his article 'North-South Regional Trading Arrangements in South Asia’.
2 LDCs have the right to delay
implementing their TRIPS obligations until the end of 2021. (Patenting
of plants, plant varieties and animals is still optional under WTO
regulations.)
Source: Countercurrents.org
