As Yet Another Free Trade Agreement Fails To Deliver, Why Should People Believe USTR's Claims About TPP's Huge Benefits?

from the learning-from-history dept

As the US applies more and more pressure to the other nations taking part in the secret TPP negotiations in an attempt to get them to accept its demands, one issue that is starting to be raised is the central one of benefits. Given the sacrifices the USTR is demanding from other countries in order to strike a deal, people in affected countries are rightly questioning what exactly they will get in return. The growing doubts about the value of TPP are presumably why at this late stage the USTR has just released a document touting its "economic benefits". There are two things worth noting about this.

First, that no evidence is offered to back up the big numbers being thrown around there, so we know nothing about the assumptions and methodology behind the figures. And secondly, as Burcu Kilic rightly points out, if the USTR wants people to consider the economic benefits, it should also produce a similar report on the economic damage that could result from TPP so that they can see whether on balance it is worth proceeding with the deal. Needless to say, such analyses are never conducted -- at least, not by governments.

Of course, predicting the economic effects of complex trade agreements that haven't even been concluded is nigh on impossible. But as an alternative, instead of trying to squint into the future, we can perhaps look back at what actually happened with previous free trade agreements. Techdirt has already written about two major deals, NAFTA and KORUS, both of which turned out to be disastrous for the US, but what about the others?

A small, bilateral FTA was signed between the US and Colombia just under a year ago. Recently, President Obama welcomed Colombia's President Santos to the White House, and referred to the trade deal as follows:

We also had an opportunity to talk about the success so far of the Free Trade Agreement and its implementation. There's still some details that are being worked on. Nevertheless, what we've seen is a 20 percent increase in trade between our two countries since its signing. And that creates jobs in Colombia, it creates jobs here in the United States of America.
That's the kind of upbeat assessment you'd expect during these visits, but not everyone agrees with it. For example, Oxfam has recently produced a study on the effects of the FTA on Colombian farmers, in which:
[it] warned that of products important for Colombia's small-scale producers, especially whey, rice, white corn, milk powder and pork, were at greatest risk of being undercut by an increase in US imports and a fall in import prices.
Specifically:
It turns out that during the first nine months of the trade agreement, US exports to Colombia grew at a much greater rate than Colombia's exports to the US, leading to a 40 percent drop in Colombia's balance of trade with the US. Colombia's trade deficit with the US in processed foods deteriorated dramatically, and the country also fared poorly with regard to agricultural commodities, as its exports to the US declined while its imports from the US increased.
In other words, Oxfam claims that the reality of Obama's "20 percent increase in trade between our two countries" is lop-sided, with the US selling more, and Colombia's small-scale producers suffering as a result, since they are unable to compete with the larger US agricultural and processed food companies and their cheaper products.

Cynics might say that you'd expect Oxfam to take this line, and it's certainly difficult to tell what is really happening in the country. But this BBC news story from a couple of weeks ago gives us a hint:

Several thousand Colombian farmers have marched through the streets of Bogota to demand that the government comply with agreements reached in September.

Farmers' leaders said the Colombian government had breached 72 of 88 points agreed to end the previous protest.

"Things are as bad or worse than they were before," said one of their leaders, Cesar Pachon.

In August, the farmers had said the government's agricultural policies were driving them into bankruptcy.

They said that free trade agreements with the European Union and the United States, which had recently come into force, were flooding the market with agricultural products at prices they were unable to match.
As an Oxfam post points out, undermining small-scale farmers may have a knock-on effect with serious consequences for US policy in the region:
The US has invested a lot in Colombia -- more than eight billion dollars in US aid has gone to the country since 2000 to eradicate the illicit drug trade, promote alternative agricultural development and bolster the government's war effort. With peace talks now underway, comprehensive rural reform is the first item on the agenda of negotiations between the Colombian government and the [Marxist-Leninist terrorist organization] FARC.

Yet the evidence now shows that several of the agricultural products most important to Colombia's small-scale farmers -- dairy, rice, white corn, and pork -- are at greatest risk of being undermined by imports from the US in the first year under the agreement.
In other words, not only is the US-Colombia trade agreement de-stabilizing key parts of Colombian society, but also could well start to undo a decade's worth of US efforts to combat drug production and terrorist activity there. So much for Obama's claim that the bilateral agreement was a "success". Participating nations may want to bear this in mind when considering the USTR's cheery projections about TPP's benefits.

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+

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Filed Under: free trade agreement, tpp, ustr


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  1. icon
    Spaceman Spiff (profile), 13 Dec 2013 @ 9:01am

    Beware!

    Beware TLUC - The Law of Unintended Consequences! Though I have to admit, that I am only assuming that the consequences were unintended!

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