Challenging trade and investments promotion as a way to consolidate agroecology

There is no question that Agroecology, in the framework of Food Sovereignty, requires trade and investments. However, not all approaches and ways of addressing trade and investment contribute to consolidate and ensure Agroecology. For that to happen, the policies implemented by States and the institutions they generate with regards to trade and investment flows are key. The countries that are sovereign in terms of their agricultural and food system enjoy sovereign trade and investment regimes as well.

Nowadays, the dominant trade and investment framework claims there is a causal link between the inflow of investments and a country’s growth and development. Repeated constantly in a fundamentalist way, this assumption blurs the fact and hinders seeing that this way of negotiating investments and trade reproduces the most perverse logics and rationale of the capitalist system and operates as an instrument for accumulation in favor of transnational corporations (TNCs).

The rationale on which investment flows are based needs to be replaced in order for them to become a contribution to the paths of recovery and construction of sovereignty in the countries of the Global South.

In Latin America, this rationale shift is urgently needed, given that the vast majority of development paths are based and follow a free market, free trade and free investments rationale.

Free market, free trade and free investment: a triad that constrains States

The way in which Food Sovereignty is constrained by trade liberalization as envisioned by the dominant economic theory follows a simple equation: tariff cuts on imports of foreign products lead to the flooding of the domestic market with lower-priced products (many times highly subsidized in their country of origin and strongly concentrated in the hands of transnational capital).

This discourages and damages domestic production that could develop added value and include manufacturing vs. the simple extraction of raw materials. Industrial products manufactured in developing countries are generally not competitive as a consequence of the international division of labor and the fact that developed countries posses highly industrialized economies that concentrate the higher added value links of the production chains, including those with high technology value, and are very competitive in the global market.

At the same time, many of the advantages featured by the developed world in relation to investments and trade are based on the historical inequality in terms of the right to development. The path towards development followed by the countries in the global North began in historical moments where the current rules for trade and investment did not exist. These rules have proven to be highly restrictive for the development of domestic industries, added value and competitiveness in international trade.

The way to stop this vicious equation is breaking away from the free trade- based scheme and regulations and laying the foundations for new rules and domestic policies aimed at national industrial development under conditions of sovereignty (in all senses) and guided by the interests of the population. Some indications about where these changes might take place point out to the methodologies and contents of trade and investment agreements.

A quick review of the investment and trade liberalization landscape in Latin America shows paths that are deeply based on free market, free trade and free investment principles. The common denominator is that their liberalization clauses, rules and methodologies do not allow the State to establish new foundations for the construction of a sovereign development strategy, given that they are obliged to respect the principle of non-discrimination of foreigners, based on National Treatment and Most Favored Nation rules and the prohibition to enforce performance requirements. In addition, liberalization imposes specific investor-State dispute settlement mechanisms that establish a parallel legal system outside the national jurisdictions.

Latin America advances towards free trade

Latin America features a varied landscape in terms of the adoption of Free Trade Agreements (FTAs) and Bilateral Investment Treaties (BITs). South America, Central America and Mexico show differences when analyzed as sub-regions. At the same time, in South America there are also different trends that allow to divide the sub-region into Southern Cone and Northern Cone.

The proximity and links with Northern countries, especially the US, represents an “adjustment variable”. Central America and Mexico have a history of proximity to and influence from the US that is also reflected in the trade liberalization processes. For instance, for Mexico, an unquestionable landmark in their trade liberalization history is the coming into force of the North American Free Trade Agreement (NAFTA) [1] in 1994. Mexico´s market openness to the liberalization of trade was significant after signing NAFTA. This path can also be identified in other countries, whereby following the adoption of conventional FTAs with a developed country (preferably the UE, Canada or the US), they begin moving forward increasingly towards the negotiation and approval of multiple FTAs and BITs [2].

The same can be observed in some South American countries that had been part of the regional integration process known as Andean Community of Nations (CAN). However, the subsequent adoption of FTAs by those countries with the European Union and the US effectively destroyed the possibility to consolidate a different kind of international insertion, shifting instead to aggressive conventional liberalization of trade and investments. This is specifically the case of Colombia and Peru [3].

The path followed by the countries that created the Common Market of the South (MERCOSUR) is different: Brazil and Argentina as well as Uruguay and Paraguay have all experienced deep economic, trade and investment liberalization processes, just as the rest of Latin American countries, through the implementation of Washington Consensus policies. The 90s resulted in liberalized and flexibilized countries that opened themselves to TNCS and experienced a drastic reduction of the role of the State, in addition to the impacts on social cohesion and democracy derived from the military and civil-military dictatorship processes.

But these countries chose to insert themselves at international level through the MERCOSUR regional integration process. This process was initiated with a neoliberal rationale, but its structure and features changed when progressive and left-wing governments took office at the beginning of the 21st Century. This transformation prevented these countries for a long time from giving in to signing FTAs to integrate themselves into the world. Nevertheless, the MERCOSUR countries did liberalize their investment regimes [4].

In the case of Central America, countries have not signed many BITs, with a quite low average per country. However, the regional integration process in that part of the world, the Central American Common Market (MCCA) never succeeded in becoming a path for integration that could overcome trade aspects, and the proximity of its members to North America –particularly the US (first through the CAFTA and then through the Association Agreement signed with the EU)– impacted on trade and investment liberalization and determined the landing of northern TNCs.

Agroecology needs sovereignty and public policies

The trade and investment framework has significant impacts on one of the most important sectors for the sovereignty of countries: food and the right to food. The consequences of trade and investment liberalization on the local production systems of Latin American countries have been devastating. The entry of food products to developing country markets through trade liberalization has opened the doors not only to an invasion of different food consumption patterns, but has also implied loss of biodiversity and local and regional knowledge among other things, as well as soil erosion and deforestation, the impoverishment and displacement of peasant communities and small-scale family farmers and the grabbing of millions of hectares of rich and arable lands by TNCs.

The impacts of trade and investment liberalization in terms of Food Sovereignty are not recorded by the dominant economic theory.

The State [5] continues being at the same time a piece that does not fit and a piece that is missing in the puzzle. As a sovereign public power, the State must play the key role of regulator, articulator, and especially designer of policies to foster sustainable and sovereign development. Trade and investment liberalization policies restrict the possibility to implement active policies for the promotion of local food production systems and agroecological experiences sustained at local or regional level by communities; to offer technical and economic support for the construction of local commercialization systems; or to implement price controls and food labeling policies, among other impacts. They do not allow this type of policies because they are viewed as threats to and discriminatory of current or potential investors or of the products of these foreign investments.

Resistance to the neoliberal trade and investment regime: pointers for system change

Agroecology needs public policies and concrete support. Public policies can only be realized if the States are sovereign to define the development policies and strategies that they deem most convenient. Agroecology cannot be consolidated without policies. The current trade and investment regime restricts the possibility to implement policies, while being based on unfair premises and rationales that are opposed to economic, environmental and social justice. Challenging the logic imposed by the free market, free trade and free investment regime is essential. Following are some pointers in that direction:

National agroecology plans: If we consider that agroecology represents a material, cultural, symbolic, political, economic and environmental basis that is essential for food sovereignty, then we need national plans that address the needs of small-scale food farmers and their territories.

Rules for TNCs, rights for peoples: The primacy of human rights and peoples´ sovereignty is undisputable. TNCs should respect national laws and policies and human rights, and should be subject to binding international treaties that control them and bring them to justice when they commit violations. The establishment of a binding treaty on human rights and transnational corporations in the framework of the United Nations is urgently needed.

Assessment of investment promotion policies: the trade and investment regime generates impacts. It is time to start assessing these impacts with indicators that reflect the reality in the territories while taking into account the huge power asymmetries between TNCs and States in the territories, before moving forward with the adoption of these instruments.

Protected state-owned enterprises and public services: state-owned enterprises and public services are key foundations to ensure access to an endless number of human rights. Neither public services nor state-owned enterprises should be directly or indirectly on the table for negotiation as part of any current or future trade and investment agreements. All current mega regional agreements include public services and state-owned enterprises in the negotiation, ignoring their important contributions to development.

References

1. NAFTA was signed by the US, Canada and Mexico. There are numerous analyses about the benefits of this FTA that make reference to the causal relationship between the signing of this agreement and the proliferation of economic units known as “maquilas” that focus on the production of export products in enslavement-like labor conditions.

2. Mexico has signed approximately 13 FTAs with different countries and regions and 29 BITs.

3. In 2010, the European Union concluded the negotiations for signing an FTA (promoted by the European region as an Association Agreement) with Peru and Colombia. At first, the agreement with these countries was part of a bi-regional agreement that included the regional integration process of the Andean Community of Nations (CAN) together with Bolivia and Ecuador. However, the pressure by the European Union to include all liberalization chapters of the FTAs -those related to trade and those that do not strictly relate to trade such as Intellectual Property – caused the exit of Bolivia and Ecuador and subsequently the unraveling of CAN as a regional integration process.

4. Brazil is the only member country in MERCOSUR that has not ratified any of the BITs it has negotiated, which are therefore not in force. As for the rest of the countries: Argentina has signed almost 60 BITs, Paraguay has signed approximately 22 treaties and Uruguay almost 30. While not all of them are in force in these countries, these numbers reflect the openness of the countries to investments, following the economic recipes implemented in the entire region. In contrast to other Latin American regions such as Central America or the Andean region, the absence of MERCOSUR and its members in FTAs gave rapidly way to the bilateral route of signing and adopting BITs.

5. In some countries, such as those in the Southern Cone of South America, the State as a public authority entity has been an integral part of modern society. In the case of Uruguay, the role of the State and state-owned enterprises is key in terms of the development strategy. Something similar happens in Argentina and Brazil, although in these countries it is also necessary to take into account other forms of collective construction associated to peasant and indigenous communities. The role of the State must then be played down taking into account each country’s path in relation to the construction of its modern society and the current circumstances.