Signing away the future: How trade and investment agreements between rich and poor countries undermine development

Signing away the future: How trade and investment agreements between rich and poor countries undermine development

How bilateral and regional free trade agreements rob developing countries of their economic governance

This briefing paper argues that trade and investment are essential for development, and the imbalances that characterise and distort global trade and investment rules must be addressed as a matter of urgency. It agues that rich countries use bilateral and regional free trade agreements (FTAs) and investment treaties to win concessions that they are unable to obtain at the World Trade Organization (WTO), where developing countries can band together and hold out for more favourable rules. While this approach has been labelled ‘competitive liberalisation’ and ‘stepping stones to future multilateral agreements’, the paper argues that the far-reaching proposals and aggressive approach of the agreements contradict these statements.

The paper outlines a number of the negative impacts of these regional agreements

  • they strip developing country capacity to effectively govern their economies and to protect their poorest people as rules dismantle national policies designed to promote development
  • rules on intellectual property reduce poor people’s access to life-saving medicines, increase the prices of seeds and other farming inputs, and make it harder for developing-country firms to access new technology
  • rules on liberalisation of services threaten to drive local firms out of business, reduce competition, and extend the monopoly power of large companies
  • investment rules prevent developing-country governments from requiring foreign companies to transfer technology, train local workers, or source inputs locally
  • the investment chapters make governments vulnerable to being sued by foreign investors if new regulations are perceived as damaging the investor’s profits

The paper argues that the changes in the rules progressively undermine economic governance, transferring power from governments to largely unaccountable multinational firms, robbing developing countries of the tools they need to develop their economies and gain a favourable foothold in global markets.

The paper proposes that trade rules (multilateral, regional, or bilateral) should

  • recognise the special and differential treatment that developing countries require in order to move up the development ladder
  • enable developing countries to adopt flexible intellectual-property legislation to ensure the primacy of public health and agricultural livelihoods and protect traditional knowledge and biodiversity
  • exclude essential public services such as education, health, water and sanitation from liberalisation commitments
  • recognise the right of governments to regulate the entry of foreign investors to promote development and the creation of decent employment, and include commitments to enforce core labour standards for all workers
  • ensure mechanisms for extensive participation of all stakeholders in the negotiating process, with full disclosure of information to the public, including the findings of independent impact assessments