September 5, 2008

Free Trade or False Logic?

Exploring the Canada-Colombia Free Trade Agreement

by Moira Peters, Dawn Paley

The Dominion - http://www.dominionpaper.ca

[cc 2.0] Chiquita bananas, an important export from Colombia. In 2007, Chiquita plead guilty in US court to paying protection money to paramilitaries in Colombia. Photo: Airton T. Wacker Kieling

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On Saturday, June 7, the Canadian government announced that it had wrapped up negotiations with Colombia for a Canada-Colombia Free Trade Agreement (FTA). "The free trade agreement will expand Canada-Colombia trade and investment, and will help solidify ongoing efforts by the government of Colombia to create a more prosperous, equitable and secure democracy," Canada's Minister of Foreign Affairs David Emerson said in a statement following the announcement.

The notion that an FTA between Canada and Colombia would result in increased prosperity for Colombians is based on the much-repeated concept of ‘free trade,’ which, according to the dominant economic model, opens up markets and encourages investment.

[cc 2.0] Colombian president Álvaro Uribe speaks in Washington, DC in June of 2007. The US congress has thus far ‘frozen’ the ratification of the US-Colombia Free Trade Agreement partly due to concerns about human rights in Colombia. Canadian and Colombian bureaucrats wrapped up negotiations on the Canada-Colombia FTA in June of this year. Photo: Center for American Progress

“Colombia exports coffee, oil, coal, gold, emeralds and bananas. These are the same kinds of products that Colombia was exporting 100 years ago,” states Mario Valencia, an economist with the Colombian Network in Response to Free Trade (RECALCA). “We import technology and industrial goods, and it is necessary to export more and more primary materials to buy the same amount of technology and machines. This type of exporting scheme is deepened with the signing of free trade agreements.”

When governments and corporations speak about free trade, they are often referring to tariffs, which are per cent taxes charged on products as they are being imported. According to Colombian researcher Héctor Moncayo, "Tariffs are considered 'barriers' to international trade, but these tariffs provide benefits for the importing country: tax revenue and protection for local industries."

Moncayo explains: "Multinational corporations claim that these tariffs are denying them access to international markets and that these tariffs must be eliminated. This is generally what is referred to as 'free trade.'" He goes on to state that there have always been tariffs, and that, "while the oligarchies and governments of weak countries [like Colombia] will drop import tariffs if there is pressure for them to do so, the powerful countries maintain their tariffs."

In Canada, trade barriers on foreign products are designed to protect Canadian industry and agriculture.

Examples of Canadian trade barriers that apply to trade with Colombia include:

- sanitary requirements for seafood, plants, seeds, vegetables and fruit
- special permission for textiles, fowl and dairy
- quotas on coffee
- eight per cent import tax on sugar
- seasonal tariffs on vegetables and fruit

[Data: Colombian Network in Response to Free Trade (RECALCA); Canadian Sugar Institute]

Canada's general tariffs-–ones that could eventually be lifted with an FTA-–are already considered low. And, according to RECALCA, 90.6 per cent of imports to Canada are already tariff-free.

In terms of being able to compete in Canada, an FTA is not expected to open up the market in a significant way for Colombian products. Nor will it address agricultural subsidies that grant Canadian farmers a competitive advantage over their Colombian counterparts.

Agreements on the Rights of Transnational Corporations

If the FTA between Canada and Colombia is not so much about lowering tariffs and improving market access for Colombian exporters, what are the benefits of this kind of agreement, and to which economic sectors will these benefits flow?

According to Colombian economist Héctor Mondragon, "These agreements should be known as 'Agreements on the Rights of Transnational Corporations' instead of as 'Free Trade Agreements.'" Indeed, investment guarantees for Canadian corporations are a key element of the FTA between the two countries.

Canada has recently finished negotiating an FTA with Peru, the texts of which are public, and the deal with Colombia is expected to look similar. According to Foreign Affairs Canada, "An investment chapter in the Canada-Peru FTA locks in market access for Canadian investors in Peru and provides greater stability, transparency and protection for their investments."

This means that Canadian corporations investing in Colombia or Peru stand to further benefit from FTAs, because the agreements remove the possibility that the host government will raise taxes, change its laws, or expropriate properties.

Lobbying by industry in favour of an FTA with Colombia has been intense. In mid-May, the Canadian Chamber of Commerce sent a letter to Lee Richardson, chair of the Standing Committee on International Trade, to “strongly encourage [the] committee to endorse these negotiations and the benefits that they will bring to Canadian companies and to Canadians.” Eight companies signed on in support of the letter, including Barrick Gold Inc., Teck Cominco, Nexen Inc. and Talisman Energy Inc.

Hush, rush and sign

According to a press release issued by RECALCA, the Canada-Colombia FTA negotiations "were extraordinarily fast and unlike the negotiations with the United States, which lasted 16 rounds, they were wrapped up in the fifth round of negotiations, out of the six rounds planned at the outset in July of 2007."

The texts of the Canada-Colombia FTA are still hidden from the public, despite the fact that negotiations have finished. One of the justifications used to push forward free-trade agreements is increasing ‘transparency.’ Instead, unelected Canadian and Colombian bureaucrats negotiated the Canada-Colombia deal in total secrecy. In fact, the end of Canadian negotiations with Colombia was announced before the Standing Committee on International Trade had finished the report it was preparing to advise the government during negotiations.

"By making this announcement only days before the Standing Committee on International Trade report would have been completed, the government is clearly saying that it does not respect the work of parliament," stated Liberal International Trade Critic Navdeep Bains.

The report, meant to "guide negotiations," was released more than two weeks after negotiations were concluded. It contains eight recommendations, of which the second "recommends that the government of Canada maintain close ties with Colombia without signing a free trade agreement."

Free trade on the table this fall

Now that an early election has been called by Stephen Harper, the FTA will be sidelined during election campaigns. Because the agreement is already negotiated, however, once the new government is installed in Canada, the Canada-Colombia FTA may be among the first items to be tabled – presented to MPs – this winter, once Parliament sits again.

Previously, the prime minister had the authority to sign an FTA without discussion in the House of Commons. However, the current process is the result of an election promise by the Harper Conservatives, and "nobody has much experience with this new process or really knows where it leads," says Burnaby-New Westminster MP Peter Julian, the NDP Critic on International Trade.

Once tabled, the FTA will sit before the House for 21 days. Voting will not necessarily take place. In Canada, a vote in parliament is not necessary to ratify the agreement, unlike in the United States, where the Democrat-led congress has thus far 'frozen' the ratification of the US-Colombia Free Trade Agreement partly due to concerns about human rights in Colombia.

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