Europe’s second conquest of Latin America
Author: GRAIN
Originally Published at Peace and Conflict Monitor on 10/07/2008
The European Union (EU) is negotiating a veritable epidemic of “Association Agreements” or “Cooperation Agreements” throughout the world. In addition to the almost 30 agreements already signed, the EU is currently negotiating, or about to begin negotiating, further agreements with more than 40 countries.[1] The agreements are notable for their broad scope and their “open” and “ongoing” nature; in other words, they oblige the signatory countries in years to come periodically to extend the agreement and to undertake an undefined number of judicial, administrative, economic and social reforms, the aim of which is to provide ever more favourable investment conditions for European companies. As they accumulate, the changes will amount to constitutional reforms, which will be decided at ministerial level, far from the eyes of Parliaments and public opinion in the countries concerned.
Since 1990, Latin America has been an important target for European investment; indeed, it is the most important foreign destination of all for Spanish companies, whose profits from this region have played a significant role in promoting economic growth at home. Industrial capital is interested in Latin America because of the continent’s rapid process of urbanisation (which increases demand for services), its abundant mineral resources, its oil, its biodiversity and the willingness of the region’s governments to privatise resources, ecosystems and public sector companies at derisory prices. European investment has now overtaken US investment and people today are talking about a new Conquest, with Europeans increasingly taking over communications, energy, water, banks, oil and fishing. Investment has been particularly high because of the privatisation of the public sector.[2]
It is therefore not surprising that Latin America has also become an important target for EU attempts to conclude trade agreements. The EU’s first trade agreement was signed with Mexico in 2000. This was followed two years later by an agreement with Chile and, more recently, with Caricom (the Caribbean Community, composed of 15 Caribbean nations). The EU is currently negotiating with Central America, the Andean Community of Nations and Mercosur. If all these negotiations end in agreements, the EU will have extended its tentacles into all countries in the region, with the possible exception of Cuba and Venezuela. The region will be incorporated into an expanded version of the Free Trade Area of the Americas (FTAA), except that now it will be linked to the European Union rather than the USA (as was envisaged under the FTAA). The EU’s objective is to use these agreements to complete the privatisation process, to remove restrictions on European property and activity in the region, to acquire full access to natural resources and to obtain guarantees that European companies will be able to operate with clear advantages over national companies. Moreover, all these concessions granted to European companies are to be protected from any political changes that the peoples of the region might want to undertake in the future.
As with the United States, negotiations with the EU have been conducted largely in secret, which prevents parliaments, citizens and social movements from obtaining any relevant information. It is clear that the reason for such secrecy is to prevent the kind of social mobilisation that helped to scupper the FTAA. In order to put pressure on countries that take a more independent position or are more willing to defend their national interest, the EU has negotiated with regional blocs, at times destroying earlier processes of integration, such as the Andean Community of Nations. The message is clear: “sign up or be isolated”. Unless there is significant social mobilisation, it is very likely that the governments of the region will give in to this pressure.
With a view to promoting public discussion and debate about these agreements, we present here an analysis of the implications and scope of some of those that have already been signed. We also analyse the implications of some European Union documents, published over the last two years, that set out the EU’s strategy and intentions in the negotiations.
General Aspects
“This is an ambitious agenda designed to sharpen
the contribution of trade policy to growth and jobs in Europe, to contribute to
the liberalisation of global trade and to complement other external policy
objectives of our trade policy.”
Global Europe: Competing in the World[3]
The agreements with the European Union are notable for their scope and for covering much more than strictly economic matters. The EU talks about “political and economic” agreements, or “Free Trade Agreements Plus” (FTA+),[4] and has explicitly said that it seeks coverage and guarantees equal to or greater than those contained in any other current free trade agreements – for example, those signed with the United States. According to official EU documents, trade negotiations must be compatible with the European Union’s Security Strategy, which states that the greatest threats to European security lie outside Europe.[5] The EU therefore requires that Third World countries, as well as conceding trade advantages, must also cooperate on political, military and internal control matters, including repression under anti-terrorist laws.
The agreements already signed vary significantly from one country to another. Unlike those signed with the United States, the content of which changes very little, agreements signed with the EU vary in form and content. However, certain fundamental elements are present in all agreements, including those that guarantee, in the medium term, that the conditions imposed by the agreements fully correspond to the EU’s trade objectives.
A fundamental characteristic of treaties with the EU is that they are not only broad in scope but also designed to be extended. In addition to specific and detailed clauses, there are very general and open clauses that can be interpreted in many ways, or that require future reformulation and expansion, always with the aim of facilitating European company operations. These are the so-called “progressive” or “review” clauses, which may form part of each chapter (as in the cases of Chile and Mexico) or may be included in the general provisions (as in the case of the Caribbean countries). The EU does not therefore need to sign the same agreement with all countries because it can achieve in future reviews anything that it does not achieve in the first round. It is therefore important when analysing the possible effects of treaties with the EU to examine not only the text currently being negotiated, but also the economic and political objectives being pursued by the EU.
The task of monitoring the implementation of agreements and of periodically extending their scope falls to an Association Council, formed by representatives of the Council of the European Union and ministerial representatives of the non-European partners (in this case, the Latin American countries). The Association Council has the power to set up committees (also at ministerial level) to carry out more detailed monitoring, draft new agreements and decide upon implementation measures. The final decisions, taken by the Council, will be converted by decree into rules and norms, and their implementation will be compulsory. The Association Council and its committees can listen to the opinions of the respective parliaments and civil society organisations, but they have no obligation to take them into account.
In other words, the agreements with the EU are more than a series of specific agreements: they are an indefinite commitment to change national ways of life and societies in order to provide European companies with increasing guarantees. The power and obligation to make and implement future changes remains in the hands of governments. Parliaments and social movements are denied a chance to reject the changes, to exercise effective control or even to participate. This means that countries are giving up both the right to exercise national sovereignty and the obligation to respect the right of society to participate in decision-making.
The so-called “soft” part of the agreements
“The EU has a strategic interest in developing international rules and cooperation on competition policies to ensure European firms do not suffer in third countries …”
Global Europe: Competing in the World[6]
“The central aims will be … to promote industrial cooperation projects, including projects deriving from the process of privatisation …”
Article 17c of the EU–Chile Agreement[7]
Agreements with the EU are usually presented as “soft” agreements designed to promote cooperation rather than to protect the European Union’s economic interests. The agreements include many cooperation clauses in various fields, such as technology, science, culture, education and support for sustainable development.
Closer examination, however, reveals that much of this “co-operation” amounts to little more than vague promises, with no firm commitments. Moreover, many conditions are attached to such “co-operation”, conditions that are designed to strengthen the presence of European companies in all aspects of the partner country’s national life. Indeed, the use of the term “cooperation” is in many cases only a way of disguising obligations that partner signatories are agreeing to.
Tariff reductions, for example, form part of “co-operation in the field of customs”. In the proposed agreement with Central America, “cultural cooperation” is in fact an instrument with which to privatise culture, with one clause stating: “the parties will seek to provide technical assistance to Central American states with the aim of assisting in the development of cultural industries.”[8]
A great deal of EU effort focuses on achieving for itself the most favourable position with regard to intellectual property rights. This is largely achieved through the paragraphs on cooperation. The first paragraph of the chapter on technical and scientific co-operation in the agreement with Chile states that cooperation should take place “particularly as regards the rules for use of intellectual property resulting from research”[9] and then includes business participation in scientific and technological development among the objectives. In other words, scientific and technological cooperation is a tool for privatisation, patents and other forms of intellectual property.
Something very similar occurs in the agreement with the Caribbean countries, which states that cooperation includes “support in the preparation of national laws and regulations for the protection and enforcement of intellectual property rights, including the training of personnel on enforcement”.[10] “Co-operation” means here that new intellectual property laws will be introduced and that European experts expect to draft those laws.
There are many examples in other fields. The main objective of “cooperation on mining” with Mexico is “promoting exploration, exploitation and profitable use of minerals”.[11] The chapters on economic cooperation with Chile and Mexico are worded vaguely but are aimed at protecting investment. The objectives include “developing a legal framework for the Parties that favours investment”.[12] In the case of Chile, the chapter on economic cooperation mentions the need to “consolidate economic relations in key sectors such as hydroelectricity, oil and gas, renewable energy, energy-saving technology and rural electrification”[13] and promote “better access to the urban, air, maritime, rail and road transport markets”[14]
In general, the clauses on cooperation do not necessarily envisage direct co-operation or links between nation states or public sectors. The different treaties make repeated reference to cooperation between “networks of economic operators”, that is, to links between private entities or between states and private entities. The obligations are very lopsided: at no point do the agreements provide for the regulation of demands and conditions imposed by the private sector during “cooperation”, but they do compel states to open up to the private sector. In fact, this kind of “cooperation” means placing Latin American countries at the disposal of European companies.
No ambiguity in the “tough” part of the agreements
“Each party shall take any measure necessary to comply with the arbitration panel ruling.”
Article 210 of the EU–Cariforum agreement
In contrast to sections about cooperation, which are ambiguous and often mask what is really intended, the sections about the need to “create a favourable environment for investment” are based on two very clear provisions: implementation of the agreements is compulsory, and reprisals for non-implementation are allowed. If the EU considers that a country has not complied with an agreement, it can take that country to a private tribunal whose decisions are binding. If the country in question does not then comply, the EU can take reprisal measures such as unilaterally increasing tariffs or banning imports from that country.
Moreover, the agreements strengthen transnational companies’ powers (granted by the WTO) to sue (also in a private court) when they consider that their interests have not been sufficiently protected. In this case, rulings against countries include impounding exports and forcing a country to pay million-dollar fines. More than 200 lawsuits of this kind were under way in 2007 alone. The total number of disputes is much higher, as parties often reach agreement before the matter goes to court. Chile has been fined more than US$1 billion over the last five years [15]
EU objectives and strategies
The European Union has decided to renew its efforts to help EU businesses get their
goods and services into new markets … using the EU’s global and bilateral trade
deals not only to open markets further, but to ensure they stay open.[16]
European Union documents are illuminating. In Global Europe: competing in the world,[17] the EU Commission states that opening markets abroad is a pillar of its competitiveness. In a later document,[18] the Commission sets out its policies in detail, especially those related to its Market Access Strategy, and identifies what the EU perceives to be the main trade barriers. Below, we briefly discuss the implications of the EU’s definitions. Given the open and expansive character of the agreements that the EU intends to negotiate, all these scenarios could well become reality.
1. Reduction of taxes on foreign business activity, including tariffs on imports and exports.
The EU believes that it is essential to reduce taxes paid by European companies in Latin American countries. It therefore requests additional reductions in import/export tariffs and fewer taxes on all European company activities in signatory countries, including mining and oil. It is especially concerned to stop the levying of taxes on the export of raw materials. In addition, the “most-favoured nation” and “double taxation” clauses (explained below) might mean that companies do not pay taxes on the profits obtained in Latin American countries.
With regard to tariffs, the EU has stated that “although these have been eroded by successive rounds of negotiation, high tariffs still pose problems for EU exporters”. It therefore seeks further reductions in import tariffs, including tariffs on agricultural products. The EU makes no commitment to reduce its agricultural subsidies in return. If these reductions are agreed, local agricultural products will therefore have to start competing, either gradually or immediately, with subsidised European products.
These tax reductions will seriously affect the capacity of partner countries’ national companies to compete with European companies on their own territory. Another major impact is that the government’s tax revenue will be reduced, and consequently the state’s capacity to provide education, health, infrastructure, sanitation, welfare, technical and other services. This may have a very severe impact on countries with weak or small economies. EU figures indicate that African, Caribbean and Pacific (ACP) countries will lose 70 per cent of their revenues from import duties on EU exports,[20] which would mean an average reduction for African countries of a quarter of total public revenue. The EU suggests increasing other taxes to compensate. Indeed, in Chile such policies led to the elimination of import duties on luxury items and an increase in taxes on domestic consumption. So any Chilean importing a Rolls-Royce pays no special taxes, but the tax that all pay on food, clothes and medicines has increased by 5 per cent.
2. Opening the country to uncontrolled trade flows. The EU sees controls over imports and exports as “customs procedures [that are] burdensome for [the] import, export and transit”[21] of goods. It denies countries the possibility of regulating or even influencing their international trade, or encouraging determined economic processes, or protecting their own population.
In Latin America’s free trade agreements with the United States, the prohibition of controls over trade specifically included a prohibition on regulating the flow of food products (only Nicaragua demanded an exception in this case). There is no guarantee that the EU will not make the same demand when the time comes to interpret or extend the agreements. Such a clause prevents countries from stopping the export of basic foods, even when the population is starving or experiencing a food crisis.
The EU also seeks to reduce rules on the transit of goods. Signatory countries may be used as a platform to export to third countries. In the case of Central America, this might mean, for example, that countries are required to allow EU goods to arrive at a single port in the region and be distributed to the other Central American countries from there.
Along with the full freedom to circulate its goods, European companies are demanding national legal status, which will increase their opportunities to use signatory countries as platforms for exports. European companies will therefore not only become strong competitors in national markets but will also compete with the local country’s exports to other markets.
3. Changing quality standards and technical rules. The EU sees quality and technical rules as possible “barriers” to trade and has included various clauses aimed at eliminating them on a case-by-case basis. The EU wants gradually to reduce each country’s capacity both to draw up and to enforce rules on the quality, security and safety of imports, exports and the economic activity of European companies within its borders. Elimination will take place during future rounds of negotiations held to “review” the agreement and undoubtedly the strongest negotiator will win. The EU will first seek selectively to reduce enforcement procedures and quality requirements on products entering another country. This will doubtlessly facilitate the import of products rejected in the EU. Brazil was recently forced to accept second-hand tyres after the EU took the case to the international courts. Meanwhile, private companies remain free to make their own demands as and when they like, especially when importing into Europe.
4. Simplifying and restricting the use of sanitary and phytosanitary measures. These measures are used when goods enter a country, with the aim of protecting the health of human beings, plants and animals, and agricultural development in general. They are especially used with foods, medicines and agrochemicals and are already strongly biased in favour of agribusiness and pharmaceutical companies. However, they are still among the few barriers to the use and entry of dangerous or poor quality substances, medicines and foods.
The EU has expressed its interest in modifying or eliminating these measures, just as it has with other quality standards. Indeed, it will probably use the same process to modify and eliminate them. The United States already uses these arguments to stop countries restricting or controlling the entry of genetically modified organisms. In the case of Europe, it means that Latin American countries could bar the entry only of cattle definitely shown to be infected with BSE (“mad cow disease”), not those that might be infected, as the precautionary principle would dictate. Europe is pressing so hard to reduce controls over its exports that Argentina no longer carries out health inspections on some animal products imported from Europe, although this could endanger its own multi-million-dollar economic activity.[22]
5. Unrestricted access to raw materials, especially mineral resources. The EU considers it unacceptable for countries to impose “restrictions on access to raw materials, particularly restrictive export practices, including export taxes, which drive up prices for products such as … key mineral and metal goods.”[23] In other words, it wants unrestricted access to the natural resources of countries signatory to trade agreements. That includes access to biodiversity and a total opening of its territorial waters to European fishing vessels.
Clauses of this type seek to establish that restrictions to the exploitation and export of natural resources by European companies are possible only if national consumption, or exploitation by national companies, is simultaneously restricted.
Food crops are currently considered to be raw materials for the production of fuels. If the EU achieves its objective, countries could face serious obstacles if they attempt to regulate the flow of food unless they simultaneously restrict consumption by their own population. In the current food crisis, such a development appears unlikely but it is possible; its consequences would be very serious.
6. Tougher regime for intellectual property rights The EU has specifically said that it wants to obtain “the maximum possible protection” for intellectual property rights and tough penal sanctions for infringement of the new laws. This is extremely serious because intellectual property laws operate on the assumption that the accused is guilty until proved innocent. The worst aspect is that the agreements with the EU incorporate the principle that it is possible to take legal action against someone on the grounds that they intend not to respect intellectual property rights.
With regard to plants and seeds, the EU demands adherence to UPOV Convention 91, a form of appropriation that is very similar to a patent. The EU requires patents for medicines, and biological and biotechnological products, including those that derive from traditional knowledge. It does not explicitly require patents on plants and animals, but neither does it ban them nor identify them as an exception. According to European rules (which is what the EU intends to impose in the region through the Association Agreements), plants, animals and micro-organisms are patentable biotechnological products. Plants and seeds could therefore be subject to double privatisation: upov and patents.
7. The opening of all sectors of the economy and all aspects of national life to European investment In its most radical version, this would allow the direct or indirect privatisation of all public companies and state services, including armies and police forces. It would be similar to current practice by the United States. In the more immediate future, it will open up mineral and natural resources, water, transport, communications, electricity, health, education, pension funds, banks, the management of national parks, ports and airports to European companies. If states privatise their services through “outsourcing”, European companies will be able to tender. The review clauses ensure that the opening gets more and more extensive. It will not be possible to place limits on
foreign property. European companies will be able to gain monopoly control of basic sectors of Latin American economies.
In addition, European companies will be accorded “national treatment”; that is, it will not be possible to give public and private national companies preferential treatment over European companies. At best, European companies will enjoy the same conditions as national companies. “Most-favoured nation” clauses, however, give European companies special privileges, including less taxation or simply no taxation at all, guaranteed profits and absolute freedom to withdraw capital from the country.
8. Government obligation to put all public procurement out to international tender. Public procurement is an important market, politically and economically. EU documents calculate that it is worth between 10 per cent and 25 per cent of a country’s GDP. These state contracts ensure the supply of goods to hospitals, schools, the army, police, ministries and parliament. They are also an instrument for ensuring a stable market for local small, medium and large companies.
To put public procurement out to international tender, as required by the agreements, will mean that governments might have to entrust the construction of roads and schools to European companies, and buy exercise books, pencils, textbooks, mil
Footnotes:
[1] See the list of agreements already signed (with access to the full texts) and a list of negotiations under way at: http://ec.europa.eu/trade/issues/bilateral/index_en.htm
[2] ECLAC, Foreign Investment in Latin America and the Caribbean 2001, United Nations, Chile, May 2002. http://www.eclac.cl/
cgi-bin/getProd.asp?xml=/publicaciones/xml/9/ 10869/P10869.xml&xsl=/
ddpe/tpl-i/p9f.xsl&base=/tpl/imprimir.xsl
[3] Commission of the European Communities, Staff Working Document 52006SC1230, Global Europe: Competing in the World, a Contribition to the EU’s Growth and Jobs Strategy, annex, Brussels, 4 December 2006. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=celex:52006SC1230:en:html
[4] El
Comercio supplement, Ecuador, 9 May 2008.
[5]The Council of the
European Union, European Security Strategy, A Secure Europe in a Better World – the European Security Strategy, Approved by the European Council. Brussels, 12 December 2003. http://www.consilium.europa.eu/cms3_fo/showPage.asp?id=266&lang=en
[6] European Commission, External Trade, Global Europe – Competing in the World, Brussels, 4 October 2006. http://trade.ec.europa.eu/doclib/html/130376.htm
[7] Inter-American Development Bank, Acuerdo por el que se establece una Asociación entre la Comunidad Europea y sus Estados Miembros, por una parte, y la República de Chile, por la otra (in Spanish). http://www.direcon.cl/
documentos/tlc%20ue/texto%20completo%20acuerdo%20chile%20ue.pdf
[8] Proposed text for EU–Central America Agreement, Chapter 8, Article 4, on cultural co-operation.
[9] EU–Chile Agreement, Article 36.1.
[10] EU–CARIFORUM Agreement, Article 164.2.
[11] EU–Mexico Agreement, Article 22a.
[12] EU–Chile Agreement, Article 21b.
[13] Ibid.
[14] Ibid.
[15] World Trade Organisation, The Disputes. http://www.wto.org/english/tratop_e/dispu_e/dispu_by_country_e.htm, and the International Centre for Settlement of Investment Disputes, http://icsid.worldbank.org/icsid/FrontServlet
[16] External Trade Explained. The Market Access Partnership – removing obstacles to doing business outside the EU. December 2007. http://trade.ec.europa.eu/doclib/html/137742.htm
[17] European Commission, Global Europe: Competing in the World: a contribution to the EU’s growth and jobs
strategy. http://trade.ec.europa.eu/doclib/docs/2006/october/tradoc_130376.pdf
[18] Commission of the European Communities, Global Europe: A Stronger Partnership to Deliver Market Access for European Exporters, Brussels 18 April 2007.
[19] Communication from the Commission to the European Parliament, the Council, the European Economic and
Social Committee and the Committee of Regions, Global Europe: A Stronger Partnership to Deliver Market Access for European Exporters, 2007,183 final.
[20] L. Fontagne, C. Mitaritonna and D. Laborde, An Impact Study of the EU–ACP Economic Partnership Agreements (EPAs) in the six ACP regions, Commission of the European Union, Directorate General for Trade, Paris, January2008.
[21] Commission of the European Communities, Global Europe: A Stronger Partnership to Deliver Market Access for European Exporters, Brussels 18 April 2007. COM (2007) 183 final.
[22] European Commission, Strengthened Market Access Strategy delivers results for eu exporters, 27 May 2008. http://trade.ec.europa.eu/doclib/docs/2008/february/tradoc_137786.pdf
[23] Commission of the European Communities, Global Europe: A Stronger Partnership to Deliver Market Access for European Exporters, Brussels 18 April 2007. COM (2007) 183 final.
[24] European Commission, An Impact Study of the eu–acp Economic Partnership Agreements (epas) in the Six
acp Regions, March 2008. http://ec.europa.eu/trade/whatwedo/trade_analysis/st_acp_epa_en.htm
[25] Government of Chile, Reforma Procesal Penal, Inversión, http://www.minjusticia.cl/rpp/inversion.php
[26] EFE, “Según Human Rights Watch, la reforma judicial de México violaría los derechos humanos”, quoted in The Santa Fe New Mexican newspaper, 14 March 2008. http://www.santafenewmexican.com/
La%20Voz/031408-problemas-sistema-judicial
[27] Norman Girvan, Implications of the Cariform–EC EPA, http://www.normangirvan.info/wp-content/uploads/2008/01/girvanimplicationsepa10jan.pdf.
[28] Government of Chile, Foreign Ministry, Trade balance 1999–2007 (in Spanish), April 2008. http://cms.chileinfo.com/ documentos/ saldos_balanza_comercial_2007_ver_2.pdf
[29] Ibid.
[30] GRAIN figures based on European companies’ annual reports.
[31] Rodolfo Aguirre Reveles and Manuel Pérez Rocha L., The EU–Mexico Free Trade Agreement Seven Years
on: a Warning to the Global South, debate paper, Alternative Regionalisms, June 2007. http://www.tni.org/reports/altreg/eumexicofta.pdf
[32] ADN Mundo, Evo Morales: “Los TLC son instrumentos de colonización y dominio”, bilaterals.org, 16 May 2008. http://www.bilaterals.org/article.php3?id_article=12123&var_recherche=ue+can&lang=es
[33] Enlazando Alternativas 3: Declaración de la Cumbre de los Pueblos, bilaterals.org, 19 May 2008. http://www.bilaterals.org/article.php3?id_article=12144&lang=es
Bio: GRAIN is incorporated in Spain as an international, non-profit foundation, and has its coordination office in Barcelona . A wholly autonomous organisation, GRAIN’s programme of work is currently implemented by a team of fifteen people, representing different nationalities and experiences. For more information please visit www.grain.org
