US-Andean Trade Deals will Harm Developing Countries

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The US is pushing “free trade agreements” (FTAs) with the Andean countries of Peru, Colombia and Ecuador that will harm thousands of vulnerable small farmers, block access to affordable medicines and favor foreign investors, according to a new report released today by international agency Oxfam.

The report, “Song of the Sirens,” outlines the negative impacts the proposed agreements will have on millions of people in the Andean region. The US is demanding concessions that could affect the sustainability of development policies and weaken the ongoing process of integration with neighboring countries, Oxfam says.

Although negotiations with Ecuador have been temporarily suspended, the agreement with Colombia is awaiting final executive approvals and the Peru agreement, already signed by both countries, will be considered by the Peruvian Congress in the coming days and in the US Congress in the coming months.

“Developing countries have been enchanted by the appeal of free-trade agreements, but, much like the song of the Sirens, this attraction is ultimately self-destructive,” said Stephanie Weinberg, trade policy advisor for Oxfam. “The benefits that an FTA offers Peru, Colombia and Ecuador will be far outweighed by the negative impacts of agricultural dumping, harsh patent rules and deregulated foreign investments.”

Oxfam believes that the Peru and Colombia agreements on agriculture, intellectual property and investment rules would harm the development of these countries. In agriculture, the agreements would dismantle safeguard mechanisms that are vital for food security and the livelihoods of small farmers, while making no attempt to address the unfair dumping of American overproduction.

“The livelihoods of a quarter of the population of these countries, especially the poorest in rural areas, depend on agriculture for their livelihoods,” said Weinberg. “The FTAs pry open the markets of Peru and Colombia without any consideration for the damaging effects of dumped, cheap, subsidized American products.”

On intellectually property, the US has succeeded in extending pharmaceutical patents beyond 20 years, which goes well beyond agreements made at the World Trade Organization. As a consequence, medicine prices in Peru will increase by almost 10% in the first year of the FTA and 100% after 10 years, while Colombia will have to spend an extra $940 million a year to buy more expensive medicines and nearly 6 million people there will lose access to medicines. The new investment rules in the agreements would also curtail the powers of Andean governments to regulate foreign investment.

“Trade could be the engine to pull millions out of poverty, but the winners of this agreement are American and international companies,” said Weinberg. “In the Andean countries where half the population lives in poverty, this agreement will actually reduce access to affordable medicines and stifle opportunities for development.”

The US has started concentrating on bilateral agreements because the WTO’s Doha Development Round is deadlocked and talks on the Free Trade Area of the Americas (FTAA) have stalled. Oxfam says that the US is using these new bilateral deals to force poorer countries to give up a lot more than they would at the WTO.

“The US Congress should not approve trade agreements that will harm developing countries. It should instead encourage developing countries to utilize trade as a means of achieving sustainable economic development and poverty reduction,” said Weinberg. “But with these free trade agreements, the US is locking in unfair trade rules that pull the rug from underneath Peru and Colombia.”

NOTE: Some of the facts discussed in the report:

  • In the Andean region approximately half the population lives in poverty.
  • In Peru, nearly 20% of population doesn't have access to medical care; in Colombia it's 45%.
  • Almost a quarter of the Andean population depends on agriculture for their livelihood (22% in Peru, 23% in Colombia, 30% in Ecuador).
  • WTO “TRIPS plus” measures include extending the patent beyond the 20 years agreed at WTO and prohibiting the use of clinical data to produce generics for at least five years, even after the patent has expired.
  • Medicine prices in Peru could rise by almost 10% within the first year of the FTA implementation, 100% in 10 years and 162% in 18 years.
  • Colombia’s health system will have to spend an extra $940 million a year to cover the cost of medicines after the implementation of the agreements; nearly 6 million people will not have access to medicines, of whom 4,440 HIV patients will not be able to afford treatment.
  • Twenty-five thousand US cotton producers get $3.5 billion in subsidies a year; 28 thousand Peruvian cotton producers get nothing.
  • Cotton production in Peru fell from 260,000 hectares in 1960 to 89,000 hectares in 2004, a 75% drop.
  • 1,700,000 families in Peru alone depend on agriculture to make a living.

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