TIFA: Risk or Rescue

While it is touted that the Trade and Investment Framework Agreement would further trade and investment prospects between the United States and Bangladesh, there are a number of caveats that should be consider first, write Meer Ahsan Habib and Tapas Kumar Paul

THE Awami League Government appears to be considering the Trade and Investment Framework Agreement with the United States quite seriously. As of yet, the current draft has neither been opened to the public, nor to the experts. However, the agreement has attracted a lot of attention.

In recent years a growing number of trade and investment framework agreements have been signed between the US and other countries. Many trade experts argue that America is pursuing the bilateral course outside the World Trade Organisation as a means to maintain control over least developed countries under the guise of ‘cooperative effort’. If the least developed countries can be managed through such bilateral treaties, it will be easier for the US to pursue its desired trade policy within the multilateral framework without much resistance. After Sri Lanka (July 2002), Pakistan (June 2003) and Afghanistan (September 2004), Bangladesh is in line to be the fourth country in South Asia to sign such an agreement.

‘A Trade and Investment Framework Agreement is a consultative mechanism for the United States to discuss issues affecting trade and investment with another country’ is how the US defines the agreement where the emphasis is on the mechanism of consultation. However, there is no clarity as to what kind of consultations would take place. In view of previous experience, it is not difficult to guess that the relative bargaining strength will be the determining factor in this agreement.

According to the agreement’s earlier draft, the framework agreement’s objectives are to increase and diversify trade and investment opportunities and to strengthen bilateral economic relationship by increasing commercial and investment opportunities. At the same time it also talks about removal of impediments to trade and investment flows. Traditionally, the US has tried to include human rights, labour standards and environment besides others things in trade agreements. But least developed countries have opposed such inclusion rightly, pointing out that these were protectionist measures. Bangladesh has so far ratified seven out of eight fundamental conventions of the International Labour Organisation — the remaining one relates to ratification of convention 138 on minimum age. If there is a framework agreement, there should be a provision to judge international labour standards in accordance with Bangladesh’s own labour laws and that of the UN organisation.

The US government considers the framework agreement for those that are at the ‘beginning stages of opening up their economies’ to international trade and investment and for economies that are traditionally isolated or relatively closed. The Bangladesh economy does not conform to the first category; the term isolated may refer to the economy of Myanmar but Bangladesh’s trade openness is around 45 per cent of GDP at present which was about 20 per cent at the beginning of the 1990s. The growth rate of openness during the 1990s has been 5.3 per cent and four per cent since 2000.

It was mentioned in the framework agreement that both countries will expand trade in ‘goods and services’. It should be mentioned that service sector constitutes about 80 per cent of the US economy, while for Bangladesh it is only 48 per cent. The so-called ‘structural change model of development’ may not be applicable in this case. There should be an effective demand for those services in Bangladesh for trade to flourish.

Bangladesh should also not agree to any clause relating to intellectual property rights which may force Bangladesh to implement them before 2016. All such framework agreements contain a clause which ‘recognises the importance of providing adequate and effective protection and enforcement’ of intellectual property rights. But as a least developed country, Bangladesh is exempted from such obligations till 2016 under the World Trade Organisation. In July 1995 the US and Nicaragua signed a bilateral investment treaty, conditional upon Nicaragua providing adequate and effective protection for US intellectual property rights. Later in January 1998 the US and Nicaragua signed a bilateral intellectual property rights agreement which was to be implemented by July 1999, ahead of Nicaragua’s stipulated deadline to do so under the global trade forum (January 1, 2000). Intellectual property rights have been an economic and political weapon for multinational corporations and for the developed countries.

By implementing intellectual property rights, Bangladesh will need to extend protection for branded drugs, start patenting plants and animals, computer software and extend copyright protection. As a result, farmers might be forced not to preserve seeds or reproduce fish breeds or livestock. Copyright protection will adversely affect students, universities and libraries. In case of computer software, open source movement has become very popular as a cheap alternative to corporations like Microsoft. Implementation of intellectual property rights may very well lead to corporate monopoly.

Bangladesh signed a bilateral investment treaty with the US during the despotic regime of HM Ershad, on March 12, 1986. Reportedly, the framework agreement of 2005, in its preamble, acknowledged this treaty. It is still unknown whether the current draft still ‘acknowledges’ this treaty. It has been around 23 years that the previous agreement was signed. Before finalising the framework agreement, the bilateral treaty on reciprocal encouragement and protection of investment needs to be revised.

Many of our neighboring countries have not yet signed the framework agreement. Two of the Asian giants, China and India, see 21 per cent and 17 per cent of their exports respectively going to the American market. A question can genuinely be raised why neither has such a framework agreement in place.

In May 2003, the Stevedoring Services of America, a US company, lost a legal battle over building a private port facility in Bangladesh. The Supreme Court ruled that the approval of and follow-up works for construction of two private terminals at Patenga and Narayanganj by the company as arbitrary and illegal. The court verdict observed that the government did not consider applications of two British and Australian companies which were interested in the Patenga terminal. Trade in service has been a major concern from the American side in all the framework agreements. So the proposed agreement raises concern that it could target securing the interest of the Stevedoring Services of America and other US companies.

The government is expecting funds from the Millennium Challenge Account which is sponsored by the American government. Many argue that the government is proceeding with the framework agreement in haste only to secure access to this fund. Allocation from this fund is made on the basis of three basic indices — corruption, governance and democracy.

Before finalisation of the framework agreement or any other agreements, the government should duly consider Bangladesh’s interests first. The framework agreement must ensure that Bangladesh enjoys duty and quota free access to the US market. To safeguard the national interest of both the countries, this agreement should contain an article concerning amendment of the treaty through mutual consent. Particularly, the framework agreement should include ‘temporary movement of labour’ — more popularly mode 4 — with regard to movement of natural persons. Parliamentary standing committees have not been formed as yet. Any such treaty should be discussed in the standing committees on foreign affairs and commerce. The commerce ministry may set up a taskforce including representatives from stakeholder groups, trade experts, chamber leaders along with officials from relevant ministries. This committee could then review the draft and seek opinion as well. Participation in negotiations without properhomework may turn out to be catastrophic for Bangladesh.

(click to read in the New Age published on 15.02.09)

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Create a website or blog at WordPress.com

Up ↑

%d bloggers like this: