TICFA, US Bilateralism and Bangladesh

It was the US government that had come up with the proposal of signing Trade and Investment Framework Agreement (TIFA) with Bangladesh in 2001. First draft of it saw the inclusion of nine articles and 13 paragraphs on trade and investment related issues between the two countries. The overriding criticism against TIFA was that it would not serve the economic and development interests of an economically weak country like Bangladesh. Rather economically powerful US would get opportunity of exerting political pressure on its counterpart for their own economic and trade gains.  Then again amid public criticism the two governments had to revise the draft in 2005 to incorporate seven articles and 19 paragraphs.  This criticism still continued to prevail over the years even after the revision of the first draft.

To placate the critiques, after a decade of negotiation, TIFA has recently received a new name Trade and Investment Cooperation Forum Agreement (TICFA) with the words cooperation and forum being added.  Only in four cases the name TIFA varied and became Trade and Investment Cooperation Forum (TICF), Trade and Investment Development Cooperation Agreement (TIDCA), Framework Agreement for Trade, Economic, Investment, Technical Cooperation (FATEITC). Whatever the term is, these are the precursors for the USA to have complete bilateral trade and investment (BTI) agreements with its strategic allies.

The signing of TICFA has finally removed the smoke-screen that had thus far prevailed over its prospect of getting off.  Those who advocate or at least do not oppose TICFA vindicate it exclusively from economic point of view disregarding the political economy context of the USA’s recent predilection towards BTI agreements and the power asymmetry of the two countries both in military and economic terms.

This write-up sides with the critiques of the country in assessing the TICFA from three particular standpoints: (a) political economy of US preference for BTI; (b) implications of TICFA for Bangladesh; (c) experiences of the countries already in such agreements with the USA. The first perspective indeed provides the theoretical and contextual foundation for discussing the two other aspects.

Political economy of US preference for BTI

The foreign economic policy of the USA was tuned exclusively towards multilateralism throughout the post-war period for promoting a (neo-)liberal world order. The establishment of the General Agreement on Tariffs and Trade (GATT), World Bank, International Monetary Fund (IMF) was the testimonies to this trend during those years. Bilateralism was limited more towards formulating certain trade instruments like voluntary export restraints (VERs), and trade remedies like Section 301 and later Super 301 rather than having bilateral or even regional trade agreements.

But the multilateralism promoted by the USA through the Bretton Woods Institutions could not ensure that it could consistently perform for its economic dominance in the later period. Its share in world exports of manufactures declined from 29 percent in 1953 to 13 percent in 1976. The weighted real exchange rate of the United States (in index terms, 1975 = 100) even depreciated from around 83 in 1961 to 106 in 1978.

By the 1980s, US economic dominance eventually deteriorated or at least reached a position of equality or symmetry compared to other industrial countries like Japan, Germany.  This symmetric interdependence compelled US government to turn towards forming regional trade blocs in the late 1980s and early 1990s. This trade policy change coincided also with the demise of the ideologically bipolar world.  It got realized through the US participation in the regional organizations like North American Free Trade Agreement (NAFTA), the Enterprise for the Americas Initiative (EAI), the Asia-Pacific Economic Cooperation (APEC) forum and the ASEAN Regional Forum (ARF) etc.

A dynamism of various types of alliance building in terms of regional identity, development level, trade, economic, environmental issues  (cairns group; ACP, friends of fish, G-90, small and vulnerable economies, Africa group etc) emerged in multilateral trade negotiations. This trend in alliance building has offset the political clout of the USA in the recent years in multilateral negotiation particularly after the creation of the World Trade Organization (WTO) in 1994 replacing the GATT. At the WTO, the US government is no longer successful in pressing ahead with its agenda of coercing the small countries to embrace their own legal standard of trade and investment regime.  This depressing multilateral diplomacy of the USA at the WTO still exists along with its economically “falling behind” syndrome compared to its major trading partners and competitors. US economy is currently in more a precarious condition with a GDP growth of 1.6% given the fact that China is the most potential candidate to overtake US economy soon. China has the second largest GDP with a growth rate of 7.8%.  Robert Zoelick, the US trade representative, while explaining the reason for its economic decline, put blame on its sluggishness in signing bilateral trade agreements as he pointed out:

. . . While the United States stepped aside, others moved ahead. The European Union now has 27 bilateral free trade and customs agreements, 20 of which it negotiated in the course of the 1990s, and the EU is in the process of negotiating 15 more. After NAFTA, Mexico sped past the United States to negotiate eight free trade agreements with 32 countries…  There are over 130 free trade agreements in the world; the United States is party to only two. There are 30 free trade agreements in the Western hemisphere; the United States belongs to only one.

Under the circumstances, the motivation of competition and strategic concern over the need for getting back political power in trade negotiation through bilateralism eventually paved the way for signing TIFA with its strategic ally Taiwan in 1994 with the objective of entering into a full-fledged bilateral trade agreement in future. Since then the USA, according the Office of the US Trade Representative (USTR), has so far signed such forerunner agreements with more than 50 countries which are mostly its strategic allies. Obviously, through those bilateral agreements, the US tends to ensure its advantage which it cannot do otherwise in multilateral negotiation forum.  The USTR was also quite candid to admit that: “TIFAs can help focus attention on trade issues which often include barriers that the US faces, and, therefore, can help expand US access”.

Implications for Bangladesh

The strategic reason motivated TICFA is not an economic cooperation or development agreement. This forum agreement is devoid of any sector-driven or market access-centric element for bilateral cooperation over trade and trade plus issues. It is practically no more than a platform unilaterally initiated by the USA outside the WTO platform for bilateral negotiation over trade, investment facilitation, intellectual property rights (IPR), and other trade plus issues (labour standard, environment, corruption, transparency etc.). This forum agreement inevitably does not contain anything that addresses market access or development issues which are the lifelines of Bangladesh for its trade and economy.

In the context of the recent cancellation of Generalized System of Preference (GSP) by the US government, the issue of market access has got more politicized which now needs more policy attention than ever for Bangladesh. The apparels exporters of Bangladesh also pay 15.3% duty for entering the US markets.  But the TICFA does not authority to go beyond the issues which are of special concern to the US policy makers.

The forum agreement even reiterates the bilateral commitment of the parties to the Bilateral Investment Treaty which was signed back in 1986 during the autocratic Ershad regime and before the establishment of the WTO for the protection of investment.  It is indeed not a bilateral commitment as such, but a unilateral commitment in practical sense on the part of an LDC, struggling hard to attract foreign investment for its economic prosperity.  The current U.S. direct investment in Bangladesh is indeed one of largest after the UK.  The investment now stands at USD 1 billion. More importantly it has significant investment in environmentally and locally sensitive energy and power sectors. Chevron is the most leading in terms of US investment in Bangladesh.   US investment worth of more than $2 billion is also in the pipeline for power plants, coal mines and fertilizer plants.

One-on-one negotiation framework under such strategically motivated agreement, sidelining the already existing multilateral platform like the WTO, however, holds a potential risk for the country like Bangladesh.  It is more likely that the global hegemonic USA with its gradual economic decline and the fear of insecurity for “global terrorism” would become diplomatically more aggressive in taking the recourse in unilateral policy adoption for its economic gain in the name of bilateralism. And the weak partner of the agreement may also even willfully give in to the unilateral demands of its globally powerful partner. It is particularly truer when the ruling party of the relatively weak partner has performance deficit or legitimacy crisis at domestic front. In such scenario the ruling elites of the relatively weak country may prefer to act to the satisfaction of the influential counterpart for garnering external support.  The signing of the TICFA by the Bangladesh government just on the eve of the announcement of polls date by the chief election commissioner strongly hints that vulnerability.

It is no denying that the US government had indeed struggled hard in the last one decade to get through the TICFA.  USA and India are now at loggerhead to settle the political fate of Bangladesh given the political crisis that looms large over holding a credible parliamentary election in absence of a major opposition party. Predictably at this critical juncture at domestic political level, the major opposition party of Bangladesh also welcomed inking of the TICFA probably expecting that it would help them earn political “confidence” of the global superpower.

Against such scenario, we must not also ignore the fact that Bangladesh is one of the influential and vocal WTO members in multilateral trade negotiation in upholding the interests of the LDCs.  And in many cases, Bangladesh operates as a leader on behalf of the LDCs at the WTO.  Signing of this bilateral forum agreement now means Bangladesh as a member of the WTO will have a moral or at least a legitimacy crisis in multilateral trade negotiation to go against or not to act in favor of the trade and economic interest of the USA or any other industrialized countries that it did many times in the past on behalf of the LDCs.  Other countries – already signed bilateral framework/forum agreements – have now started to feel the pinch of one-on-one approach based trade negotiation with the USA keeping the WTO aside.

Experiences of the signatory countries

In evaluating the experiences of the southern countries’ bilateral agreements with the countries like the USA, EU, Saman Kelegama, the executive director of the Institute of Policy Studies of Sri Lanka, in one of his articles titled ‘North-South Regional Trading Arrangements in South Asia, rightly observed that “the southern countries most often ignore the details of the trade arrangement at the start and thereby undermine the cost of market access”.

In the article he explained how US policy makers had imposed conditionality on Sri Lanka in getting access for its readymade garment products to the US markets. The conditions imposed by the USA include fulfilling the stipulated rules of origin with a provision of reverse purchase of US fabrics; amendment of IPR laws to remove the obligations for compulsory licensing and of the competition policy legislation; also liberalization of capital account for trade exchanges with the US.  Same story goes with Chile and Singapore. After signing bilateral trade agreement, they have lost the authority to exercise any control over capital outflow to the USA.

In most cases the inclusion of controversial issues in the US bilateral trade agreements is actually the outcome of the lobbying by the multinational corporations for profit maximization and monopoly control. For instance, the Intellectual Property Committee, a coalition of 13 largest US-based multinational corporations, worked with the office of the US Trade Representatives to put forward their own  proposal of imposing US legal standard on global IPR and making those rights enforceable under the WTO agreements.  Ninety-six of the 111 members of the US delegation negotiating on IPRs during the Uruguay Round were from the private sector.

US multinationals endeavor to force US trade partners to commit to obligations that go even further than those in the WTO Agreement on Trade Related Intellectual Property Rights (TRIPS). They have been lobbying for pushing the issue of patenting biotechnological innovation into the bilateral trade negotiation, not covered under the original TRIPS. Their venture is now known as ‘TRIPS-plus’.  The Industry Trade Advisory Committee-15 (ITAC-15) on IPR – comprised of chief executives of certain multinational companies from different sectors – has been constantly working for the incorporation of TRIPS-plus measures in BTI agreements. But the LDCs have the right of not implementing their TRIPS obligations until the end of 2021.  Patenting of plants, plant varieties and animals are also still optional under WTO regulation.

Under the impact of ITAC-15’s policy advocacy, the TIFA signatory countries including Laos, Vietnam, Morocco and Singapore incorporated domestic plant variety protection laws based on the TRIPS-plus model of the International Union for the Protection of New Varieties of Plants (UPOV).  The UPOV provides for patenting plants, animals, and even ‘essential’ biological processes for the production of plants and animals.  The  advisory committee in its report on the US-Oman free trade agreement also advised the US government that they maintain “a strong bilateral program to deal with IPR deficiencies in non-FTA countries, many of which are critical markets…. It is therefore essential that traditional trade tools such as Special 301, Section 301, the unilateral trade preference programs and WTO dispute settlement be aggressively employed to lift levels of intellectual property protection in those countries.’

TIFA/TICFA is not necessarily only a corporate lobbying-driven trade and investment framework. It is also broadly related to US foreign policy objectives and geopolitical goals. The US manipulates these agreements to ensure politico-economic and military gains from its weaker trade partners.  The US government brought its partners of “war on terror” like Australia, Thailand, Pakistan and the Middle Eastern countries under BTI immediately after the event of 9/11.  A statement made by the US trade representative Robert Zoellick in 2004 during US-Pakistan bilateral investment talks is very much relevant to understand BTIs security implication. He emphasized that: “Pakistan and the United States are partners in combating global terrorism. A BIT [bilateral investment treaty] based on the high standards contained in our model text can play an important role in strengthening Pakistan’s economy, so as to create new opportunities for exporters and investors in both economies and assist in meeting the economic conditions to counter terrorism” [emphasis given] . Similar sentiment he also echoed while signing the TIFA with the United Arab Emirates (UAE) and Qatar in the same year.  

The Last Words

The USA is not the only country that pushes for bilateral agreements. The European Union, Japan, and even India with its weaker counterparts also follow the same footsteps. There is now harm in it as long as these agreements serve the trade and economic purposed of the two countries. But when bilateral agreements like TIFA/TICFA are the results of strategic and security concerns of a globally powerful, but economically declining country with the aspiration of sidelining the WTO agreements to impose more radical and stringent obligations of trade and investment and of IPR on the economically weak partners, one should be cautious and have foresight before putting all the weight behind such agreements. One may argue that both Bangladesh and USA have renewed their commitment to the WTO and its obligations by signing TICFA. In that case, it is important that we reflect on the negative experiences of the TIFA/TICFA signatory countries regarding TRIPS plus in particular and other relevant issues.

As the ruling regime in Bangladesh has signed the TICFA, it is more likely that the economically “falling behind” global superpower will vie for more gains from an LDC than losses in bilateral trade negotiation.   Under this new reality, it will be a constant challenge for the party/alliance in power – whoever it is – to make sure that Bangladesh gains or at least does not get engaged into asymmetric reciprocity with the USA.  But the syndrome of giving in to the USA has already appeared with the last moment signing of TICFA by the government. Whatever is the reason behind this TICFA, it indeed does indicate what our mainstream political parties are up to anything whenever they are competing against each other and their survival gets into trouble. Only narrow partisan interests guide the parties, currently in or want to be in power in Bangladesh, thus turning their back on the people, and their struggle for survival.  One thing we can now be sure of and it is that our future is more towards signing of more TICFA like agreements by the current and future ruling elites only to appease their more powerful counterparts and win their heart, not trusting the people of Bangladesh and leaving them behind to suffer and struggle.