DEPARTMENT OF HISTORY

Unequal Treaties

International Trade Agreements and Underdevelopment in

Latin America, 1994-2015

BY MARK NORMINGTON

WORD COUNT: 19,469

SUBMISSION DATE: September 2015

DEGREE: MA Contemporary History and International Politics

- 1 -

Contents

List of Figures ------------------------------------------------------------------------------------------------------------ 1

Introduction -------------------------------------------------------------------------------------------------------------- 2

Chapter 1 – Market Access ------------------------------------------------------------------------------------------- 14

Chapter 2 – Deregulation --------------------------------------------------------------------------------------------- 22

Chapter 3 – Intellectual Property Rights --------------------------------------------------------------------------- 29

Chapter 4 – Investor Arbitration ------------------------------------------------------------------------------------ 36

Chapter 5 – Context and Motivations ------------------------------------------------------------------------------ 43

Conclusion -------------------------------------------------------------------------------------------------------------- 51

List of Abbreviations -------------------------------------------------------------------------------------------------- 53

Bibliography ------------------------------------------------------------------------------------------------------------ . 54

List of Figures

Figure 1.1 – Share of manufacturing in GDP of Argentina, Brazil and Chile ------------------------------ 17

Figure 1.2 – Applied tariffs on manufactured products in Argentina, Brazil and Chile ------------------- 17

Figure 2.1 – Research and Development Expenditure in Latin America and the Developed World --- 27

Figure 3.1 – Number of Patents held by Latin America and the Core Countries -------------------------- 30

Figure 4.1 – Most Frequent ISDS Respondent States (total as of end of 2014) ---------------------------- 40

Figure 4.2 – Most Frequent ISDS Initiator States (total as of end of 2014) -------------------------------- 41

Figure 5.1 – GDP per capita Disparity between Latin America and the Core ------------------------------ 44

- 2 -

Introduction

The Chilean government may be assured that a liberal commercial policy will produce the same results in

Chile as in England, that is, the increase of government income and the increase of the comforts and

morality of the people. This system, which in the United Kingdom has been accepted after much

consideration and which after having been tested by experience has been successful beyond the most

optimistic expectations, can be – well considered – worthy of a try on the part of the Government of Chile.1

– Instructions of the Chargé d’Affaires of Great Britain in Chile

The above quote dates from 1853, during a period when the United Kingdom was convincing many

countries outside its formal colonial possessions – whether through displays of military force or through

diplomatic persuasion such as that exampled above – to sign so-called ‘unequal treaties’.2 Although the

agreements which are most associated with the title ‘unequal treaties’ are those which were signed

between the United Kingdom and China following the Opium Wars – for example the Nanking Treaty

of 1842 – this particular breed of international agreement was first used by the United Kingdom in Latin

America, beginning with Brazil in 1810.3 The unequal treaties opened up the markets of the countries

which signed them to British goods, through depriving the non-British contracting parties of the ability

to set their own tariff rates, holding them down at a flat rate of typically around five percent.4

The British Chargé d’Affaires’ assurances that a liberal commercial policy, i.e. free trade, would

‘produce the same results in Chile as in England’ were not genuine. The unequal treaties signed by Latin

American countries were part of a larger imperial project on the part of the United Kingdom, and the

other European imperial states, to expand the foreign market for their manufactured goods by hindering

the growth of manufacturing industries abroad.5 While British manufacturing boomed, the manufacturing

industries of the Latin American countries declined.6 Only when the larger Latin American countries

managed to regain control over their tariff rates towards the end of the nineteenth century did their

manufacturing industries begin to recover.7 The unequal treaties have since become infamous for the dire

effects they had on the economies of the countries which signed up to them.

In the present era, history seems to be repeating itself. Since the mid-1990s, international trade

agreements have arisen which have benefited the most developed countries and have had detrimental

1 Instructions of the Chargé d’Affaires of Great Britain in Chile, September 23, 1853, quoted in Andre Gunder Frank, Capitalism and Underdevelopment in Latin America: Historical Studies of Chile and Brazil (New York and London: Monthly Review Press, 1969), pp. 67-68. 2 Ha-Joon Chang, Economics: The User’s Guide (London: Penguin, 2014), p. 64. 3 Ha-Joon Chang, Kicking Away the Ladder: Development Strategy in Historical Perspective (London: Anthem Press, 2002), p. 53. 4 Chang, Kicking Away the Ladder, p. 53. 5 Chang, Kicking Away the Ladder, p. 53. 6 Frank, Capitalism and Underdevelopment in Latin America, pp. 67-68, 163. 7 Chang, Kicking Away the Ladder, p. 54.

- 3 -

effects for Latin America. At the time of writing, a new wave of multilateral trade agreements is currently

being negotiated, consisting of the Trans-Pacific Partnership (TPP), the Transatlantic Trade and

Investment Partnership (TTIP), and the Trade in Services Agreement (TiSA). TPP is a wide-ranging trade

agreement covering many different areas, from trade in goods and services to the environment to

intellectual property rights. There are currently twelve countries involved in TPP negotiations. These are

– as the name would suggest – countries bordering the Pacific Ocean, with the notable exceptions of

China and Russia. TTIP performs a similar function, but takes the North Atlantic as its geographical axis

rather than the Pacific. The USA and the European Union are the two contracting parties. TiSA has a

more limited scope, applying only to trade in services, yet applies to a larger number of countries including

the North American states, most of Europe, Pakistan, Japan, South Korea, Australia, New Zealand, and

several countries in Central and South America.

Of these, TPP and TiSA affect Latin America, with Chile, Peru, and Mexico engaged in

negotiations for both agreements, and Uruguay, Colombia, Costa Rica, Panama and Paraguay currently

only signed up to TiSA, though Colombia and Costa Rica have also announced an interest in joining TPP

and it is possible that other Latin American countries may join before negotiations are concluded.1

This paper will focus on an analysis of TPP and TiSA. Many of the terms of these two upcoming

trade agreements are not completely new; they are either copied verbatim or adapted slightly from terms

contained in previous agreements which have been concluded since the mid-1990s. These include three

agreements which were concluded during the Uruguay Round of WTO negotiations in 1994: the

Agreement on Trade-Related Investment Measures (TRIMS), the Agreement on Trade-Related Aspects

of International Property Rights (TRIPS), and the General Agreement on Trade in Services (GATS); and

also the North American Free Trade Agreement (NAFTA) signed in 1994, and other free trade

agreements or bilateral investment treaties (BITs) signed between the highly developed countries and

Latin American states. By examining TPP and TiSA it will therefore be possible to analyse the effects

which these similar trade agreements had, and thereby to predict the potential effects of TPP and TiSA

on economic development in their Latin American signatory states.

It is the aim of this paper to argue that similar criticisms which were aimed at the unequal treaties

of the nineteenth century by dependency theory writers of the 1960s and 1970s can be re-applied to

modern day trade agreements. It will be argued that certain analytical aspects of dependency theory, when

applied to the political rather than the economic sphere, can facilitate a better understanding of the

context of and motivations for these agreements. As such, this introduction will expound some of the

key concepts of dependency theory. It will chart the reasons for the decline of dependency theory in the

1970s and 1980s, and will then examine some of the recent pertinent literature concerning international

1 Barbara Kotschwar and Jeffrey Schott, “The Next Big Thing?: The Trans-Pacific Partnership & Latin America,” Americas Quarterly, 2013, accessed July 27, 2015, http://www.americasquarterly.org/next-big-thing-trans-pacific-partnership; United Nations Economic Commission for Latin America and the Caribbean, Latin America and the Caribbean in the World Economy: A Sluggish Postcrisis, Mega Trade Negotiations and Value Chains: Scope for Regional Action (Santiago: United Nations, 2013), p. 69.

- 4 -

development and international trade agreements which it will be contended could benefit from the

inclusion of some of the analytical aspects of dependency theory.

The unequal treaties of the nineteenth century were roundly condemned by dependency theory writers

in the 1960s and 1970s, who claimed that these treaties contributed to a state of ‘underdevelopment’ in

Latin America.1 They argued that the treaties were symptomatic of a global framework of asymmetric

power relations, characterised as a dichotomy between a highly developed ‘core’ and a less developed

‘periphery’. Immanuel Wallerstein sums up dependency theory as the notion that ‘some countries were

stronger economically than others (the core) and were therefore able to trade on terms that allowed

surplus-value to flow from the weaker countries (the periphery) to the core.’2 It was argued by

dependency theorists that the core had achieved its advanced stage of development through the

exploitation of the periphery, and continued to do so.* The periphery was not less developed than the

core because it was at an earlier stage of development, but because the core had used its powerful position

to benefit itself at the expense of the periphery, resulting in accelerated development for the core and

hampered development – or underdevelopment – for the periphery.

A crucial aspect of dependency theory was an acknowledgement of the interconnectedness of the

economies of the countries which made up the core and periphery. These countries were not isolated

systems which were independently making their way towards the latter stages of development. Rather,

the countries which made up the core and periphery were part of a single global system. The core had

not achieved its high level of development through domestic means alone, but also through the

exploitation of the periphery. The process of development in the core, and underdevelopment in the

periphery, were thus fundamentally interlinked. The crux of core-periphery relations, in the words of

Cristóbal Kay, lay in an acknowledgement that ‘the process of development and underdevelopment is a

single process: that the [core] and periphery are closely interrelated, forming part of one world economy.’3

The exploitative relationship that existed between core and periphery, dependency theorists

argued, manifested itself in several key ways. These included:

1. The inhibition by the core of economic development in the periphery.

2. Economic dependence of the periphery on the core.

3. A flow of wealth from periphery to core.

1 See for example Frank, Capitalism and Underdevelopment in Latin America, pp. 67, 163. 2 Immanuel Wallerstein, World-Systems Analysis: An Introduction (Durham and London: Duke University Press, 2004), p. 12. * N.B. World-Systems Theory, a close relation of dependency theory pioneered by Immanuel Wallerstein, complicated this concept by introducing the category of ‘semi-periphery’. See Wallerstein, World-Systems Analysis, p. 28. 3 Cristóbal Kay, Latin American Theories of Development and Underdevelopment (London: Routledge, 1989), p. 26, quoted in Fernando Ignacio Leiva, “Toward a Critique of Latin American Neostructuralism,” Latin American Politics and Society 50, no. 4 (2008), p. 9.

- 5 -

4. A growing wealth disparity between core and periphery.1

This situation was able to come about because of the vast disparity in economic power between

core and periphery. Since the core was able to trade on consistently advantageous terms with the

periphery, it was able to advance its economic position while leaving the periphery in a dependent and

inferior position. Herein lies the difference between the concepts of interdependence and dependence.

In a global economic system in which national economies are interlinked, there exists a state of

interdependence. Rare are the cases in the modern age in which a country has produced everything it

consumes; the continual functioning of national economies is reliant upon international exchange. This

state of interdependence becomes dependence when it is combined with asymmetric power relations –

that is, a situation in which some countries have more power than others. Fernando Cardoso and Enzo

Faletto sum up this distinction very well:

Superficial or apologetic analysts, in order to minimize exploitative aspects of the international economy,

have merely assumed that “modern” economies are “interdependent.” By stating this platitude, they often

forget that the important question is what forms that “interdependency” takes. While some national

economies need raw material produced by unskilled labor, or industrial goods produced by cheap labor,

others need to import equipment and capital goods in general. While some economies become indebted to

the financial capital cities of the world, others are creditors. Of course, bankers need clients, as much as

clients need bankers. But the “inter-relationship” between the two is qualitatively distinct because of the

position held by each partner in the structure of the relationship. The same is true for the analysis of

“interdependent” economies in world markets.2

Owing to the Marxist background of many of its proponents, dependency theory adopted a class-

based analytical framework and a focus on global distribution of wealth. While its emphasis on

interactions between core and periphery may appear to imply a focus on relations between more- and

less-developed nation-states, its analytical focus was on the interaction of international classes. According

to dependency theorists, the local, national, and global economy were all linked into a pyramidal system

of exploitation, whereby surplus-value flowed from the working classes in the periphery at the base of

the pyramid upwards through an ever-decreasing number of capitalists to the capitalist class in the core.

This idea is most clearly enunciated by Andre Gunder Frank:

[T]his exploitative relation…in chain-like fashion extends the capitalist link between the capitalist world and

national metropolises to the regional centers (part of whose surplus they appropriate), and from these to

local centers, and so on… At each step along the way, the relatively few capitalists above exercise monopoly

power over the many below, expropriating some or all of their economic surplus and, to the extent that they

are not expropriated in turn by the still fewer above them, appropriating it for their own use. Thus at each

1 See for example Dale Johnson, “Dependence and the International System,” in Dependence and Underdevelopment: Latin America’s Political Economy, ed. James Cockroft, Andre Gunder Frank, and Dale Johnson (Garden City, New York: Anchor Books, 1972), pp. 72-74. 2 Fernando Henrique Cardoso and Enzo Faletto, Dependency and Development in Latin America, trans. Marjory Mattingly Urquidi (Berkeley, etc.: University of California Press, 1979), p. xxi.

- 6 -

point, the international, national, and local capitalist system generates economic development for the few

and underdevelopment for the many.1

Thus it was class interests, rather than national interests, which dependency theorists argued had

perpetuated the underdevelopment of the periphery. Emergent behaviour stemming from economic

imperatives produced a global system of exploitation stretching from the local to the global level. It was

economic incentives which prompted the British ruling class to request that Latin American countries

sign unequal treaties in the nineteenth century; a request which was aided by the interests of the Latin

American economic elites which were involved in the export of primary products and as such would

benefit from free trade with the United Kingdom.2

Dependency theory suffered from several weaknesses, chief of which was its frequently dogmatic

Marxism. This severely weakened the theory’s implications for government policy, since it was often

concluded that the only way to combat underdevelopment was through a domestic socialist revolution

which would lead to a rejection of the world capitalist system and would result in complete separation

from the global market.3 Typical of this approach is Andre Gunder Frank’s book Capitalism and

Underdevelopment in Latin America which, after plenty of highly insightful analysis, concludes with the rather

incongruous and unhelpful statement ‘evidently, the only way out of Latin American underdevelopment

is armed revolution leading to socialist development.’4 Additionally, the neo-Marxist leanings of

dependency theory caused it to focus purely on economic structures, lacking a recognition of political

structures.

The theory’s powers of prediction were also relatively poor; it failed to envision a situation in

which countries could escape their state of underdevelopment other than by cutting themselves off

completely from the global economy following a socialist revolution. The rapid economic growth of East

Asian countries such as Taiwan, Singapore, and South Korea without these conditions therefore landed

a severe blow to dependency theory. For many, this discredited the core-periphery model which formed

the basis of the theory since domestic political and institutional factors were seen as far more important

in holding back development than international structural and economic factors.5

In part because of these weaknesses, dependency theory fell out of academic favour – a process which

began in the 1970s and was virtually complete by the mid-1980s.6 This decline was greatly aided by the

1 Frank, Capitalism and Underdevelopment in Latin America, pp. 7-8. 2 Cardoso and Faletto, Dependency and Development in Latin America, pp. 15-16; 60. 3 Eric Helleiner, “Economic Liberalism and Its Critics: The Past as Prologue?” Review of International Political Economy 10, no. 4 (2003),” p. 688. 4 Frank, Capitalism and Underdevelopment in Latin America, p. 318. 5 Omar Sánchez, “The Rise and Fall of the Dependency Movement: Does It Inform Underdevelopment Today?” Estudios Interdisciplinarios de América Latina y el Caribe 14, no. 2 (2003), accessed August 4, 2015, http://eial.tau.ac.il/index.php/eial/ article/view/893/946. 6 Sánchez, “The Rise and Fall of the Dependency Movement.”

- 7 -

rise of neoliberalism and the associated shift in economic thinking to free market fundamentalism which

began in the 1970s. The overt Marxism of dependency theory’s approach put many people off as Marxism

became less fashionable – both academically and politically – during this period. The nail in the coffin

for dependency theory, and its close relation Latin American structuralism, was the Latin American Debt

Crisis of the early 1980s which was deemed to have been caused in large part by the inward-oriented

import-substitution policies of Latin American countries as advocated by these theories. Such inward-

oriented policies were considered to have been shown to be inferior to the outward-oriented policies of

the East Asian newly industrialised countries.1

Economic nationalism, as associated with dependency theory and Latin American structuralism,

was renounced and instead developing countries were advised to embrace globalisation. In the field of

international development, the Washington Consensus became the new orthodoxy. Rejecting notions of

structural advantage or any conception of the detrimental effects which the actions of developed

countries could have on developing countries, the Washington Consensus instead claimed that

developing countries could achieve the same level of development as developed countries if they followed

its prescriptions.2 These took the form of a set of neoliberal policies broadly aimed at promoting trade

and capital account liberalisation, privatisation, deregulation, and fiscal retrenchment.3

Over the past two decades, the Washington Consensus has come under increasing criticism from a broad

spectrum, ranging from Marxists such as David Harvey to neoclassical economists such as Joseph

Stiglitz.4 Much has been written in disapproval of its recommendations, and it has generally been agreed

amongst its critics that it has not produced the positive results for developing countries which had been

promised. Instead, it has been broadly recognised that the neoliberal policies recommended by the

Washington Consensus have harmed growth in developing countries and have increased global

inequality.

The turn away from the Washington Consensus among Western academics has been

accompanied by the rise of rival paradigms emerging from developing countries. The most notable of

these have been East Asian developmentalism and Latin American neostructuralism, both of which stress

the need for the active participation of the state in developing economies in order to ensure the efficient

and equitable operation of the market, leading to economic development.5 These rival paradigms have

re-awakened an acknowledgement of the importance of politics in development; this was largely absent

1 Charles Gore, “The Rise and Fall of the Washington Consensus as a Paradigm for Developing Countries,” World Development 28, no. 5 (2000), p. 792. 2 Gore, “The Rise and Fall of the Washington Consensus as a Paradigm for Developing Countries,” p. 789. 3 Gore, “The Rise and Fall of the Washington Consensus as a Paradigm for Developing Countries,” p. 789. 4 Helleiner, “Economic Liberalism and Its Critics,” pp. 686-687. 5 Gore, “The Rise and Fall of the Washington Consensus as a Paradigm for Developing Countries,” p. 789.

- 8 -

from the Washington Consensus, which focused very narrowly on economics. It was also absent from

dependency theory, which was overly focused on economic, as opposed to political, structures.

The success of state-led development strategies pursued by countries in East Asia gave rise to a new

paradigm for developing countries in the form of the ‘developmental state’ – a model which has attracted

considerable attention and acclaim. It has been observed by many writers that the East Asian

developmental states – examples of which include China, Japan, Taiwan, and South Korea – have

produced ‘extraordinary rates of economic growth’ combined with ‘a relatively egalitarian distribution of

income.’1 For instance, Stiglitz notes that the East Asian countries achieved ‘a reduction of poverty,

widespread improvements in living standards, and even a process of democratization’ alongside

economic growth.2 He writes that previous development strategies have focused too narrowly on

economics, paying little attention to institutional constraints and lacking historical context.3

In his assertion that previous development strategies have been overly focused on economics,

Stiglitz stands in some agreement with Adrian Leftwich, who states that ‘development must also be

understood as a profoundly political process…[emphasis in original]’ and argues that the national state is

the only agency capable of promoting development through acting as a ‘central coordinating

intelligence’.4 It is generally accepted by academics who have written on the subject of developmental

states that the success of the East Asian countries lay in the active intervention of the state in the economy

in order to promote economic development. This was not Soviet-esque state planning, since the East

Asian developmental states fully embraced the capitalist market economy. Rather, it was a co-operative

relationship between the state and the market in which the state used its power to promote the growth

of new industries while using extensive regulation to maximise the societal benefit of this industrial

expansion.

At the same time, developmental states protected their emerging industries from foreign

competition through the use of tools such as tariffs, subsidies, and regulation of foreign direct investment

(FDI).5 Ha-Joon Chang in particular vaunts the benefits which both the developed countries and the East

Asian developmental states have gained from infant industry promotion – that is, the protection of

emergent domestic industries from foreign competition until they are sufficiently internationally

1 Ziya Önis, “The Logic of the Developmental State,” review of Asia’s Next Giant: South Korea and Late Industrialization by Alice Amsden, The Political Economy of the New Asian Industrialism by Frederic Deyo, MITI and the Japanese Miracle by Chalmers Johnson, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization by Robert Wade, Comparative Politics 24, no. 1 (1991), p. 109. 2 Joseph Stiglitz, “Towards a New Paradigm of Development,” in Making Globalization Good: The Moral Challenges of Global Capitalism, edited by John Dunning (Oxford: Oxford University Press, 2003), p. 81. 3 Stiglitz, “Towards a New Paradigm of Development,” pp. 78-79. 4 Adrian Leftwich, States of Development: On the Primacy of Politics in Development (Cambridge: Polity, 2000), p. 7. 5 Önis, “The Logic of the Developmental State,” p. 110; Peter Evans, “Predatory, Developmental, and other Apparatuses: A Comparative Political Economy Perspective on the Third World State,” Sociological Forum 4, no. 4 (1989), p. 563; Peter Evans, “Transferable Lessons?: Re-examining the Institutional Prerequisites of East Asian Economic Policies,” Journal of Development Studies 34, no. 6 (1998), p. 78; Chang, Economics, p. 432.

- 9 -

competitive to warrant the lowering of these barriers.1 In this way, economic nationalism as practised by

the East Asian developmental states differs from that envisioned by dependency theory since it

constitutes not a complete de-linking from the global economy, but a transitional stage which allows the

gap in competitiveness between domestic and foreign industries to be closed, followed by integration

into the global economy.

The desirability of the application of the developmental state model in Latin America has been

demonstrated by an increasing willingness on the part of governments in the region to deviate from the

prescriptions of the Washington Consensus, and the emergence of Latin American neostructuralism – a

rival development paradigm to the Washington Consensus which has many similarities to East Asian

developmentalism.2 Over time, neostructuralism has moved to the centre of Latin American politics and

has pushed neoliberalism from its once dominant position.3 In a similar vein to East Asian

developmentalism, Latin American neostructuralism advocates co-operation between state and market

in order to encourage the growth of the manufacturing industry; specifically, the shift to higher value-

added industries and achieving ‘international competitiveness based on increased productivity and

innovation.’4 Its focus is on export-oriented industrialisation, in contrast to import substitution

industrialisation which had been advocated by Latin American structuralism from the 1950s to the 1970s.

In common with its structuralist predecessor, Latin American neostructuralism envisages the utilisation

of a strategic industrial policy to actively support industrialisation in the region.5

Neostructuralism has attracted some criticism, for example from Fernando Ignacio Leiva, for

paying insufficient attention to structural factors (despite its name) which may stand in the way of its

planned development approach – in particular, the constraints presented by the increasing power of the

developed countries and large multinational corporations over the region.6 A key weakness of

neostructuralism, argues Leiva, is its abandonment of the conceptualisation of global power asymmetries

in the form of core-periphery relations, a concept previously been held in common by Latin American

1 Chang, Kicking Away the Ladder, p. 10; Ha-Joon Chang, Bad Samaritans: Rich Nations, Poor Policies and the Threat to the Developing World (London: Random House Business, 2007), p. 38. 2 Cristóbal Rovira Kaltwasser, “Towards Post-Neoliberalism in Latin America?” review of Beyond Neoliberalism in Latin America? Societies and Politics at the Crossroads, edited by John Burdick, Philip Oxhorn and Kenneth M. Roberts, Governance after Neoliberalism in Latin America, edited by Jean Grugel and Pia Riggirozzi, Latin American Neostructuralism: The Contradictions of Post-Neoliberal Development, by Fernando Ignacio Leiva, Post-Neoliberalism in the Americas, edited by Laura Macdonald and Arne Ruckert, Contemporary Latin America: Development and Democracy beyond the Washington Consensus, by Francisco Panizza, Challenging Neoliberalism in Latin America, by Eduardo Silva, Latin American Research Review 46, no. 2 (2011), p. 225. 3 Nick Miroff, “Latin America’s Political Right in Decline as Leftist Governments Move to Middle,” Guardian, January 28, 2014, accessed July 16, 2015, http://www.theguardian.com/world/2014/jan/28/colombia-latin-america-political-shift; Gore, “The Rise and Fall of the Washington Consensus as a Paradigm for Developing Countries,” pp. 795-796. 4 Leiva, “Toward a Critique of Latin American Neostructuralism,” p. 6. 5 Leiva, “Toward a Critique of Latin American Neostructuralism,” p. 5. 6 Leiva, “Toward a Critique of Latin American Neostructuralism,” pp. 11-12.

- 10 -

structuralism as well as dependency theory. This rejection of the concept of core-periphery relations has

weakened neostructuralism’s ability to conceptualise the process of underdevelopment in Latin America.1

Both East Asian developmentalism and Latin American neostructuralism, while presenting a step

forward from the Washington Consensus in their recognition of the beneficial role which the state can

play in the development process, lack a conception of international structural factors which may constrain

such state-led approaches to development as advocated by these two paradigms. They give insufficient

attention to the interconnectedness of national economies in the global capitalist system, instead

following the Washington Consensus approach of linking development to purely domestic factors. While

the jettisoning of the dependency theory concept of core-periphery relations has allowed for markedly

more useful policy recommendations, this has been at the expense of the analytical strength which came

with this concept.

In recent decades, a great deal of progress has been made on the examination of the constraints placed

on state-led development approaches in the form of ‘development policy space’ literature. Essentially,

development policy space literature argues that developed countries have blocked off many state-led

avenues for development, which they and the East Asian developmental states had used successfully in

the past. To a great extent this literature borrows from the ideas of nineteenth-century German economic

Friedrich List, who pioneered the concept of ‘kicking away the ladder’ to denote the hypocritical nature

of advanced industrial countries which had benefited from protectionism during their earlier stages of

development and yet were preaching the merits of free trade to other, less developed nations.2

International trade agreements are one of the chief mechanisms by which the constraining of

state-led development approaches has been achieved. For example, Ha-Joon Chang and Robert Wade

have both argued that the agreements which came out of the Uruguay Round – a round of World Trade

Organisation (WTO) trade negotiations concluded in 1994 – constitute a modern version of List’s

‘kicking away the ladder’.3 Through these agreements, it has become much more difficult for developing

countries to use measures such as subsidies, tariffs, and regulation of FDI.

The shrinkage of the range of policy options regarding economic development available to

present-day developing countries – the ‘development policy space’ from which the literature takes its

name – is a common, uniting theme amongst development policy space writers. That is not to say that

they agree on precisely how much policy space has been lost by developing countries. Kevin Gallagher,

Alice Amsden, and Takashi Hikino have argued that, although the policy space available to developing

1 Leiva, “Toward a Critique of Latin American Neostructuralism,” p. 9. 2 Chang, Kicking Away the Ladder, p. 3. 3 Chang, Kicking Away the Ladder, p. 10; Robert Wade, “What Strategies are Viable for Developing Countries Today? The World Trade Organization and the Shrinking of ‘Development Space’,” Review of International Political Economy 10, no. 4 (2003), p. 621.

- 11 -

countries has been reduced as a result of international trade agreements, a significant amount still remains

open to them.1

Overall, development policy space literature has been a valuable contribution to the field of

international development. Along with East Asian developmentalism and Latin American

neostructuralism, it has reasserted the importance of politics in the process of development. It has

successfully highlighted constraints which developed countries have put on state-led development

strategies for present-day developing countries. In doing so, it has fought back against the aid narrative

which dominates public discourse regarding international development. The governments of developed

countries – particularly the USA and United Kingdom – are keen to stress their benevolence when it

comes to overseas aid – a claim which goes largely unchallenged by mainstream media.2 A keyword search

for ‘international development’ in any of the main British and US national newspapers’ websites returns

lists of articles dominated by concerns over aid budgets and aid effectiveness. During the rare occasions

when international development is mentioned in mainstream political discourse, it by and large takes the

form of debate over enlarging or shrinking the aid budget. Little is mentioned of the actions taken by

developed countries and the multinational corporations headquartered on their soil which undermine

this benevolence. Development policy space literature has begun to form a counter-narrative which

reveals the two-faced nature of developed countries, which give with one hand and yet take with the

other.

However, development policy space literature lacks an acknowledgement of the global political

structure which underpins the creation of international trade agreements which constrain the policy

options of developing countries. While its adherents have been very successful in demonstrating the

negative economic effects which these trade agreements have had on developing countries, they have

given little attention to the factors which gave rise to these agreements – to the political leverage which

the most developed countries are able to exercise over the global economy and to the internal classes

which influence their governments. Though much has been made in popular discourse of the rise of the

BRICS (Brazil, Russia, India, China, and South Africa) and the associated shift in global power towards

the East and South, it is clear from the international trade agreements which have emerged since the mid-

1990s that the same countries which held the reins of power over the global economy half a century ago

still maintain their dominant position today. Development policy space literature, though very strong on

the reduced prospects for growth which developing countries have suffered as a result of international

trade agreements, has paid little attention to the global flow of wealth from poor to rich which this

1 Kevin Gallagher, “Understanding Developing Country Resistance to the Doha Round,” Review of International Political Economy 15, no. 1 (2008), p. 67; Alice Amsden and Takashi Hikino, “The Bark is Worse than the Bite: New WTO Law and Late Industrialization,” Annals of the American Academy of Political and Social Science 570 (2000), pp. 104, 108. 2 Alex Scrivener, The Poor are Getting Richer: And other Dangerous Delusions (London: Global Justice Now, 2015), p. 19.

- 12 -

position of power has allowed the most developed countries to achieve through shifting the rules of the

global economy further in their favour.

The academic environment seems ripe for the re-emergence of some of the key features of dependency

theory. Neoliberalism and the Washington Consensus, key factors in the decline of dependency theory,

have become increasingly unpopular amongst academics in both the developed and developing world.

Development policy space literature has greatly contributed to a counter-narrative to the Washington

Consensus and the aid narrative. This counter-narrative could benefit from borrowing some of the major

dependency theory concepts – core-periphery relations, an acknowledgement of class interests, and a

focus on global distribution of wealth. By applying these concepts to the political sphere, a better

understanding of the political conditions which allow the most developed countries to fix the rules of the

global economy in their favour can be achieved. This will allow for a better comprehension of both the

context of and motivations for international trade agreements in the present era.

It is the aim of this paper to argue that the core concepts of dependency theory listed above

remain relevant to Latin America’s present-day position in the global economy. The vast disparity in the

amount of political power held by the core and Latin America have allowed the countries of the core to

shift the rules of the global economy further in their favour, resulting in the economic symptoms which

dependency theorists argued characterised core-periphery relations. More precisely, the core countries

have shifted the rules in favour of their economic elites. The paper will argue this through an analysis of

recent international trade agreements and their effects on economic development in Latin America, while

framing these agreements within the wider global structure of core-periphery relations. Through

providing a bridge between development policy space literature and dependency theory, it should be

possible to enhance the analytical and conceptual strength of the former while avoiding the weaker

aspects of the latter.

The first four chapters will each focus on one key aspect of TPP and TiSA which has the potential to

perpetuate underdevelopment in Latin America. Chapter 1 will examine the impact of the liberalisation

of trade and investment, and chapter 2 will focus on the impact of deregulation, particularly of FDI.

Chapter 3 will assess the consequences of increasingly stringent intellectual property rights, and chapter

4 will analyse the unprecedented rise of investor arbitration clauses in international trade agreements.

Chapter 5 will provide some context by framing these aspects within the wider structure of core-periphery

relations. It will also examine the motivations and incentives which result from this structure and which

have led to the emergence and acceptance of the international trade agreements being discussed in this

paper. The paper will conclude with a set of policy implications which have arisen as a result of the

findings in this paper, aimed at the most developed countries.

- 13 -

At this point, since this paper is examining economic development in Latin America, it is necessary to

provide a definition for the term ‘development’. Many competing definitions exist which take into

account a variety of different factors, but due to the scope of this paper, it will take a narrowly economic

view of development. A distinction must be made between economic growth and economic

development. Economic growth denotes an increase in output, whereas economic development is the

increase in productive capabilities, resulting from the transformation of production activities.1 The

former is a necessary but not sufficient condition for the latter. As Chang has noted, a resource bonanza

may well cause rapid economic growth, but will not lead to economic development unless it is

accompanied by a concomitant increase in productivity.2 Chang and Amsden both argue that in the

majority of cases, economic development has been achieved through the growth of manufacturing

industries, since this is the sector in which increased productivity can most easily be obtained.3

Furthermore, the manufacturing sector is able to spread higher productive capabilities to other sectors

of the economy through the provision of capital goods.4 The spread of knowledge – for example in the

form of skills, manufacturing processes, and organisational structures – plays a fundamental role in this

process. As Amsden writes:

Economic development is a process of moving from a set of assets based on primary products, exploited

by unskilled labor, to a set of assets based on knowledge, exploited by skilled labor. The transformation

involves attracting capital, human and physical, out of rent seeking, commerce, and “agriculture” (broadly

defined), and into manufacturing, the heart of modern economic growth.5

A brief note on sources – as TPP and TiSA are still being negotiated in secret at the time of writing,

leaked draft texts of the agreements have been used in the absence of finalised, publically available

versions. It is therefore possible that the final versions of these two treaties could vary from those being

analysed in this paper. However, it seems unlikely that the final versions will vary significantly from the

drafts currently available given the high degree of similarity between different drafts of the treaties

produced thus far. Additionally, it must be noted that the respective governments of the signatories to

TPP and TiSA have not yet ratified the agreements, so it is possible that the agreements may not go ahead

in all of the states which are currently negotiating.

1 Chang, Economics, p. 243. 2 Chang, Economics, pp. 242-243. 3 Chang, Economics, pp 256-257; Alice Amsden, The Rise of “the Rest”: Challenges to the West from Late-Industrializing Economies (Oxford: Oxford University Press, 2004), p. 2. 4 Chang, Economics, p. 258. 5 Amsden, The Rise of “the Rest”, p. 2.

- 14 -

Chapter 1 – Market Access

Liberalisation is the predominant theme of both TPP and TiSA; in fact, it has been the predominant

theme of international trade agreements since the mid-1990s. By the term ‘liberalisation’, it is meant that

these agreements aim to reduce barriers to trade and investment. In this, there is a clear parallel with the

unequal treaties of the nineteenth century, which reduced barriers to Latin American countries’

importation of European manufactured goods. This was achieved through the reduction of the tariffs of

Latin American countries, and the use of the Most Favoured Nation (MFN) clause – two mechanisms

which have been used in trade agreements in the present era to further open up the markets of countries

in the periphery to goods, services, and investment from the core.

[T]he commercial treaties which Chile made at that time all included the “most favored nation clause.” By

this clause the contracting states obligate themselves to grant to the other contracting party whatever

privileges they may grant to a third country. This happened with the European countries, especially England,

which thanks to this clause made a veritable colony out of [Latin] America and prevented the progress of

manufacturing…in Chile.1

So wrote Sergio Sepúlveda with regards to the nineteenth-century unequal treaties. The clause works in

much the same way in modern-day trade agreements, obliging signatories to treat each other’s goods,

services, investments, etc. no worse than they treat those of any other country. MFN clauses can be found

in many modern international trade agreements, including TRIMS, TRIPS, GATS, and NAFTA. The

clauses have tended to follow a standard format, varying only slightly to reflect their subject matter. The

MFN clause in TPP regarding investment is a representative example:

Each party shall accord to investors [and investments] of another Party treatment no less favourable than

that it accords, in like circumstances, to investors [and investments] of any other Party or of any non Party

with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other

disposition of investments in its territory.2

‘Party’ and ‘non-Party’ refers to signatories and non-signatories of TPP, respectively, meaning that if a

TPP signatory gives preferential treatment to investments from another country – whether TPP member

or not – it must give equally preferential treatment to investments from all other TPP member states.

TiSA contains an identical MFN clause, but with respect to services and service suppliers.3 No MFN

clause in TPP with respect to market access for goods has as yet been released. However, a leaked

1 Sergio Sepúlveda, El Trigo Chileno en el Mercado Mundial (Santiago: Santiago Editorial Universitaria, 1959), pp. 71-72, quoted in Frank, Capitalism and Underdevelopment in Latin America, p. 69. 2 Trans-Pacific Partnership draft, January 20, 2015, obtained from WikiLeaks, “Secret Trans-Pacific Partnership Agreement (TPP) – Investment Chapter,” March 25, 2015, accessed July 20, 2015, https://wikileaks.org/tpp-investment/wikileaks-tpp-investment-chapter/page-1.html# [henceforth TPP investment chapter], p. 12 8 Article II.5. 3 Trade in Services Agreement: Draft Provisions, April 24, 2015, obtained from WikiLeaks, “Trade in Services Agreement (TiSA): Core Text (April 2015),” July 1, 2015, accessed July 20, 2015, https://wikileaks.org/tisa/core/tisa-core-text.pdf [henceforth TiSA core text], p. 4 Article […].

- 15 -

document detailing the state of play following the Salt Lake City round of negotiations in November

2013 reveals the existence of a ‘Market Access in Goods’ chapter.1 Furthermore, the Office of the United

States Trade Representative lists five ‘defining features’ of TPP, the first of which is ‘Comprehensive

market access: to eliminate tariffs and other barriers to goods and services trade and investment…’2 It

therefore seems highly likely that an MFN clause with respect to market access for goods will be

forthcoming.

The statement of the Office of the United States Trade Representative also makes it clear that elimination

of tariffs will be a key feature of TPP. It goes on to say, ‘The text on trade in goods addresses tariff

elimination among the partners, including significant commitments beyond the partners’ current WTO

obligations, as well as elimination of non-tariff measures that can serve as trade barriers.’3 The members’

WTO obligations were already quite stringent – the Uruguay Round of negotiations in 1994 lowered the

level at which tariffs were bound, and also significantly increased the proportion of tariffs which were

bound.4 For developing countries, the percentage of tariffs which were bound went up from 21% to 73%

as a result of the negotiations.5 There has been further pressure on Latin American countries to reduce

their tariffs since the Uruguay Round, which has resulted in a downwards trend in their tariff rates.6

The WTO – of which all Latin American states are members – describes its trading system as ‘a

system of rules dedicated to open, fair and undistorted competition.’7 However, the particular

liberalisation agenda which it has pushed is anything but fair. As will be demonstrated below, it has

disproportionately benefited the core at the expense of the periphery, resulting in the hampering of Latin

American development and a flow of wealth from poor to rich. By aiming for ‘fair’ competition, it has

created a system which is rigged in favour of the most developed. By striving towards ‘undistorted’

competition, it has distorted the economies of Latin America.

MFN clauses, through disallowing Latin American countries from giving preferential treatment to their

neighbours, have made forms of regional co-operation aimed at building productive capacity much more

1 TPP State of Play after Salt Lake City 19-24 November 2013 Round of Negotiations, obtained from WikiLeaks, “Second release of secret Trans-Pacific Partnership Agreement documents,” December 9, 2013, accessed August 1, 2015, https://wikileaks.org/ second-release-of-secret-trans.html [henceforth TPP state of play], p. 4; TPP: Country Positions, November 6, 2013, obtained from WikiLeaks, “Second release of secret Trans-Pacific Partnership Agreement documents,” December 9, 2013, accessed August 1, 2015, https://wikileaks.org/Second-release-of-secret-Trans.html [henceforth TPP country positions], p. 1. 2 Office of the United States Trade Representative, “Outlines of TPP,” November 12, 2011, accessed August 1, 2015, https:// ustr.gov/tpp/outlines-of-tpp. 3 Office of the United States Trade Representative, “Outlines of TPP.” 4 Amsden, The Rise of “the Rest”, p. 267. 5 World Trade Organisation, “Understanding the WTO: Principles of the Trading System,” accessed August 8, 2015, https:// www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm. 6 World Bank, “Indicators – Tariff rate, applied, weighted mean, all products (%),” accessed August 8, 2015, http://data.world bank.org/indicator/TM.TAX.MRCH.WM.AR.ZS. 7 World Trade Organisation, “Understanding the WTO: Principles of the Trading System.”

- 16 -

difficult to achieve without exposing the countries involved to the repercussions of breaching their

obligations. At the same time, tariff elimination has made it more difficult for countries in the region to

protect their industries from foreign competition. When used correctly, tariffs perform a valuable

function for developing countries, since by placing a tax on foreign imports they effectively increase the

price of these imports to domestic consumers. This gives domestically-produced products a better chance

of competing against cheaper imports made by more productive foreign industries. Without substantial

tariffs, some domestic industries may be overwhelmed by competition from foreign imports, particularly

high-skill, high value-added, high-productivity industries where the countries of the core have a

substantial advantage. In the nineteenth century, the low tariff barriers and MFN clauses imposed by

unequal treaties was the key factor in the contraction of Latin American industry, resulting in a per capita

growth rate of -0.4% for the region during the period they were in effect – significantly below the growth

rates of Western Europe and the USA.1

The loss of domestic industries damages economic development – it results in a loss of skilled,

high-wage jobs, not only in the industry which has been lost but also in any industries with which it has

formed linkages. For example, a car manufacturer may source its raw materials and machinery from other

domestic businesses. If the car manufacturer found itself unable to compete with foreign imports and

shut down, this would also damage these suppliers. Furthermore, when consumers buy foreign imports,

the profit thus created is not re-invested in expanding domestic industries or increasing productive

capabilities. Instead, the profit leaves the country and fuels economic development abroad. While this is

not necessarily a problem if there is a balance between the kind of products that are imported and

exported, if imports are from higher value-added industries than exports, as is frequently the case in Latin

America, then this will result in the erosion of productive capabilities and will therefore harm economic

development.2

High-skill, high value-added, high-productivity industries are exactly the kind of industries which

Latin American neostructuralists have argued are necessary for the region to acquire in order to attain a

higher level of economic development.3 Yet it is these industries which have suffered the most in Latin

American countries under the liberalised economic order promoted by the core. Latin America has

suffered from premature deindustrialisation, primarily as a result of trade liberalisation: the share of

manufacturing in Latin American GDP fell from 27% in the late 1980s to 15% in 2014.4 In Brazil, this

process has been even more pronounced, with manufacturing decreasing from around 30% of GDP in

the late 1980s to just over 10% in 2014.5 As can be seen from figures 1.1 and 1.2, there is noticeable

1 Chang, Economics, p. 65; Frank, Capitalism and Underdevelopment in Latin America, pp. 67-68, 163; Chang, Bad Samaritans, p. 25. 2 Leiva, “Toward a Critique of Latin American Neostructuralism,” p. 6. 3 Leiva, “Toward a Critique of Latin American Neostructuralism,” p. 6. 4 Chang, Economics, p. 266. 5 World Bank, “Indicators – Manufacturing, value added (% of GDP),” accessed August 8, 2015, http://data.worldbank.org/ indicator/NV.IND.MANF.ZS.

- 17 -

correlation between the decline in manufacturing in Argentina, Brazil and Chile, and the reduction of

tariffs on manufactured products in these countries. This pattern is repeated for the other Latin American

countries.1 In developed countries, some deindustrialisation may be expected as employment increasingly

shifts to services. However, no Latin American country has as yet reached the level of development where

this kind of deindustrialisation would be expected.2 Instead, the decline of manufacturing in the region

1 World Bank, “Indicators – Manufacturing, value added (% of GDP);” World Bank, “Indicators – Tariff rate, applied, weighted mean, manufactured products (%),” accessed August 8, 2015, http://data.worldbank.org/indicator/TM.TAX. MANF.WM.AR.ZS. 2 Gabriel Palma, “Four Sources of De-industrialisation and a New Concept of the ‘Dutch Disease’,” paper presented at the Economic Growth and Development Initiative Roundtable of the Human Sciences Research Council of South Africa, May 21, 2007, accessed August 10, 2015, http://intranet.hsrc.ac.za/document-2458.phtml, p. 5.

0

5

10

15

20

25

30

35

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014M

anufa

cturi

ng,

val

ue

add

ed (

% o

f G

DP

)

Argentina

Brazil

Chile

Figure 1.1 – Share of manufacturing in GDP of Argentina, Brazil, and Chile.

Source: World Bank, “Indicators – Manufacturing, value added (% of GDP).”

0

5

10

15

20

25

30

35

40

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Ap

plie

d t

arif

f ra

tes

for

man

ufa

cture

d

pro

duct

s, w

eigh

ted m

ean

(%

)

Argentina

Brazil

Chile

Figure 1.2 – Applied tariffs on manufactured products in Argentina, Brazil and Chile.

Source: World Bank, “Indicators – Tariff rate, applied, weighted mean, manufactured products (%).”

- 18 -

has been accompanied by the expansion of lower value-added, lower-productivity extractive industries,

which has highly worrying implications for Latin America’s future development prospects.1 The problem

with market liberalisation is that it forces developing countries to stick to their traditional Ricardian

position rather than trying to break in to new areas in which the countries of the core are dominant. For

Latin American countries, this has entailed stepping back from high value-added manufacturing and re-

assuming their historical role as exporters of raw materials.2 However, it has been widely accepted that

assuming this role does not provide for a promising development strategy. As Wade has noted,

[T]he development experience of Latin America and Africa over the whole of the twentieth century shows

that regions that integrate into the world economy as commodity supply regions – in line with their

‘comparative advantage’ – …are only too likely to remain stuck in the role of commodity supply regions,

their level of prosperity a function of access to rich country markets and terms of trade for their

commodities.3

Many writers, particularly those who have contributed to the development policy space literature, have

pointed out that present-day developed countries and the East Asian developmental states made

extensive use of tariffs – and other protective measures such as quotas and subsidies which have also

come under attack from the WTO – during their development.4 The USA and Germany reaped benefits

from this approach during the nineteenth century during the time that the United Kingdom was the

global economic hegemon.5 They gradually reduced their tariffs at their own pace over the course of the

nineteenth and twentieth century.6 In the second half of the twentieth century, Japan and South Korea

reduced their tariffs, quotas and subsidies, but this was also after a lengthy period of protectionism. For

example, Japan subsidised its exports until 1964 by completely exempting them from tax, and South

Korea pursued a broadly similar policy.7 Japan and South Korea are frequently held up by advocates of

the liberalised economic order as examples of the advantages of market liberalisation. However, what

they fail to realise is that these countries’ liberalisation of their markets was not a cause of their catching

up with the levels of development of the core. Rather, liberalisation was made possible only as a consequence

of this process of catch-up, which had been facilitated by their use of protectionist measures.

Free trade between countries which have attained the same level of development can provide

mutually beneficial results, but between countries with differing levels of development it serves only to

further enrich the more developed countries at the expense of the less developed. Forcing more- and

less-developed countries to compete with inadequate protection for the latter is akin to a professional

1 Palma, “Four Sources of De-industrialisation,” pp. 27-28. 2 Palma, “Four Sources of De-industrialisation,” pp. 27-28; Wade, “What Strategies are Viable for Developing Countries Today?” p. 631. 3 Wade, “What Strategies are Viable for Developing Countries Today?” p. 631. 4 See for example Wade, “What Strategies are Viable for Developing Countries Today?” p. 629. 5 Helleiner, “Economic Liberalism and its Critics,” p. 687. 6 Thomas Piketty, Capital in the Twenty-First Century (London and Cambridge, Mass.: Belknap Press, 2014), p. 492. 7 Scrivener, The Poor are Getting Richer, p. 15.

- 19 -

golfer playing against an amateur without using a handicap: the result is predictable and, despite what the

WTO claims, to describe it as fair competition is to misuse the word ‘fair’.

Through the reduction of tariffs, many Latin American countries have also lost a lucrative source

revenue. For small developing countries such as those in Central America, tariffs can frequently account

for over half of government revenue, since these countries often have poor tax collection apparatuses

and customs duties are the easiest taxes to collect.1 Research conducted by the International Monetary

Fund (IMF) has shown that for every dollar low-income countries have lost in tax revenue through tariff

reduction, they have gained ‘at best’ thirty cents through other forms of taxation, while middle-income

countries have recovered between forty-five and sixty cents.2 This puts severe strain on government

spending, especially at a time when governments in developing countries are losing out on a large amount

of tax revenue through tax avoidance by multinational corporations.3 The loss of tax revenue reduces the

capacity of developing country governments to invest in infrastructure, education, etc. and therefore

damages economic development.

The impact of NAFTA on Mexico provides an instructive case study as to the effects of trade

liberalisation between core and peripheral countries. NAFTA contained a comprehensive article on tariff

elimination which stipulated that ‘no Party may increase any existing customs duty, or adopt any customs

duty, on an originating good’ and that ‘each Party shall progressively eliminate its customs duties on

originating goods…’4 Furthermore, it prohibited any restriction on the importation of goods from

another NAFTA member.5

When the agreement was signed in 1994, it was clear that the USA and Canada were at a much

higher level of development than Mexico: the USA’s GDP per capita stood at $28,000, Canada’s at

$22,000, while the figure for Mexico was $8,800.6 Predictably, US and Canadian businesses benefited

from the agreement while the Mexican economy suffered. Mexican GDP per capita growth languished

at an average of 1.2% annually for the remainder of the decade after it signed up to NAFTA in 1994.7

Since 2000, growth has been below 1%, less than half the regional average.8 Real wages have declined

and the unemployment rate has risen.9 Whereas the poverty rate for Latin America as a whole has been

reduced from 43.9% in 2002 to 27.9% in 2013, in Mexico it still stands at over 50% – almost exactly

1 Chang, Bad Samaritans, p. 69. 2 Christian Aid, The Shirts off their Backs: How Tax Policies Fleece the Poor (Christian Aid, 2005), p. 6. 3 Martin Kirk, The One Party Planet (The Rules, 2014), p. 40. 4 NAFTA Secretariat, North American Free Trade Agreement (1994) [henceforth NAFTA], p. 7 Article 302. 5 NAFTA, p. 13 Article 309. 6 World Bank, “Indicators – GDP per capita, PPP (current international $),” accessed August 10, 2015, http://data.world bank.org/indicator/NY.GDP.PCAP.PP.CD. Figures are rounded to two significant figures. 7 Laura Carlsen, “Under NAFTA, Mexico Suffered, and the United States Felt its Pain,” New York Times, November 24, 2013, accessed August 7, 2015, http://www.nytimes.com/roomfordebate/2013/11/24/what-weve-learned-from-nafta/under-nafta-mexico-suffered-and-the-united-states-felt-its-pain. 8 Mark Weisbrot, “NAFTA: 20 Years of Regret for Mexico,” Guardian, January 4, 2014, accessed August 7, 2015, http:// www.theguardian.com/commentisfree/2014/jan/04/nafta-20-years-mexico-regret. 9 Carlsen, “Under NAFTA, Mexico Suffered, and the United States Felt its Pain.”

- 20 -

where it was in 1994 (52.4%).1 Judging by the currently available text of TPP, NAFTA is the closed

existing relation to this upcoming agreement. The fate of Mexico after signing up to NAFTA therefore

provides some indication of the effects which this upcoming trade agreement may have on the economies

of the Latin American countries which have signed up to it, should it be finalised.

The picture was not entirely rosy for the USA. North of the Mexican border, the agreement has

agreement has resulted in hundreds of thousands of job losses, downward pressure on US wages, and

declining labour conditions.2 Ordinary Americans have not benefited from NAFTA, whereas the owners

and shareholders of large US corporations have gained from reduced labour costs and easier access to

the Mexican market. The agreement seems to have been negotiated not with the national interests of any

of the member states in mind, but instead it has been shaped to serve the interests of a ‘corporate class’.

This is hardly surprising when trade agreements such as NAFTA are negotiated behind closed doors,

with the significant presence of corporate lobbyists and interest groups.3

With respect to services, TiSA contains a Market Access article which is identical to an article with the

same name which appeared in GATS in 1994. This article stipulates that signatory states may not impose

‘limitations on the number of service suppliers[, total value of service transactions or assets, total value

of service operations or on the total quantity of service output] whether in the form of numerical quotas,

monopolies, exclusive suppliers or the requirements of an economic needs test.’4 This greatly restricts the

ability of Latin American governments to limit the entry of foreign service suppliers into their respective

national markets. It also means that these governments are unable to shape their service markets, for

example by limiting the size and growth of particular services such as banking and tourism. The

prohibition of economic needs tests means that, even if it can be demonstrated that supply already meets

demand for a particular service, governments are still not permitted to prevent the entry of foreign service

suppliers into the market, where these suppliers may then go on to supplant domestic service suppliers.5

Since Latin America is a net importer of services,6 this leads to the same kind of problems for Latin

American economic development as imported manufactured goods encroaching on the market positon

of domestic industries – profits from internal consumption being re-invested into foreign development,

rather than domestic development.

1 Weisbrot, “NAFTA: 20 Years of Regret for Mexico.” 2 Carlsen, “Under NAFTA, Mexico Suffered, and the United States Felt its Pain;” Weisbrot, “NAFTA: 20 Years of Regret for Mexico.” 3 Joseph Stiglitz, “Multinational Corporations: Balancing Rights and Responsibilities,” Proceedings of the Annual Meeting of the American Society of International Law 101 (2007), p. 11. 4 TiSA core text, p. 5 Article I-3; World Trade Organisation, General Agreement on Trade in Services (1994) [henceforth GATS], p. 297 Article XVI. 5 Jessica Woodroffe, GATS: A Disservice to the Poor: The High Costs and Limited Benefits for Developing Countries of the General Agreement on Trade in Services (London: World Development Movement, 2002), p. 23. 6 United Nations Economic Commission for Latin America and the Caribbean, Latin America and the Caribbean in the World Economy (Santiago: United Nations, 2004), p. 148.

- 21 -

WTO trade rules regarding goods were extended to cover services in the form of GATS in

response to US pressure.1 Like high value-added manufacturing, services is an industry in which the core

countries have a distinct advantage, since growth in services has been dominated by these countries in

recent decades.2 The enforced liberalisation of services markets contained in GATS – and more recently

in TiSA – is therefore a highly self-serving action on the part of the core. That this was indeed the case

was acknowledged by European negotiators back in 1987, when they commented that they could ‘not

see any comparative advantage for developing countries in any sector of services trade for the foreseeable

future.’3 In 1999, five years after GATS came into force, Argentina agreed that liberalisation of services

markets had benefited only the developed countries, commenting that following GATS developing

countries had ‘failed to increase their share of global trade in services.’4

The self-servedness of GATS for the core countries is hardly surprising given the dominance of

these countries – and particularly, these countries’ corporate interests – in negotiations. In WTO

negotiations, even though in theory the organisation works on a one country one vote system, in practice

critical decisions are made in the so-called ‘green room’ negotiations, where the USA, Canada, the EU

and Japan dominate.5 Furthermore, David Hartridge, former Director of the WTO Services Division,

has admitted the powerful influence that corporate interests had in GATS negotiations, stating that

‘without the enormous pressure generated by the American financial services sector…there would have

been no services agreement.’6

1 Amsden and Hikino, “The Bark is Worse Than the Bite,” p. 110. 2 Jessica Woodroffe and Clare Joy, Out of Service: The Development Dangers of the General Agreement on Trade in Services (London: World Development Movement, 2002), p. 7. 3 Woodroffe and Joy, Out of Service, p. 7. 4 Quoted in Woodroffe and Joy, Out of Service, p. 7. 5 Woodroffe, GATS: A Disservice to the Poor, p. 53. 6 Quoted in Woodroffe and Joy, Out of Service, p. 15.

- 22 -

Chapter 2 – Deregulation

Once goods, services and investment have entered the national market, governments can use regulation

to reduce market inefficiencies, protect domestic producers, and to maximise the positive aspects of

foreign investment. Regulation, particularly of FDI, was used extensively by the present-day core

countries during their development.1 In addition, East Asian countries including Japan, Korea and Taiwan

successfully used regulation of FDI to maximise the benefit they gained from it, fuelling their economic

development.2 Luckily for these countries, they managed to achieve this before the mid-1990s, when

international trade agreements which reduced the ability of governments to regulate FDI began to come

into force.

TPP and TiSA both contain strong deregulatory elements, which borrow heavily from TRIMS

and GATS, as well as from BITs negotiated between the highly developed states and developing

countries. The most comprehensive of these is the National Treatment clause which, like the MFN clause,

pervades modern-day international trade agreements. TPP contains a National Treatment clause

concerning investment, and TiSA contains one covering services. No National Treatment clause covering

trade in goods has as yet been released, but for the reasons detailed in the previous chapter with regard

to the MFN clause, it seems likely that such a clause will make it into the final draft – especially since the

leaked TPP state of play document leaked after the Salt Lake City round of negotiations explicitly states

that ‘National Treatment’ is one of the subheadings of TPP’s Market Access chapter.3

As can be seen from the National Treatment clause contained in TPP’s investment chapter, these

take a similar form to MFN clauses:

Each Party shall accord to investors [and investments] of another Party treatment no less favourable than

that it accords, in like circumstances, to its own investors [and their investments] with respect to the

establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of

investments in its territory.4

However, unlike MFN clauses, National Treatment clauses only apply once the goods, services, or

investments they cover have entered the national market – tariffs are therefore unaffected by these

clauses.5 National Treatment clauses make it significantly more difficult for governments to give

preferential treatment to domestic producers. For example, if any Latin American country wished to

effectively subsidise its export industries by completely exempting them from tax – just as Japan did until

19646 – it would find itself in breach of a National Treatment clause, unless it also exempted foreign

industries which operated on its soil from tax. The WTO writes that National Treatment clauses ensure

1 Chang, Bad Samaritans, p. 96. 2 Chang, Economics, p. 432. 3 TPP country positions, p. 1. 4 TPP investment chapter, p. 12 7 Article II.4. 5 World Trade Organisation, “Understanding the WTO: Principles of the Trading System.” 6 Scrivener, The Poor are Getting Richer, p. 15.

- 23 -

that foreign and domestic goods, services and investment are ‘treated equally.’1 Like the ways in which

the WTO has marketed tariff reduction, the injustice of this rule is hidden behind the rhetoric of fairness.

Far from being an instrument dedicated to equal treatment, the National Treatment clause places the

economic interests of the corporate class above the rights of the governments of developing countries

to protect the interests of their citizens.

The National Treatment clause in TiSA provides an indication that the terms this new wave of

trade agreements represent a step up in severity from those negotiated in the WTO. In GATS, the

National Treatment clause read ‘In the sectors inscribed in its Schedule, and subject to any conditions

and qualifications set out therein, each Member shall accord…’ meaning that only services which

signatories chose to include were subjected to the National Treatment clause.2 However, in TiSA this

clause states that ‘Subject to any conditions and qualifications in its Schedule, each Party shall accord…’3

which indicates that it will be assumed that all services will be covered by the National Treatment clause,

unless they are explicitly exempted. Thus, signatories must anticipate which sectors will need to be

protected in the future – a significantly more difficult task for developing countries where industries

which exist in the highly developed countries are in their infancy or do not yet exist and therefore lack

domestic interest groups to advocate for their protection.4 Once again, this encourages developing

countries to stick to their established industries and not to try to break into any new sectors.

The measures in TPP’s investment chapter also represent a considerable increase in severity from WTO

agreements. Many are aimed at reducing the control which Latin Americans – not just Latin American

governments – have over the activity of foreign-owned multinational corporations operating in their

respective countries. For example, TPP members are forbidden from requiring that any business located

in its territory, including subsidiaries of multinational corporations, ‘appoint to senior management

positions natural persons of any particular nationality.’5 Requiring that ‘a majority of the board of

directors or any committee thereof…be of a particular nationality’ is permitted, though only ‘provided

that the requirement does not materially impair the ability of the investor to exercise control over its

investment.’6

This section of the agreement appears to be designed in order to ensure that FDI originating

from the corporate class in the core remains firmly in control of that class, and remains tied to the

interests of their home countries. It promises to create a situation in which foreign nationals are able to

exercise greater control over economic activity in countries to which they have little or no connection.

1 World Trade Organisation, “Understanding the WTO: Principles of the Trading System.” 2 GATS, p. 298 Article XVII. 3 TiSA core text, p. 6 Article I-4. 4 Stiglitz, “Multinational Corporations,” p. 18. 5 TPP investment chapter, p. 12 16 Article II.10. 6 TPP investment chapter, p. 12 16 Article II.10.

- 24 -

Of course, it is not necessarily the case that the decisions of senior managers will be influenced by their

nationality. But if, for example, a Chilean were a senior manager in a subsidiary of a US-owned

multinational operating in Santiago and had to make decisions on whether to source materials from a

domestic company or from the United States, or on whether to re-invest profits in Chile or repatriate

them to the parent company, it seems likely that the social and cultural ties which they have to their home

country could sway them to come to a different decision than if a US national were in their position.

For its part, TiSA legislates against ‘measures which restrict or require specific types of legal entity

or joint venture…’ and against ‘limits on the participation of foreign capital…’ in the service sector.1

Such terms were also present in GATS.2 These rules mean that Latin American governments cannot

insist that FDI in the service sector be a joint venture with a domestic firm, and cannot limit the

proportion of shares held by foreign investors in any service supplier – it could be one hundred percent

foreign owned. These measures, and those in TPP discussed above, threaten to create a situation in which

the increasing participation of foreign capital in Latin America leads to a loss of agency on the part of

Latin Americans over parts of their national economies.

Arguably the most important form of regulation which international trade agreements have prevented

Latin American countries from employing is the use of performance requirements. In return for allowing

foreign investors to set up a firm inside in a country’s territory, performance requirements oblige these

investors to fulfil certain commitments – for example, sourcing a certain proportion of their inputs from

domestic suppliers (domestic contents requirements), training local staff, or transferring a particular

technology. Performance requirements have been used by developing countries in order to harness

foreign investment to contribute as much as possible to their economic development. For example, India

successfully used domestic contents requirements and training clauses until the early 1990s in order to

build up its automobile components industry.3

FDI can be a mixed blessing for developing countries. One the one hand, attracting investment

can provide a real boost to a country’s economic growth – in the words of Chang, ‘the positive

relationship between a country’s investment ratio and its rate of economic growth is one of the few

undisputed relationships in economics.’4 Moreover, since FDI is not simply a financial flow but involves

the importation of management practices and – frequently – technology, it can facilitate the diffusion of

more productive techniques into the host country, driving economic development.5 If enterprises set up

as a result of FDI form linkages with domestic companies, the increased demand as a result of this can

1 TiSA core text, p. 5 Article I-3. 2 GATS, p. 297 Article XVI. 3 Shahrukh Rafi Khan, “WTO, IMF and the Closing of Development Policy Space for Low-Income Countries: A Call for Neo-Developmentalism,” Third World Quarterly 28, no. 6 (2007), p. 1075. 4 Chang, Economics, p. 254. 5 Chang, Economics, p. 425.

- 25 -

lead to the latter’s expansion and development. However, subsidiaries of foreign-based multinational

corporations are in no way obliged to form linkages with domestic firms, and instead are increasingly

importing their inputs from subsidiaries owned by the parent company. A significant proportion of global

trade is accounted for by transactions between different parts of the same company – the British

government has estimated that between fifty and sixty percent of global trade is made up of such

transactions.1 Moreover, foreign multinationals frequently do not wish to establish a long-term

production base which would involve re-investing profits in the host country, but instead repatriate

profits to the home country. Domestic competitors which may have formed such a long-term production

base can easily find themselves crowded out by the entrance of a highly productive competitor to the

national market. Performance requirements are extremely useful tools which governments in developing

countries can use in order to maximise the positive spill-over effects of FDI while minimising, as far as

possible, the negative effects.

Performance requirements came under attack from the WTO in the form of TRIMS. This attack

has been continued by TPP, which has added to the list of performance requirements which signatories

are forbidden from utilising. TRIMS forbids contracting parties from mandating that foreign investors

use a certain level of domestic content, or from conditioning the (continued) receipt of an advantage on

domestic contents requirements – a rule which is reiterated in TPP.2 This makes it more likely that

subsidiaries of foreign-based multinational corporations will be able to operate as enclaves, forming few

or no linkages with domestic firms and therefore minimising positive spill-over effects from their

operation.

Both agreements forbid the restriction of the sales of goods or services in the host country’s

territory which are produced by FDI, and also forbid conditioning the quantity of goods which foreign

investors may import on the quantity of domestic goods which they export.3 The absence of the former

requirement makes it more likely that subsidiaries of foreign firms will be able to crowd out local

competitors, while the absence of the latter reinforces the prohibition of domestic contents requirements,

as well as presenting a potential threat to the host country’s foreign exchange reserves. Amsden and

Hikino have pointed out that TRIMS still permitted developing countries to maintain the 100% export

requirement of export-processing zones (EPZs) – a form of export promotion.4 However, TPP explicitly

prohibits signatories from requiring that firms ‘export a given level or percentage of goods or services,’

threatening the ability of developing countries to use EPZs to promote the export of domestic products.5

1 Christian Aid, The Shirts off their Backs, p. 14. 2 World Trade Organisation, Agreement on Trade-Related Investment Measures (1994) [henceforth TRIMS], p. 143 Annex – Illustrative List; TPP investment chapter, pp. 12 12-12 14 Article II.9. 3 TRIMS, p. 143 Annex – Illustrative List; TPP investment chapter, p. 12 13 Article II.9. 4 Amsden and Hikino, “The Bark is Worse than the Bite,” p. 110. 5 TPP investment chapter, p. 12 13 Article II.9.

- 26 -

A significant departure from TRIMS is TPP’s prohibition of technology transfer performance

requirements. TPP states that members may not impose on foreign investors a requirement ‘to transfer

a particular technology, a production process, or other proprietary knowledge to a person in its territory.’1

It has been mentioned previously that the transfer of knowledge is of vital importance to the process of

economic development. The banning of technology transfer performance requirements promises to slow

down knowledge transfer, making it more difficult for peripheral countries to obtain technologies used

in the core, for example in high value-added manufacturing. This is especially true at a time when

intellectual property rights have been significantly strengthened, making the acquisition of foreign-owned

knowledge more expensive for developing countries, as will be discussed in more detail in the next

chapter. The loss of technology transfer performance requirements is particularly galling for Latin

American countries, since the development strategies of many of these countries – for example

Argentina, Brazil, Chile and Mexico – are predicated upon obtaining foreign technology through FDI,

rather than investing in domestic research and development.2

TPP member states are permitted to condition the receipt of an advantage, for example a tax

break, on a technology transfer performance requirement.3 This means that TPP signatories are required

to offer incentives to foreign investors in order to gain the same benefits which they used to be able to

obtain through the use of performance requirements. This may lead to a situation in which countries in

Latin America which have signed up to TPP are forced to compete over tax rates in order to attract

investors which are willing to transfer technology. Reduction of tax revenue as a result of this competition

would lessen the ability of these countries to invest in domestic research and development, deepening

the dependence of these countries on foreign firms for the acquisition of technology.

Furthermore, there is evidence to suggest that relying on FDI is not the best method to obtain

technology. Amsden has demonstrated that throughout the 1990s, countries which significantly invested

in their own research and development – including Japan, South Korea, the USA, France and Germany

– achieved far greater advances in technology than those such as Argentina, Brazil, Chile and Mexico

which relied on foreign investment.4 Additionally, the former countries managed to secure a greater

proportion of private investment in their research and development spending.5 In Figure 2.1 it can be

seen that spending on research and development in these Latin American nations has continued to

languish behind the aforementioned developed countries. If reliance on spill-over from FDI was the best

method of acquiring technology, then Latin American TPP signatories being pulled into a cycle of

dependence on foreign firms for technology transfer might not necessarily be a bad thing. However,

1 TPP investment chapter, p. 12 13 Article II.9. 2 Amsden, The Rise of “the Rest”, pp. 14, 281. 3 TPP investment chapter, p. 12 14 Article II.9. 4 Amsden, The Rise of “the Rest”, pp. 277-278. 5 Amsden, The Rise of “the Rest”, p. 278.

- 27 -

since domestic investment is demonstrably a more effective method, such a cycle of dependence has

worrying implications for the economic development of Latin American TPP members.

With respect to investments related to the provision of services, TiSA – much like GATS – mandates

that signatories ‘shall not apply restrictions on international transfers and payments…’1 This facilitates

the repatriation of profits by subsidiaries of multinational corporations, and since TiSA covers financial

services this also amounts to financial liberalisation. This opens up the financial markets of developing

countries to inflows of ‘hot money’ – short-term speculative investments which are little more than bets

on exchange rate movements.2 These investments can be withdrawn at a moment’s notice and as such

cannot be put to any constructive long-term use, yet considerably increase economic instability within

the recipient country.3 The experience of the 1980s and 1990s demonstrates the great extent to which

increased instability as a result of the liberalisation of financial markets increased the incidence of debt

crises.4

Furthermore, the crises during these two decades were more frequent and, with the exception of

the Great Depression, more severe than at any previous time.5 Of course, debt crises affect peripheral

countries more than they do core countries, since the former have less capacity to deal with such crises.

Debt crises may require developing countries to go cap in hand to the IMF – and agreeing to its structural

1 TiSA core text, p. 9 Article 1-7; GATS p. 293 Article XI. 2 Joseph Stiglitz, Globalization and its Discontents (London: Penguin Books, 2002), p. 65. 3 Stiglitz, Globalization and its Discontents, pp. 17, 65. 4 David Harvey, A Brief History of Neoliberalism (Oxford: Oxford University Press, 2007), p. 162. 5 Stiglitz, Globalization and its Discontents, p. 15.

Figure 2.1 – Research and Development Expenditure in Latin America and the Developed World.

Source: World Bank, “Indicators – Research and Development Expenditure (% of GDP),” accessed August 10, 2015,

http://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS.

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Res

earc

h a

nd

Dev

elo

pm

ent

exp

end

iture

(%

of

GD

P)

Argentina

Brazil

Chile

Germany

France

Japan

Korea, Rep.

Mexico

United States

- 28 -

adjustment conditionalities – or to sell off state assets to foreign companies, further increasing the

economic dependence of peripheral countries on the core, and increasing the degree of control which

the corporate class of the latter has over the economies of the former. The vicious cycle which this creates

has led David Harvey to argue that ‘Crisis creation, management, and manipulation on the world stage

has evolved into the fine art of deliberate redistribution of wealth from poor countries to the rich.’1

Forced deregulation as a result of international trade agreements might be excusable if it increased the

level of investment in developing countries which signed them, contributing to their economic

development. However, both the United Nations Conference on Trade and Development (UNCTAD)

and the World Bank have released studies which conclude that compliance with the deregulatory

conditions of the Uruguay Round agreements is not a significant contributory factor to attracting more

foreign investment.2 Moreover, in Latin America – where FDI inflows have increased since the 1990s –

gross fixed capital formation (a measure of investment) has declined.3 In 2012 it stood at just 20.4% of

GDP for Latin America and the Caribbean, compared to 40.7% for East Asia and the Pacific.4

Overall, the deregulatory effects of international trade agreements concluded since 1994 have

allowed the core’s corporate class easier access to Latin American markets, while reducing the gains which

Latin American states gain from their investment. TPP and TiSA promise to improve this access even

more, while forcing signatories to enact further deregulation, putting the interests of the corporate class

above the development needs of Latin America.

1 Harvey, A Brief History of Neoliberalism, p. 162. 2 Wade, “What Strategies are Viable for Developing Countries Today?” p. 629. 3 Gallagher, “Understanding Resistance to the Doha Round,” p. 72. 4 Tejvan Pettinger, “Gross Fixed Capital Formation,” Economics Help, December 14, 2012, accessed August 14, 2015, http://www. economicshelp.org/blog/6536/economics/gross-fixed-capital-formation.

- 29 -

Chapter 3 – Intellectual Property Rights

In contrast to other international trade agreements which emerged from the Uruguay Round which

weakened the power of governments to regulate the free flow of goods, services and investment, TRIPS

forced governments to strictly regulate the free flow of information by strictly enforcing intellectual

property rights. It states that ‘Members shall ensure that enforcement procedures…are available under

their law so as to permit effective action against any act of infringement of intellectual property rights

covered by this Agreement…’, an obligation which is reiterated in TPP’s chapter on intellectual property.1

The shift in tone compared to the other agreements covered is striking – as the subject matter shifts from

collective rights to individual property rights, the emphasis shifts from limiting government action to

compelling governments to take ‘effective action’.

Tightening up global enforcement of intellectual property rights disproportionately benefits the

core, since 97% of all patents, copyrights, and trademarks are held by the highly developed countries.2

As can be seen in figure 3.1, the number of patents held by even the largest Latin American economies*

is significantly lower than that held by rich European countries, and is dwarfed by the holdings of the

USA and Japan. Present-day developed countries, particularly the recently industrialised East Asian

countries, benefited greatly from the importation of knowledge which was possible because of their lax

enforcement of foreign intellectual property rights – whether that be in the form of reverse-engineering,

imitation, or the use of academic books by foreign authors. For example, during their development,

Japan, Taiwan and South Korea were each known as the ‘counterfeit capital’ of the world.3 Enforcing

tighter restrictions on such practices therefore increases the costs to peripheral countries of acquiring

knowledge – costs which will go to the core countries which hold the vast majority of intellectual property

rights.

1 World Trade Organisation, Agreement on Trade-Related Aspects of Intellectual Property Rights (1994) [henceforth TRIPS], p. 338 Article 41; Trans-Pacific Partnership draft, May 16, 2014, obtained from WikiLeaks, “Updated Secret Trans-Pacific Partnership Agreement (TPP) - IP Chapter (second publication),” October 16, 2014, accessed July 20, 2015, https://wikileaks.org/tpp-ip2/ [henceforth TPP intellectual property chapter], p. 44 Article QQ.H.1. 2 Chang, Bad Samaritans, p. 140. * Data for Argentina are unavailable. 3 Wade, “What Strategies are Viable for Developing Countries Today?” p. 626.

- 30 -

As well as obliging WTO members to strictly enforce intellectual property rights, TRIPS lowered the

criteria necessary for a piece of information to be covered by a patent, and increased patent life –

provisions which have been repeated in TPP. The provision on patentable subject matter declares that

patents shall be available ‘for any inventions, whether products or processes, in all fields of technology,

provided that they are new, involve an inventive step and are capable of industrial application.’1 These

terms are highly vague, and attempts to clarify them in NAFTA and TPP have merely substituted terms

for them which were even more vague: ‘For the purposes of this Article, a Party may deem the terms

“inventive step” and “capable of industrial application” to be synonymous with the terms “non-obvious”

and “useful”, respectively.’2 To this, TPP adds ‘For greater certainty, a Party may not deny a patent solely

on the basis that the product did not result in an enhanced efficacy of the known product…’ meaning

that a patent may be granted even if the information it covers does not actually improve the product in

any way.3

By using these extremely vague terms to denote what may be covered by a patent, TRIPS had the

effect of allowing much smaller pieces of information to be patented than had previously been allowed.4

It also extended patent life, setting the minimum term of protection for patents at twenty years.5 These

changes had the effect of vastly increasing the number of patents in existence – in figure 3.1 a rapid

increase in the number of patents held by the United States and Japan can be seen, beginning in the mid-

1 TRIPS, p. 331 Article 27; TPP intellectual property chapter, p. 23 Article QQ.E.1. 2 NAFTA, p. 333 Article 1709; TPP intellectual property chapter, p. 23n Article QQ.E.1. 3 TPP intellectual property chapter, p. 23 Article QQ.E.1. 4 Chang, Bad Samaritans, p. 140. 5 TRIPS, p. 334 Article 334.

Figure 3.1 – Number of Patents held by Latin America and the Core Countries.

Source: Gapminder, “Indicators – Patents in Force (Total),” accessed July 31, 2015, http://www.gapminder.org/data.

0

200

400

600

800

1000

1200

1400

1600

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

To

tal n

um

ber

of

pat

ents

in

fo

rce

(th

ousa

nd

s)Brazil

Chile

France

Germany

Japan

Mexico

United Kingdom

United States

- 31 -

1990s. This was not due to any miraculous rise in innovation in these two countries during this period –

it was a direct result of the effects of TRIPS after it came into force in 1994. In TPP, the USA and Japan

have proposed further expanding patentable subject matter, extending patents to ‘inventions for plants

and animals’, ‘new methods of using a known product’, and even ‘diagnostic, therapeutic and surgical

methods’, though many of the other signatories oppose these provisions.1

The vast increase in the number of patents in force as a results of TRIPS increased the price of acquiring

knowledge, a price which is of course predominantly borne by developing countries since they are net

importers of knowledge. After TRIPS had been signed, the World Bank estimated that the increase in

technology license payments alone would cost developing countries an additional $45 billion a year.2 At

the same time, it was estimated that US corporations would gain an additional $19 billion a year in

royalties as a result of the agreement.3

Payments for the use of intellectual property are a significant component of the flow of wealth

from periphery to core. To take the example of Latin America in 2012, in that year payments for the use

of intellectual property resulted in a net loss for the region of $8.1 billion – compare this to the $7.4

billion which the region received in foreign aid that year.4 This statistic alone demonstrates how false the

aid narrative is – while core countries do give financial aid to peripheral countries, they receive this money

back plus extra from aid recipients. Moreover, whereas the money for foreign aid comes from taxpayers

in aid donor countries, when the money comes back to these countries it does not flow back into the

pockets of taxpayers but to the intellectual property right holders, which are predominantly large

corporations. Therefore, in effect, the portion of taxes of citizens of the core countries which is thought

to be going to helping less fortunate nations overseas is actually going to the corporate class within the

core. The incessant focus of the mainstream media and political discourse on aid serves to cover up this

fact. Effectively subsidising the purchase of intellectual property by developing countries through the

donation of financial aid will of course slightly ease the financial burden of these countries. However, it

does nothing to reduce global inequality since it further enriches the very wealthiest while keeping

developing countries in a dependent and inferior position.

1 TPP intellectual property chapter, p. 23 Article QQ.E.1; TPP intellectual property chapter, p. 23n Article QQ.E.1. 2 Chang, Bad Samaritans, p. 141. 3 Wade, “What Strategies are Viable for Developing Countries Today?” p. 624. 4 World Bank, “Indicators - Charges for the use of intellectual property, payments (BoP, current US$),” accessed July 31, 2015, http:// data.worldbank.org/indicator/BM.GSR.ROYL.CD; World Bank, “Indicators - Charges for the use of intellectual property, receipts (BoP, current US$),” accessed July 31, 2015, http://data.worldbank.org/indicator/BX.GSR. ROYL.CD; World Bank, “Indicators - Net official aid received (constant 2012 US$),” accessed July 31, 2015, http://data. worldbank.org/indicator/DT.ODA.OATL.KD. All figures are presented in 2012 US$ and are rounded to 2 significant figures. No data for Cuba’s payments for the use of intellectual property were available so the country has been omitted from the calculations.

- 32 -

Closing the gap in knowledge between peripheral and core countries is essential for the successful

development of the former, and thereby reducing global inequality.1 The strengthening of intellectual

property rights could be justified if it resulted in an increase in innovation: heightened expectation of

financial reward may have prompted more investment in research and development. However, as can be

seen from figure 2.1 in the previous chapter, research and development spending in Latin American

countries has remained very low despite the increase in financial incentives to innovate. This is likely due

to the fact that the larger Latin American economies, as was detailed in the previous chapter, have relied

on spill-over from foreign investment for the acquisition of technology, and so do not have a sufficiently

advanced research and development infrastructure to take advantage of the increased financial incentives

to innovate. Moreover, the possession of a monopoly on key technologies by the core makes domestic

innovation a less achievable means of acquiring technology for Latin American states, despite the

demonstrable benefits of this method as opposed to a reliance on external sources. An increase in

domestic innovation as a result of TRIPS may have gone some way towards offsetting the increased costs

of acquiring technology from abroad, but for Latin America TRIPS has resulted only in increased costs.

Increasingly stringent rules concerning intellectual property rights, when combined with the deregulatory

effects of TPP examined in the previous chapter, promise to create a situation in which Latin American

countries are increasingly dependent on external sources for technology, and are then forced to pay more

for it.

Furthermore, TRIPS may have actually slowed down innovation in Latin America. The vast

increase in the number of patents which it precipitated has increased the legal costs required to ensure

that a new product is not violating an existing patent. This is not only due to the sheer increase in the

number of patents which need to be examined, but also because TRIPS has worsened the problem of

interlocking patents – a set of overlapping patent rights, frequently belonging to different parties, which

all need to be overcome before a technology can be commercialised.2 Increased legal costs naturally

obstruct innovators in peripheral countries more than their counterparts in the core, since they in general

have fewer resources available to them to challenge accusations of patent violation. There are very strong

financial incentives for patent owners in the core to accuse competitors of infringing on their patent

rights, and for arguing that their patents encompass as much as possible, since this allows them to

monopolise the market for their product.3 For Latin American innovators, the potential legal costs of

challenging these patent holders may discourage them from trying to enter the market.

In addition, strengthened intellectual property rights hamper innovation by restricting access to

knowledge. As Stiglitz writes,

1 Joseph Stiglitz, “Economic Foundations of Intellectual Property Rights,” Duke Law Journal 57, no. 6 (2008), p. 1694. 2 Chang, Bad Samaritans, p. 140. 3 Stiglitz, “Economic Foundations of Intellectual Property Rights,” p. 1702.

- 33 -

Knowledge is the most important input into the production of knowledge. Intellectual property restricts

this input: indeed, it works by limiting access to knowledge. One way of thinking about this is in terms of

any standard production process. If you increase the price of an input, it reduces the supply of the output.1

Since more stringent intellectual property rights as a result of TRIPS have increased the price of acquiring

knowledge, it therefore follows that the production of knowledge through innovation will be impeded.

The toughening up of intellectual property rights by TRIPS has given rise to another problem for

developing countries – biopiracy. This involves the patenting, usually by developed countries, of

unpatented knowledge regarding plant and animal life held in common by communities in developing

countries. In other words, it involves the expropriation of indigenous knowledge. A prime example of

this is the granting of a US patent for basmati rice, regardless of the fact that basmati rice had been

consumed in India for thousands of years.2 This is a problem for the communities whose knowledge has

been patented, since it may reduce their ability to sell the products of this knowledge. Instead, these gains

go to the company which owns the patent. For example, in 1999 POD-NERS, a US-owned seed

company, patented the enola bean which had traditionally been grown in Mexico, and then proceeded to

sue Mexican companies which tried to sell the bean in the USA.3

Much of the indigenous knowledge which has come under threat from biopiracy could not be

patented by the communities which it belonged to, either because they lacked the resources to do so, it

was not clear who the original inventor was, or simply that it was deemed too obvious to warrant being

patented. However, with the arrival of TRIPS and the reduction in the size of a piece of information

which could be patented, corporations in the core with the money to fund the patenting process have

found themselves able to take indigenous knowledge out of the public domain and use it for their own

financial benefit. Local communities are frequently unable to challenge such use of their traditional

knowledge, since they lack the resources to fund a lengthy legal battle.4

The pharmaceutical industry has been a particularly active participant in biopiracy in Latin

America.5 To take one example, the US pharmaceutical company PureWorld, Inc. has patented the

extracts of the maca plant, the extraction process, and the use of such extracts as a treatment for sexual

dysfunction in animals, including humans, and for several forms of cancer.6 The maca plant is native to

Peru and has been cultivated for food and medicinal purposes by indigenous Peruvians for thousands of

years, yet Peru’s indigenous communities have received no payment for the commercial usage of the

1 Stiglitz, “Economic Foundations of Intellectual Property Rights,” p. 1710. 2 Stiglitz, “Economic Foundations of Intellectual Property Rights,” p. 1704. 3 Amanda Landon, “Bioprospecting and Biopiracy in Latin America: The Case of Maca in Perú,” Nebraska Anthropologist, paper 32 (2007), accessed August 15, 2015, http://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=1031&context=nebanthro, p. 67. 4 Clare Hogan, “Biopiracy: The New Tyrant of the Developing World,” July 17, 2014, Council on Hemispheric Affairs, accessed August 15, 2015, http://www.coha.org/biopiracy-the-new-tyrant-of-the-developing-world. 5 Hogan, “Biopiracy.” 6 Landon, “Bioprospecting and Biopiracy in Latin America,” p. 69.

- 34 -

plant by PureWorld.1 The Peruvian government challenged the patent on behalf of its indigenous

communities, citing the fact that under Peruvian law patents may not be held on parts of plants, including

extracts; however, this challenge was unsuccessful.2

Such challenges may prove even more difficult under TPP – of which Peru is a signatory – due

to the extension of patents to ‘inventions for plants and animals’, facilitating the commercial exploitation

of indigenous knowledge in Latin America by corporations in the core. It seems likely that corporate

lawyers would find it a relatively easy task to argue that an extraction process and the medicinal usage of

extracts thus produced constituted ‘inventions for plants’, and therefore qualified for TPP’s definition of

what was patentable. TPP’s investment chapter takes a very firm stance against expropriation, citing a

very limited number of situations in which it is permissible and then stipulating that adequate

compensation must be paid by the expropriator.3 However, it is notable that this article states that the

‘creation of intellectual property rights’ does not constitute expropriation, exempting pharmaceutical

companies from the obligation to pay due compensation to the indigenous communities whose

knowledge they expropriate through the creation of patents.4

The pressure for the strengthening of intellectual property rights has come from countries in the core,

and especially from the corporate class within those countries. It has been seen that in TPP negotiations,

it is the USA and Japan which are pushing for the extension of patentable subject matter. With regard to

TRIPS, Stiglitz writes from his professional experience that US Council of Economic Advisers and Office

of Science and Technology opposed the agreement – ‘we believed that it was bad for American science,

bad for global science, and bad for developing countries.’5 However, there was little public consultation

and instead the agreement was shaped by the entertainment and pharmaceutical industries.6 This

demonstrates the large amount of influence which the corporate class had over TRIPS, as it does over

most international trade agreements.

That the corporate class shaped TRIPS is hardly surprising, since strengthened intellectual

property rights serve to enrich that class. TRIPS has increased the price of knowledge, hampering

development in Latin America by impeding the acquisition of knowledge both from foreign and domestic

sources. The proliferation of patents since the mid-1990s has particularly worrying implications for the

development of high-productivity, high value-added manufacturing industries in Latin American

countries, for example consumer electronics, the growth of which will rely heavily on the importation of

1 Landon, “Bioprospecting and Biopiracy in Latin America,” pp. 69-70 2 Landon, “Bioprospecting and Biopiracy in Latin America,” p. 70; Prithwiraj Choudhury and Tarun Khanna, “Bio-Piracy or Prospering Together?: Fuzzy Set and Qualitative Analysis of Herbal Patenting by Firms,” Harvard Business School working paper, February 28, 2014, accessed August 20, 2015, http://www.hbs.edu/faculty/Publication%20Files/14-081_6cfa4f81-d5cb-44f6-9a0c-1fe7c91f61ef.pdf, p. 5. 3 TPP investment chapter, p. 12 9 Article II.7. 4 TPP investment chapter, p. 12 11 Article II.7. 5 Stiglitz, “Multinational Corporations,” p. 57. 6 Stiglitz, “Multinational Corporations,” p. 57.

- 35 -

knowledge from abroad. Furthermore, intellectual property rights constitute one of the chief causes of

the flow of wealth from periphery to core, whether directly in the form of license payments or indirectly

through the expropriation and commercial exploitation of indigenous Latin American knowledge.

Overall, while TPP’s intellectual property chapter lists one of its objectives as to ‘maintain a balance

between the rights of intellectual property holders and the legitimate interests of users and the community

in subject matter protected by intellectual property,’ by repeating and adding to the provisions of TRIPS,

it completely fails to do this.1 Instead, it advances the interests of intellectual property holders to the

detriment of the legitimate interests of users and the community. Latin American populations have

suffered the consequences of strengthened intellectual property rights without receiving any significant

benefits.

1 TPP intellectual property chapter, p. 3 Article QQ.A.2.

- 36 -

Chapter 4 – Investor Arbitration

Perhaps the most controversial aspect of TPP is its provisions for investor arbitration, which takes the

form of an Investor-State Dispute Settlement (ISDS) clause. This particular clause is quite a recent

phenomenon, having been pioneered in NAFTA and the US-Argentina BIT, both of which entered into

force in 1994. ISDS clauses seek to resolve disputes – for example an alleged breach of contract – between

investors and the governments of states in which they have made their investments, which involve a loss

of profits on the part of the investor. Whereas previously these kind of disputes would have been settled

in the courts of the host country, under an ISDS clause they are resolved in a theoretically independent

international court, the most prominent being the World Bank-affiliated International Centre for the

Settlement of Investment Disputes (ICSID) in Washington, DC.

The language used in international trade agreements to describe the dispute settlement process,

much like that used to describe other clauses, is designed to make ISDS seem highly reasonable and

objective. For example, on its website ICSID describes itself as ‘an independent, depoliticized and

effective dispute-settlement institution.’1 However, the way that ISDS works in practice is hardly

independent or depoliticised, and the expansion of its adoption in Latin America has disquieting

implications for the region’s development.

TPP details the ways in which arbitrators should be chosen in order to form the tribunal which

is to preside over the ISDS case: ‘[T]he tribunal shall comprise three arbitrators, one arbitrator appointed

by each of the disputing parties and the third, who shall be the presiding arbitrator, appointed by

agreement of the disputing parties.’2 Taken at face value this seems very fair and reasonable; however,

this passage bears a striking resemblance to the following:

The said questions shall be referred to a tribunal composed of three arbitrators, one to be named by the

President of the United States, and one by the President of Nicaragua, at or before the time of signing of

this protocol, and the third…to be selected by mutual accord between the first two named arbitrators.3

The tribunal referred to in the preceding quote was being set up in 1909, during a period which witnessed

the height of US imperialism, following the cancellation by the Nicaraguan government of a lumber

concession owned by the George D. Emery Company, a US firm. While giving the outward appearance

of reasonableness and impartiality, the US government was able to use its considerable influence to make

sure that tribunals such as this came to the conclusions that it wanted. This historical precedent

1 International Centre for the Settlement of Investment Disputes, “About,” accessed August 21, 2015, https://icsid.worldbank .org/apps/ICSIDWEB/about/Pages/default.aspx. 2 TPP investment chapter, p. 12 24 Article II.21. 3 Protocol of Agreement between the United States of America and Nicaragua, May 25, 1909, United States Department of State, Papers Relating to the Foreign Relations of the United States with the Annual Message of the President Transmitted to Congress December 7, 1909 (Washington: United States Government Printing Office, 1909), p. 461 Article III.

- 37 -

demonstrates that a seemingly fair process, when it exists within a context of asymmetric power relations,

can have highly unfair results.

ISDS is only to be used in the event of contract infraction; TPP lists the situations in which ISDS may

be used:

[T]he claimant, on its own behalf, may submit a claim to arbitration under this Section a claim

(i) that the respondent has breached

(A) an obligation under Section A [all of TPP’s investment chapter not directly pertaining to

ISDS],

(B) an investment authorization, or

(C) an investment agreement;

and

(ii) that the claimant has incurred loss or damage by reason of, or arising out of, that breach…1

Again, these measures appear to be highly reasonable. However, the scope which this section gives for

possible claims is enormous. TPP negotiators have protested that the use of the term ‘investment

agreement’ is too ambiguous since ‘under the concept of Investment Agreement nearly all significant

contracts that can be made between a State and a foreign investor are included.’2 Furthermore, both TPP

and TiSA contain very vague terms which can be exploited by corporate lawyers to make reasonable

actions taken by Latin American governments to curb the activities of foreign corporations on their soil

count as breaches of contract. For example, TPP decrees that expropriation or nationalisation may only

be carried out,

(a) for a public purpose;

(b) in a non discriminatory manner;

(c) on payment of prompt, adequate, and effective compensation…; and

(d) in accordance with due process of law.3

Additionally, the trade agreement states that ‘No Party may…require an investor of another Party, by

reason of its nationality, to sell or otherwise dispose of an investment…’4 The agreement’s definition of

investment is incredibly broad, covering enterprises, stocks and shares, loans, futures and other

derivatives, management and other contracts, intellectual property rights, licenses and permits, and ‘other

tangible or intangible, movable or immovable property, and related property rights, such as leases,

mortgages, liens and pledges.’5

1 TPP investment chapter, pp. 12 20-12 21 Article II.18. 2 TPP state of play, p. 2. 3 TPP investment chapter, pp. 12 9-12 10 Article II.7. 4 TPP investment chapter, pp. 12 17-12 18 Article II.11. 5 TPP investment chapter, pp. 12 3-12 4 Article II.1.

- 38 -

In Argentina, several years ago a foreign water consortium was awarded a 95 year contract to

manage a local water supply.1 If, ten years from now, the government of Argentina observed that the

water consortium was not performing its duties particularly well and instead wished to give the contract

to a local provider, it would not be particularly difficult for the consortium’s lawyers to claim that the

cancellation of its contract was not being carried out ‘in a non discriminatory manner’ or that it was being

forced to dispose of its investment ‘by reasons of its nationality’. It would then be able to take the

Argentinian government to an ISDS tribunal and demand compensation for the loss of anticipated profits

covering the remainder of the 95 year contract. Multinational utility companies have shown that they are

both willing and able to use the ISDS mechanism to combat government attempts to regulate their

actions – at the time of writing, dozens of energy and water companies are suing the government of

Argentina for billions of pounds for freezing utility prices.2

TiSA’s annex on domestic regulation adds to the list of vague promises which may be held against

Latin American governments at some point in the future, stating that,

Where a Party maintains measures relating to licensing requirements and procedures, qualification

requirements and procedures, and technical standards which require authorization for the supply of a

service, the Party shall:

(a) ensure that such measures are based on objective and transparent criteria and…

(b) ensure that the procedures used by, and the related decisions of, any competent authority are impartial

with respect to all applicants, and that the competent authority should reach its decisions in an independent manner

[emphasis added].3

The use of the highlighted terms means that any attempt by governments to introduce legislation

regulating the entry of foreign service providers into the domestic economy could be deemed a breach

of contract, since it could be argued that such legislation is not based on objective and transparent criteria,

is not impartial with respect to all applicants, and the decision was not reached in an independent manner

since it was reached by a political body. Foreign service providers unable to access the national market

of the country whose government enacted such measures would be able to sue the government for the

loss of potential profits which they suffered due to the advent of these regulations.

Examples abound of ISDS clauses – which already exist in over three thousand trade agreements

worldwide4 – being used by corporations to sue governments which have taken measures to protect the

public interest. One of the first known ISDS cases took place in 1997, when the US corporation Metaclad

1 Woodroffe and Joy, Out of Service, p. 8. 2 Scrivener, The Poor are Getting Richer, p. 16. 3 Trade in Services Agreement: Annex on Domestic Regulation, April 23, 2015, obtained from WikiLeaks, “Trade in Services Agreement (TiSA): Domestic Regulation Annex (April 2015),” July 1, 2015, accessed July 22, 2015, https://wikileaks.org/tisa/ domestic/04-2015/tisa-annex-on-domestic-regulation.pdf, pp. 2-3. 4 Jonathan Weisman, “Trans-Pacific Partnership Seen as Door for Foreign Suits against U.S.,” New York Times, March 25, 2015, accessed August 21, 2015, http://www.nytimes.com/2015/03/26/business/trans-pacific-partnership-seen-as-door-for-foreign-suits-against-us.html?_r=0.

- 39 -

invoked NAFTA in order to sue the Mexican government for denying it permission to operate a waste

disposal site. The Mexican government took this action because a geological survey had found that the

waste would contaminate the local water supply of the area surrounding the site. Nevertheless, the ISDS

tribunal ruled in favour of Metaclad and ordered the Mexican government to pay $16.9 million in

compensation.1 Since the mid-1990s, there has been a steady upwards trend in the annual number of

ISDS lawsuits; in 1994 there were fewer than five known ISDS cases, whereas in 2013 there were almost

sixty.2 Latin American governments are frequently the targets of these suits.

Using an ISDS clause in a treaty signed in 1991 between Uruguay and Switzerland, the tobacco

corporation Philip Morris – which is headquartered in the USA but which has an operations centre in

Switzerland – is currently suing the Uruguayan government for $25 million for increasing the mandatory

size of health warning on cigarette packets.3

Pacific Rim, a subsidiary of the Canadian-Australian mining company OceanaGold, is currently

suing the government of El Salvador for $301 million – equivalent to just under two percent of the

country’s GDP – in order to cover the loss of potential profits it incurred through the Salvadoran

government’s failure to approve metal mining permits due to the threat which such activity posed to the

country’s water supply.4 A majority of the population support the moratorium on mining permits and it

is easy to see why – 90% of the country’s surface water is already highly contaminated, and 20% of the

rural population lack access to safe drinking water.5 Allowing more mining operations to take place in

the country would very likely worsen the problem of water pollution. Even if the ISDS tribunal rules in

favour of the Salvadoran government, fighting the lawsuit has already cost the government almost $13

million – a substantial loss of revenue.6

In 2012, the government of Ecuador was forced to pay out $1.77 billion – at the time, the largest

ISDS award in history – to the US Occidental Petroleum Corporation for the unilateral cancellation of

its contract with the corporation.7 The Ecuadorian government justified the contract cancellation by

arguing that Occidental Petroleum had violated its contract by selling a 40% economic interest in its oil

exploration and exploitation activities in Ecuador to the Alberta Energy Corporation Ltd. – a transfer

1 Kirk, The One Party Planet, p. 31. 2 United Nations Conference on Trade and Development [UNCTAD], Recent Trends in IIAs and ISDS (United Nations, 2015), figure 2. 3 Trefis Team, “An Uruguayan Lawsuit with International Implications for Philip Morris,” Forbes, September 22, 2014, accessed August 21, 2015, http://www.forbes.com/sites/greatspeculations/2014/09/22/an-uruguayan-lawsuit-with-international-implications-for-philip-morris; Jim Armitage, “Big Tobacco puts countries on trial as concerns over TTIP deals mount,” Independent, October 21, 2014, accessed August 21, 2015, http://www.independent.co.uk/news/business/analysis-and-features/big-tobacco-puts-countries-on-trial-as-concerns-over-ttip-deals-mount-9807478.html. 4 Manuel Pérez-Rocha, “When Corporations Sue Governments,” New York Times, December 3, 2014, accessed August 21, 2015, http://www.nytimes.com/2014/12/04/opinion/when-corporations-sue-governments.html. 5 “International Coalition Supports El Salvador in Battle against Canadian Mining Company,” Mining Watch Canada, April 9, 2014, accessed August 21, 2015, http://www.miningwatch.ca/news/international-coalition-supports-el-salvador-battle-against-canadian-mining-company. 6 Pérez-Rocha, “When Corporations Sue Governments.” 7 Pérez-Rocha, “When Corporations Sue Governments.”

- 40 -

which was in breach of the corporation’s contract with Ecuador and was also against Ecuadorian law,

which required ministerial approval for such actions.1 However, ICSID ruled in favour of the corporation

after it argued that the Ecuadorian government had breached the US-Ecuador BIT since its actions were

‘unfair, arbitrary, discriminatory and disproportionate.’2 The government of Venezuela has also come

under fire from ICSID, being told to pay $1.6 billion in compensation to Exxon for the nationalisation

of oil projects.3

Data produced by UNCTAD shows that ISDS is predominantly a tool used by corporations based in the

core against the governments of the periphery. In 2012, only one third of cases were brought against

developed countries, whereas 64% of cases were initiated by corporations based in them.4 For 2014, the

figures were 40% and 83%, respectively.5 As can be seen in figure 4.1, Latin American states feature

heavily in the list of countries targeted by ISDS cases – with Argentina and Venezuela in the top two

positions, and Mexico and Ecuador also prominently featuring on the list. Figure 4.2 shows that it is

European and North American countries which are the most frequent initiators of ISDS cases, with the

United States by far in the lead. Of the three most frequently invoked trade agreements in order to initiate

ISDS proceedings, two are between the USA and a Latin American state – NAFTA and the US-Argentina

BIT.6

The defendant states do not win in the majority of cases – only 37% of cases so far have been

ruled in favour of the state, whereas 53% of cases have either ended in the investor’s favour or have been

1 Tai-Heng Cheng and Lucas Bento, “ICSID’s Largest Award in History: An Overview of Occidental Petroleum Corporation v the Republic of Ecuador,” Kluwer Arbitration Blog, December 19, 2012, accessed August 21, 2015, http://kluwerarbitration blog.com/blog/2012/12/19/icsids-largest-award-in-history-an-overview-of-occidental-petroleum-corporation-v-the-republic-of-ecuador. 2 Cheng and Bento, “ICSID’s Largest Award in History.” 3 Pérez-Rocha, “When Corporations Sue Governments.” 4 UNCTAD, Recent Developments in Investor-State Dispute Settlement (ISDS) (United Nations, 2013), p. 1. 5 UNCTAD, Recent Trends in IIAs and ISDS, pp. 5-6. 6 UNCTAD, Recent Trends in IIAs and ISDS, p. 7.

Figure 4.1 – Most Frequent ISDS Respondent States (total as of end of 2014).

Source: UNCTAD, Recent Trends in IIAs and ISDS, figure 3.

- 41 -

settled out of court. Making up the remaining ten percent, 8% of cases have been discontinued, and 2%

have ruled in favour of the investor but the defending state has not had to pay any damages.1 Evidently,

if a state is taken to an ISDS tribunal there is a good chance that it will have to pay compensation to its

accuser. Even if the state wins, fighting the legal battle can incur considerable costs, as shown in the

example of El Salvador. Large corporations are often more able to meet these costs – in the example of

Philip Morris vs. Uruguay, the corporation’s annual revenue is $80 billion, which dwarfs Uruguay’s GDP

of $53 billion2 – and if the tribunal rules in Philip Morris’ favour the compensation awarded will more

than cover their legal fees.

Graham Harrison has argued that neoliberalism is best understood as ‘a global ‘architecture’ of authority

and material power which can both incentivise and punish divergence and reform ‘slippage’.’3 If this is

indeed the case, then ISDS surely represents a disciplinary mechanism to fulfil the role of punishing

divergence and reforming slippage. If countries try to shift their policies away from the liberalised global

economic order, then ISDS can provide effective punishment to bring them back into line. By robbing

governments of revenue through the award of sometimes staggering amounts of compensation, it lessens

the ability of governments to pursue state-led development strategies, making them even more dependent

on foreign investment. The high costs involved, not just in potential compensation but in legal fees, must

surely deter governments from taking actions which might anger foreign investors, even if these actions

are in the public interest.

By shifting dispute resolution from the host country to ‘independent’ international courts, ISDS

clauses shift the balance of power in favour of large multinational corporations and undermine the

democratic mandate of Latin American governments. These corporations gain greater protection than

1 UNCTAD, Recent Trends in IIAs and ISDS, figure 5. 2 Armitage, “Big Tobacco puts countries on trial as concerns over TTIP deals mount.” 3 Graham Harrison, Neoliberal Africa: The Impact of Global Social Engineering (London and New York: Zed Books, 2010), p. 23.

Figure 4.2 – Most Frequent ISDS Initiator States (total as of end of 2014).

Source: UNCTAD, Recent Trends in IIAs and ISDS, figure 4.

- 42 -

that available to domestic firms, and these protections promise to make it much harder for Latin

American governments to regulate the activities of foreign investors in their respective countries, or to

restrict the access of foreign corporations to their markets and resources. ISDS quite clearly

disproportionately benefits the corporate class based in the core, since it allows them to invest wherever

they wish with a reduced level of risk, safe in the knowledge that their investments are protected from

interfering governments who might try to harness foreign investment to serve their populations’ interests.

Unsurprisingly, it has been the countries in the core which have been pushing for the inclusion

of an ISDS clause in TPP, with only the USA and Japan supporting the proposal in its current form.1

According to TPP negotiation documents, the USA has been particularly unwilling to give way on the

inclusion of an ISDS clause in the agreement, showing ‘no signs of flexibility…’2 Furthermore, the

inclusion of ISDS in international trade agreements demonstrates the power which the corporate class

has over trade agreement negotiations. Not only does ISDS not benefit the public interest in peripheral

countries, it does not benefit the public interest in core countries. There has been an outcry by public

interest groups in the USA and Europe against TTIP which also contains an ISDS clause, and the threat

to democracy, the environment and public service provision which it represents.3 As can be seen in figure

4.1, governments in developed countries have also been the targets of ISDS tribunals. Clearly, ISDS is

not purely a tool used by core countries against peripheral countries – even though the latter bears the

brunt of ISDS claims, this dichotomy fails to accurately characterise the usage of ISDS. Instead, ISDS is

best understood as a tool used by the corporate class against governments which threaten their economic

interests. An acknowledgement of class interests, rather than ‘national’ interests (however they may be

defined), allows for a better understanding of ISDS and where the pressure for the inclusion of this clause

in international trade agreements comes from.

1 TPP state of play, p. 2. 2 TPP state of play, p. 2. 3 George Monbiot, “The TTIP trade deal will throw equality before the law on the corporate bonfire,” Guardian, January 13, 2015, http://www.theguardian.com/commentisfree/2015/jan/13/ttip-trade-deal-transatlantic-trade-investment-treaty.

- 43 -

Chapter 5 – Context and Motivations

Just as the unequal treaties of the nineteenth century formed part of a larger imperial project, so the

international trade agreements of the present era exist within a wider context of asymmetric power

relations. For a more complete understanding of international trade agreements, it is important to analyse

them within the framework of global core-periphery relations. As Stiglitz writes, ‘one cannot look at the

reasonableness of any particular agreement in isolation from a broader context – or even assess its true

impact.’1 Trade agreements are one way in which the core uses its position of power to benefit itself and

further solidify its position. There are other ways in which this is achieved, several of which will be

discussed in this chapter, and it is important to recognise that these varying mechanisms form part of a

large pattern of core-periphery relations. TPP, TiSA and other international trade agreements which have

emerged since the mid-1990s do not exist in isolation but are symptomatic of this global structure.

Development policy space writers have tended to overlook this aspect of international trade agreements

and in so doing have denied them of much-needed context.

The present global economy is characterised by inequality, both in terms of material wealth and

in terms of political power. This paper has demonstrated the ways in which, through international trade

agreements, the countries in the core have been able to shift the rules of the global economy further in

their favour – or, more accurately, in the favour of the core’s corporate class. It has been shown that

these trade agreements have contributed to the inhibition of development in Latin America, the economic

dependence of the region on the core, and a flow of wealth from Latin America to the core.

Additionally, they have contributed to a growing wealth disparity between the two sets of

countries. As can be seen in figure 5.1, there is a considerable gap in GDP per capita between Latin

America and the countries in the core and there has been a strong tendency for this gap to increase over

the course of the past few decades. This tendency has only been tempered since 2008 by the effects of

the financial crash. Even the fastest growing Latin American economy, Chile (highlighted in bold), has

not achieved the same rate of growth over this period as the core countries. Furthermore, since income

inequality is higher in Latin American countries than in the core,2 there is an even more significant gap

in living standards for average citizens between the two sets of countries than that indicated by the graph.

1 Stiglitz, “Multinational Corporations,” p. 8. 2 World Bank, “Indicators – GINI index (World Bank estimate),” accessed August 23, 2015, http://data.worldbank.org/ indicator/SI. POV.GINI.

- 44 -

While not necessarily using dependency theory terminology, many writers who have criticised

neoliberalism have highlighted other processes whereby the highly developed countries have used their

position of power to produce situations which have led to the economic symptoms of core-periphery

relations (inhibition of development, economic dependence, flow of wealth from periphery to core,

growing wealth disparity). Much has been written on the use by the World Bank and IMF of structural

adjustment – conditionalities attached to loans or debt relief and rescheduling which force countries

accepting this financial help to enact Washington Consensus policies such as deregulation and the

removal of trade barriers.1 For example, by 1994 eighteen developing countries, including Argentina,

Brazil, Mexico, Uruguay and Venezuela, had agreed to deals with the IMF which forgave them a total of

$60 billion in debt in return for their adoption of Washington Consensus reforms.2 In recent years,

structural adjustment programmes have been replaced with poverty reduction strategy papers, which

perform a similar function.3 As has been seen in chapters one and two, trade liberalisation and

deregulation serve to harm the economic development of peripheral countries, and benefit the corporate

class in the core. The policies pushed by the World Bank and IMF have been widely condemned for

1 Gore, “The Rise and Fall of the Washington Consensus as a Paradigm for Developing Countries,” p. 790. 2 Harvey, A Brief History of Neoliberalism, p. 75. 3 Peter Hardstaff, Treacherous Conditions: How IMF and World Bank policies tied to debt are undermining development (London: World Development Movement, 2003), p. 5.

Sample of core countries (United States,

Australia, Canada, Netherlands, Germany,

Japan, UK, France)

Latin American countries

(Chile highlighted in bold)

Figure 5.1 – GDP per capita Disparity between Latin America and the Core.

Source: Gapminder, “Indicators – Income per person (GDP/capita, PPP$ inflation-adjusted),” accessed July 31, 2015,

http://www.gapminder.org/data.

- 45 -

slowing down growth in developing countries and increasing inequality – both within these countries and

globally.1

In addition to formal pressure to adopt Washington Consensus policies through structural adjustment

programmes, peripheral countries are exposed to informal pressures because of their position in the

global economy. Faced with shrinking government revenues and comparatively poor growth, many

developing countries find themselves dependent on attracting foreign investment in order to kick-start

their economic development. In order to entice investors, these countries must compete with each other

to appear the most conducive to foreign investment; frequently this involves a ‘race to the bottom’ of

regulatory standards.2 Institutions in the core such as credit rating agencies and the World Bank fuel this

process by producing country rankings which allow investors to quickly and easily judge where to place

their money.

The ‘big three’ credit rating agencies – Moody’s, Standard and Poor’s, and Fitch – all based in the

USA, can make or break the ability of developing country governments to raise capital on the private

international market.3 The World Bank’s country rankings are also able to influence international

investors. Many of the indicators used to calculate these rankings essentially translate into the extent that

developing countries have embraced the Washington Consensus.4 For instance, the World Bank’s Doing

Business Index measures the ‘ease of doing business’ in each country, and higher scores are obtained

through the lowering of regulatory standards.5 In their eagerness to obtain better credit ratings and move

up in country rankings, developing countries adopt measures which the core countries have defined as

desirable – measures which, of course, work to the benefit of those who have the power to define them.

William Easterly, while highly critical of the World Bank and IMF’s structural adjustment

programmes, has praised the ‘honest reporting’ of the Doing Business Index which, in his words, ‘affects

a country’s ability to attract capital and so creates incentives for piecemeal changes to…regulations’.6

Easterly’s view seems to be that because the Doing Business Index uses market forces to encourage

developing countries to adopt Washington Consensus reforms, this makes it more virtuous than the

overtly coercive practice of structural adjustment. He fails to appreciate that both of these measures work

1 Chang, Bad Samaritans, p. 28; William Easterly, The White Man’s Burden: Why the West’s Efforts to Aid the Rest have done so much Ill and so little Good (Oxford: Oxford University Press, 2006), p. 60; Harvey, A Brief History of Neoliberalism, p. 154; Hardstaff, Treacherous Conditions, p. 11; Anup Shah, “Structural Adjustment – A Major Cause of Poverty,” Global Issues, March 24, 2013, accessed August 23, 2015, http://www.globalissues.org/article/3/structural-adjustment-a-major-cause-of-poverty. 2 Layna Mosley and Saika Uno, “Racing to the Bottom or Climbing to the Top?: Economic Globalization and Collective Labor Rights,” Comparative Political Studies 40, no. 8 (2007), pp. 923, 926. 3 Alexander Cooley, “Thinking Rationally about Hierarchy and Global Governance,” Review of International Political Economy 10, no. 4 (2003), pp. 677-678. 4 Harrison, Neoliberal Africa, p. 86. 5 World Bank, “Economy Rankings,” Doing Business: Measuring Business Regulations, accessed August 23, 2015, http://www.doing business.org/rankings; Alice Martin-Prével, Willful Blindness: How the World Bank’s Doing Business Rankings Impoverish Smallholder Farmers (Oakland, CA: The Oakland Institute, 2014), p. 8. 6 Easterly, The White Man’s Burden, p. 97.

- 46 -

to the same end: they both form part of the global structure of core-periphery relations, which encourage

the uptake of policies which benefit the economic elites in the core.

The countries in the core have been able to use their influence to alter the global rules regarding debt

repayment in the favour of lenders and against the interest of borrowers – meaning predominantly in

favour of the corporate class involved in the financial sector and against the interests of governments in

the periphery. A key watershed moment was the Mexican default of 1982-4. Previously, if a government

defaulted on its debt then its lenders were expected to accept the losses which resulted from a bad

investment decision – therein lay the chief element of risk in international lending. However, in the case

of the Mexican default the US Treasury and the IMF, fearing the impact which the default would have

on lenders, arranged a deal with the Mexican government whereby the debt was not wiped out but

rescheduled in exchange for the adoption of Washington Consensus policies.1 This treatment became

standard in the form of structural adjustment, and thus the global rules regarding debt repayment were

fundamentally changed.2

The result of this shift has been greatly reduced risk for international lenders, and spiralling levels

of debt incurred by the governments of the periphery. Eric Toussaint has calculated that the total external

debt owed by developing countries in 1980 was $580 billion; by 2002 this had quadrupled to $2,400

billion (figures adjusted to account for inflation).3 During this time, debt repayments made by developing

countries amounted to a little over $4,600 billion – thus developing countries ‘repaid eight times what

they owed only to find themselves four times more indebted.’4 The spiralling debt owed by peripheral

countries has made them more dependent on the core for fresh loans or debt rescheduling in order to

allow them to keep up with their debt repayments, and has resulted in a flow of wealth from periphery

to core. For example, in 2002 the debt service paid by peripheral countries to their creditors in the core

amounted to $343 billion – almost nine times the $37 billion in aid they received that year.5

Pressure emanating from countries in the core can compel the governments of peripheral countries to

further restrict their actions beyond what they are obliged to as a result of international trade agreements.

Alice Amsden and Takashi Hikino raise the important point that many developing countries have stuck

much more closely to the Washington Consensus than they are required to by international trade

agreements.6 Research by Shahrukh Rafi Khan has backed up this view, demonstrating that there is a

significant gap between the level at which developing countries’ tariffs for non-agricultural goods are

1 Harvey, A Brief History of Neoliberalism, p. 29. 2 Chang, Bad Samaritans, p. 32. 3 Eric Toussaint, “Transfers from the Periphery to the Centre, from Labour to Capital,” accessed August 23, 2015, http://oat. tao.ca/~jerome/ToussaintSouthNorthflows.pdf, p. 1. 4 Toussaint, “Transfers from the Periphery to the Centre, from Labour to Capital,” p. 2. 5 Toussaint, “Transfers from the Periphery to the Centre, from Labour to Capital,” p. 4. 6 Amsden and Hikino, “The Bark is Worse than the Bite,” p. 104.

- 47 -

bound by international trade agreements and loan conditionalities, and the (lower) level of tariffs which

these countries actually apply.1 He argues that this disparity is a result of pressure imposed by highly

developed countries on recipients of aid. Indeed, he concludes from his empirical research that ‘a one-

percentage point increase in aid (as a percent of GNI) is associated with a 0.6% higher gap between

bound and applied tariffs.’2

With regard to intellectual property rights, one of the actions available to the governments of

developing countries in order to circumvent the enormous costs of purchasing foreign knowledge is the

issuance of compulsory licenses. Compulsory licensing involves a government permitting an organisation

in its territory to use patented knowledge without the consent of the patent holder, when such use serves

the public interest.3 Although TRIPS did restrict the circumstances under which compulsory licenses may

be used – limiting their duration and requiring that compensation be paid to patent holders – they still

remained a useful tool available to developing countries.4 However, governments and corporations in the

core – the US government and pharmaceutical companies in particular – have taken to putting pressure

on peripheral governments which are considering issuing a compulsory license not to do so, even when

they are not violating TRIPS in any way.5

It has been seen that the terms of international trade agreements concluded since the mid-1990s have

advantaged the core at the expense of Latin America. Moreover, it seems highly likely that this was

deliberate policy on the part of the governments in the core rather than an unintended consequence. The

US-Argentina BIT contains many of the clauses contained in TPP, TiSA and other trade agreements

discussed in this paper, including market liberalisation, deregulation and investor arbitration. Signed in

1994, it has since served as a model for BITs negotiated between the highly developed countries and

Latin America. In his letter of transmittal for this agreement, President George Bush wrote,

The Treaty is designed to protect U.S. investment… The treaty’s standstill and rollback of Argentina’s trade

distorting performance requirements are precedent steps in opening markets for U.S. exports. In this regard,

as well as in its approach to dispute settlement, the treaty will serve as a model for our negotiations with

other South American countries. The treaty is fully consistent with U.S. policy toward international

investment.6

The emphasis is very much on the benefits which US investors will gain from the agreement, rather than

on the agreement being mutually advantageous for both parties. Bush even explicitly states that the

prohibition of performance requirements is designed to open Argentina’s markets to US exports. While

1 Khan, “WTO, IMF and the Closing of Development Policy Space for Low-Income Countries,” p. 1078. 2 Khan, “WTO, IMF and the Closing of Development Policy Space for Low-Income Countries,” p. 1078. 3 Gallagher, “Understanding Developing Country Resistance to the Doha Round,” p. 70. 4 Gallagher, “Understanding Developing Country Resistance to the Doha Round,” p. 70. 5 Chang, Bad Samaritans, p. 140; Stiglitz, “Multinational Corporations,” p. 7. 6 George Bush, Letter of Transmittal, January 19, 1995, contained within United States Senate, Treaty with Argentina Concerning the Reciprocal Encouragement and Protection of Investment, 103rd Congress 1st Session 103-2 (1994).

- 48 -

it may appear obvious that the USA would promote its own economic interests when negotiating trade

agreements, it is important to distinguish between intended and unintended consequences. Since

international trade agreements such as TPP and TiSA being negotiated at the time of writing are extremely

similar in both form and function to the US-Argentina BIT, it must be assumed that ‘U.S. policy toward

international investment’ has not changed substantially since the mid-1990s.

It has also been demonstrated that international trade agreements since the mid-1990s have

furthered the economic interests of the corporate class based in the core, rather than serving a ‘national’

interest. The current generation of trade agreements is no exception: the Peterson Institute of

International Economics has calculated that the likely effects of TPP on the US economy amount to a

cumulative increase of 0.13% of GDP by 2025.1 Moreover, a Centre for Economic and Policy Research

study has shown that due to the tendency of such trade agreements to redistribute wealth upwards, most

Americans stand to lose out as a result of the agreement.2

The corporate class is able to exert considerable influence over the content of international trade

agreements firstly because of the power which the core countries have over such agreements, and

secondly because of the immense lobbying power which the corporate class has in these countries. The

corporate class has a significant stake in the outcome of international trade agreements and immense

resources under their control which they are able to use to put pressure on negotiators. Ordinary citizens

are on the whole either unaware of the import of these agreements or lack the resources to make their

opposition known. The ongoing TTIP negotiations are an illustrative example of the presence of the

corporate class in trade agreement negotiations: out of 597 behind-closed-doors meetings which the

European Commission held regarding TTIP between January 2012 and February 2014, 528 were with

corporate lobby groups.3 Elections in the core are rarely won or lost over trade agreements, whereas

donations to political parties from grateful corporations can greatly bolster the chances of electoral

success. To argue that the content of international trade agreements closely aligns with the interests of

the corporate class is not to subscribe to a conspiratorial worldview; it is the logical choice for elected

officials to make given the incentives presented to them. The influence of the corporate class over

democratic decision-making is confirmed in a recent study on the impact of interest groups on US

politics. In the study, it was found that the proportion of ordinary US citizens who supported a particular

policy had virtually no impact on the probability that the policy was implemented; when it came to

1 Mark Weisbrot, “The Trans-Pacific Partnership treaty is the complete opposite of ‘free trade’,” Guardian, November 19, 2013, accessed August 24, 2015, http://www.theguardian.com/commentisfree/2013/nov/19/trans-pacific-partnership-corporate-usurp-congress. 2 David Rosnick, Gains from Trade?: The Net Effect of the Trans-Pacific Partnership Agreement on U.S. Wages (Washington, DC: Center for Economic and Policy Research, 2013), p. 1. 3 “TTIP: A Corporate Lobbying Paradise,” Corporate Europe Observatory, July 14, 2015, accessed August 24, 2015, http:// corporateeurope.org/international-trade/2015/07/ttip-corporate-lobbying-paradise.

- 49 -

economic elites, however, there was a very strong correlation between their support for a particular policy

and the likelihood of its adoption.1

Given that international trade agreements are deliberately designed to benefit the corporate class in the

core, why would Latin American governments sign up to them? The economic dependence of Latin

American countries on the core surely plays a considerable role. In many cases, particularly for the smaller

Latin American economies, these states are dependent on the countries in the core for the procurement

of high value-added manufactured goods, investment, loans and technology. Latin American countries

whose economies are geared towards the production of primary goods or low value-added manufactured

goods such as textiles are dependent on exports to the large markets of the core in order to maintain

their economic wellbeing. Again, this is especially true for the smaller Latin American economies. Given

their condition of economic dependence and their subsequently weak negotiating position, these

countries must accept the terms dictated to them by their more powerful trading partners or else risk

losing their business, the results of which would most likely be more harmful than the effects of the trade

agreements.

For the larger Latin American economies which are not as dependent on the core and so are able

to exercise greater autonomy in trade negotiations, the composition of domestic economic interests also

play an important role in motivating their governments to sign such agreements. In economies dominated

by primary industries there will be a push amongst economic elites for an export-oriented, liberalised

trade policy since this would further their economic interests, even if it harmed the growth of

manufacturing and ultimately hindered the country’s economic development. Due to the relatively small

presence of manufacturing industries in these countries, the domestic economic interests which would

lobby for the government not to sign up to liberalising trade agreements do not have a powerful enough

voice.2 Chile provides an excellent example of this. The legacy of Pinochet’s neoliberal reforms left a long

shadow over the Chilean economy – since the 1970s, manufacturing in the country has severely declined

and its economy has come to depend on the export of raw materials, especially copper, and

counterseasonal agricultural products to developed countries north of the equator.3 The copper industry

alone accounts for 19% of government revenue.4 Accordingly, Chile has longstanding commitment to

trade liberalisation, and was one of the first countries to join TPP negotiations. Peru, another TPP

1 Martin Gilens and Benjamin Page, “Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens,” Perspectives on Politics 12, no. 3 (2014), p. 573. 2 Stiglitz, “Multinational Corporations,” p. 36. 3 Amsden, The Rise of “the Rest”, p. 291. 4 Central Intelligence Agency, “Chile,” World Factbook, accessed August 24, 2015, https://www.cia.gov/library/publications/ the-world-factbook/geos/ci.html.

- 50 -

member, has a similar economic profile, with a focus on the export of minerals, petroleum and natural

gas.1

The liberalised trade policy of Mexico, as characterised by its inclusion in NAFTA and TPP, is

somewhat curious given its significant manufacturing industry. However, this is perhaps explained by the

importance of oil exports for country: around 30% of government revenue comes from the state-owned

oil company.2 The country’s geographical proximity to the USA and the necessity of good diplomatic

relations between the two countries doubtless also plays a role. Brazil provides a stark contrast to the

countries mentioned above, being significantly less enthralled to the liberalised economic order. With its

large domestic market and relatively advanced manufacturing sector, it is less dependent on exports and

so is able to be more selective in the trade agreements it signs.3 Furthermore, the significant presence of

domestic economic interests linked to manufacturing will discourage the Brazilian government from

signing up to agreements which may harm the sector unless it has little choice in the matter, as is the case

with WTO agreements.

It has been seen that the interests of economic elites provides a major motivation for both the initiation

and acceptance of international trade agreements. Furthermore, the influence of the corporate class can

be seen in other manifestations of core-periphery relations such as those discussed previously in this

chapter. Curbing the power of the corporate class is therefore necessary not just to halt the proliferation

of exploitative international trade agreements, but to combat core-periphery relations more generally.

1 Central Intelligence Agency, “Peru,” World Factbook, accessed August 24, 2015, https://www.cia.gov/library/publications/ the-world-factbook/geos/pe.html. 2 Central Intelligence Agency, “Mexico,” World Factbook, accessed August 24, 2015, https://www.cia.gov/library/publications /the-world-factbook/geos/mx.html. 3 Central Intelligence Agency, “Brazil,” World Factbook, accessed August 24, 2015, https://www.cia.gov/library/publications/ the-world-factbook/geos/br.html.

- 51 -

Conclusion

It is generally believed that our continent receives real financial aid. The data show the opposite. We can

affirm that Latin America is making a contribution to financing the development of the United States and

of other industrialized countries.1

– Gabriel Valdés, ex-Foreign Minister of Chile

International trade agreements concluded since the mid-1990s constitute a modern version of the unequal

treaties of the nineteenth century: they have benefited the corporate class in the core at the expense of

Latin America. The wave of trade agreements currently being negotiated represent the most egregious

examples, promising to both lock in and build upon the worst aspects of the agreements negotiated at

the WTO Uruguay Round.

These international trade agreements form part of a global framework of core-periphery relations,

whereby the countries in the core are able to use their position of power to ensure that the rules of the

global economy take the form that they desire. The corporate class based in these countries is able to use

its considerable influence over elected governments to make certain that their interests, above all, are

represented. The use of a class-based analysis such as that utilised by dependency theorists is vital in order

to locate where the pressure for these trade agreements comes from, and thereby to allow such

agreements to be tackled.

The key features of core-periphery relations highlighted by dependency theory writers in the

1960s and 1970s – inhibition by the core of economic development in the periphery, economic

dependence of the periphery on the core, a flow of wealth from periphery to core, and a growing wealth

disparity between core and periphery – have been demonstrated to still be present in the relationship

between Latin America and the highly developed countries in the present-day global economy. The quote

above by the ex-Foreign Minister of Chile, though made in 1969, is just as applicable in 2015.

Development policy space literature has been very strong on the inhibition by the core of

economic growth and development in the periphery. However, it has had significantly less to say about

the other aspects of core-periphery relations. Given the finite nature of the planet’s resources, a global

development strategy based on economic growth alone cannot be successful. Mankind’s consumption of

the Earth’s resources is already at an unsustainable level. Ecological imperatives make it untenable for

the economic development of developing countries to be based on receiving an ever-smaller slice of an

ever-growing pie. Tackling poverty requires tackling global inequality. The flow of wealth from peripheral

countries to the core’s economic elites must be stopped; until this is achieved, foreign aid will represent

just a trickle in the opposite direction.

1 Statement by Gabriel Valdés, ex-Foreign Minister of Chile, to President Richard Nixon, June 12, 1969, quoted in Cockroft, Frank and Johnson, Dependence and Underdevelopment, p. ix.

- 52 -

It may be asked – what is wrong about advancing your own economic interests? In an environment of

fair competition, there is nothing wrong with this. Indeed, it is the basis of modern economics. However,

when a small group has a disproportionate amount of power and is able to continuously further its

economic interests at the expense of others who are powerless to stop them, this amounts to oppression.

At the national level, the state exists to limit the harmful effects which may result from the unconstrained

pursuit of individuals’ economic interests. At the international level, no such authoritative body exists.

Given the improbability of such a body emerging, it therefore falls to the core countries to monitor

themselves and to pursue an international economic policy based on compassion as well as self-interest.

The capacity of the countries in the core to show compassion to less fortunate countries has been

shown by the generosity of foreign aid and of humanitarian relief efforts following natural disasters. If

the governments of the highly developed countries are serious about supporting international

development, they must also combat the damage which their international economic policies inflict upon

developing countries.

Most immediately, this requires opposing trade agreements such as TPP and TiSA. International

trade agreements are not necessarily a problem in themselves; the problem is when they contain terms

such as those discussed in this paper which serve to harm developing countries. International cooperation

is necessary in order to tackle global inequality by taking such measures as clamping down on international

tax havens, reducing the debt burden of developing countries, and facilitating technology transfer. Trade

agreements can play a role in this if they are negotiated with the needs of developing countries in mind,

rather than in the vein of unequal treaties.

In the longer term, combating exploitative trade agreements requires addressing the root cause

of the problem: the influence of the corporate class over the governments of the core. Pessimists may

scoff that this policy implication is just as revolutionary and unlikely as the calls for domestic socialist

revolution by some dependency theory writers. However, it could conceivably be achieved through

changes to the ways that political parties are funded and the introduction of greater controls on lobbying.

Perhaps if this is accomplished, international trade agreements can be negotiated based on the pursuit of

mutual advantage, rather than taking advantage.

- 53 -

List of Abbreviations

BIT – Bilateral Investment Treaty

EPZ – Export-Processing Zone

FDI – Foreign Direct Investment

GATS – General Agreement on Trade in Services

GDP – Gross Domestic Product

ICSID – International Centre for the Settlement of Investment Disputes

IMF – International Monetary Fund

ISDS – Investor-State Dispute Settlement

MFN – Most Favoured Nation

NAFTA – North American Free Trade Agreement

TiSA – Trade in Services Agreement

TPP – Trans-Pacific Partnership

TRIMS – Agreement on Trade-Related Investment Measures

TRIPS – Agreement on Trade-Related Aspects of Intellectual Property Rights

TTIP – Transatlantic Trade and Investment Partnership

UNCTAD – United Nations Conference on Trade and Development

WTO – World Trade Organisation

- 54 -

Bibliography

Primary Sources

Armitage, Jim. “Big Tobacco puts countries on trial as concerns over TTIP deals mount.” Independent.

October 21, 2014. Accessed August 21, 2015. http://www.independent.co.uk/news/business/

analysis-and-features/big-tobacco-puts-countries-on-trial-as-concerns-over-ttip-deals-mount-

9807478.html.

Central Intelligence Agency. “Brazil.” World Factbook. Accessed August 24, 2015. https://www.cia.gov/

library/publications/the-world-factbook/geos/br.html.

Central Intelligence Agency. “Chile.” World Factbook. Accessed August 24, 2015. https://www.cia.gov/

library/publications/the-world-factbook/geos/ci.html.

Central Intelligence Agency. “Mexico.” World Factbook. Accessed August 24, 2015. https://www.cia.gov/

library/publications/the-world-factbook/geos/mx.html.

Central Intelligence Agency. “Peru.” World Factbook. Accessed August 24, 2015. https://www.cia.gov/

library/publications/the-world-factbook/geos/pe.html.

Gapminder. “Indicators – Income per person (GDP/capita, PPP$ inflation-adjusted).” Accessed July 31,

2015. http://www.gapminder.org/data.

Gapminder. “Indicators – Patents in Force (Total).” Accessed July 31, 2015. http://www.gapminder.org

/data.

International Centre for the Settlement of Investment Disputes. “About.” Accessed August 21, 2015.

https://icsid.worldbank.org/apps/ICSIDWEB/about/Pages/default.aspx.

“International Coalition Supports El Salvador in Battle against Canadian Mining Company.” Mining Watch

Canada. April 9, 2014. Accessed August 21, 2015. http://www.miningwatch.ca/news/international

-coalition-supports-el-salvador-battle-against-canadian-mining-company.

Kotschwar, Barbara and Schott, Jeffrey. “The Next Big Thing?: The Trans-Pacific Partnership & Latin

America.” Americas Quarterly. 2013. Accessed July 27, 2015. http://www.americasquarterly.org/

next-big-thing-trans-pacific-partnership.

Miroff, Nick. “Latin America’s Political Right in Decline as Leftist Governments Move to Middle.”

Guardian. January 28, 2014. Accessed July 16, 2015. http://www.theguardian.com/world/2014/jan

/28/colombia-latin-america-political-shift.

NAFTA Secretariat. North American Free Trade Agreement. 1994.

Office of the United States Trade Representative. “Outlines of TPP.” November 12, 2011. Accessed

August 1, 2015. https://ustr.gov/tpp/outlines-of-tpp.

- 55 -

Pettinger, Tejvan. “Gross Fixed Capital Formation.” Economics Help. December 14, 2012. Accessed

August 14, 2015. http://www.economicshelp.org/blog/6536/economics/gross-fixed-capital-

formation.

TPP: Country Positions. November 6, 2013. Obtained from WikiLeaks. “Second release of secret Trans-

Pacific Partnership Agreement documents.” December 9, 2013. Accessed August 1, 2015. https://

wikileaks.org/second-release-of-secret-trans.html.

TPP State of Play after Salt Lake City 19-24 November 2013 Round of Negotiations. Obtained from

WikiLeaks. “Second release of secret Trans-Pacific Partnership Agreement documents.” December

9, 2013. Accessed August 1, 2015. https://wikileaks.org/second-release-of-secret-trans.html.

Trade in Services Agreement: Annex on Domestic Regulation. April 23, 2015. Obtained from WikiLeaks.

“Trade in Services Agreement (TiSA): Domestic Regulation Annex (April 2015).” July 1, 2015.

Accessed July 22, 2015. https://wikileaks.org/tisa/domestic/04-2015/tisa-annex-on-domestic-

regulation.pdf.

Trade in Services Agreement: Draft Provisions. April 24, 2015. Obtained from WikiLeaks. “Trade in

Services Agreement (TiSA): Core Text (April 2015).” July 1, 2015. Accessed July 20, 2015. https://

wikileaks.org/tisa/core/tisa-core-text.pdf.

Trans-Pacific Partnership draft. May 16, 2014. Obtained from WikiLeaks. “Updated Secret Trans-Pacific

Partnership Agreement (TPP) - IP Chapter (second publication).” October 16, 2014. Accessed July

20, 2015. https://wikileaks.org/tpp-ip2.

Trans-Pacific Partnership draft. January 20, 2015. Obtained from WikiLeaks. “Secret Trans-Pacific

Partnership Agreement (TPP) – Investment Chapter.” March 25, 2015. Accessed July 20, 2015.

https://wikileaks.org/tpp-investment/wikileaks-tpp-investment-chapter/page1.html#.

Trefis Team. “An Uruguayan Lawsuit with International Implications for Philip Morris.” Forbes.

September 22, 2014. Accessed August 21, 2015. http://www.forbes.com/sites/greatspeculations/

2014/09/22/an-uruguayan-lawsuit-with-international-implications-for-philip-morris.

“TTIP: A Corporate Lobbying Paradise.” Corporate Europe Observatory. July 14, 2015. Accessed August 24,

2015. http://corporateeurope.org/international-trade/2015/07/ttip-corporate-lobbying-paradise.

United Nations Conference on Trade and Development. Recent Developments in Investor-State Dispute

Settlement (ISDS). United Nations, 2013.

United Nations Conference on Trade and Development. Recent Trends in IIAs and ISDS. United Nations,

2015.

United Nations Economic Commission for Latin America and the Caribbean. Latin America and the

Caribbean in the World Economy. Santiago: United Nations, 2004.

United Nations Economic Commission for Latin America and the Caribbean. Latin America and the

Caribbean in the World Economy: A Sluggish Postcrisis, Mega Trade Negotiations and Value Chains: Scope for

Regional Action. Santiago: United Nations, 2013.

- 56 -

United States Department of State. Papers Relating to the Foreign Relations of the United States with the Annual

Message of the President Transmitted to Congress December 7, 1909. Washington: United States

Government Printing Office, 1909.

United States Senate. Treaty with Argentina Concerning the Reciprocal Encouragement and Protection

of Investment. 103rd Congress 1st Session 103-2. 1994.

World Bank. “Economy Rankings.” Doing Business: Measuring Business Regulations. Accessed August 23,

2015. http://www.doingbusiness.org/rankings.

World Bank. “Indicators – Charges for the use of intellectual property, payments (BoP, current US$).”

Accessed July 31, 2015. http://data.worldbank.org/indicator/BM.GSR.ROYL.CD.

World Bank. “Indicators – Charges for the use of intellectual property, receipts (BoP, current US$).”

Accessed July 31, 2015. http://data.worldbank.org/indicator/BX.GSR.ROYL.CD.

World Bank. “Indicators – GDP per capita, PPP (current international $).” Accessed August 10, 2015.

http://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD.

World Bank. “Indicators – GINI index (World Bank estimate).” Accessed August 23, 2015. http://data.

worldbank.org/indicator/SI.POV.GINI.

World Bank. “Indicators – Manufacturing, value added (% of GDP).” Accessed August 8, 2015. http://

data.worldbank.org/indicator/NV.IND.MANF.ZS.

World Bank. “Indicators - Net official aid received (constant 2012 US$).” Accessed July 31, 2015. http://

data.worldbank.org/indicator/DT.ODA.OATL.KD.

World Bank. “Indicators – Research and Development Expenditure (% of GDP).” Accessed August 10,

2015. http://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS.

World Bank. “Indicators – Tariff rate, applied, weighted mean, all products (%).” Accessed August 8,

2015. http://data.worldbank.org/indicator/TM.TAX.MRCH.WM.AR.ZS.

World Bank. “Indicators – Tariff rate, applied, weighted mean, manufactured products (%).” Accessed

August 8, 2015. http://data.worldbank.org/indicator/TM.TAX.MANF.WM.AR.ZS.

World Trade Organisation. Agreement on Trade-Related Aspects of Intellectual Property Rights. 1994.

World Trade Organisation. Agreement on Trade-Related Investment Measures. 1994.

World Trade Organisation. General Agreement on Trade in Services. 1994.

World Trade Organisation. “Understanding the WTO: Principles of the Trading System.” Accessed

August 8, 2015. https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm.

- 57 -

Secondary Sources

Amsden, Alice and Hikino, Takashi. “The Bark is Worse than the Bite: New WTO Law and Late

Industrialization.” Annals of the American Academy of Political and Social Science 570 (2000): 104-114.

Amsden, Alice. The Rise of “the Rest”: Challenges to the West from Late-Industrializing Economies. Oxford: Oxford

University Press, 2004.

Cardoso, Fernando Henrique and Faletto, Enzo. Dependency and Development in Latin America. Translated

by Marjory Mattingly Urquidi. Berkeley, etc.: University of California Press, 1979.

Carlsen, Laura. “Under NAFTA, Mexico Suffered, and the United States Felt its Pain.” New York Times.

November 24, 2013. Accessed August 7, 2015. http://www.nytimes.com/roomfordebate/2013/

11/24/what-weve-learned-from-nafta/under-nafta-mexico-suffered-and-the-united-states-felt-its-

pain.

Chang, Ha-Joon. Kicking Away the Ladder: Development Strategy in Historical Perspective. London: Anthem

Press, 2002.

Chang, Ha-Joon. Bad Samaritans: Rich Nations, Poor Policies and the Threat to the Developing World. London:

Random House Business, 2007.Chang, Ha-Joon. Economics: The User’s Guide. London: Penguin,

2014.

Cheng, Tai-Heng and Bento, Lucas. “ICSID’s Largest Award in History: An Overview of Occidental

Petroleum Corporation v the Republic of Ecuador.” Kluwer Arbitration Blog. December 19, 2012.

Accessed August 21, 2015. http://kluwerarbitrationblog.com/blog/2012/12/19/icsids-largest-

award-in-history-an-overview-of-occidental-petroleum-corporation-v-the-republic-of-ecuador.

Choudhury, Prithwiraj and Khanna, Tarun. “Bio-Piracy or Prospering Together?: Fuzzy Set and

Qualitative Analysis of Herbal Patenting by Firms.” Harvard Business School working paper.

February 28, 2014. Accessed August 20, 2015. http://www.hbs.edu/faculty/Publication%20Files/

14-081_6cfa4f81-d5cb-44f6-9a0c-1fe7c91f61ef.pdf.

Christian Aid. The Shirts off their Backs: How Tax Policies Fleece the Poor. Christian Aid, 2005.

Cockroft, James, Frank, Andre Gunder and Johnson, Dale. Dependence and Underdevelopment: Latin America’s

Political Economy. Garden City, New York: Anchor Books, 1972.

Cooley, Alexander. “Thinking Rationally about Hierarchy and Global Governance.” Review of International

Political Economy 10, no. 4 (2003): 672-684.

Easterly, William. The White Man’s Burden: Why the West’s Efforts to Aid the Rest have done so much Ill and so

little Good. Oxford: Oxford University Press, 2006.

Evans, Peter. “Predatory, Developmental, and other Apparatuses: A Comparative Political Economy

Perspective on the Third World State.” Sociological Forum 4, no. 4 (1989): 561-587.

Evans, Peter. “Transferable Lessons?: Re-examining the Institutional Prerequisites of East Asian

Economic Policies.” Journal of Development Studies 34, no. 6 (1998): 66-86.Frank, Andre Gunder.

- 58 -

Capitalism and Underdevelopment in Latin America: Historical Studies of Chile and Brazil. New York and

London: Monthly Review Press, 1969.

Gallagher, Kevin. “Understanding Developing Country Resistance to the Doha Round.” Review of

International Political Economy 15, no. 1 (2008): 62-85.

Gilens, Martin and Page, Benjamin. “Testing Theories of American Politics: Elites, Interest Groups, and

Average Citizens.” Perspectives on Politics 12, no. 3 (2014): 564-581.

Gore, Charles. “The Rise and Fall of the Washington Consensus as a Paradigm for Developing

Countries.” World Development 28, no. 5 (2000): 789-804.

Hardstaff, Peter. Treacherous Conditions: How IMF and World Bank policies tied to debt are undermining development.

London: World Development Movement, 2003.

Harrison, Graham. Neoliberal Africa: The Impact of Global Social Engineering. London and New York: Zed

Books, 2010.

Harvey, David. A Brief History of Neoliberalism. Oxford: Oxford University Press, 2007.

Helleiner, Eric. “Economic Liberalism and Its Critics: The Past as Prologue?” Review of International Political

Economy 10, no. 4 (2003): 685-696.

Hogan, Clare. “Biopiracy: The New Tyrant of the Developing World.” July 17, 2014. Council on Hemispheric

Affairs. Accessed August 15, 2015. http://www.coha.org/biopiracy-the-new-tyrant-of-the-

developing-world.

Johnson, Dale. “Dependence and the International System.” In Dependence and Underdevelopment: Latin

America’s Political Economy, edited by James Cockroft, Andre Gunder Frank, and Dale Johnson, 71-

111. Garden City, New York: Anchor Books, 1972.

Kaltwasser, Cristóbal Rovira. “Towards Post-Neoliberalism in Latin America?” Review of Beyond

Neoliberalism in Latin America? Societies and Politics at the Crossroads edited by John Burdick, Philip

Oxhorn and Kenneth M. Roberts, Governance after Neoliberalism in Latin America edited by Jean

Grugel and Pia Riggirozzi, Latin American Neostructuralism: The Contradictions of Post-Neoliberal

Development by Fernando Ignacio Leiva, Post-Neoliberalism in the Americas edited by Laura Macdonald

and Arne Ruckert, Contemporary Latin America: Development and Democracy beyond the Washington

Consensus by Francisco Panizza, Challenging Neoliberalism in Latin America by Eduardo Silva. Latin

American Research Review 46, no. 2 (2011): 225-234.

Kay, Cristóbal. Latin American Theories of Development and Underdevelopment. London: Routledge, 1989.

Kirk, Martin. The One Party Planet. The Rules, 2014.

Landon, Amanda. “Bioprospecting and Biopiracy in Latin America: The Case of Maca in Perú.” Nebraska

Anthropologist, paper 32. 2007. Accessed August 15, 2015. http://digitalcommons.unl.edu/cgi/view

content.cgi?article=1031&context=nebanthro.

Leftwich, Adrian. States of Development: On the Primacy of Politics in Development. Cambridge: Polity, 2000.

- 59 -

Leiva, Fernando Ignacio. “Toward a Critique of Latin American Neostructuralism.” Latin American Politics

and Society 50, no. 4 (2008): 1-25.

Martin-Prével, Alice. Willful Blindness: How the World Bank’s Doing Business Rankings Impoverish Smallholder

Farmers. Oakland, CA: The Oakland Institute, 2014.

Monbiot, George. “The TTIP trade deal will throw equality before the law on the corporate bonfire.”

Guardian. January 13, 2015. http://www.theguardian.com/commentisfree/2015/jan/13/ttip-

trade-deal-trans atlantic-trade-investment-treaty.

Mosley, Layna and Uno, Saika. “Racing to the Bottom or Climbing to the Top?: Economic Globalization

and Collective Labor Rights.” Comparative Political Studies 40, no. 8 (2007): 923-948.

Önis, Ziya. “The Logic of the Developmental State.” Review of Asia’s Next Giant: South Korea and Late

Industrialization by Alice Amsden, The Political Economy of the New Asian Industrialism by Frederic Deyo,

MITI and the Japanese Miracle by Chalmers Johnson, Governing the Market: Economic Theory and the Role

of Government in East Asian Industrialization by Robert Wade. Comparative Politics 24, no. 1 (1991): 109-

126.

Palma, Gabriel. “Four Sources of De-industrialisation and a New Concept of the ‘Dutch Disease’.” Paper

presented at the Economic Growth and Development Initiative Roundtable of the Human

Sciences Research Council of South Africa. May 21, 2007. Accessed August 10, 2015.

http://intranet.hsrc.ac.za/ document-2458.phtml.

Pérez-Rocha, Manuel. “When Corporations Sue Governments.” New York Times. December 3, 2014.

Accessed August 21, 2015. http://www.nytimes.com/2014/12/04/opinion/when-corporations-

sue-governments.html.

Piketty, Thomas. Capital in the Twenty-First Century. London and Cambridge, Mass.: Belknap Press, 2014.

Rafi Khan, Shahrukh. “WTO, IMF and the Closing of Development Policy Space for Low-Income

Countries: A Call for Neo-Developmentalism.” Third World Quarterly 28, no. 6 (2007): 1073-1090.

Rosnick, David. Gains from Trade?: The Net Effect of the Trans-Pacific Partnership Agreement on U.S. Wages.

Washington, DC: Center for Economic and Policy Research, 2013.

Sánchez, Omar. “The Rise and Fall of the Dependency Movement: Does It Inform Underdevelopment

Today?” Estudios Interdisciplinarios de América Latina y el Caribe 14, no. 2 (2003). Accessed August 4,

2015. http://eial.tau.ac.il/index.php/eial/article/view/893/946.

Sepúlveda, Sergio. El Trigo Chileno en el Mercado Mundial. Santiago: Santiago Editorial Universitaria, 1959.

Scrivener, Alex. The Poor are Getting Richer: And other Dangerous Delusions. London: Global Justice Now,

2015.

Shah, Anup. “Structural Adjustment – A Major Cause of Poverty.” Global Issues. March 24, 2013.

Accessed August 23, 2015. http://www.globalissues.org/article/3/structural-adjustment-a-major-

cause-of-poverty.

Stiglitz, Joseph. Globalization and its Discontents. London: Penguin Books, 2002.

- 60 -

Stiglitz, Joseph. “Towards a New Paradigm of Development.” In Making Globalization Good: The Moral

Challenges of Global Capitalism, edited by John Dunning, 76-107. Oxford: Oxford University Press,

2003.

Stiglitz, Joseph. “Multinational Corporations: Balancing Rights and Responsibilities.” Proceedings of the

Annual Meeting of the American Society of International Law 101 (2007): 3-60.

Stiglitz, Joseph. “Economic Foundations of Intellectual Property Rights.” Duke Law Journal 57, no. 6

(2008): 1693-1724.

Toussaint, Eric. “Transfers from the Periphery to the Centre, from Labour to Capital.” Accessed August

23, 2015. http://oat.tao.ca/~jerome/ToussaintSouthNorthflows.pdf.

Wade, Robert. “What Strategies are Viable for Developing Countries Today? The World Trade

Organization and the Shrinking of ‘Development Space’.” Review of International Political Economy 10,

no. 4 (2003): 621-644.

Wallerstein, Immanuel. World-Systems Analysis: An Introduction. Durham and London: Duke University

Press, 2004.

Weisbrot, Mark. “NAFTA: 20 Years of Regret for Mexico.” Guardian. January 4, 2014. Accessed August

7, 2015. http://www.theguardian.com/commentisfree/2014/jan/04/nafta-20-years-mexico-

regret.

Weisbrot, Mark. “The Trans-Pacific Partnership treaty is the complete opposite of ‘free trade’.” Guardian.

November 19, 2013. Accessed August 24, 2015. http://www.theguardian.com/commentisfree/

2013/nov/19/trans-pacific-partnership-corporate-usurp-congress.

Weisman, Jonathan. “Trans-Pacific Partnership Seen as Door for Foreign Suits against U.S.” New York

Times. March 25, 2015. Accessed August 21, 2015. http://www.nytimes.com/2015/03

/26/business/trans-pacific-partnership-seen-as-door-for-foreign-suits-against-us.html?_r=0.

Woodroffe, Jessica. GATS: A Disservice to the Poor: The High Costs and Limited Benefits for Developing Countries

of the General Agreement on Trade in Services. London: World Development Movement, 2002.

Woodroffe, Jessica and Joy, Clare. Out of Service: The Development Dangers of the General Agreement on Trade in

Services. London: World Development Movement, 2002.