by Tom Loudon, Quest for Peace Staff

After almost two years of negotiations, Peru recently signed and ratified a Free Trade Agreement (FTA) with the United States.  To date, they are the only country in the original four country Andean group to have signed an FTA.  The lame duck president, Alejandro Toledo signed the agreement with the US three days after the first round of the Peruvian Presidential elections, and the lame duck Congress ratified it in late June.

Oddly enough, both of the candidates who will be in the June runoff elections have indicated their opposition to the agreement.  It is as yet unclear how the new Peruvian Congress will view the agreement as negotiated.  It is in this context that the US is encouraging that the FTA be ratified by the outgoing Peruvian Congress, thus seriously tying the hands of the incoming government authorities.  Once there has been some decision in Peru, some in Washington feel it is likely that the Bush Administration will move quickly to bring it for a vote in Congress, possibly as early as this summer.

The popular sectors, including unions and social movements in Peru have been much less active in Peru than in other Andean countries.  They were seriously impacted by the brutal repression they experienced under the Fujimori government.  In spite of that repression, several groups, representing farmers, workers, the Catholic Church and the health care sector have engaged in a protracted campaign of resistance to this agreement.  In Peru, there have been protests, strikes and work stoppages in opposition to the agreement. Two days prior to the election, an Election Jury accepted as valid 60,000 signatures which have been collected to require a popular referendum on the FTA.  This is the first step in the process, and the Peruvian Congress has to make the final ruling on a referendum initiative, but it indicates the level of popular resistance.  There continue to be national mobilizations against the agreement, which have gotten significantly larger since the actual text was released, and more people are hearing of the impacts, which will be devastating for many sectors of the society.

In spite of some feeling that a U.S. Congressional vote could come quickly, it is a difficult thing to predict.  The US Administration continues to vacillate on their legislative strategy.  Many Congressional Republicans, especially those in textile or industrial districts would certainly prefer not being forced into another controversial vote so close to the November elections.  The electoral situation in Peru also complicates their strategy.  If Ollanta Humala, the candidate who received the most votes in the first round were to win the June election, he would almost certainly reverse any previously decided agreement.  Faced with that uncertainty, it seems the only viable strategy for the Administration is to wait until the Peruvian situation is more defined. 

Issues which have been raised against the agreements are similar in all of the countries who have signed, closed or continue negotiating.  Three areas which stand out as the most damaging in all of the agreements are labor, intellectual property rights issues, especially related to medicines and agriculture.  Some of the principal issues on these three areas are articulated below.

LABOR

The true US position on labor issues was exposed during the negotiations.  During a September 2005 visit to Washington, Peruvian President Toledo said Peru would be willing to incorporate the ILO's five basic labor standards into the FTA and provide for an enforcement mechanism.  The USTR reacted quickly, insisting that the President really did not mean what he had said.  The US prefers a policy of ‘enforce your own labor standards' for the signatory countries, which in most cases means that precarious labor standards continue as the norm.  In Peru, there exists a system of subcontracting, where temporary labor contracts are used as a mechanism to prevent union organizing.  Workers who try to organize or join a union will loose their jobs when the temporary contract comes up for renewal.  Since existing standards protect this kind of behavior, signing an FTA will merely insure that an unhealthy situation for workers will merely be further institutionalized. 

IPR

At the time it was negotiated and signed, CAFTA was criticized for its Intellectual Property Rights Chapter, because it granted an additional 5 years of data exclusivity for companies holding patents, thus lengthening the time before generic versions of drugs become available.  This regime effectively extends patents five additional years more than what is mandated at the WTO.  This is a particularly heinous provision, which highlights the influence of the pharmaceutical industry in this country.  In their relentless quest for profit, they are more than willing to increase the level of hardship and suffering of poor people in impoverished countries.  They are effectively able to condemn people to suffering and in some cases death by raising the costs of medicine in countries where it can least be afforded.

The Peruvian Agreement is even more restrictive than the IPR provisions of CAFTA.  The data exclusivity provision broadens the scope of data protected, because it covers all safety and efficacy information submitted by companies, not just "undisclosed" data, which is what was protected in the CAFTA agreement.  Specifically, it restricts the ability of those manufacturing generic drugs to get approvals from regulators based on public information regarding safety and efficacy before the data exclusivity period expires.  As more of these agreements are negotiated, the more they favor the pharmaceutical companies in their ability to protect patents for even longer periods, increasing profits for the companies and making medicines less affordable for poor people.

AGRICULTURE

As is the case with most of the Latin American countries who have been signing agreements with the U.S., the damage to the agriculture sector in Peru will likely be the cause of the most suffering and social disruption in the country.  Once the text had been published, Conveagro, the Peruvian National Convention on Agriculture did a thorough analysis of the text.  In their most recent document on impacts to agriculture they estimate, that hundreds of thousands of Peruvian farmers would quickly be affected by the agreement. 

CORN

In the yellow corn productive chain, which in addition to corn, includes poultry and pig production, there are about 200,000 people employed and the sector accounts for 21% of agriculture production.  One would think the Peruvian government would protect this sector at all costs.  The original proposal which Peru presented regarding corn was to allow 160,000 tons to be imported free of tariff, to increase by 3% per year, and have gradual tariff elimination, beginning after 4 years, for a 15 year period.  They finally agreed to allow 500,000 tons per year, which increases by 30,000 (6%) per year, while at the same time reducing the tariffs on additional imports.  This quota represents about 50% of the current corn imports, and would be about 25% of the current in country demand.  Given an increasing annual demand, internal production has been growing, generally steadily for the last 20 years.  What is troublesome is how the potential lower price of imported subsidized corn from the U.S. will impact the future ability of Peruvian farmers to compete, especially given that the new FTAs which the U.S. is demanding require the signatory countries to renounce their rights under the WTO agreements to apply a Special Agricultural Safeguard. 

Argentina is currently the market from which Peru imports most of it's externally purchased corn, currently about 80%.  It will be interesting to see what measures are adopted by Argentina to recover those lost markets. In any case, it seems that the impact of such large quantities of corn from the U.S., likely coming in at a lower price than is available nationally, will seriously disrupt the internal production short range, and probably disappearing it long range.  

CHICKEN

Peru has agreed to provide immediate access with no tariff for 12,000 tons of chicken ‘dark meat,' which increases annually by 960 tons, to reach nearly 24,000 tons within 10 years.  Additionally, they have agreed to have a gradual elimination of tariffs on other chicken pieces, gradually scaled in over 16 years.  Currently, Peru is nearly self-sufficient in chicken production, with only small quantities imported annually, reaching its peak at 2400 tons in 2003.

The immediate problem for Peruvian chicken producers is the huge opening for dark meat.  Assuming that the population will substitute their normal consumption of fresh chicken for frozen, there will likely be a huge downturn in the demand for Peruvian produced chicken.  This situation will further reduce the demand for corn, as the production levels of chicken drops. 

PORK

Pork is also considered a very ‘sensitive' product.  In spite of the fact that Peru has been consistently self-sufficient in pork production, in the TLC the current tariff which is 25% will be completely phased out in a 4 year period.  So again, the new agreement will, in a very short time seriously affect a huge number of Peruvian national producers. 

CONCLUSIONS

As articulated by our partners in Peru, in many areas the original position which was carried into the negotiations by the Peruvian negotiating team has been abandoned, undoubtedly under intense U.S. pressure and to the detriment of many sectors in Peru.  The Peruvian National Convention on Agriculture is recommending that the treaty be re-negotiated.  Unfortunately this is not something the U.S. would consider, and unless the Peruvian President or Congress rejects the agreement, or a referendum is held in Peru which rejects it, the U.S. will sooner or later bring it forward for a vote in Congress. 

It is a small wonder that these agreements are referred to as ‘combos' by some of their detractors.  A ‘combo' is what you get at the fast food restaurant. When a country is seeking market access for their products in the US market, which is usually the primary interest for signing, the ‘combo' is what they are forced to ‘swallow.'  The ‘combo' includes many items which will create more suffering and hardship, which won't in any way justify possible benefits which may be realized by increasing market access.  The beneficiaries may be a few well placed individuals or businesses, but the negative impacts on the population as a whole far outweigh the benefits.  The articulation of new alternatives to this system is an important piece in the process of finding more humane forms of commercial interaction between countries.

The Peruvian FTA is in many ways a copy of the DR-CAFTA and other previous FTAs which have been promoted by the U.S.  Each new agreement however sets a new floor from which the U.S. negotiates the subsequent agreement. These agreements are designed and promoted to protect the interest of a few relatively small, but very powerful sectors in the U.S.  They continue to be very short-sighted, designed only to protect the short term bottom-lines of these U.S. corporations.  By destroying rural economies, they result in massive migration, both to the cities and to other countries.  The heightened level of migration from Mexico in the last ten years is very connected to the destruction of the Mexican rural economy which has bee a result of NAFTA.  In spite of the propaganda of the U.S. to the contrary, these agreements continue to be bad for labor both the countries of the south and the north, and promote a model which leads to an increase in disparity between the rich and poor. We join with a multitude of organizations in Peru and in the United States in opposition to this poorly conceived agreement.