Committee for the Abolition of Illegitimate Debt

“Free trade and debt are not just about money,” said Attac Maroc. There is a logic of domination behind them. Debt has historically played a central role in the colonial system in Africa, while international trade has been hijacked by imperialist powers to advance their interests.

At the end of the 19^th century, for example, France, Spain and Britain all had their eyes on Morocco and wanted to control it. In 1856, Britain pressured Morocco into signing a trade agreement that allowed the British to penetrate the Moroccan market, giving them a commercial advantage over their local counterparts.

The imposition of the French protectorate in 1912 was the final blow to Morocco’s sovereignty, which was unable to resist European encroachment. Soon after, the weakened country faced droughts and needed aid to deal with the situation. Morocco then became indebted to the colonial powers. The debt increased as a result of colonialism and the construction of infrastructure to serve colonial interests. By the time of independence in 1956, Morocco was one billion dirhams in debt.

In the 1980s, the implementation of neoliberal policies under the structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

IMF : http://www.worldbank.org/ programmes of the World Bank World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

and the IMF IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org , which led to massive privatisation, had a devastating impact on the daily lives of the Moroccan people. In addition, free trade agreements, such as those signed with the European Union and the United States, increased the country’s trade deficit, which in turn reduced the income of the Moroccan economy.

The case of Morocco shows how closely debt and free trade are intertwined. Debt in the global South has increased the push for free trade agreements, which in turn has reinforced Southern countries’ dependence on rich economies.

 ICSID ICSID The International Centre for the Settlement of Investment Disputes (ICSID) is a World Bank arbitration mechanism for resolving disputes that may arise between States and foreign investors. It was established in 1965 when the Washington Convention of that year entered into force.

Contrary to some opinions defending the fact that ICSID mechanism has been widely accepted in the American hemisphere, many States in the region continue to keep their distance: Canada, Cuba, Mexico and Dominican Republic are not party to the Convention. In the case of Mexico, this attitude is rated by specialists as “wise and rebellious”. We must also recall that the following Caribbean States remain outside the ICSID jurisdiction: Antigua and Barbuda, Belize, Dominica (Commonwealth of) and Suriname. In South America, Brazil has not ratified (or even signed) the ICSID convention and the 6^th most powerful world economy seems to show no special interest in doing so.

In the case of Costa Rica, access to ICSID system is extremely interesting: Costa Rica signed the ICSID Convention in September, 1981 but didn’t ratify it until 12 years later, in 1993. We read in a memorandum of GCAB (Global Committee of Argentina Bondholders) that Costa Rica`s decision resulted from direct United States pressure due to the Santa Elena expropriation case, which was decided in 2000 :
"In the 1990s, following the expropriation of property owned allegedly by an American investor, Costa Rica refused to submit the dispute to ICSID arbitration. The American investor invoked the Helms Amendment and delayed a $ 175 million loan from the Inter-American Development Bank to Costa Rica. Costa Rica consented to the ICSID proceedings, and the American investor ultimately recovered U.S. $ 16 million”.

https://icsid.worldbank.org/apps/ICSIDWEB/Pages/default.aspx , the World Bank’s lesser-known institution

Before the triumph of neoliberalism, international trade was used by European countries as an instrument of geopolitical and commercial domination for the past 500 years, as bilaterals.org recalled. Colonial companies and states joined forces to conquer territories and impose legal regimes that benefited Europeans. For instance, Hugo Grotius, considered one of the fathers of international law, was a lawyer for the Dutch East India Company.

In this sense, colonialism was as much about the conquest of territory and the exploitation of wealth as it was about the imposition of trade rules based on European notions of wealth, the environment, and so on. For example, during the colonial era, Europeans created special tribunals to settle trade and investment disputes related to their activities in colonies.

Since decolonisation, the World Bank has played a central role in continuing this parallel judicial system. In 1965, the International Centre for Settlement of Investment Disputes (ICSID), part of the World Bank Group, was established on the basis of principles drawn up by Hermann Josef Abs ABS
Asset backed security A generic term designating a security issued by an intermediate entity (SPV) between a transferor and investors in the context of a securitization operation. This security is a bond. When the assets backing these securities (called underlying assets) are made up of mortgage loans like subprime loans, they are called Mortgage Backed Securities (MBS). MBS are subdivided into Residential Mortgage Backed Securities (RMBS), backed by mortgage loans made to private individuals and Commercial Mortgage Backed Securities (CMBS). The term Collateralized Debt Obligations (CDOs) is used when the underlying assets are bonds issued by companies or banks, and Collateralized Loan Obligations (CLOs) when these assets are bank loans. , a German banker, and Hartley Shawcross, a British oil industry executive. ICSID provides an arbitral tribunal to resolve disputes relating to foreign investments. Bilateral investment treaties and free trade agreements include references to ICSID in the event of a dispute between a state and a foreign investor protected by such an agreement. This process is known as investor-state dispute settlement (ISDS).

The ISDS mechanism has been criticised by social movements around the world as it has caused terrible suffering in many countries of the global South. In South Africa, for example, European investors challenged a law aimed at redressing the inequalities of the apartheid era, and succeeded in getting the law watered down so that their profits would not be affected too much. Pakistan was also ordered to pay six billion dollars to an Australian company for cancelling a mining concession contract that the country’s Supreme Court had ruled illegal, even though the company had only invested about $200 million. There are over a thousand such claims around the world, wreaking havoc on populations, the environment and countries’ finances.

 When people’s resistance defeated the Tunisia-EU FTA

ISDS was at the heart of the negotiations between the European Union (EU) and Tunisia on a “Deep and Comprehensive Free Trade Agreement” (DCFTA), which has so far failed to win the approval of the Tunisian side.

According to the Tunisian Observatory of Economy, the DCFTA was meant to further the economic liberalisation already implemented by the 1995 Association Agreement between the two parties. A neocolonial attitude on the part of the Europeans could be felt during the negotiations, as the trade agreement was more about imposing European interests than having an agreement that could be truly beneficial to both sides.

European negotiators argued that the DCFTA would lead to a harmonisation of standards between the parties, but it was more about Tunisia agreeing to implement European regulations. For instance, the EU pushed Tunisia to accept European standards on sanitary and phytosanitary measures. The EU also tried to lure Tunisia with financial aid, which the country needed to deal with the debt that had grown since the 2011 revolution, as a condition for signing the FTA.

A sense of coercion was felt throughout the negotiations, leading to a large movement of resistance in Tunisia. “Even deep in the countryside, everyone understood that the trade agreement was lopsised,” the Observatory insisted. For example, the EU could subsidise its agriculture, but Tunisia could not. A broad coalition managed to derail the agreement by organising protests, lobbying and public relations work, demanding parliamentary accountability and blocking negotiations. Ultimately, the DCFTA was shelved and negotiations have not resumed since.

 EPA = Economic Pauperisation Agreement

The situation in Kenya is different, as Kenya signed an Economic Partnership Agreement (EPA) with the EU in June 2023. The EPA was originally supposed to be signed with the entire East African Community regional bloc, and negotiations were completed in 2014. But Tanzania, Uganda and Burundi refused to sign. Under pressure from the EU, Kenya finally agreed to the deal on its own. As the only non-least developed country in the East African bloc, Kenya stood to lose preferential access to the EU market. Kenya had also accumulated debt over the years, the Kenyan Peasants League pointed out, and the EPA package came with a development fund.

The EPA will strengthen export-oriented and monoculture Monoculture When one crop alone is cultivated. Many countries of the South have been induced to specialize in the production of a commodity for export (cotton, coffee, cocoa, groundnuts, tobacco, etc.) to procure hard currency for debt repayments. agriculture in Kenya, undermining the country’s food sovereignty and putting local producers in unhealthy competition with highly subsidised European companies. The League added that tomato farmers in Ghana were suffering from imports of cheap European produce. Chicken farmers in Cameroon have suffered the same fate. Both countries have EPAs with the EU.

There are also concerns from neighbouring countries that Kenya could act as a gateway to the East African common market and, more broadly, to Africa. When EPAs came into force in Ghana and Côte d’Ivoire, EU products found their way into the common market area of the Economic Community of West African States.

These are some of the reasons why EPAs have earned the sobriquet “economic pauperisation agreements”.

 The AfCFTA trap

While social movements have been vocal in their opposition to the EPAs, another neoliberal project is looming over the African continent : the African Continental Free Trade Area (AfCFTA).

The idea of creating a Africa-wide free trade area emerged in 2012 as an initiative of the African Union (AU). The agreement was signed in 2018, but some of its trade rules have only been implemented since October 2022 and between just seven states. As of today, Eritrea is the only AU state that has refused to sign.

The AfCFTA aims to liberalise 90% of non-sensitive products and establish a common external tariff with the rest of the world, explained CADTM Africa.

Under the guise of pan-Africanism, the AfCFTA is built on the dogma of free market capitalism. It promotes an export-led development model. It includes trade rules found in bilateral agreements that benefit elites and transnational capital at the expense of local communities.

Someone in the audience from Mali remarked that free trade zones have been very problematic in her country. They have had a negative impact on communities and have encouraged land grabbing. In addition, there has never been any kind of public consultation or information sharing on the implementation of these zones.

Now, the AfCFTA promotes the expansion of operations in free trade zones to further promote so-called development, while it has been argued that regional integration in Africa should rather be built on the original pan-African principles of solidarity and complementarity to stop the bleeding.

 Towards just societies

The workshop concluded that social movements, communities, citizens, etc. need to build a power struggle to reverse the trend. In Côte d’Ivoire, local people protested against the arrival of the Auchan supermarket, which led to the closing of local shops, and boycotted the French company. A similar public campaign also targeted Auchan in Senegal. Such product boycotts can have an impact on large foreign companies.

Ultimately, this is a global issue, not just an African one. The plundering of resources is everyone’s problem. To defeat imperialism, Thomas Sankara said everyone should consume and eat local. Debt and so-called “free trade” have been instrumental in imposing a neocolonial system of domination based on ever more exports and dependence on extractivism. Favouring the local over the international could well be one of the alternatives for societies to face the challenges of our time, including the climate crisis, migration, food and energy sovereignty. International mobilisations such as this counter-summit allow people from all over the world to connect and raise awareness on global issues, thus playing an important role in building solidarity for social justice.