Diplomatic Relations- Highest Bidder Wins!

Chalk one up for China this week. They have managed to convince the neutral country of Costa Rica to break diplomatic relations with the Republic of China (Taiwan) after more than six decades and establish formal relations with them. As Taiwanese Foreign Minister James Huang said Thursday, China had offered Costa Rica "an astronomical figure" to break off relations with Taiwan. This move by Costa Rica is expected to have a sort of domino effect with countries such as Nicaragua, Panama and Paraguay possibly following suit. Due to the fact that Taiwan only has formal relations with 24 countries and many of these in Latin America, these moves could diminish the international standing of Taiwan.

The Costa Rican President and Nobel Peace Prize winner Oscar Arias, made very blunt statements this week in announcing his decision to formally end his country's ties to Taiwan. He made it known that the move was dictated by his desire to improve the economy of Costa Rica but did not respond to the allegations of Chinese 'incentives'. Arias announced the line of the new age- "We are looking to strengthen the commercial ties and attract investment" and criticized Taiwan for giving so little aid to its allies. As he noted, "I was always critical of the Taiwanese, and I can say now that I always told them...if you want to have friends in the world, you should be more generous." He said "Without a doubt, we will get more help from China. The reasons are very obvious,” adding that relations with mainland China will “bring greater well being and development for Costa Rica, which cannot remain static in a changing world.” What a nice way to treat a country such as Taiwan that has given Costa Rica millions of dollars in aid over the years and spearheaded numerous projects. As an example, the Costa Rican bridge in the picture above is ironically named the Taiwan-Costa Rica Friendship Bridge and was completed in 2003 for about $26 million dollars all donated by Taiwan. I wonder if the name will remain the same now?

It is sad when a country now decides that it will have or not have relations with another country based on nothing more than how much money is involved. I also find it ironic that the concepts of neutrality, old friendships and many shared ideals are thrown over the bus for the promise of a quick buck and bigger markets. Surprisingly, in these days, a Nobel Peace Prize winner and humanitarian picks China. Gotta love globalization, huh?

Foreign Investors and Free Trade

Remember the days when a company decided to set up shop in a foreign country and were actually bound by that country's laws and regulations? Well, those days have evolved into a climate of 'anything goes'. With foreign investor protection clauses tucked away in these bi-lateral (more than 2500) and 'free trade' agreements, a country's laws and regulations are meaningless if it is perceived to infringe on a company's ability to generate current or future profits. Damn be democracy, damn be the environmental laws, damn what the people want, they say- We invested in your country and we have the right to realize our full profit potential and make this investment pay off. This is one of the sad realities of globalization. These rules are promoted by the World Bank and other international financial institutions and enforced through the World Bank's 'arbitration court' and other international tribunals.

Foreign investors can now sue for a laundry list of things. If a company perceives a country's environmental laws or public health laws to be in the way of their profit line, they can sue in this 'arbitration court' claiming that these laws diminish the value of their investment. Suppose for example that a Canadian mining company wishes to operate an open pit mine in Guatemala, for example, and Guatemala, a signatory member of CAFTA (Central American Free Trade Agreement) says that the project violates their environmental laws. Guess what? The company simply goes to the 'arbitration court' and sues the government of Guatemala. Great system, huh? And who pays when the companies win? Let's see...the corrupt politicians who signed these agreements....No...it's the working and poor citizens stuck with the bill.

These excessive investor protection laws must be replaced with just laws. This 'anything goes' model of business belongs in the trash bin of history and it is time for these foreign investors to act like the responsible global citizens that they should be.