Trade agreements and the land: Investment agreements and their potential impacts on land governance

Global Development and Environment Institute | October 2018

Trade agreements and the land: Investment agreements and their potential impacts on land governance

by Rachel Thrasher, Dario Bevilacqua, Jeronim Capaldo

In an increasingly well-known phenomenon, state-owned and private corporations, as well as private investors of agricultural land have purchased or (where land is not sale-able) acquired long-term leases on large swathes of land for food and biofuel production (Smaller and Mann 2009). These transactions generally involve investors from the United States, the European Union, Arab or wealthy Asian states. The target countries, by contrast, are found in sub-Saharan Africa, Southeast Asia, Central and South America, and Eastern European countries in the former USSR (Saturnino et al. 2011; Smaller and Mann 2009).

In the expanding global trade regime, investor protection has become a priority for both investor home states and the host states that receive themi. Home states are invested (often literally) in the success of their investor. As they are promised development, new technology and economic growth through the work of these foreign investors. Evidence of growth from foreign direct investment (FDI) is mixed at best (Smaller and Mann 2009). However, research has found that FDI has a positive effect only where projects have shared domestic and foreign ownership (Javorcik 2004), where the country already has a human capital base able to absorb the new technology (Borensztein 1998), and in countries that are relatively more developed (Alfaro et al. 2009).

Despite plentiful evidence to the contraryii, developing host states continue to put faith in large-scale foreign investment to grow their economies. To induce investors to purchase/lease their land, governments offer extensive tax breaks for foreign corporations, sell/lease the land at below-market prices and even go as far as to clear their own citizens from the land to make room for large-scale plantations (Mousseau and Mittal 2011a, Mousseau and Mittal 2011b, Mousseau and Sosnoff 2011). This has led to a race among regulators, competing with each other to attract foreign capital, while, at the same time, loosening other policies aimed at protecting general interests (such as the environment, health, labor rights, and so on and so forth), which may conflict with or slow down investment. Because of the negative effects on local populations, commentators have called these transactions “land grabs”iii , a phenomenon that has been documented extensively (Oakland Institute 2014). While promising economic growth, largescale land investment deals have caused increased inequality, widespread displacement of people, and destruction of natural resources. Efforts at land reform through title and registration schemes have left local communities with increasingly tenuous and uncertain claims to their land. Indeed, the favorable conditions offered to foreign investors, even when coherent under the principle of formal equality, may produce substantial inequality towards local operators – which do not have the same economic and market powers to compete –, creating limits and barriers to local development and internal economies.

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