Fair Trade: CAFTA Will Fail the Test

Fair Trade: CAFTA Will Fail the Test, But Likely Make the Vote

• Yesterday, President Bush renewed his call for Congress to pass the Central American Free Trade Agreement (CAFTA), claiming the pact is “in our national interest.”

• CAFTA’s opponents report that 190 Democrats and 40 Republicans oppose the measure, which means that the White House is only 13 votes shy of the 218 needed for approval in the House.

• Although the administration would like to see CAFTA come to a vote before the July 4th recess, lawmakers may take the full 90 legislative days to either reject or approve the agreement.

• Despite President Bush’s assertions, CAFTA promises an affliction on both U.S. workers and Central American economies.

Yesterday, President Bush again urged Congress to approve the Central American Free Trade Agreement (CAFTA), signaling that the controversial measure, which would remove nearly all tariffs on U.S. exports to the region, may finally be coming to a vote in the House. Casting the issue in terms of national security, Bush argued that “strengthening our economic ties with our democratic neighbors is a vital issue of national importance,” and that CAFTA would promote stability and prosperity in the hemisphere, as well as reduce immigration from Central America. But CAFTA’s passage is all but certain, as both Democrats and Republicans deeply oppose the bill (190 Democrats and 40 Republicans are reported to be against its passage), expressing concern over the agreement’s lack of labor provisions, among other factors. This means that the Bush administration is still 13 votes shy of the 218 necessary to approve CAFTA, which the White House hopes to pass before the July 4th recess, although legislators may take up to 90 days to reach a decision. The Bush administration intends to exert maximum political pressure to produce a win because it fears if a high priority agenda item like CAFTA goes down, it will signal that the Lame Duck phase of Bush’s presidency has really begun. Also, the defect of CAFTA would dissipate the already flagging momentum behind the Free Trade Area of the Americas (FTAA), signifying that the President’s trade efforts (a huge chunk of his legislative “must list”) are dead in the water.

The opposition correctly argues that CAFTA will exploit Central American laborers, and at the expense of American workers. But media coverage of the measure has been disturbingly one-sided. Numerous high-flying analysts, exalting free trade as the savior of the world’s struggling economies (but not necessarily for free), are reluctant to delve below CAFTA’s glittering surface and scrutinize the baleful realities of similar arrangements in the past. More often than not, they turned out to be non win-win situations, with the winners and losers entirely predictable. In 1994, almost this country’s entire army of economic consultants and the U.S. Chamber of Commerce exuberantly insisted that the North American Free Trade Agreement (NAFTA) would create high-paying jobs for American workers and dramatically improve living standards in Mexico. However, a decade later, most Mexicans have seen little such prosperity, as almost one and a half million farmers have lost their land; NAFTA is also believed to have caused the loss of more than 900,000 jobs here because many U.S. businesses have moved south (and to China) in search of cheaper labor.

In recent weeks, columnists have given an inordinate attention to CAFTA’s virtues, with most of them accepting the unexamined arguments of U.S. special interest groups. But CAFTA’s advocates have failed to address the overarching fact that free trade does not necessarily signify fair or providential trade, especially when it involves economies as markedly asymmetrical as that of the U.S. and those of Central America, with the U.S. $12 trillion economy totally engulfing the CAFTA countries’ combined $85 billion market.

History has shown that free trade agreements between disparate economies can prove troublesome. Mexico, whose annual GDP of more than $1 trillion makes it only slightly better equipoised with the U.S. market, experienced widespread economic hardship soon after NAFTA kicked in. Meanwhile, the Bush administration refuses to learn from past mistakes and recognize that removing the relatively minute U.S. tariffs on incoming Central American goods while simultaneously maintaining stiff subsidies on its competing products, is certain to harm small-scale Central American farmers.

The U.S. Chamber of Commerce has come out with the far fetched claim that CAFTA is necessary in order to “level the playing field” for U.S. workers and enterprises. However, under the present system of tariffs, a number of U.S. crops enjoy heavy subsidies, meaning that independent Central American farmers are simply unable to compete with well-endowed U.S. agribusinesses, the pact’s main beneficiaries. Clearly, the playing field is not slanted at all, or at too small a degree to serve as a significant deterrent to U.S. exports swamping the region. Arguing that CAFTA will be able to balance intrinsic U.S. trade advantages is like matching a major league baseball team on steroids against Little Leaguers and heatedly insisting that, because the umpires use the same rulebook, somehow it is a fair match.

Even more discouraging, CAFTA has been hailed as the silver bullet for many of the western hemisphere’s social ills. While CAFTA is about more than trade, it is not, as many columnists have claimed, the master solvent to U.S. concerns over national security questions, illegal immigration, drug trafficking and the left-leaning ideology now sweeping across Latin America. Since 1994, the pace of illegal immigrants arriving from Mexico has nearly doubled, drug-related violence continues to claim lives along the U.S.-Mexico border and terrorists, including Luis Posada Carriles as well as members of Al Qaeda, are suspected to have found easy entry into the U.S. via Mexico. Since the advent of CAFTA is likely to increase poverty by displacing many rural dwellers throughout Central America as well as generate an estimated 25 percent job loss in the maquila industry, this can only act as a propellant for the already surging tide of left-leaning political leaders who tout slogans for more social progress for impoverished and marginalized Latin Americans.

This analysis was prepared by COHA Research Fellow Sarah E. Schaffer.

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