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The Folly of a Free Trade Pact with Central America
AmericanEconomicAlert.org ^
| Wednesday, April 07, 2004
| Alan Tonelson
Posted on 04/07/2004 10:14:34 AM PDT by Willie Green
For education and discussion only. Not for commercial use.
The Bush administration is hailing its new planned Central American Free Trade Agreement as a cutting edge trade deal that will expand U.S. opportunities in an important regional market. Instead, CAFTA shows that U.S. trade policy has become completely divorced from the main needs of the U.S. economy, U.S. manufacturers, and American workers.
New markets for American products would indeed greatly benefit a U.S. economy still fragile after three sluggish years and a manufacturing sector that remains severely depressed. But the idea that the five Central American signatories of CAFTA can become these new markets doesn´t pass the laugh test.
El Salvador, Guatemala, Honduras, Nicaragua, and Costa Rica are not only among the world´s poorest countries, they´re among its smallest economies as well. Measured by their ability to buy U.S. products, their combined economic output totaled only $62 billion, according to the latest (2002) data. That´s less than the output of Orlando, Fla. or Bergen County, N.J.
The collective economies of the five Central American CAFTA countries are also half the size of San Diego and Phoenix. And U.S. Trade Representative Robert Zoellick´s decision to tack the Dominican Republic onto CAFTA doesn´t help much. Adding its $23.2 billion economy to the Central American 5 creates a total market still smaller than the economies of the metropolitan areas of Tampa-St. Petersburg, Fla., San Jose, Cal., and St. Louis, Mo. ($87.5 billion, $88.3 billion, and $92.2 billion, respectively).
How in the world can economies this small, filled with people so poor, be important markets for U.S. exports, and growth engines for the $10 trillion U.S. economy?
Recent experience, however, teaches that poor, tiny countries can become major suppliers for the U.S. market, especially if CAFTA-like trade deals attract export-oriented investment seeking penny-wage workforces lacking the right to press for decent pay and working conditions. For example, from 1996 to 2003, U.S. goods imports from the six countries in question rose by nearly 63 percent, to $16.862 billion. U.S. goods exports to these countries increased by a seemingly healthy 51 percent during this period. But many of these shipments consisted of fabric sent to Central America for sewing once done in the United States, then returned to America to be sold as final products.
Essentially, U.S. companies are exporting to Central America the materials for garment production work that used to be done in U.S. factories. The results? No new final markets for U.S.-made products, the loss of tens of thousands of working-class American jobs, and higher U.S. trade deficits and international debts. At a time when manufacturing employment is feeble, U.S. debts are nearing alarming levels, and the dollar´s future strength consequently is in doubt, these are the last outcomes America needs.
The CAFTA countries won´t benefit from the new deal, either. The U.S. market for the labor-intensive goods they need to specialize in is already saturated with the imports of all the other third world countries and regions that have recently expanded trade with America notably China. As no less than the U.S. International Trade Commission has recently reported, when global apparel quotas are removed in January, 2005, the Central Americans will face even more competitive pressure from China and its virtually endless supply of cheap labor.
The Bush administration could help workers in the United States and at least some third world regions if it would limit overall imports by setting some trade liberalization priorities. That way, the main trade liberalization benefits for third worlders could be channeled to countries of special interest like our hemispheric neighbors in Central America or Mexico or the Caribbean.
But the White House has so far refused, and once the quotas come off, its message to Central America will undoubtedly be the same as its recent message to African exporters worried about Chinese competition: That´s your problem.
To revive its manufacturing sector and all the economic and national security benefits it generates, the United States urgently needs a new set of trade policies. Defeating the misguided Central American Free Trade Agreement is the place to start.
Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).
TOPICS: Business/Economy; Culture/Society; Editorial; Foreign Affairs; Government
KEYWORDS: cafta; ftaa; globalism; latinamerica; nafta; offshoring; thebusheconomy; trade
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To: AAABEST; afraidfortherepublic; A. Pole; arete; billbears; Digger; DoughtyOne; ex-snook; ...
ping
2
posted on
04/07/2004 10:15:08 AM PDT
by
Willie Green
(Go Pat Go!!!)
To: Willie Green
All the free trade pact I have seen this country make have been total pants downers for the middle class.
3
posted on
04/07/2004 10:17:00 AM PDT
by
TXBSAFH
(KILL-9 needs no justification.)
To: All
Click The Logo To Donate
4
posted on
04/07/2004 10:19:43 AM PDT
by
Support Free Republic
(If Woody had gone straight to the police, this would never have happened!)
To: Willie Green
The results? No new final markets for U.S.-made products, the loss of tens of thousands of working-class American jobs, The CAFTA countries won´t benefit from the new deal, either. The U.S. market for the labor-intensive goods they need to specialize in is already saturated with the imports of all the other third world countries and regions that have recently expanded trade with America notably China.
Oh, where to begin? So, this will cost American jobs because this work will now be done in Central America? But it won't help Central America because the market is already saturated?
So, how about a little consistency? If it hurts the U.S., it must help Central America. And wouldn't you prefer we traded with struggling Central American democracies instead of China?
To: Toddsterpatriot
We should not have any trade pacts that hurt America whether they are with Asian or South American countries. The idea that the US should be hurt so that the other countries in our hemisphere can be helped is fresh out of the global socialist's handbook. It is demeaning for an American to tell other Americans that they must be hurt economically so we can "help" a so-called democracy somewhere else. This is unconstituional abuse of power on the part of our political elites and it is anti-American to the core.
To: hedgetrimmer
Did you read the article? It tries to have it both ways. America will be hurt, but Central America won't be helped because the market is saturated. If the market is saturated then these countries will not be able to sell us anything. If they can't sell us anything, how will we be hurt?
I don't believe trade hurts America. Trade only occurs when it is beneficial to both parties. We would get goods from these Central American countries and they would get dollars. These dollars are only redeemable for American goods made by American workers.
So, how is America harmed?
To: Toddsterpatriot
"These dollars are only redeemable for American goods made by American workers. "Forgive me for being so economically ignorant, but if WE can buy goods and services around the world with our dollar, why can't foreigners do the same thing?
To: Toddsterpatriot
the mexicans reported to the european commission that another result of nafta was that US government price supported grain products could enter into mexico. US grain products are something like 40% or more cheaper than those in Mexico. Some of the cheaper price has to do with US farmer efficiencies and some has to do with government supports. 30% of Mexican population lived off the land in 1990. The invasion of US grain has killed their livlihood. Guess where these mexican farmers go. That's right. North.
9
posted on
04/07/2004 11:17:47 AM PDT
by
ckilmer
To: ckilmer
http://www.geocities.com/ericsquire/articles/ftaa/ar030114.htm Mexican farmers say NAFTA ruins lives, forces migration
By Tessie Borden
Arizona Republic Mexico City Bureau
Jan. 14, 2003
MEXICO CITY - Organized farmers here are using every tactic they can think of - violent protests, hunger strikes and catcalls - to show Mexican President Vicente Fox that NAFTA is killing their way of life and driving many of them across the U.S.-Mexican border to earn a living.
Their complaints center on the Jan. 1 lifting of tariffs on almost 80 farm products under the 10-year-old North American Free Trade Agreement, part of a gradual phaseout of all taxes.
Nogales is an important port of entry and exit for that trade, primarily winter vegetables and grain. More than 60 percent of winter vegetables imported from Mexico enter the United States there, about $1.4 billion worth of business last year. About $16.8 million worth of grain, meat and dairy products crossed into Mexico from U.S. farms in 2001 through Nogales, according to the U.S. International Trade Commission.
The Arizona border also is a prime point of entry for illegal immigrants, with between 1 million and 2 million crossings each year. More than 25,000 people were arrested last year, according to the U.S. Border Patrol.
Mexican farmers, who make up 18 percent of the population but 30 percent of those in dire poverty, have been protesting since last month. They defied police and broke into congressional chambers Dec. 10, one of them on horseback and carrying a Mexican flag, breaking windows and causing lawmakers to run for cover. A threatened blockade of the border on Jan. 1 was averted only when Fox agreed to talks.
Last week, farmers began a hunger strike at the foot of the Angel of Independence, a Mexico City landmark, vowing not to eat until Fox promises to improve their lot.
At a forum in Veracruz state, farmers loudly dismissed Agriculture Minister Javier Usabiaga, whom they called "stubborn and closed-minded" after he told them they should be more effective producers.
The farmers say they can't compete with cheap pork, corn, milk and other products from government-subsidized and highly mechanized U.S. farmers. More and more are being forced to rent or sell their land to corporations, then head to the United States, illegally crossing into Arizona, California and Texas in search of jobs, said Jaime Castillo Ulloa, one of the hunger strikers and a member of the National Union of Regional Autonomous Peasant Organizations.
"This is a process of struggle that we have carried from years back," Castillo Ulloa said. "But it has gained strength because of the recent opening (lifting of the tariffs)."
The farmers want Fox to renegotiate the agriculture portion of NAFTA and craft a new farm policy. Otherwise, they say, they will fight at the border and in the streets to keep their way of life.
"Farmers are worn down," Castillo Ulloa said. "Sooner or later, this fight is going to explode and tear this country apart."
Fox has been cordial. On Jan. 6, he began negotiations with a coalition of 12 farmers groups under the banner "The Countryside Can Bear No More." They hope to reach an agreement by early next month to end the rural crisis.
Fox and Luis Ernesto Derbez, the economic minister who last week became Fox's new foreign minister, indicated NAFTA will not be renegotiated. U.S. officials have echoed the sentiment. But Fox said he is open to discussion and to a new farm policy.
"We have to achieve, through a joint effort, that (agriculture) should give these thousands of farm families the standard of living they deserve," Fox said during the opening of talks. "We also have to have a more rational use of our agricultural resources, specializing in crops in which we have comparative advantages, so we can obtain as much benefit as possible from the free trade agreements."
Even with no revision, the farmers and their legislative backers say both countries can reach side deals for when commodities such as grains can be exported to Mexico.
"What we're calling for is not necessarily a revision, but a nearing of interests," said Jesus Dueñas Llerenas, a congressman from Fox's National Action Party who is a member of the legislative Agriculture Commission. "We should have temporality. When our farmers are harvesting corn and beans, we stop imports until their grain is sold."
Parr Rosson III, a professor at the University of Texas and member of the Phoenix-based pro-NAFTA Border Trade Alliance, said some of that is happening, through rules that allow Mexico to charge extra-high tariffs if the price of commodities like corn drops below a certain point. However, Mexico has chosen not to enforce those duties because it is a net importer of corn, and the corresponding price increase would hurt Mexicans.
Rosson said it was understood all along that the Mexican government would sacrifice small grain farmers, pork producers and poultry growers for the sake of its competitive edge in vegetables, fruits and tropical products.
"When corn and wheat and rice producers talk about being in trouble, they're probably right," he said. "That's part of the tradeoff that happened."
NAFTA renegotiation could upset Mexican farmers, too, Rosson said. He said U.S. farmers would love to renegotiate the part governing tomato, avocado and sugar imports from Mexico, labor-intensive crops where Mexico has advantage.
"In this country we've lost a lot of tomato growers," he said.
U.S. farmers also face the same competition and subsidy problems Mexican farmers complain about, but from China and the European Union, said Matt McInerney, executive vice president of the Western Growers Association, a trade group for 3,500 farmers in Arizona and California.
"We can respect their apprehension," McInerney said. "We find ourselves needing to adapt to the marketplace by finding efficiencies through technologies."
Reach the reporter at
tessie.borden@arizonarepublic.com
10
posted on
04/07/2004 11:20:16 AM PDT
by
ckilmer
To: ckilmer
http://www.ictsd.org/weekly/03-11-26/inbrief.htm REPORT RELEASED ON NAFTA'S IMPACTS
A report entitled "NAFTA's (North American Free Trade Agreement) Promise and Reality: Lessons from Mexico for the Hemisphere", was recently released by the Carnegie Endowment for International Peace, a Washington-based research institute. The release coincided with the Free Trade Agreement of the Americas (FTAA) negotiations occurring in Miami, Florida from the 17-21 November (see related story, this issue). The study analysed NAFTA's influence on rural employment, household income, agricultural production and land use, migration patterns and the environment. The report concluded that NAFTA had been "neither the disaster its opponents predicted nor the saviour hailed by its supporters" for Canada, the US and Mexico after it took effect on the 1 January 1994. The report, however, found few benefits for Mexico from the agreement. John Audley, who edited the report, found NAFTA "rough" for rural Mexicans, and said NAFTA had not helped the Mexican economy keep pace with a growing demand for jobs, nor had productivity growth led by NAFTA translated into higher wages. Rural farmers had started to farm more marginal land to replace lost income caused by the collapse in commodity prices, which showed the inability of NAFTA to deliver environmental benefits, such as reduced deforestation and tillage.
For more information, visit
http://www.ceip.org/files/Publications/NAFTA_Report.asp?from=pubdate. "NAFTA at ten: Who heard of the giant sucking sound?," CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE PRESS RELEASE, 19 November 2003; "Report finds few benefits for Mexico in NAFTA," THE NEW YORK TIMES, 19 November 2003; "NAFTA little benefit to Mexico, study finds," REUTERS,19 November 2003.
11
posted on
04/07/2004 11:22:21 AM PDT
by
ckilmer
To: GhostofWCooper
Forgive me for being so economically ignorant, but if WE can buy goods and services around the world with our dollar, why can't foreigners do the same thing? They can and we can. The dollars may pass through various third parties. But all the dollars will eventually buy something American.
To: hedgetrimmer
The idea that the US should be hurt so that the other countries in our hemisphere can be helped is fresh out of the global socialist's handbook. The coming election in November gives us "two" choices, global socialism versus global socialism.
13
posted on
04/07/2004 12:01:02 PM PDT
by
janetgreen
(President Bush, what happened to AMERICA FIRST?)
To: Willie Green
It gets worse: see article posted "Bush to States: CONFORM to CAFTA" yesterday on FR.
States were "advised" to drop their purchasing policy and legislation to conform to CAFTA rules--yet to be written, BTW.
14
posted on
04/07/2004 12:02:11 PM PDT
by
ninenot
(Minister of Membership, TomasTorquemadaGentlemen'sClub)
To: Toddsterpatriot
These dollars are only redeemable for American goods made by American workers. "Economics 101: the USD is one of two currencies which are completely fungible.
The banana republics can buy oil, French mushrooms, English cars, and Thai hookers with USDollars.
15
posted on
04/07/2004 12:05:19 PM PDT
by
ninenot
(Minister of Membership, TomasTorquemadaGentlemen'sClub)
To: DWPittelli; GhostofWCooper
But all the dollars will eventually buy something American.Yup.
T-Bonds.
16
posted on
04/07/2004 12:07:24 PM PDT
by
ninenot
(Minister of Membership, TomasTorquemadaGentlemen'sClub)
To: ninenot; DWPittelli
The banana republics can buy oil, French mushrooms, English cars, and Thai hookers with USDollars. So, let me get this straight. They might take our dollars and never buy anything from us?
To: Toddsterpatriot
It's sort of interesting. I've found that when you really push people that are anti-free trade or anti-NAFTA about what is actually wrong with the trade deal, they really just don't know crap about the darn thing.
The CAFTA or the FTAA is going to be a fact of life, and it will probably be sooner rather than later. There were plenty of chicken littles that were up in arms about having a free trade deal with a developing country (Mexico) in the NAFTA, and they have been proven wrong. They are still wrong.
18
posted on
04/07/2004 12:11:23 PM PDT
by
Il Duce
To: Il Duce
I've found that when you really push people that are anti-free trade or anti-NAFTA about what is actually wrong with the trade deal, they really just don't know crap about the darn thing. Yeah, they usually say that the lower prices we get, let's say on steel, are bad because after our steel industry goes under, foreign companies or countries will then hike their prices.
So, to protect us from higher prices in some indefinite future, we must pay those higher prices now!!!! Our future is at stake!!! LOL.
To: Il Duce; Toddsterpatriot
Yes, Todd, they will buy something from America, eventually: T-bonds, as I posted above.
MAYBE they'll buy a tractor from Case, or a dozer from Cat.
There were plenty of chicken littles that were up in arms about having a free trade deal with a developing country (Mexico) in the NAFTA, and they have been proven wrong. They are still wrong.
As to you, former Italian dictator: prove it.
Tell the ex-employees of Evinrude/Milwaukee how Mexico had NOTHING to do with them being displaced.
Tell the ex-employees of AOSmith/Tower Automotive in Milwaukee that Mexico had NOTHING to do with their unemployment.
Tell them that. They will rub your thick skull into the Mexican dust surrounding the plants, in Mexico, where the jobs went.
But you don't have the balls to come up here and try, do you?
20
posted on
04/07/2004 12:31:08 PM PDT
by
ninenot
(Minister of Membership, TomasTorquemadaGentlemen'sClub)
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