No Troops, No CAFTA

The United States has formed a new Central American Free Trade Agreement (CAFTA) with Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua. Trade is supposed to bring countries together, but this week Honduras and the Dominican Republic announced they were pulling their small troop contingents out of the U.S.-led coalition in Iraq. Their governments decided they would rather follow the example of the new Socialist regime in Spain than stay true to the commitments they made to their largest trading partner, the United States, which had just granted them commercial preferences.

In response, American leaders should seriously reconsider the participation of Honduras and the Dominican Republic in CAFTA, and perhaps scrap the entire agreement which has not yet been voted on in the U.S. Congress.

CAFTA has been hailed by the Bush Administration as being both beneficial to U.S.-based exporters by opening new markets and supportive of economic growth in the developing economies of Central America. But on balance, it is hard not to consider CAFTA primarily as a development program, an example of "trade as aid" meant to transfer money and job opportunities to a Third World region desperately in need of both.

Even the U.S. Trade Representative's office has trouble arguing that CAFTA will help the recovery of American industry. The export gains being cited are mainly agricultural; rice, pork, beef, dairy and soybeans. American farmers do need new foreign markets, but Central America can hardly be the solution to the U.S. farm problem given the poverty of the CAFTA members. The combined economic output of the six CAFTA states (in 2002) was only $85 billion. This total is smaller than the $92 billion economy of St. Louis, Missouri.

The largest of the CAFTA states is the Dominican Republic, with a GDP of $23 billion. The United States had a trade deficit with the Dominican Republic of $242 million in 2003. U.S. goods exports to the Dominican Republic were $4.2 billion. Corresponding U.S. imports from the Dominican Republic were $4.5 billion, an increase of $286 million over 2002.

U.S. firms have placed just over $1 billion of direct investment into the Dominican Republic, mainly for manufacturing in special export processing zones producing apparel, footwear, electronic products and medical goods, using U.S. components outsourced to the Dominican Republic's cheap workforce. Like the NAFTA agreement upon which CAFTA is based, the future trend will be for increased outsourcing and larger U.S. trade deficits.

That CAFTA is really about expanding investment and export-oriented production in Central America is further demonstrated by the agreement's provisions regarding textiles, investment protections and labor rights. In textiles, there are the cumulation provisions, which will allow apparel from CAFTA members to contain various amounts of Mexican and Canadian inputs. This allows textile manufacturers, primarily those who moved out of the United States into Mexico under NAFTA, to tap into the even cheaper CAFTA labor pool and still export their output into the U.S. market.

Firms which invest in CAFTA countries are given increased and explicit protections against adverse discriminatory treatment or expropriation. Workers, on the other hand, lose the safeguards, meager as they are, under the Generalized System of Preferences (GSP) program which CAFTA supercedes. GSP required that countries "take steps" to comply with internationally-recognized protections against discrimination, child and forced labor, and guarantees for workplace safety and the right to organize; CAFTA does not.

The purpose of CAFTA is to make Central America an even more lucrative place for firms to locate their export-oriented factories. The strongest lobbying for the agreement is thus coming from transnational corporations and retail chains who want to play a new group of workers off against workers in other countries to obtain cheaper consumer goods. The CAFTA governments also want to shift more jobs from the United States and elsewhere to their countries. CAFTA leaders know it is a very competitive world and want whatever preferences they can get in what is largely a zero-sum game.

Which brings us back to the betrayal of the United States in Iraq by two CAFTA states. The world is awash in cheap labor and surplus production capacity. International trade is currently a buyer's market, with the United States the world's largest customer and the market everyone is trying to reach. This gives Washington enormous leverage. It can reward those countries who support its leadership in world affairs, and punish those who oppose it. Foreign governments should never believe that they can defy the United States, break commitments or side with opponents without paying a very high price.

Unfortunately, U.S. trade policy is run both structurally and philosophically by people who do not think in terms of integrating commerce with broader national strategy. When Chile joined Mexico, France, Germany, Russia and China in opposing Washington on the U.N. Security Council during the run up to the Iraq war, there was considerable anger in the Bush Administration. Pentagon officials were heard to ask, "why should we give Chile the free trade agreement it wants, when it won't even give us its vote at the UN?" The obvious answer was to say "no" to Chile unless it changed its stance on Iraq.

But the USTR is divorced from the larger issues confronting the country. Robert Zoellick pushed forward the Chile Free Trade Agreement as if nothing else in the world was happening, because for Zoellick nothing else is happening. The failure of President George W. Bush to pull Zoellick back into the loop, meant that Chile got away with stabbing the U.S. in the back----and other states could hope to do the same.

The actions of such tiny states as Honduras and the Dominican Republic may seem trivial, but the principle is of enormous importance, as is the damage. States like France and China, who profit enormously from their trade relations with the United States, gleefully kick Uncle Sam and mock him as a fool. These countries need access to the American market far more than America needs them as "trade partners." It is long past time for Washington to remind them of that situation in a direct and unmistakable manner. Scrapping CAFTA would cost virtually nothing to send a very loud message across the globe.

William R. Hawkins is Senior Fellow for National Security Studies at the U.S. Business and Industry Council.

Government control of trade, the opposite of free trade, can make a few well-connected interests spectacularly rich. sites like this one are controlled by those interests.

They lie, distort and play on prejudices. what the hell does iraq have to do with free trade. it's all about having the government direct the flow of trade to the pockets of the well-connected oligarchs, and Willie is stupid enough (or connected enough) to support it.

"Government control of trade, the opposite of free trade,

Well where is the 'free trade'? The NAFTA 'free trade' deals were thousands of pages of government to government negotiations which our reps could not change but the lobby reps could. Willie is right.

and Willie is stupid enough (or connected enough) to support it.

???

Have you been experimenting with hallucinogens again?

Same should go for NAFTA. Any country that expects to take the wealth of the USA should help contribute to the cause. Tourist visas, trade, and immigration permits should be based on how much support we get. It's like that old kid's story with the hen asking for help planting and growing and harvesting the wheat and no one wanted to help until it came time to eat the bread and then they all expected to get in on that.

Who wants to help the USA in the fight against world terrorism? "Not I" said Mexico, "not I" said France, "not I" said Honduras, "not I" said Spain........ who wants to take the wealth and the jobs the USA has built up? "I do" said Mexico, "I do" said France, "I do" said Honduras, "I do" said Spain..... It's all take and no give.

Have you been experimenting with hallucinogens again?

it could've been worse, he could've posted his favourite marxist quotes again. please Willie, will you do that just for me?

The United States has formed a new Central American Free Trade Agreement (CAFTA) with Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua.

I've bought Dickies work shirts for many years because of their quality and, equally or more important, because they are American made. I just bought again for this year and noted the quality seemed lower than usual. Then I noticed the tag: Made in Nicaragua.

To all those former Dickies employees that made me those fine shirts for all these years: Thanks, and your fine work will never be forgotten. Hope you've managed to stay employed.

Government control of trade, the opposite of free trade, can make a few well-connected interests spectacularly rich. sites like this one are controlled by those interests.

I suppose that they also controlled the founding fathers when they wrote the Constitution since they gave government the specific power to regulate trade?

It's free trade that's making a few specific interests spectacularly rich at the expense of America in general.

please Willie, will you do that just for me?

I think I'll place you on my "ignore this idiot" list instead.
I'm kinda surprised you're not there already
but what the heck, pinhead trolls are always reinventing themselves anyway.

That former employed Dickies worker can go fight and die in Iraq while job goes to those who refuse to lift a finger. While they get the good jobs, Americans get to pay for the war. I wonder how much China has contributed?

I suppose that they also controlled the founding fathers when they wrote the Constitution since they gave government the specific power to regulate trade?

giving that power was one mistake. giving a wink and a nod to slavery was another. I suppose you consider them infallible little gods, but I have no such illusions

It's free trade that's making a few specific interests spectacularly rich at the expense of America in general.

the vast majority of economists will disagree with you. in any case you need to post some references to back that up.

I admire the way you avoid answering every single argument raised against you, I really do. I've been following your posts for months, it's a splendid little tactic.

the vast majority of economists will disagree with you.

Weren't those the same type of people who argued that NAFTA would slow immigration from Mexico because with jobs in Mexico, they would only want to come here to shop ---- and that was when we had a trade surplus with that country which has now turned into a growing trade deficit and immigration from there is ever more desperate.

I don't know all the specifics of CAFTA, but I do know that CAFTA requires Costa Rica to end its government monopolies on telecommunications, insurance, and the internet, and eliminates barriers to imports of American food products. It's a big win for American business and farmers in that regard.

Of course, they're one of our most reliable allies in every respect, voting with us at the UN and actively helping interdict drug shipments. They couldn't send troops to Iraq, though, because they have no military whatsoever. Even their police are armed primarily with radar guns to catch speeders.

excellent point.

I admire the way you avoid answering every single argument raised against you, I really do. I've been following your posts for months,

Then you're also well aware that I actually spend significant time rebutting economic arguements.
But I find it to be a nonproductive waste of my time to "debate" the disingenous, circuitous "logic" spewed by neo-marxist gay activists. Such individuals are invariably emotionally disturbed and impossible to reason with. We humans, as a species, are indeed fortunate that only a tiny fraction of our populace is susceptible to such a degenerative affliction.

Our government still cannot understand that other countries love it when we make a deal because we always make a bad one.

That isnt always the case.Take the FTA between USA/Australia coming into effect soon.....it's worth three times as much to America than Australia.Mainly because sugar was left off the table and the fact that low-end manufacturing jobs in Australia pay more than they do in the US.

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