CAFTA: Exporting American Jobs & Industry

Articles

By William Norman Grigg, The New American, published on www.StopCAFTA.com, April 18, 2005

CAFTA, a forerunner of an "EU of the Americas," trades away American jobs in the name of rewarding Latin American "democracies."

Allen Johnson, chief agricultural negotiator for the Office of the U.S. Trade Representative, was enjoying his vacation in late February when he received a panicky call from the White House. The mid-year meeting of the National Association of State Departments of Agriculture (NASDA) was on the verge of delivering a stinging rebuke to the Bush administration by passing a resolution opposing the proposed Central American Free Trade Agreement (CAFTA).

CAFTA would build on the three-nation North American Free Trade Agreement (NAFTA) by expanding the trade bloc to include Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica, and the Dominican Republic. Congressional ratification of CAFTA is coveted by the White House, its political allies in Central America, and politically connected corporate interests who stand to profit from outsourcing production to low-wage nations in the region. It is stoutly opposed by U.S. agricultural and textile producers, who are reeling from the economic impact of NAFTA and are understandably worried that CAFTA would trigger another flood of imports and another hemorrhage of industrial jobs. Most importantly, since the agreement would further undermine our nation's ability to control its economic destiny, it has prompted opposition from Americans who seek to preserve our national independence.

As a February 26 AP report noted: "CAFTA is the most significant multilateral pact for the United States since the North American Free Trade Agreement with Mexico and Canada more than a decade ago. It is seen as crucial to the greater goal of establishing a free trade zone for all the Western Hemisphere." The supposed hemispheric "free trade zone," the Free Trade Area of the Americas (FTAA), would actually be an embryonic mega-state modeled after the socialistic European Union (EU). The EU, it is important to remember, was initially sold to the European public as a "free trade" area, as well.

Having succeeded in moving several bilateral free trade agreements through Congress in its first term, the Bush administration "faces its toughest test" in seeking approval for CAFTA. According to CAFTA supporter Rep. Kevin Brady (R-Texas), passage of the agreement is "difficult but doable."

Congressional Quarterly reported that Republican congressional leaders in both houses are preparing to hold hearings on CAFTA. The hearings would be followed by "a non-binding advisory markup" in which House and Senate committees would "draft the implementing legislation that the administration will send to Congress for an up-or-down vote." Under so-called fast track rules, noted Congressional Quarterly on March 14, "a 90-day clock for congressional approval starts ticking when the administration officially sends the legislation to Congress."

The Bush administration was painfully aware that winning congressional approval for CAFTA would require strangling the opposition before it found a public voice. Thus Allen Johnson was summoned back to Washington to address the meeting of state agriculture officials in an attempt to persuade them not to denounce CAFTA.

By the time Allen Johnson had been bundled into a Washington-bound jet to address NASDA on February 21, the group's Marketing and International Trade Committee had unanimously (with two abstentions) adopted a resolution opposing CAFTA. Although he prostrated himself shamelessly before the group's general assembly, Johnson was not successful in convincing the required two-thirds majority to overturn its Marketing and International Trade Committee's anti-CAFTA resolution. He was also unsuccessful in persuading the group to keep news of its disagreement with the White House out of the press.

"Fat chance," commented syndicated agricultural affairs analyst Alan Guebert. "The vote sent shockwaves through the usually pro-trade NASDA, whose members literally know the lay of the food and farm land in their home states. That's their job; looking farmers and ranchers in the eye every day. On February 19 … almost half of them looked in the mirror and said, 'My producers are right; CAFTA is wrong.' Moments later, the White House fire bell rang." According to Delaware Agriculture Secretary Michael Scuse, vice chairman of the NASDA committee that condemned CAFTA, "we're more concerned about how CAFTA affects farmers than how it affects trade."

"Free Trade" — or Foreign Aid?

Chief among the objections offered by NASDA and many other CAFTA critics is the fact that the supposed "free trade" agreement would impose what amounts to unilateral trade disarmament on U.S. agricultural producers. The six foreign nations included in the pact would be granted immediate access to U.S. food markets. However, U.S. producers would have to wait for years, or even decades, in order to be granted reciprocal access.

If, as expected, the FTAA follows the CAFTA model by opening U.S. domestic markets first, with access to foreign markets coming only years later, the results for U.S. farmers would be nothing less than devastating. During the prescribed interval, Guebert observes, "nations like Brazil, Russia and India will become food exporting powerhouses to both the U.S. and the world while American farmers become calendar watchers."

If the point of CAFTA is to promote free exchange of goods and services between producers and consumers, why is the pact designed to offer artificial competitive advantages to foreign food producers? Rather than promoting what could honestly be called free trade, CAFTA amounts to a foreign aid program — using nonreciprocal access to U.S. markets as a roundabout subsidy for agricultural programs in foreign nations.

And this is hardly the only way in which CAFTA amounts to a foreign aid scheme disguised as a "free trade" initiative. The Bush administration and its pro-CAFTA allies habitually refer to the pact as a means of promoting economic "development" and building "democratic institutions" in Central America. This refrain was featured prominently in a hastily assembled nationwide tour of ambassadors from the CAFTA nations.

"Ambassadors and officials from Central America made a passionate plea in Seattle … for U.S. passage of a regional trade deal they see as a vital tool to help lift their countries out of poverty," reported the February 25 Seattle Times. "While acknowledging that CAFTA isn't perfect, the officials said it is a vital tool for development and forms part of a package of government and market changes that would promote stability and democracy, and energize the economies of the Central American nations."

Roxane Premont of the Citizens Committee to Stop the FTAA (an ad hoc project of the John Birch Society, of which this magazine is an affiliate) attended a session of the "CAFTA Roadshow" in Raleigh-Durham, North Carolina, where participants preached exactly the same message. "They definitely offered the argument that CAFTA was vital as a way of promoting economic development in Central America," Mrs. Premont told THE NEW AMERICAN. "Several of the speakers emphasized the idea that we should use CAFTA as a form of foreign aid, rewarding these 'emerging democracies' in the region."

It's important to recognize that economic growth is a result of production, not consumption. Thus the logic of the "trade as foreign aid" argument dictates that CAFTA is intended to promote the importation of goods from Central America, rather than the export of U.S. goods to the region.

Pro-CAFTA Congressman Jeff Flake (R-Ariz.) describes the region as "a potentially significant trading bloc with the United States." However, the aggregate economy of the six CAFTA nations is minuscule. "Add up the six CAFTA economies and you get a market the size of New Haven, Connecticut," points out trade analyst Alan Tonelson of the U.S. Business and Industry Council.

Assistant U.S. Trade Representative Christopher Padilla insists that while the CAFTA nations are small, "they are actually very big markets for our products. In fact, we trade more with Central America than we trade with Brazil or Australia." If that claim were true, it would make CAFTA redundant — assuming, once again, that promotion of free trade is the desired result.

However, as Tonelson writes, "U.S. exports to the CAFTA [nations] are dominated by what might be called 'turnaround exports.' That is to say, exports that are not final products which are actually consumed abroad, but parts and components of final products that are assembled or further processed abroad, and then shipped right back for consumption in the United States. As a result, they don't service net new demand in foreign markets — which eventually would require domestic employers to expand production, hire new workers, and boost wages. They service the same old demand in the same old market — America's."

Put in the simplest terms, the CAFTA nations are an economically stagnant population of 46 million people, more than half of whom live below the poverty level (as defined by their standard of living, not ours). Costa Rica, the wealthiest CAFTA nation, has a per-capita GDP of $9,000 — roughly one-quarter of ours. Every nation other than Costa Rica displays net emigration, meaning that their citizens are leaving home in search of economic opportunity.

Is this the raw material of a potentially lucrative U.S. export market — or a low-wage population that will act as a magnet for further outsourcing of our embattled manufacturing sector? Tonelson concludes that CAFTA is a "classic outsourcing agreement" — an arrangement in which the only significant U.S. export would be manufacturing jobs to poor, low-wage nations.

According to CAFTA supporters, this is precisely why it's important to ratify the accord. Rep. Kevin Brady (R-Texas) insists that CAFTA is a proper reward to Central American nations that "have emerged from years of war and dictatorial rule to make major steps toward promoting democracy and human rights," reported the AP. "Kicking them down the ladder would be a major mistake," insisted the congressman. Rep. Jeff Flake (R-Ariz.) makes a similar point, stating that his "primary" reason for supporting CAFTA is his belief that the agreement would "spur U.S. investment … and promote economic development in the region."

Of course, Reps. Brady and Flake, like scores of other congressmen who express support for CAFTA, were elected to represent the interests of U.S. citizens, not the interests of Costa Rica, El Salvador, Guatemala, Honduras, or the Dominican Republic. Nor is promoting "economic development" in foreign lands at the expense of American prosperity among Congress's constitutional responsibilities — a fact that voters should impress on the minds of their representatives before CAFTA is brought to a vote. Moreover, even if the purpose were to help poor peoples in foreign lands improve their standards of living, the long-term solution can only be found in political and economic freedom, not in pulling the U.S. down.

"No" on CAFTA Is "Yes" to China?

Approval of CAFTA would offer, at best, negligible economic benefits to the U.S. — and very likely inflict severe damage to our already suffering industrial sector. This much is obvious to anyone who invests a minimal amount of time to examine the mathematics of the proposition. Knowing that the positive case for CAFTA is nonexistent, the Bush administration and its allies have chosen to accentuate the negative by playing the China card. Reports CNN correspondent Christine Romans: "In Washington, CAFTA supporters call a vote against CAFTA a vote for China."

In January, the World Trade Organization (WTO) lifted the worldwide system of nation-based textile import quotas. This resulted in an immediate surge in textile exports from China, and the beginning of what the August 5, 2004 Christian Science Monitor predicted would be "a massive transfer of jobs and wealth in the developing world over the next few years." The Chinese textile tsunami stands to wipe out what remains of the U.S. textile industry, as well as thousands of low-wage jobs in the six CAFTA nations.

Assistant U.S. Trade Representative Christopher Padilla, the Bush administration's point man for CAFTA, insists that "only by uniting together through CAFTA will the textile makers in the Southeast states and apparel makers in Central America be able to face the oncoming competition from China.... A vote against CAFTA is a vote against U.S. textiles and a vote for China."

There really is no choice, former U.S. Rep. Cass Ballenger (R-N.C.) told textile manufacturers during a CAFTA tour stop in Raleigh, North Carolina. Citing the WTO's action in lifting Chinese textile import quotas, he emphasized: a vote against CAFTA is a vote for China. This refrain was immediately taken up by other participants in the nationwide pro-CAFTA tour. A vote against CAFTA is a vote in favor of China, recited El Salvador's ambassador Rene Rodriguez. A vote against CAFTA is a vote for China, echoed Costa Rican ambassador Tomαs Duenas.

"The bottom line is the Chinese are eating our lunch," stated Mark Smith, managing director of Western Hemisphere affairs for the U.S. Chamber of Commerce, which favors the agreement. "They will do it with or without CAFTA. The question remains how much lunch there will be left for them to eat." According to Keith Crisco, CEO at Asheboro Elastics of North Carolina, the alternative to enactment of CAFTA would be "Asia wiping that place off the map." For this reason — can you guess what comes next? — "a vote against CAFTA is a vote for China."

Representative Virginia Foxx (R-N.C.), whose district is heavily dependent on the textile industry, finds the CAFTA-China refrain both tiresome and unconvincing. "I've heard that plenty of times, and I'm certainly not convinced," Rep. Foxx told THE NEW AMERICAN. "While I certainly don't want to lose our markets to China, the fact is that it was NAFTA that practically wiped us out — and CAFTA would do even more damage than NAFTA did."

"Most of the people in my district are very opposed to CAFTA for economic reasons, although there are some [textile] industry people who sincerely think it represents the best of several bad options," she continued. But she opposes the pact not only because of the damage it will do to our economy, but also because of the threat it represents to our imperiled national independence. "I have concerns about our involvement in any kind of international arrangement of this sort that undermines our sovereignty — whether it's NAFTA, CAFTA, the WTO, or certainly the United Nations," she explained.

Once the role that CAFTA would play in a WTO-administered global economic regime is recognized, the breathtaking cynicism of the Bush administration's pro-CAFTA "China card" becomes apparent.

During a special "lame-duck" session in 1994, Congress ratified U.S. membership in the WTO. This resulted in what GOP congressional leader (and then-incoming House Speaker) Newt Gingrich described as "a very big transfer of power" from Congress to the global trade body. In committee testimony, Gingrich — who supported the WTO — told his colleagues, "we need to be honest about the fact that we are transferring from the United States at a practical level significant authority to a new organization. This is a transformational moment."

The scope of that transformation was described in Our Global Neighborhood, the 1995 report of the UN-aligned Commission on Global Governance. The WTO, explained that august body, is "a crucial building block for global economic governance.... The WTO and advanced regional groups such as the EU will increasingly be faced with the issue that will dominate the international agenda in years to come: how to create rules for deep integration that go way beyond what has traditionally been thought of as 'trade.'"

The "regional groups" referred to above include NAFTA, as well as CAFTA and the FTAA, if and when the latter come into being. They would be regional affiliates of a WTO-managed global economy, in which our government would be required to implement economic policies established by unaccountable socialist bureaucrats in Geneva.

Essentially the same people who promoted the WTO are now telling us that we have no choice but to encourage Congress to approve CAFTA — which would be a regional affiliate of that same WTO.

Stop CAFTA!

The Bush administration is clearly frantic about CAFTA's prospects in Congress. Witness Allen Johnson's hasty deployment to try to stop NASDA's anti-CAFTA resolution. Another illustration is found in the nomination of former Ohio Republican Congressman Rob Portman to serve as U.S. trade representative. A Capitol Hill source told THE NEW AMERICAN that Portman was chosen "specifically because the Bush administration believes that Portman's connections in Congress will help push CAFTA through."

This view is shared by Jamal Abu-Rashed, chairman of the economics department at Xavier University, who told the Cincinnati Post that "the push to enact the Central American Free Trade Agreement needed a congressional insider to get legislators who have become wary of job losses from sweeping trade treaties behind the pact." "Congress has been less enthusiastic about trade lately because of the job impacts," stated Abu-Rashed. "Bush wants somebody to resist Congress' efforts to resist [trade pacts]."

Congress displays remarkable composure about the loss of American jobs and the steady surrender of our sovereignty to regional bodies. However, congressmen take immediate alarm when their own jobs are threatened. Americans must make it clear to their congressional representatives that if they vote for CAFTA, they will be given the chance to explore new career opportunities in the private sector they are doing so much to destroy.

Read the complete article.

Also see CAFTA's big secret, by Lou Dobbs, CNN, June 30, 2005

Keystone to Convergence, by William Norman Grigg, The New American, published on www.StopCAFTA.com, April 18, 2005