CAFTA and the Legacy of Free Trade






T

his
past April debate began in Congress on the Central American Free
Trade Agreement (CAFTA). CAFTA represents the Bush administration’s
effort to resurrect its stalled plans for a “free trade”
zone encompassing the entire Western hemisphere, called the Free
Trade Agreement for the Americas (FTAA). FTAA is the Bush-Corporate
plan to extend the North American Free Trade Agreement (NAFTA),
passed in 1994, that established a free trade zone between Canada,
the U.S., and Mexico. NAFTA has already cost U.S. workers the loss
of more than a million jobs. 


CAFTA
is thus the strategic nexus, the transition between NAFTA and Bush’s
future plans for a Western hemisphere-wide version of NAFTA involving
34 nations, a FTAA. But passage of CAFTA is not guaranteed. Not
because of massive public opposition to the further loss of U.S.
jobs to corporate-defined trade that would result should CAFTA and
FTAA pass. But because of splits within the U.S. corporate elite
over the proper pace and focus of free trade. 


U.S.
agribusiness is uneasy about the CAFTA deal, especially the politically
powerful sugar industry. Textiles, apparel, and other U.S. light
manufacturing industries are also opposed. With average factory
wages of 90 cents an hour in the CAFTA region, CAFTA will almost
certainly result in significant losses due to imports for these
U.S. corporations, which are already being hammered by even lower
cost imports from China producing similar factory goods for 64 cents
an hour. From their perspective, they don’t need another “China
on their doorstep” to compete with. 


Aligned
against this group are corporations strongly pushing for  further
expansion of “free trade” in the Western hemisphere. This
group constitutes a long list of “who’s who” among
U.S. multinational corporations. With only $33 billion in U.S. annual
trade with Central America today, these corporate forces dominating
U.S. trade policy for the past two decades are not concerned about
exports vs. imports. The value of current U.S. trade with the small
city-state of Singapore, for example, exceeds U.S. trade with all
the CAFTA nations. U.S. multinationals’ interest in the CAFTA
deal is not about trading products with Central America, it is about
opening U.S. corporate foreign direct investment into that region
and then extending it beyond, to all of Latin America. For them
CAFTA is not really about trade, but about exporting their factories
(and U.S. jobs) to the region to take advantage of lower labor costs,
looser environmental regulations, and lower taxes in particular.
As others have noted, CAFTA is not a trade agreement, but a U.S.
multinational corporation “outsourcing” agreement. 


Lined
up on behalf of this latter corporate faction are the big guns of
the corporate lobbying world—the Business Roundtable (BRT),
the National Association of Manufacturers (NAM), the U.S. Chambers
of Commerce (USCC), and their joint cross-organization lobbying
organization on which representatives of all the above traditional
corporate lobby groups sit called the Emergency Committee for American
Trade, or ECAT. 


ECAT
is composed of the CEOs of major U.S. corporations with global operations.
The same folks sit on ECAT that drove NAFTA and China free trade
deals in the 1990s. ECAT was formed in the late 1970s when the current
“free trade” offensive began to take form. ECAT corporations
total $2 trillion in annual sales and employ five and half million
workers. The interlockings between ECAT and the BRT, the NAM, and
others are exceptionally tight. For example, Harold McGraw III,
who is chair and CEO of the McGraw-Hill companies is also chair
of ECAT as well as chair for the International Task Force of the
Business Roundtable. ECAT is also the lobbying arm for the ad-hoc
Business Coalition for U.S.-Central American Trade, a subgroup of
400 companies and trade associations, established specifically to
get CAFTA passed. Their ad-hoc coalition is an example of loose
corporate alliances that come and go with specific legislative objectives.
ECAT remains as the front coordinating group focusing on “free
trade” for the traditional general corporate lobbying groups
like BRT, NAM, and others. CEOs of the latter sit on the former,
and may bring in others to participate in ad-hoc formations like
the Business Coalition.





ECAT
and other corporate driven trade policies over the past quarter
century have cost U.S. workers at least 8 million lost jobs and
reduced wages for the rest by at least 15-25 percent as a result
as well. Since Bush alone took office, approximately 1.8 million
U.S. jobs have been lost directly attributable to so-called “free
trade.” Those losses were roughly equally distributed between
losses due to NAFTA trade and China trade. Higher paying manufacturing
and technology jobs have been leaving the U.S. in tens of thousands
every month. 


The
devastation of U.S. jobs by such trade policies is not a recent
Bush phenomenon. This has been going on since Reagan and now is
accelerating to record levels under George W. Bush. Consider the
manufacturing sector in the U.S. alone: in 1979 just before Reagan
came to office, there were 21.2 million manufacturing jobs in the
U.S. By 1992, after 12 years of Reagan and Bush senior there were
only 16.7 million such jobs. According to one study, trade and the
growing U.S. trade deficit accounted for 83 percent of the millions
of jobs lost in manufacturing alone between 1979-1994. According
to the same study, the millions of jobs lost to foreign imports
paid on average twice that of new jobs that were created in U.S.
export industries during the same period. Jobs lost were clearly
being replaced by jobs of lower quality and lower pay. 


Apart
from assisting and presiding over the launching of a free trade
offensive by U.S. corporations in the 1980s, it was on Reagan’s
watch that a first formal free trade agreement was negotiated by
the U.S. with another country, in this case Canada in 1988. 


The
U.S.-Canada Free Trade law served as the precursor to NAFTA. Building
on the U.S.-Canada Free Trade agreement, George H.W. Bush in 1990
then developed the plan to extend that agreement to Mexico, thus
creating NAFTA, the direct predecessor to the currently debated
CAFTA. However, it would take a Democrat, Bill Clinton, to deliver
the Bush-corporate vision. 


With
3.2 million jobs already lost by 1994, following the implementation
of NAFTA that same year, another 3 million jobs were lost between
1994 and 2000. Moreover, the trade-related loss of 3 million jobs
during the Clinton years occurred in only 7 years, in contrast to
the previous 3 million jobs lost during the previous 15 years from
1979-1994. Trade-related job loss during the 1990s occurred at an
average rate of 428,000 a year compared to 213,000 a year on average
during the Reagan-Bush period, or nearly twice as fast. That accelerating
loss in the 1990s was due largely to NAFTA.  


There
is a direct relationship between U.S. trade deficits and U.S. job
losses due to trade. For example, the U.S. Department of Commerce
in 1994 estimated that for every $1 billion in U.S. trade deficit
(or surplus), one could expect a loss (or gain) of approximately
13,000 jobs in the U.S. 


The
U.S. net trade deficit with Mexico and Canada surged from $16.1
billion in 1993, the year preceding NAFTA’s implementation,
to $111 billion a year today. By 2000 a total of 766,000 actual
and potential U.S. jobs were lost to Mexico due solely to the effects
of NAFTA. During the first two years of the George W. Bush administration
another 113,00 jobs were directly lost, raising the overall total
of net U.S. jobs lost due to NAFTA between 1994-2002 to 879,280.
An additional number of lost jobs for 2003-04 is yet to be estimated,
but it is probably safe to assume the total loss of jobs to date
from NAFTA exceeds one million and rising. 


The
loss of a million U.S. jobs, overwhelmingly manufacturing and high
paid quality jobs, has had a definite negative impact on the average
hourly wage in the U.S. The U.S. Trade Deficit Review Commission,
a source unlikely to overestimate the loss of jobs due to trade,
concluded in its report in 2000 that “Trade is responsible
for at least 15% to 25% of the growth in wage inequality in the
United States” 


But
NAFTA wasn’t the only game in town during the Clinton years.
Between 1994 and 2000 trade policies apart from NAFTA resulted in
the loss of additional high paid U.S. jobs. Most notable among other
initiatives was Clinton’s successful push for more open trade
with China. In 1999, the year preceding the passage of PNTR, U.S.
imports from China exceeded exports to China by $81 vs. $13 billion.
The loss of U.S. jobs from China trade during the 1990s had already
amounted to 880,000, according to reliable estimates.  


In
2001 the U.S. International Trade Commission (USITC) predicted that
by 2010 the U.S. trade deficit with China would reach $131 billion.
This would translate into a net further loss of 817,000 jobs from
trade with China, added to the 880,000 jobs lost during the 1990s.
But even this would prove a gross underestimation. 


By
the end of Bush’s first term in 2004, fully 6 years earlier
than predicted by the USITC, the trade deficit with China amounted
to $162 billion (not $131 billion), creating the largest trade imbalance
ever recorded by the United States with a single country and millions
more lost jobs to that economy. That China trade deficit is projected
to exceed $200 billion in 2005. Under George W. Bush it is clear
that U.S. job losses due to trade deals have been accelerating.
That’s a $162 billion annual trade deficit with China and another
$111 billion for NAFTA; with more than a million lost jobs due to
NAFTA and another 1.7 million lost to China over roughly the last
decade. 



The Bush-Corporate Drive 



I

n
2002 the Bush team and U.S. corporate free traders set out in heavy
handed fashion to force an FTAA agreement on Latin American nations
that largely benefited U.S. multinational corporations at the expense
of those nations. Bush had originally planned to achieve this through
negotiations within the World Trade Organization (WTO). But trade
negotiations collapsed in September 2003 at the WTO meeting in Cancun,
Mexico. Resistance to Bush and U.S. demands within the WTO was led
by a coalition of 21 nations, at the core of which were 13 Latin
American countries, in turn led by Brazil, Argentina, and Venezuela.
These were countries that had been particularly ravaged by free
market and free trade experiments in the previous decade and now
had elected leaders willing to bargain harder with the U.S. 


The
focus of their opposition was Bush’s refusal to open U.S. agricultural
markets at Cancun, his insistence on pro-U.S. intellectual property
rights, his opposition to labor and environmental issues, and U.S.
demands for special treatment for U.S. pharmaceutical, technology,
and professional services. 


Bush
had hoped to quickly follow up any success at the September 2003
WTO with the rapid conclusion of an inter-Americas FTAA agreement
scheduled for November 2003 in Miami. Bilateral free trade agreements
concluded the previous July 2003 with Chile and Singapore were to
provide the “model” for the FTAA. But once again at Miami
in November 2003, the same issues of agricultural subsidies, U.S.
tariffs, intellectual property, rules for unlimited direct U.S.
investment, and services trade were key. Brazil, Argentina, and
Venezuela once again led the opposition. To avoid an embarrassing
break up of this second attempt at regionalized trade, the U.S.
agreed to what was called FTAA-lite, essentially a face saver for
the Administration. It meant in effect that all parties would keep
trying to negotiate a FTAA-wide agreement at a subsequent date,
although for now FTAA was essentially tabled indefinitely. 


Following
the tactical defeats in Cancun and Miami, Bush trade strategy quickly
shifted. To reverse the appearance of momentum lost, the Bush administration
quickly closed the CAFTA deal in December 2003 with four nations
in the Central America region: El Salvador, Nicaragua, Honduras,
and Guatemala. Added impetus to CAFTA was soon provided by Costa
Rica and the Dominican Republic, both joining in early 2004. In
addition, follow-up meetings to strategize how to resurrect FTAA
were held by the CAFTA group in Mexico later in 2004 and in early
2005. 


Bush
strategy thus turned to CAFTA to get his plans for a Western hemisphere
free trade zone back on track. The Bush team envisions passage of
CAFTA as a means to pressure the South Americans to return to the
table to negotiate with the U.S. once again. Should the Bush-corporate
forces fail to get CAFTA passed, the larger real corporate trade
target of FTAA for all intents and purposes will die on Bush’s
watch. 



The Strategic Lynchpin 



C

AFTA
remains the lynchpin to Bush’s trade plans in his second term.
Should CAFTA get approved by Congress later this year, the Bush
administration will quickly attempt to add to the list of free trade
partners countries such as Peru, Ecuador, Panama, and Columbia with
which it currently is negotiating bi-lateral trade agreements, as
well as to add Chile with which it has already negotiated a trade
agreement. With CAFTA and these latter countries in hand it will
have achieved something of a countervailing presence in Latin America
with which to pressure Brazil and its allies. 


But
there are growing obstacles to this Bush plan. On the one hand,
a trade deficit is expected to exceed $700 billion in 2005, with
more than $200 billion of that attributable to China alone. On the
other hand, there is also the growing trade independence of Latin
American nations in general as those countries rapidly drift “left”
as the U.S. is bogged down in the Middle East. Brazil in particular,
together with its key allies in South America, Argentina, and Venezuela,
is intent on establishing closer trade ties and deals with Europe,
OPEC oil producing countries, and other WTO nations. Another obstacle
to Bush’s trade plans is the European Economic Community, which
not only has targeted Brazil and other southern tier South American
countries for trade deals, but also is increasingly locked in a
trade struggle with the U.S. over penetration of the China market.
On the surface this U.S.-Europe competition for China markets and
profits appear as a U.S. concern over Europe selling military technology
to China. But military sales are only a cover issue raised by the
U.S. The real struggle is over non-military markets. There is Bush’s
gamble with his current strategy of devaluing the U.S. dollar, which
may prove ineffective in terms of stimulating U.S. exports or mitigating
the U.S. $700 billion trade deficit—and it is beginning to
show signs of exacerbating economic crises in other areas of the
U.S. economy. 


Longer
term, beyond solidifying trade deals throughout Latin America, the
Bush-corporate objective is to establish more of the same in southern
Asia. Trade deals with Australia and Singapore are already in place
and negotiations are underway with Thailand and other nations in
that region. It is all part of the emergence of three regional capitalist
mega-trade blocs, aligning U.S. corporate interests and its allies
on the one hand against two other major blocs on the other: the
European Economic Community and an Asian bloc led by China. 


What
happens with CAFTA in 2005 may thus have an impact at least on how
fast the new U.S. dominated mega-trade bloc forms, even though it
will have little to do with the inevitability of its, or the two
other mega-trade blocs, eventual formation.





This article
is an excerpt from Rasmus’s just released book,



The
War at Home: The Corporate Offensive From Reagan to Bush (

www.kyklosproductions.com)

.