CAFTA Falls Short on Economic Arguments

Following is article by Mark Weisbrot of the Center for Economic Policy and Research on the CAFTA agreement which is being discussed in the Senate now. Because hearings are being held, we think that a vote could be coming up in May.

Please read and then call both Sen Smith and Sen Wyden who are on the Senate committee holding the hearings. Then also call Rep. Earl Blumenauer and ask him to vote No on CAFTA. All three continue to not say how they will vote. Recently Sen Wyden did make comments suggusting that he is leaning toward a No vote. Lets try to keep him leaning in that direction.

Representative DeFazio, Hooley, and Wu have all said they will vote No on CAFTA. Phone calls to their offices thanking them for their position would be worth while. And Rep. Greg Walden is our only Republican Representative from Oregon. We have assumed that he would vote Yes but note that two Republican Representative from Idaho recently stated they will vote No. Reason? Idaho is a big sugar beet growing state as is Eastern Oregon and they are very concerned about the effects of CAFTA on agricultural interests. Maybe Greg Walden could be pressured to be concerned also.

Their phone numbers here in Portland are
Sen Smith 503326 3386
Sen Wyden 503 326 7525
Rep Blumenauer 503231 2300
Rep Wu 800 422 4003 or 503 326 2901
Rep Hooley 503 588 9100
Rep DeFazio 541 465 6732
Rep Walden 800 533 3303 or 541 776 4646

David e. Delk, Co-Chair
Alliance for Democracy - Portland Chapter
503 232 5495
www.afd-pdx.org

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
This column was printed in the Miami Herald Saturday, April 16 and in the Duluth News-Tribine on April 18, 2005. It was distributed to newspapers by Knight-Ridder/Tribune Information Services. If anyone wants to reprint it, please let me know.

------------------------------------------------------------------

CAFTA Fall Short on Economic Arguments

By Mark Weisbrot

The proposed Central America Free Trade Agreement (CAFTA) is generating a political battle over foreign commercial policy that we haven't seen since NAFTA (the North American Free Trade Agreement) was passed more than a decade ago.

As with NAFTA, there is widespread misunderstanding of the economic issues involved. First there is the label "free trade," which is not an actual description of these accords but a marketing slogan, like "Lose the carbs â?¦ not the taste" or McDonalds' "I'm loving it."

In reality, CAFTA will increase some barriers to trade while lowering others. One of the barriers it increases is on patented pharmaceutical drugs. This is the most costly form of protectionism in the world today.

The benefits from free trade in these goods are much appreciated by the millions of Americans who cross the Canadian or Mexican border to get their prescription drugs. But CAFTA will make it more difficult for countries like Guatemala to get access to affordable medicines -- even for life-saving drugs like those needed to treat people with HIV/AIDS.

Here in the United States, labor unions and those who care about working people have made much of the loss of jobs, particularly in manufacturing, that NAFTA and the WTO have caused and that CAFTA would presumably continue. But the much bigger impact for most Americans is on wages.

Over the last 30 years the typical (median) wage in the United States has hardly grown -- only about 9 percent. Productivity -- output per employee -- has grown by 82 percent over the same period. Normally we would expect wages and salaries to grow with productivity. These trade agreements have helped keep wages from growing here, by increasing competition with workers making 60 cents per hour and by making it easier for employers to threaten to move when workers demand their share of rising productivity. The result is that our society is becoming increasingly divided into the "two Americas" that Senator John Edwards made his campaign theme last year in the Democratic presidential primaries.

The Bush administration has appealed to farmers in the U.S., saying that CAFTA will help them by opening up foreign markets to their products. But this argument makes no economic sense: U.S. farmers can sell all the corn they want at the world market price; the only way that opening foreign markets can help them is if it raises the world price. Markets in CAFTA countries -- five Central American countries plus the Dominican Republic -- are too small to affect world prices.

In Washington policy circles, CAFTA is being sold as a boost to economic development for our neighbors to the South. But we have now had 25 years of experience with this kind of economic integration, and the results are in: income per person in Latin America has grown by a meager 12 percent since 1980, as compared to 80 percent the prior 20 years (1960-79). By any economic measure, these reforms -- including NAFTA -- have failed.

CAFTA countries are being promised access to a growing U.S. import market, but this is about to be reversed. Our trade deficit is now so big that it cannot be sustained even at its present level. Over the next decade, the dollar will fall further and our trade deficit will shrink. Measured in non-dollar currencies, the value of U.S. imports is expected to decline over the next decade. This means that CAFTA countries are making costly concessions for a prize that most likely won't be there.

In sum, the economic arguments for CAFTA just don't hold water. No wonder its proponents rely on slogans, repetition, and millions of dollars of lobbying money to make their case.

--------------------------------------------------------------------------------
Mark Weisbrot is co-director of the Center for Economic and Policy Research.
--------------------------------------------------------------------------------

Center for Economic and Policy Research, 1611 Connecticut Ave, NW, Suite 400, Washington, DC 20009
Phone: (202) 293-5380, Fax: (202) 588-1356, Home: www.cepr.net