Wednesday, June 29, 2005


The Senate Finance Committee has approved CAFTA. The government is pushing a rather simplistic "free trade good" line, and apparently, it's working so far. Free trade certainly offers many economic advantages. But the most open system isn't necessarily the best one; it depends on a variety of complex factors. Who will benefit from open trade? The farmers and factory workers who most need it, or megacorporations? How will workers be treated? These are important questions, and they need to be answered before it's clear that opening the markets in this way is a good idea. The Bush Administration is not interested in answering these questions. Worse -- much worse, the Bush Administration is interested in actively supressing the answers to these questions. Here's a bit of the AP story:
WASHINGTON (AP) - The Labor Department worked for more than a year to maintain secrecy for studies that were critical of working conditions in Central America, the region the Bush administration wants in a new trade pact. ... In a summary of its findings, the organization wrote, ``In practice, labor laws on the books in Central America are not sufficient to deter employers from violations, as actual sanctions for violations of the law are weak or nonexistent.'' The conclusions contrast with the administration's arguments that Central American countries have made enough progress on such issues to warrant the free-trade deal. ... Behind the scenes, the Labor Department began as early as spring 2004 to block public release of the country-by-country reports. The department instructed its contractor to remove the reports from its Web site, ordered it to retrieve paper copies before they became public, banned release of new information from the reports, and even told the contractor it could not discuss the studies with outsiders.
The administration says that they took steps to prevent the results from being known because it disagreed with them. It's described alternately as 'biased' and 'fraudulent'. Surely, if there is a case to be made, there are better ways to make it than by trying to pretend that the group they hired never gave a list of reasons to reject CAFTA. How about discussing the issue on the merits? The pro-CAFTA administration is acting like a group with everything to hide. Increased economic opportunities are great, but the facts matter. And without fair Central American labor laws in place, CAFTA will not help the people who need it.


  1. "And without fair Central American labor laws in place, CAFTA will not help the people who need it."

    Wrong. Even with labor violations, the people in these countries will benefit directly because the elimination of tariffs means imported products will be cheaper. The demand for their products, artificially distorted by import duties in other countires, will increase.

    The hiding of the study results is wrong. But those who point to those studies as reasons not to support free trade are wrong. With free trade, we have more interaction with a country, and this gives more leverage to help fight the corruption which is endemic there.

    CAFTA is not free trade, but it is much freer trade than the status quo. "Free trade good" is simplistic. "Slavery bad" is also simplistic.

    The most open system *is* better than any managed system could hope to be. The countries that have had freer trade have historically experienced greater economic growth.

  2. Joe, I'm much less confident than you are that greater influence by American and foreign megacorporations will *decrease* corruption in the regions in question. Stories of foreign corporations versus exploited workers who are prevented, usually illegally, from unionizing, are very common.

    Wrong. Even with labor violations, the people in these countries will benefit directly because the elimination of tariffs means imported products will be cheaper. The demand for their products, artificially distorted by import duties in other countires, will increase.

    You're not describing CAFTA, Joe. You're describing a fair system. CAFTA, which is being pushed by the American administration on smaller nations (with minimal negotiation transparency), will retain U.S. subsidies of its own goods. Here's a bit from Oxfam:

    "Those who stand to lose in the DR-CAFTA are the ones who are already disadvantaged in these highly unequal societies, where the majority of poor people live in rural areas, rely on income from agriculture and must pay for medicines out-of-pocket," continued Weinberg. "Instead of establishing fair and equitable rules for trade, the agreement will institutionalize an uneven playing field."

    The regional trade agreement will require these developing countries to open their markets to dumping of US rice and other commodities and forbid use of adequate safeguards to ensure food and livelihood security and rural development. DR-CAFTA imposes strict new rules that extend the monopoly held by brand-name pharmaceuticals, which will limit generic competition and reduce access to affordable medicines in the future. The trade agreement provides special rights and privileges to foreign investors that can create major new liabilities to governments and undermine efforts to protect public health, the environment, and workplace safety. DR-CAFTA also blatantly ignores the fact that US farmers receive extensive subsidies and domestic supports, estimated to be around $18 billion this year alone.

    So, first point: the benefits you describe would only accrue from a fair system, unlike CAFTA.

    Second point: You say:

    "Free trade good" is simplistic. "Slavery bad" is also simplistic.

    Not all simple statements are false, of course, but my point was that this particular one was too generally-stated to be true. That's the difference between free trade and slavery: free trade isn't ALWAYS good, even though slavery is ALWAYS bad. I took that to be obvious, but maybe it's not.

    The free-trade arguments are based on supply-and-demand economics, and therefore inherit the same assumptions. In order for free trade to work the way the economic models predict, people need to be rational profit-maximizers. There need to be minimal transaction costs, which are the same for all parties. And, most relevantly, people need to be able to enter and exit markets with relative ease. Without these factors present, the models don't fit the facts.

    There's a reason we have, and need, labor laws. There's a reason we need unions. Employees need to be treated fairly and transparently, and they need to have bargaining power, and they need to have options. Factory employees in Central America have none of these things; they are at the mercy of their corporate bosses, because they have nowhere to turn if they lose their current job at thirty-nine, twenty-one, or seventeen cents per day.

    Opening trade without increasing worker protections will be disasterous. It will encourage corporations, more than ever, to 'race to the bottom', cost-wise. It is the workers who will suffer. And if they cannot unionize, and cannot be given fair wages, then they have no recourse.

    So that's point two: 'free trade' without protection for workers is not helpful. It's harmful.

    Here's point three: let's grant for the moment what I strongly disagree with. Let's suppose that you're right, Joe, and CAFTA will make things better on the whole. The study results, which our government has been actively supressing, would provide evidence that if labor rights were included within the free trade agreements, it would make things better on the whole by a whole lot more. The administration is turning its own blind eye from -- and attempting to blind the rest of us from seeing -- the historic opportunity for good that we are passing up, all in the name of slightly further lining the pockets of a few more CEOs.