By Nathan Harrington
Foreign Correspondent

Last week I argued that the proposed Central American Free Trade Agreement (CAFTA) is an attempt to circumvent the impasse reached at the World Trade Organization and Free Trade Area of the Americas and push through an unpopular economic policy agenda without public scrutiny. If that’s so, then why are the fat cats so hell-bent on this agenda, and why is it a threat to the rest of us?

CAFTA is a massive, extremely technical document, the full text of which was not released until after negotiations were concluded. By granting the Bush administration “Fast Track” authority by a margin of one single vote last year, the U.S. Congress stripped itself of the power to make any modifications to the treaty. It can only vote up or down, yay or nay, on whether to approve the agreement exactly as signed by administration trade representatives. So much for checks and balances, free and open debate, and all those silly democratic ideas. These guys mean business.

Generally speaking, CAFTA divides traded products into hundred of categories and sets quotas for the quantity of goods from each category each country will be able import to the U.S. (and vice versa). Finally, it sets a schedule for the reduction and eventual elimination of the taxes importing companies pay to the government of the receiving country, known as tariffs. In addition to raising money for the government, tariffs on foreign products are used to support domestic producers whose might not otherwise be able to compete with larger international producers. CAFTA negotiations were dominated by wrangling over quotas and tariffs for corn, sugar, bananas, and coffee, with all five Central American countries pitted against each other and against U.S. producers for a share of the U.S. market.

Elite planners in the U.S. support new trade agreements with Latin American countries in hopes of giving U.S.-based multinationals an edge in market access over European and Asian companies also looking to sell their excess production in Latin America. That’s exactly what they’ve gotten from the North American Free Trade Agreement of 1994, with predictably disastrous results for Mexico. When Mexico started to reduce the tariffs on U.S. corn which had long kept its millions of small-scale corn growers afloat, heavily subsidized, industrially-produced U.S. corn started poring into the country, and the market price of corn in Mexico has plummeted. Unable to sell their crops at a price above production cost, Mexican farmers have abandoned their lands headed for the cities in search of industrial work, and the country has become dependent on the U.S. for its main food staple.

Central America may be in for a similar “corn crisis” if CAFTA is approved this summer. Are we honestly to believe that “free and equal competition” between grossly unequal actors is going to somehow benefit everyone? In the words of a Nicaraguan economist at the Universidad Centroamerica, “The idea that within the next ten years we are going to catch-up to the point where we can compete on an equal basis with the U.S. is a lie.”

If there is a field in which Nicaragua can compete, maybe it’s easily exploitable labor. Faced with increased attempts to form labor unions at sweatshops in Mexico, the Dominican Republic and elsewhere, U.S. manufacturers hope to pit poor countries against each other in competition to see which will offer the lowest wages, taxes, and regulations. With China offering all of that plus brutal state repression against discontented workers, the only place that could be better for U.S. capitalists would be in Central America or the Caribbean, closer to U.S. consumers. Many argue that U.S.-owned factories will help the poor in Central America by creating much-needed jobs. Sweatshop jobs, they say, are better than no jobs, even if they only hire single women between the ages of 15 and 30.

Again the example of Mexico in the ten years since NAFTA is instructive. It turns out that Mexico has seen a net loss in both manufacturing jobs and the average manufacturing wage, because competition from U.S. imports has forced Mexican-owned factories in Mexico City, Puebla, and Guadalajara out of business, while the corn crisis has increased the pool of people looking for industrial employment. To add insult to injury, the factories that moved in less than ten years ago have already started to close and move their operations to Asia in search of even cheaper labor. A recent study by the conservative Carnegie Endowment for International Peace found that the few benefits attributable to NAFTA have been canceled out by negative impacts.

Even if we accept, for the sake of argument, the mistaken tendency to define development only in terms of economic growth, the simple fact is that no country has ever achieved strong long-term growth on the basis of export agriculture and the exploitation of its cheap, unskilled labor by foreign capital, which is the strategy promoted by CAFTA. On the contrary, the nations which are today considered “rich” all share a common history of heavy state involvement in the economy. In most cases, this involvement was aimed at promoting domestic markets by means of infrastructure investment, public subsidies, and especially protective tariffs.

While perfecting these tools to the maximum benefit of their own capitalist classes, the rich countries have systematically imposed disastrous “market-oriented” policies” in the Global South, first through outright colonial control, and now through the World Bank, International Monetary Fund, and, increasingly, agreements like CAFTA. In the incisive words of development scholar Ha-Joon Chang, they are “kicking away the ladder” that leads to economic development.



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