CAFTA struggles
Bruce Bartlett


June 28, 2005


This week, the Senate is expected to take up CAFTA, the Central American Free Trade Agreement. The White House is putting heavy pressure on Congress to support this agreement, which it should. But one cannot help feeling that its own missteps on trade are what have gotten this administration to the point where it must pull out all the stops to gain passage of a very modest trade agreement that probably won't have much impact one way or another. In previous administrations, this sort of agreement would have been a routine matter, not requiring extraordinary effort to get passed.

The problem for many free traders like myself is that the Bush administration has played politics with trade since day one, which has done serious damage to the fragile alliance that still supports free trade. It imposed utterly unjustified tariffs on steel, torpedoed the Doha Round of multilateral trade talks by supporting a huge increase in agriculture subsidies, and has never missed an opportunity to demagogue China for all our trade woes.

Having destroyed the prospects for a multilateral trade agreement, which was supposed to be primarily about eliminating agriculture subsidies, the Bush administration has tried to salvage some semblance of a free trade agenda by pursuing bilateral trade agreements. Such agreements have been concluded with Australia, Chile, Jordan and Singapore. Talks are underway with Bahrain, Morocco, Panama, and groups of countries in Africa and South America.

While the amount of activity is impressive, the results are not very great in terms of opening trade. Moreover, the heavy reliance on bilateral trade agreements may create future problems. Economist Anne Krueger, now the No. 2 official at the International Monetary Fund, summarized the case against preferential trade agreements in a 1999 article in the Journal of Economic Perspectives:

-- Once countries are inside a trading bloc such as NAFTA or the European Union, they have an incentive to support protection against countries outside the bloc.

-- Protectionists will use bilateral trade agreements to avoid multilateral agreements, which all economists believe are far preferable. Those who benefit from bilateral agreements will henceforth tend to oppose new multilateral deals. Once a trader has gained access to the market he is most interested in, he will not want to share those benefits with other countries.

-- Finally, the resources of organizations like the U.S. Trade Representative's Office are limited. If they are busy with bilateral agreements, they have no time or political capital left to pursue multilateral agreements.

Jagdish Bhagwati, America's leading trade economist, has gone so far as to call free trade agreements "a sham" that are actually undermining the world trading system. He argues that the proliferation of such agreements by the United States is part of a long-term effort to pursue a unilateral trade policy. "Thanks to the myopic and self-serving policies of the world's only superpower, bilateral free trade agreements are damaging the global trading system," Bhagwati says.

A 2003 study by the Congressional Budget Office found that the economic potential of bilateral agreements is very limited. It noted that NAFTA, one of the largest such agreements, had virtually no effect on the U.S. trade balance with Mexico even after eight years. However, the study also noted that there might be important non-economic reasons to support free trade agreements. For example, they could support U.S. foreign policy objectives and aid democratic forces in those countries with which we have such agreements.

Indeed, it would appear that foreign policy is the best reason to support CAFTA. It is clearly in this country's interest to encourage economic growth and reform in Central America, even if the economic benefit for us is minimal. It also keeps alive the principle of free trade, which this administration has done so much to undermine.

Still, much more could have been accomplished with CAFTA if the White House had made more of an effort. For example, it could have used this as an opportunity to start dismantling the absurd U.S. sugar policy, which keeps domestic prices far above world levels just to enrich a few producers. Although CAFTA opens the sugar market a little, much more could have been done without making the sugar lobby any more opposed to the agreement than it is anyway.

Free traders have no choice but to support CAFTA. Its failure would be seen as a victory for protectionism and would crush the hopes of economic reformers throughout Latin America. I agree with economist Tyler Cowen: "This is probably a treaty we should pass, but it is not a treaty we should be proud of."

The effort shouldn't have been this difficult. If President Bush had been more consistent in his support for free trade over the last five years, he would now be in a stronger position to get CAFTA approved.

Why does free trade need all this bureaucracy in the first place?

it doesn't.

unless you're a member of the AFL-CIO.

i sometimes lean towards nihilism and I think that people get to hung up on status quo existance and it is ness. to break down these blockades(sp?) and institutions that we have made to protect us.

that being said I don't want the working man to lose their jobs, but sometime a shake up or re-order is good for evolution.

Don't take this the wrong way ... but have you always been a chick?

why?

I was just suprised by the gender distinction under your avatar. Was that always there?

no, it was an experiment, I want to see how people treated you based on being non gender specific. I guess I am over being suspicious of message boards as of today.

sorry for the tangent

Did we treat you any differently?

I dont know I have only been a girl for an hour.............

I'll tell you one reason this will be a good thing for the American consumer -- tariffs on imports.

These tariffs are largely supported by farmers because they can't claim they can't compete with the cheaper imports from Central America. So, what we have is basically a subsidy for farmers while the cost is transferred directed to the American consumer. The effect besides higher prices? Losses of business. Here in Chicago the candy store Fanny Mae was an institution. Recently it closed its doors because it could not afford the costs of confectionary sugar because of the tariffs imposed by this government and supported by the sugar lobby. So wins? The American consumer or .05% of the American public that farms sugar beats?

What's next? Hopefully ethonol, where it takes more energy to make it than it saves when burned compared to regular fuel. Who wins? The corn farmers.

The CAFTA bill passed 217-215. Sirota tells us who we can blame:



Sirota also points out, astutely, that the majority of the above also voted for the Bankrupcy Bill and the Class Action Fairness act which limits citizens' legal rights and protects corporations. Oy.

Spanking The CAFTA 15
Jonathan Tasini, July 29, 2005

Jonathan Tasini is president of the Economic Future Group and writes his "Working In America" columns for TomPaine.com on an occasional basis. His blog Working Life chronicles the labor movement and other issues affecting American workers.

Enough is enough. The 15 so-called Democrats who voted for the Central American Free Trade Agreement must pay a heavy price for turning their backs on labor: None of them should receive a dime from labor unions and each one should face a labor-backed primary challenger next year. And the recruitment of good candidates should start now. If the CAFTA 15 do not suffer the political consequences for their vote, labor will look weak and the march of so-called “free trade” will continue.

In 1993, after a small group of Democrats defected to support the North American Free Trade Agreement (NAFTA), unions threatened to get even. But virtually nothing was done. The message this sent to each elected representative was that labor would make a lot of noise but eventually the waters would grow calm—and no one suffered for casting a vote that hurt workers here and abroad.

And so, as each trade vote loomed, Democrats could contemplate wandering off the reservation, either to protect campaign contributions from large corporate donors or to extort some promise from supporters of so-called “free trade” to build a highway, fund a pet project or place a federal research center in a wavering politician’s district. Votes were for sale.

Here are the CAFTA 15...drumroll, please...: Melissa Bean, Illinois (8th District): Jim Cooper, Tennessee (5th District); Norm Dicks, Washington (6th District); Henry Cuellar, Texas (28th District); Ruben Hinojosa, Texas (15th District); William Jefferson, Louisiana (2nd District); Jim Matheson, Utah (2nd District); Gregory Meeks, New York (6th District); Dennis Moore, Kansas (3rd District); Jim Moran, Virginia (8th District); Solomon Ortiz, Texas (27th District); Ike Skelton, Missouri (4th District); Vic Snyder, Arkansas (2nd District); John Tanner, Tennessee (8th District); and Edolphus Towns, New York (10th District).

The arguments against taking down the CAFTA 15 go something like this: Trade is only one policy arena and labor can’t pillory politicians just for voting wrong on CAFTA; doing so would tar labor with the dreaded “single-issue” constituency label. According to this line of thinking, many union members care about a broader set of issues; they need politicians who will vote right on other issues, even if those same politicians stray here and there on a vote or two. And, some would argue, trade only hurts a particular slice of the unionized workforce. Finally, going after Democrats in “swing” districts makes it harder to take back the Congress from Republicans.

Here’s the fallacy with that political pragmatism. Trade is not just a single issue. So-called “free trade” is shaping the economy, here and abroad—it is the central issue upon which other economic policy issues revolve. To overlook a politician’s vote on trade means turning a blind eye to the legislative tool most responsible for shifting the power of self-determination from the hands of citizens to the corporate boardrooms of global capitalism.

Compared to a decade ago, a broader segment of unions and their leaders are starting to see how so-called “free trade” hurts them. A July 25th letter to the House Democratic leadership raising concerns about possible Democratic defections on CAFTA was organized by none other than Harold Schaitberger, president of the International Association of Fire Fighters who was the most visible early supporter of John Kerry. He could have argued that his members aren’t directly touched by CAFTA—you can’t get firefighters from another country to put out the fire in your house here. But to his credit, Schaitberger sees this as a huge fight, hitting his members hard as deals like CAFTA help push down wages and benefits throughout the economy. As he told me at the AFL-CIO this past week, “this is a bright line…We can no longer give a pass on these issues.”

I am not unsympathetic to the political calculation of the balance of power in Washington. But one of my favorite political axioms is that if you give voters a choice between a Republican and Republican-lite, they will always choose the real thing. No other issue can, and should, distinguish the two parties. But if some Democrats cannot understand, or, worse, do not care that so-called “free trade” is eviscerating the dreams of millions of people, they shouldn’t serve in Congress. They are hurting the party’s long-term prospects, not to mention the future for workers.

I have argued for a long time that labor should stop pouring money into politics—at least at the federal level—and instead pour union resources into organizing millions of new workers. Then they can return to the political arena, when labor’s vote can carry more weight. But, for God’s sake, shouldn’t we at least cut off money to people who won’t stick up for the future economic livelihood of millions of workers?

Labor must declare immediately that unions will deny the CAFTA 15 their support. That means that, come campaign season, the CAFTA 15 will not find a single check in their mailboxes, nor receive an endorsement to grace their campaign literature, nor count on union members to make the thousands of phone calls or house visits that turn out voters. Let’s find primary opponents for each one.

Few politicians are guided by deep principle. Most understand one thing: power. And, just as important, once tasted, the absence of power is an enormously effective motivator. Nothing focuses the mind of a politician more than the thought of losing his or her seat. If labor had taken out one or two Democrats who voted for NAFTA more than a decade ago, I suspect that the CAFTA 15 might have numbered two or three—or maybe none.

The time for hardball politics is now.