CAFTA and The Legacy of Free Trade
Bush pushes his pro-corporate
by Jack Rasmus
Z magazine, July/August 2005
This 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
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
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
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
In 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
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
CAFTA 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).
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