Thread: CAFTA another misstep in U.S. trade policy

http://www.centredaily.com/mld/centreda ... 436104.htm

Posted on Mon, Aug. 22, 2005

• Outsourcing

Penn State Perspectives

CAFTA another misstep in U.S. trade policy

By John Paul Rossi

Recently, President Bush signed the Central American Free Trade Agreement into law. The legislation was first passed by both houses of Congress.

The agreement, which eliminates tariffs on imported goods from the Central American countries of Costa Rica, El Salvador, Nicaragua, Guatemala, Honduras and the Dominican Republic, will cost Americans jobs, put more downward pressure on the income of American workers, reduce their benefits, and add to the country's record trade deficit.

Starting with NAFTA (free trade with Canada and Mexico), which was signed into law in 1993, the United States government has moved aggressively to lower or eliminate barriers, such as tariffs (taxes on imports), to the free flow of goods.

The presidents and congressional representatives who supported these free-trade deals all promised they would increase exports and create jobs for American workers.

Sadly, the opposite has occurred.

In 1992, before any of these trade agreements were signed, the U.S. trade deficit (more imports of foreign goods than exports of U.S. goods) stood at a mere $84 billion, and Americans ran a trade surplus with China and Mexico.

Last year, as an ocean of foreign goods poured into the U.S. economy, that deficit increased to $618 billion.

Trade agreement partners China (permanent normal trade relations in 2000) and Mexico had become major contributors to the deficit, accounting for one-third ($207 billion) of its total.

Since 2000, the skyrocketing trade deficit, fueled by the shift of American jobs offshore, has hammered private-sector employment in the U.S., particularly in manufacturing.

Between 2000 and 2005, 3 million manufacturing jobs -- jobs that typically pay a good wage and come with employer-provided health insurance and pensions -- have been lost.

These job losses came at time when the labor force grew as 6.7 million Americans entered the job market.

Lower foreign labor costs are a key factor in these job losses. Mexican and Chinese workers in export manufacturing make one-fifth (Mexico) or one-twentieth (China) per hour the $19 hourly wage that average American industrial workers take home.

And most industrial workers in low-wage countries do not receive time-and-a-half for overtime, employer-provided health insurance or employer-provided pensions.

Chinese and Mexican manufacturers, along with U.S.-headquartered multinationals, have taken advantage of these labor "economies" and used cheap foreign labor to replace "expensive" American workers and produce goods for the U.S. market.

CAFTA will accelerate this process.

Five of its seven members -- El Salvador, Nicaragua, Guatemala, Honduras and the Dominican Republic -- are very poor countries.

The CIA's World Factbook ranks El Salvador, Nicaragua, Guatemala and Honduras as considerably poorer than China (on a per-capita GDP basis).

Hourly wages in export manufacturing in these four countries are very low.

Honduran workers making auto parts for U.S.-headquartered multinationals, for example, earn between 66 cents and 87 cents an hour.

Workers' rights in these countries are nonexistent and those who have attempted to form unions have been beaten, fired, kidnapped and assassinated.

Because CAFTA's members are on the very doorstep of the U.S. and because they have a large pool of poor, low-paid workers, more American production will be outsourced to them.

This will result in even bigger trade deficits, more job losses and lower wages and benefits.

There is an alternative: Working Americans and small- and medium-sized business owners could demand that their elected representatives stop supporting the free-trade policy that gives away jobs, bankrupts smaller companies and leads to wage and benefit cuts for those Americans who manage to hold onto a job.

They could ask their elected representatives for fairer trade deals. Under such a program, free-trade rights would be granted only to those countries whose workers are paid a decent living wage, are truly protected by maximum hours, overtime and worker safety legislation, are covered by health-care and retirement benefits and are allowed to organize unions.

Under such a trade program, imported goods from countries that do not have these protections would be taxed (a 30 percent tariff).

Such a fair-trade program would reduce the U.S. trade deficit, protect the jobs and benefits of American workers, help ensure the survival of many American small- and medium-sized businesses, and give a significant incentive to other countries to improve the income and standard of living of their workers.

The alternative is more of the same, something working Americans cannot afford.

John Paul Rossi is an associate professor of history at Penn State Erie. The opinion of the columnist does not necessarily reflect the viewpoint of the university.

How could this be a missstep with so many good verminous congress persons voting for it. Why, there is a certain vermin in N.C. that speaks out both sides of her mouth about it. Certainly you are wrong. Or maybe you are so right that it hurts. It hurts us as AMERICAN CITIZENS, the countries that it supposed to benefit, which is not this nation, and the WORLD AS A WHOLE