Two sides warming up for battle over CAFTA
May 12, 2005 9:13 AM, By Forrest Laws
Are the "sins of the father" about to be visited on the latest trade agreement to be negotiated by the Bush administration?
That’s the question some are posing as administration officials, farm organization leaders and members of Congress prepare for a showdown vote on the Central American Free Trade Agreement-Dominican Republic.
While no date has been set for a vote, House Majority Leader Tom DeLay, R-Texas, has said he would bring the measure to the floor later this month. Senate leaders have not indicated when they might consider it.
Opponents of CAFTA-DR, which supporters say would increase U.S. agricultural exports by $1.5 billion a year when it is fully implemented, are increasingly pointing to past trade agreements, such as NAFTA, as reason to be skeptical about the claims being made on behalf of the latest pact.
"When you look at the numbers, trade agreements like NAFTA haven’t worked out well for America’s farmers," said Rep. Collin Peterson, D-Minn., ranking Democrat on the House Agriculture Committee. "So-called free trade agreements are clearly not delivering as expected for America’s farmers and CAFTA-DR would mean more of the same."
Peterson released an issue brief on NAFTA that he says shows the agreement has helped lead to a significant increase in imports from Canada and Mexico, the other signatories of the North American Free Trade Agreement.
Deficits triple
Peterson cites USDA statistics indicating that the U.S. agriculture trade deficit with Canada and Mexico has almost tripled from $5.2 billion to $14.6 billion and that the United States has lost about 880,000 jobs due to NAFTA since it was signed 11 years ago.
"It doesn’t take a rocket scientist to figure out that U.S. farmers are on the losing end of these trade deals. Exports are flat and imports are rapidly growing," he said. "The saddest part about it is that our trade negotiators keep making the same mistakes in agreements like CAFTA."
Peterson’s comments were echoed by George Shuster, textile manufacturing company executive and co-chairman of the American Manufacturing Trade Action Coalition, in testimony at a House Ways and Means Committee hearing on April 21.
"Our opposition is based on the view that CAFTA replicates the flawed trade policy model of the NAFTA, Singapore, Chile, Morocco trade agreements," said Shuster. "This model involves the granting of free access to the U.S. market for producers that use pennies-an-hour wages, low labor standards and low environmental standards to undercut U.S. domestic manufacturers."
In return, the latter gain access to markets that are a fraction of the value of the U.S. market. Consumers in Costa Rica, Dominican Republic, Guatemala, El Salvador, Honduras and Nicaragua – the CAFTA members – only represent 1.86 percent of the U.S. economy.
"They have virtually no ability to purchase finished goods made in countries that pay high wages and have strong environmental, labor, safety and health standards," says Shuster. "The results of this failed model are clearly predictable; CAFTA will exacerbate the already astronomical U.S. trade deficit."
Administration officials say the focus in CAFTA should be on exports, not imports because the five Central American countries and the Dominican Republic already have duty free access to U.S. markets under the Caribbean Basin Initiative.
Export records
"You study these numbers as closely as we do, and you see what we see and that is we’re setting records for exports," Agriculture Secretary Mike Johanns said in a March 28 press conference promoting the passage of CAFTA-DR.
"It’s been a remarkable time in terms of our ability to export our ag products into the foreign marketplace. And I think this year we’re projecting the third highest year ever. If you look at NAFTA for example, we’ve had a significant increase in the amount of exports that we have made."
Johanns said the increase in U.S. imports of agricultural products from Canada and Mexico have more to do with desires by the American consumer to have "good fruit year around.
Speaking at the same news conference, Ambassador Allen Johnson, the U.S. Trade Representative’s chief agricultural negotiator, said increases in demand for coffee and tropical fruits like bananas have accounted for much of the import rise.
"I’m not someone who grades something on net imports or exports, but if you do you should be even more enthusiastic about CAFTA because what this does is increase our exports somewhere in the neighborhood of an 8-1 ratio over what our imports would be under this agreement."
Critics downplay such figures, however.
"Don’t believe the hype – there is very little for agriculture to gain with CAFTA," says Peterson. "American wheat farmers already have virtually duty-free access to Central America. U.S. grains have 94 percent of the Central American import market and soybeans have 95 percent.
"For American cattlemen, CAFTA only gives them immediate access to export high grade cuts of meat that Central Americans are too poor to afford."
Chambliss view
One of the most visible opponents of CAFTA, Senate Agriculture Committee Chairman Saxby Chambliss, says he believes the administration should be focusing more of its efforts on multilateral negotiations such as the Doha Round of the World Trade Organization and enforcing existing trade legislation.
Noting that his state of Georgia is home to strong international companies such as Coca-Cola, Home Depot, United Parcel Service and Georgia Pacific, the senator said: "Georgia was also home to a thriving textile sector that has suffered the costs of free trade with mills shuttered across the state and the entire southeast region.
"We cannot talk about the benefits of trade without understanding and preparing for the impacts beforehand," he said. "That is why measures like job training in the Trade Adjustment Assistance (TAA) program and compensation provisions in the Byrd Law enjoy such wide bipartisan support in the Congress."
Writing in The Hill newspaper, Chambliss said "Our negotiators are the best in the world, but Congress will ultimately evaluate their work based on the impact to industries in our country. Our long-term trade agenda is not well-served if we do not have the support and understanding of the people we are elected to represent."
As the two sides prepare for a vote later this month, the major farm organizations – the American Farm Bureau Federation, National Association of Wheat Growers, National Corn Growers Association, American Soybean Association and the USA Rice Federation are supporting the agreement. Groups like the National Farmers Union oppose it.
The National Cotton Council has said it cannot support the bill in its present form because of provisions that allow countries not party to the agreement; i.e., China, to use the CAFTA countries as a staging ground for the shipment of more textile and apparel products into the United States.
Surprising opposition
Opponents say the administration has not pushed for a vote before now – the agreement with the five Central America countries was reached in December 2003 – because of the surprisingly strong opposition in Congress.
"I think it’s in serious trouble," said Sen. Byron Dorgan, D-N.D., who has formed an anti-CAFTA coalition because of his concerns that the agreement would destroy the ability of sugar beet growers in his state and sugarcane growers in the South to compete.
"There’s growing opposition in the Senate," he said. "They’re clearly not confident, or they wouldn’t have waited a year to bring it up."
e-mail:flaws@primediabusiness.com
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