Central American
Free Trade Agreement (CAFTA)
The Central
American Free Trade Agreement (CAFTA or otherwise known as DR-CAFTA)
is an agreement between the United States and six countries. To
date the U.S., El Salvador, Guatemala, and Honduras have ratifi
ed the agreement, while Nicaragua, Costa Rica, and the Dominican
Republic have yet to do so. The extreme measures that were needed
to ratify CAFTA in the U.S. Congress represents a change in the
political climate around trade. Like the North American Free Trade
Agreement (NAFTA), CAFTA will do more than just eliminate tariffs
and trade barriers between those countries.
Because of the slow and often deadlocked negotiations at the World
Trade Organization (WTO) and Free Trade Area of the Americas (FTAA)
levels, the U.S. government is actively pursuing regional and
bilateral trade agreements like CAFTA. This is an attempt to isolate
countries who joined together to demand that global trade agreements
better serve the needs of developing countries (see WTO and FTAA).
From the Central American governments' point of view, CAFTA will
secure preferential access to U.S. markets, especially at a time
when U.S. quotas that once limited Chinese apparel imports have
been lifted.
Pushed by
powerful political and corporate interests, this agreement was
crafted in secret. And with President Bush’s “Fast
Track” (or Trade Promotional Authority), Congress could
only vote Yes or No on the trade deal--preventing U.S. representatives
from responding to constituents and influencing or amending the
agreement. After 14 months of overwhelming opposition, the Bush
Administration fi nally introduced CAFTA to the U.S. Congress
and was adopted in the House by a two vote margin (217-215) just
past midnight on July 28, 2005.
Based on AFSC's
work in the region and in the U.S.,
and analysis of the final CAFTA text, the organization has concluded
that, on balance, the CAFTA agreement
does not serve the interests of justice and the
common good.
Why
AFSC Opposed CAFTA
CAFTA is based
on the seriously flawed NAFTA, and it extends and amplifies the
harmful aspects of NAFTA in the following ways:
Threat
to workers in the U.S. and in Central America
* CAFTA is
likely to entrench existing sweatshops by only requiring countries
to enforce only their own labor laws, even though many fall far
below international labor standards.
* Fines for labor violations will be paid by the country to itself.
* Because the minimum wage in Central America is even lower than
in Mexico, competition will continue to move jobs out of the U.S.
and push wages lower throughout the region.
* The CAFTA definition of "labor laws" excludes laws
related to workplace discrimination and will allow abuses like
routine pregnancy testing of women workers or applicants, resulting
in a loss or refusal of employment. 1
Did
you know?
The average
hourly wage of U.S. production workers in manufacturing is $16
(2) compared to 90 cents for Honduran workers producing goods
for the U.S. market. (3)
5.5 million
Central American workers are dependent on agriculture for their
livelihoods. (4)
1.5 million
Mexican campesino farmers are estimated to have lost their livelihoods
under NAFTA's agricultural terms. (5)
Danger
of increasing the pressure on Central Americans to migrate to
the U.S.
* CAFTA,
like NAFTA has done in Mexico, would pit poor Central American
farmers against highly subsidized U.S. agribusiness.
* Grain prices will drop dramatically in Central America, forcing
small subsistence producers off their farms and into overcrowded
cities where unemployment is already high, and eventually to the
U.S.
Threat
to governments' ability to protect the welfare of their people
* CAFTA will
be used to promote privatization and deregulation of essential
services, such as health, education, and water, resulting in prohibitive
price increases, reduced access, and compromised quality.
* CAFTA would prevent governments from giving preferences to local
firms and from promoting gender equity, social justice, and respect
for human rights when granting contracts.
* CAFTA will be used to weaken national and international environmental
standards. Companies have the right to sue any government that
obstructs their capacity for profit with environmental regulations.
Did
you know?
The Harken
Oil Company is demanding $57 billion from the government of Costa
Rica on the grounds that the country's environmental impact laws,
which halted the oil company's exploration, interfere with their
investor rights. Under CAFTA, this case would be tried in an international
tribunal rather than national courts. (6)
CAFTA
is a Dangerous Template
While CAFTA
applies only to seven countries, six of which have relatively
small economies; its implications are broader than they might
appear. First, it is now possible for large companies based in
Europe to establish Central American subsidiaries, and use those
to challenge legitimate U.S. laws and regulations. Second, CAFTA
was widely seen as a template and a referendum for further trade
agreements, several of which are currently being negotiated. Although
it only passed by two votes late in the night, it provides a perceived
green light for the Bush Administration to continue down its current
path of aggressively pursuing regional trade agreements based
on this same flawed model.
The fact that
a trade agreement that is likely to have minimal economic effects
on the U.S. economy was so difficult to pass shows that future
and more significant trade accords like the FTAA and WTO will
face almost certain failure as legislators see the true effects
of these accords and opposition to them becomes even more organized.
See more resources on the CAFTA >
Notes:
1. Human Rights Watch press release Dominican Republic : U.S.
Trade Pact Fails Pregnant Women, 22 April 2004.
2. U.S. Bureau of Labor Statistics, National Employment, Hours
and Earnings, 21 June 2004.
3. Edward Alden, " Workers Bar Way to Free Trade in Central
America," Financial Times, 4 Dec. 2003.
4. Oxfam America, The Central American Free Trade Agreement: Three
Reasons for Congress to Vote No, Press Release, 22 Jan. 2004.
5. Public Citizen, CAFTA by the Numbers: What Everyone Needs to
Know, 2004 www.citizen.org/documents/CAFTAbyNumbers.pdf
6. Engler, Mark, et. al. " Harken v. Costa Rica," AlterNet,
26 March 2004 www.alternet.org/story/18258
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