Democratic Underground

Central American Sequel to NAFTA a Hit with Execs, a Bomb to Working Americans

April 28, 2005
By Roger Bybee

However improbable, the atmosphere in Washington, DC is actually even more rarified and unreal than in Hollywood, as shown by the fact that Congress would even consider the Central America Free Trade Agreement now before it.

When a super-expensive, star-studded, ultra-hyped project in Hollywood can't be sold to the public (think Gigli, Waterworld, or Ishtar), the heads of top studio executives will roll. Serious accountability is demanded. The media have a field day highlighting every flaw. Needless to say, no one mentions the idea of a sequel, except in bitter jest.

But in Washington, even the super-colossal failure of the North American Free Trade Agreement in the public's eyes fails to produce even a ripple of acknowledgement among either elite policymakers or the media. Public sentiment against NAFTA was overwhelmingly opposed beforehand, and is more strongly against it now (opposition to NAFTA-style deals is opposed by 55% even among those earning more than $100,000).

No wonder. In terms of every promise made by its proponents, NAFTA has failed: an estimated 879,000 jobs lost in the US; manufacturing wages have fallen on both sides of the border; nearly 2 million Mexican farmers have been displaced by US-subsidized food imports; already-abysmal environmental conditions have worsened along the border, and a modest US trade surplus with Mexico has turned into a $45 billion deficit. NAFTA-style "free trade" has amounted to merely exporting US factories and jobs to low-wage Mexico and importing finished products, with most Mexicans getting poorer and seeing US-made consumer goods further out of reach.

But none of this matters to the elite corporate and political officials who shape economic policy for America. In fact, they are planning a sequel to NAFTA: the Central American Free Trade Agreement with five nations just south of Mexico and the Dominican Republic. And why not? While NAFTA may have been a flop for mere citizens, it was fabulous for the Fortune 500.

Offering a very timely, penetrating and concise preview of the sequel is documentary filmmaker (of the powerful and passionate American Jobs) Greg Spotts with his new book, CAFTA and Free Trade: What Every American Should Know. Although compact, CAFTA and Free Trade manages to skillfully puncture the over-arching myth of free trade so beloved by major media pundits, examine the increasingly massive role of China as a low-wage producer surpassing even Mexico, and to discuss what passage of CAFTA and its bigger brother, the continent-wide Free Trade Agreement of the Americas - would mean for working Americans.

"Free Trade agreements have been described as tools to open up new markets for American-made goods," Spotts notes, a proposition readily swallowed by free-market fundamentalists in both parties and the media corps. This notion is highly dubious, given that Central America's combined population of 37 million has far less buying power than the three million people of Kansas. Spotts deftly skewers the absurdity of the "market-opening" premise: "Who in their right mind would invest in manufacturing a product using well-paid American workers and then try to sell that expensive product to price-sensitive, low-wage Chinese or Mexican consumers?"

As Spotts points out, "Building a viable consumer class in an impoverished nation is very hard work that can take decades." But US decision-makers show no interest in the successful European Union model of investing in the public infrastructure (roads, health, education, etc.) and assisting with building real democracy in poorer nations like Spain, Greece, and Portugal.

Instead, the "free trade" model is based on short-term plunder, untroubled by concerns like developing local purchasing power. It entails simply providing elaborate investor protections for corporations temporarily setting up shop in low-wage nations to maximize their profits. So don't bother with paying for clean water, sewers, or safe streets for your workers in places like Juarez, Mexico, which boasts the biggest concentration of US-owned maquiladora plants, typically paying 60 cents to $1 an hour.

And when an even lower-wage opportunity crops up in, for example, China, where pay may run as low as 20 to 30 cents an hour, just relocate your operation there. While Mexico gained 900,000 low-paying manufacturing jobs between 1993 and 2000, it has since lost about 250,000 of these jobs. US-based and other transnational corporations are now bypassing Mexico in favor of China, which offers a regimented, well-trained workforce at rock-bottom wages.

The Central America Free Trade Agreement is aimed at intensifying the race to the bottom, as it will make the six low-wage nations more accessible to US corporations by providing a robust set of protections for investors on intellectual property rights and a host of other concerns to corporate executives. For example, CAFTA imposes a new 5 to 10 year waiting period before nations like Guatemala can manufacture the generic version of badly-needed pharmaceuticals like anti-AIDS drugs, thereby extending the monopoly of US drug firms.

CAFTA generally represents a step backward when it comes to labor and environmental standards. Where the Generalized System of Preferences guiding trade deals requires nations "to afford internationally recognized worker rights," CAFTA would only demand that each nation enforce its own labor laws. In this context, it would pit the Central American nations with weak labor protections and sordid histories - against each other to ignore enforcement in the hopes of attracting multinational firms.

CAFTA would also uniquely undermine the ability of US states to enforce laws aimed at blocking the outsourcing of jobs, promoting the use of energy-efficient policies, or demanding the boycott of governments practicing human rights abuses, as with Burma.

Potentially, as Spotts stresses in his urgent new book, the US has the influence to nurture a version of globalization very different from CAFTA. As he puts it, "If we dare to dream, the powerful economic forces that are sweeping the world could be harnessed to build up our neighbors instead of strip-mining their labor."

CAFTA and Free Trade: What Every American Should Know by Greg Spotts (New York: Disinformation Co Ltd., 2005), 93 pages, $7.95.

Roger Bybee is a Milwaukee-based writer and activist. He can be reached at

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