Twelve years after the passage of the North American Free Trade Agreement (NAFTA), another trade agreement is facing scrutiny in Congress. The Central American Free Trade Agreement (CAFTA), while carrying a smaller economic impact, has turned into another political battle as the Bush administration faces opposition from House Democrats. What is the economic importance of the CAFTA? Why are many Democrats, who traditionally look favorably upon trade, opposing this agreement?
Washington Post staff writer Jonathan Weisman was online Wednesday, July 6, at 11 a.m. ET to discuss the politics of CAFTA. He addressed the issue in an article this morning.
A transcript follows.
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Portland, Maine: Your article on CAFTA sounds like you would like the agreement go through Congress. I am a little surprised that you didn't go into much detail as to why most Democrats might oppose the idea, other than to block Bush. Isn't it possible that their reasoning may go beyond that - that there is a real fear that legislation like this may, in the long term, hurt our economy more than anything else- and the only folks that would see real benefits from it are the wealthy corporations that already profit from exploiting the resources in these countries?
Jonathan Weisman: I don't think you read the story carefully. I did say there is a partisan element to this, beating Bush. But I also said there are real concerns about more than a decade of trade liberalization, a lack of consultation, and a firm belief that CAFTA is a step back from the progress made in previous trade deals that included progressively stronger environmental and labor standards.
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Cleveland, Ohio: What do you feel the net effect will be on Republican Congressmen from areas impacted by job losses in textiles and in sugar producing areas? On the flip side, will the Democrats who formerly supported free trade lose significant business contributions?
Jonathan Weisman: I think this will be a very tough vote for Republicans from sugar beet states and for textile state Republicans. Constituents feel they were burned badly by NAFTA and CAFTA rhymes with NAFTA. But I will bet the GOP leadership makes sure the deal passes by a single vote. They will make some number of Republicans walk the plank but only as many as are needed to pass the agreement. For Democrats, the danger is much longer term. In the short run, there's mostly political upside to opposing CAFTA, and that is foremost in their leadership calculations.
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Greenbelt, Md.: The only thing "free trade" about CAFTA is in the name. It's slavery for workers and bribes for corrupt officials(here and abroad).
CAFTA sets no minimum standards for labor or the environment, and in fact creates strong incentives for continued erosion of regulations. It undermines democracy by prioritizing political stability ("stable investment climate") over participation. It will cost jobs in the U.S. and lives in the rest of the hemisphere. Benefits accrue only to the companies and corrupt leaders involved.
The real story here isn't that most Democrats (and many Republicans) oppose this deal - it's that anyone at all supports it. 10 Democrats in the Senate already. How about doing a story that follows the money behind these votes?
Jonathan Weisman: That is certainly one perspective held by many. One word of caution, the combined GDP of all six CAFTA countries is smaller than the Czech Republic alone. You may oppose the deal on philosophical grounds, but it is very difficult to see how such tiny economies could be much of a threat to the United States.
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Centennial, Colo.: Recently there have been more and more instances of politicians criticizing China for unfair trade practices and its defense build up. Congress even seems very likely to pass a 27% tariff on Chinese products should Beijing not revalue its currency. How has fear of China in Washington affected the terms of the debate on CAFTA and the long term goal of FTAA?
Jonathan Weisman: Excellent question. Fear of China undergirds every trade matter, no matter how little it has to do with China. Textile firms do believe CAFTA will afford China a backdoor route into the United States duty free, but much of the opposition -- especially from rust belt states where small manufacturers have been decimated -- comes from anger at China. The sense is, no more trade deals, period.
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Washington, D.C. : Doesn't the question from Portland illustrate the problem with trade is mostly perception? Things have not gotten worse with the passage of free trade deals. In fact unemployment is lower and the median wage is higher today than before the passage of NAFTA. Has populist demagoguery drowned out the truth?
Jonathan Weisman: If you worked at Electrolux in Michigan and saw the plant shut down explicitly to move to Mexico, your anger at NAFTA is real and understandable. The problem is that the losers in free trade are obvious, but the larger impact on economic growth and opportunity is very intangible. It's hard to make the case to a factory worker that his job loss is the nation's gain. That said, such sentiments are easily stoked by politicians and union officials.
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Washington, D.C.: "And they say past trade agreements were accompanied by increased support for worker-retraining programs, education efforts and aid to dislocated workers -- support that the president has not provided."
Aren't those laws still in effect? Is this really a valid argument against CAFTA?
Jonathan Weisman: Yes, many of those laws are in effect but programs like trade adjustment assistance, vocational education and even basic education aid are being squeezed by the budget deficit and the president's demand that all non-security domestic spending be cut.
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Raleigh, N.C.: Do you find it ironic that American business interests as well as politicians are screaming "unfair" to China not allowing their currency to float and flooding our markets with cheap goods, yet this is the same argument that developing countries make concerning American and European agricultural subsidies? Though I do not support CAFTA, I am not against "free-trade" just as long as it is "fair-trade". I only wish the Democrats would take a stand on this issue based on the merits of the agreement, and not to spite Bush and the Republicans.
Jonathan Weisman: The West's stand on agriculture subsidies undermines every position is takes on trade in goods and services. There is simply no way you can legitimately demand one country lower its export subsidies or currency manipulation while you blatantly protect your farmers. The next round of international trade negotiations, the Doha round, is supposed to get to this point, but given the difficulty is easing sugar barriers the tiniest amount, I'm not holding my breath.
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Wheaton, Md.: It seems Democratic leadership in the House is intent on defeating CAFTA, solely in order to score points against the administration. To me, the labor and environmental law issue is a smoke-screen, as it was dismissed by Democrats in passing NAFTA and other trade agreements. As a result, the fates of these 6 countries are left to twist in the wind.
Also, given the staggering amount of money in remittances sent by American citizens to residents of these countries to buy goods, why doesn't the Hispanic community openly support and lobby for CAFTA? CAFTA would allow these other countries to save significant amounts of money when purchasing goods from the U.S.
That's how I see it. Your thoughts?
Jonathan Weisman: I think there are Democrats who are using the labor issue as a smokescreen to simply draw blood from the Bush administration. But there are dozens of Democrats in the past who have resisted such political pressures and sided with the White House -- Democrat and Republican -- and who are not doing so this time. Both sides are partially to blame here. There are some Latino groups who are coming out strongly for CAFTA, but there are also Latino labor and church groups in Central America who oppose the deal because they fear it will lead to further exploitation of workers and will devastate small campesino farmers, who will be driven off their land by cheap U.S. sugar and wheat.
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Woodbridge, Va.: The economic theory that argues for free trade is tremendously strong; it's probably the one policy question that virtually all serious economists agree on. Are the many politicians that oppose free trade, and make economically unsophisticated arguments against it, ignorant of this theory, or do they choose to ignore it for political gain?
Jonathan Weisman: It's economic theory vs. constituent anger. In our democracy, that's no contest.
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Cleveland, Ohio: Although for political reason it may not be said, do you feel the general attitude among members of both parties is that a return to trade barriers is not an option due to both logistics and the effect it would have on the economy, particularly in terms of inflationary pressures it would create?
Jonathan Weisman: I do agree with you. I think it is understood that a blanket system of tariffs and trade barriers has been economically devastating in the past and would be in the future. That's why I don't believe proposals to slap 27-percent tariffs on Chinese goods -- while politically attractive -- will never pass.
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Falls Church, Va.: I agree w/the first questioner-Portland, Maine.
The article is slanted. NAFTA was terrible. So why do you want to go back to it? It may be pro-high-class (as you said pro-business), but just about everyone could tell you it certainly isn't pro middle- and lower-class.
You've got to have a balanced approach. Getting labor standards does NOT make it a good agreement.
Jonathan Weisman: I believe I gave ample voice to your concerns in the story, but CAFTA is not NAFTA, despite its name. The economies of Mexico and Canada dwarf those of Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica and the Dominican Republic. The economic stakes here are not even comparable.
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Manassas, Va.: Just a quick comment.
To me, this is a no-brainer:
With CAFTA, we will be allowed to purchase certain products at a cheaper price, saving all of us money that otherwise would have gone to a few politician-protected domestic industries.
Furthermore, it would provide thousands of jobs to poor people in poor countries, not only improving their own lives, but it would decrease illegal immigration from these countries into the U.S.
In the end, CAFTA will be good for the US and for Central America.
Shame on both Democrats and Republicans who oppose CAFTA. Vote them out!
Jonathan Weisman: The issue is whether you look at the micro or macro level. As with all trade agreements, there are winners and losers. Sugar growers in the U.S. would face more competition while wheat growers would have new markets. Congressmen, by and large, are not dumb. They know there may be pain involved here.
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Pittsburgh, Pa.: Given the agricultural subsidies issue, how can anyone credibly claim that CAFTA will promote stability in Central America? These are economies overwhelmingly dependent on agriculture. Some of the countries managed to protect their corn for a few years, but it is very difficult to see how countries where over the half the population does not have access to electricity will become competitive in those few years. In Mexico, the corn quotas were not enforced and over 1 million corn farmers lost their livelihoods. What the agreement will trigger is even more migration to the U.S.
Jonathan Weisman: For Central Americans, I think you have put your finger on the real concern. A small-hold corn grower in Guatemala cannot compete with a farmer in Iowa. The hope is that new, more lucrative jobs will crop up in Guatemala City, and economic growth does tend to climb as agriculture industries consolidate in countries. But that takes time, and in the meantime, there probably will be a lot of out-of-work, displaced slum dwellers.
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Toledo, Ohio: It seems that every trade agreement lately somehow transforms into a sweetheart deal for the big drug companies. Has the pharmaceutical lobby gotten its hooks into the Central American Free Trade Agreement as well?
Jonathan Weisman: Oh yeah. One of the big sticking points was securing intellectual property rights for Big Pharma to head off cheap knockoffs in Central America. One of the big complaints from labor is that the administration went to bat for the drug companies but made little effort to secure labor standards.
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Fairfax, Va.: Thanks for your informative article this morning. However, I do question why the article frames the Democrats' move away from CAFTA, not in terms of specific benefits to the voters but, instead as "a swing toward isolationism (which) could reinforce voters' suspicions that the party is beholden to organized labor and is anti-business...". At the same time the article fails to address possible voter reaction to the Republicans who are turning against CAFTA. How do you reconcile assuming voters will see the anti-CAFTA Democrats as anti-business and immoderate with the fact the article makes no assumptions about how voters will view the anti-CAFTA Republicans? Do you believe voters have no suspicions about those Republicans and that their votes against CAFTA (unlike the Democrats') are automatically considered justifiable because of local economic requirements?
Jonathan Weisman: Good question. For the Democrats, this is a national issue, whether the party can be seen as a governing political force that can take control of the White House and Congress. It's bigger than individual congressional districts. Republicans are the governing party. For them, the risks are immediate and local -- district by district.
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Dayton, Ohio: I find it ironic that the same vitriol is applied to free trade as to immigration. If one doesn't want foreigners to come here, doesn't it make sense to help them create wealth in their own countries? Yet the political rhetoric completely ignores this connection.
Jonathan Weisman: Actually, Democrats have used that argument against the deal. They say NAFTA was supposed to create jobs in Mexico to stanch the flow of illegals, yet since NAFTA's passage, the problem of illegal aliens has gotten far worse. Opponents have one big advantage over proponents: While pro-CAFTA people tout the theoretical benefits, opponents have more than a decade's worth of data on swelling trade deficits, surging illegal populations and declining manufacturing to bolster their claims.
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Mendon, Ohio: I appreciate your fairness on this issue.
It's a welcome change because The Washington Post is the house organ for free trade fundamentalism.
Back in 1993, The Post even published a special book about the beauty of NAFTA.
Jonathan Weisman: Our editorial page has not changed on this subject.
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Pittsburgh, Pa.: These "more lucrative" jobs are the garment maquiladoras, which may create employed slum dwellers, but little else. The maquiladoras that increased in Mexico after NAFTA are now leaving for lower wage areas. In other words, the investment created by such trade agreements is not stable.
Jonathan Weisman: In a globalized economy, nothing is stable. One argument for CAFTA is that lowering the cost of goods from Central America will keep their manufacturing from going to China. But I doubt it. Chinese labor costs are far cheaper than even Central America's, and if a trade deal can give a temporary boost, it is only temporary.
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Arlington, Va.: Your article today mentions some of the shifts in trade negotiations recently -
What do you think are the long-term implications of the one party marginalizing another on issues such as trade that have traditionally been bi-partisan?
I see your point about handing Bush a defeat, but these members appear to view this issue as something beyond simple politics. Assuming CAFTA passes by one vote - What clear signs can we look for to see if CAFTA is a success or failure?
And how do we reinstate negotiations between the parties on future trade agreements?
Jonathan Weisman: I think the Bush administration's tendency to negotiate agreements or work out policies, then dump them on Congress is really coming back to bite them. On CAFTA, on nominees like John Bolton and on Social Security, Democrats have finally said, hey, if you don't bring us in from the beginning, don't expect us to be there in the end.
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Harrisburg, Pa.: Isn't a major problem with this entire discussion is that our government is unwilling to curb the cost of free trade in hopes that the overall benefits of free trade will win out? If we would provide for proper job conversation so that displaced employees would be provided health care along with either a new job or job retraining to obtain a new job, then the downside of free trade would be eliminated. I probably already know the answer to this question, but why isn't our government willing to spend the money to do this so its free trade policies will work?
Jonathan Weisman: Because it costs money.
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Dale City, Va.: How on earth does the sugar industry have so much political power that politicians barely dare touch protective measures that have no rational basis and indeed are harmful to everyone in the country that isn't a sugar producer?
Jonathan Weisman: For a very long time, the sugar industry has understood the tenuousness of its position. Sugar cane is not particularly conducive to the U.S., even in Louisiana and Florida, and sugar beets are a costly way of producing what is basically a very cheap product. So they have protected themselves with political campaign contributions that are by far the most generous in the ag industry. It is no coincidence that Bill Clinton interrupted one of his trysts with Monica Lewinsky to take a call from one the the Fanjul brothers, the legendary South Florida sugar barons.
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Washington, D.C.: I have to disagree with the contention that CAFTA and labor issues is merely a "smoke screen." It is a real problem. I have been to Central America and have seen the U.S. factories. These are not good jobs, in fact they often not only harm the workers but they often leave immeasurable harm on the country and land, environmentally.
In Central America, CAFTA was passed in Guatemala only after the soldiers gunned down protesters and refused to hear the concerns of civil society. In Honduras, it was passed in the dead of night, in a move that is being challenged in the country's court system .Yet, we continue to promise this will help the region become more democratic.
There are a lot of problems with CAFTA (intellectual property rights, access to medicine, etc.) not only democracy and labor rights. It is incredibly unfair to say people don't like CAFTA only because "it rhymes with NAFTA." You may not agree with our views but at least show a little respect.
Jonathan Weisman: As I said, the Democrats are not monolithic.
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It's economic theory vs. constituent anger.: No. No its not. Again, Hecksher-Olin. Basic _Capitalist_ Econ, 200. Question already asked. Please stop pretending this is so one sided and unspike the question.
Thank you.
Jonathan Weisman: Hecksher-Olin. Basic _Capitalist_ Econ, 200 vs. 1000 phone calls from textile workers to the offices of Rep. Bob Inglis. I rest my case.
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Washington, D.C.: I work for a trade association that usually lobbies strongly for free trade agreements, but our members have more or less ignored CAFTA because it affects less than 1% of our industry's exports.
My concern is what this Congressional divisiveness, and especially the Democrats' partisan opposition to CAFTA, will mean when it comes time to vote on the results of the WTO Doha Round, which will have far more broad and important implications for the U.S. economy. It will be hard for the pro-trade Democrats who vote against CAFTA to come back and vote for the Doha Round in 2007.
Of course, I'm optimistically assuming there will be a result in Doha Round to vote for.
Jonathan Weisman: This is the real fight. If CAFTA goes down, the Doha round starts under a very dark cloud. If it passes, the labor and agriculture interests will have to regroup all over as Doha proceeds. CAFTA is a prelude and important one.
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Mendon, Ohio: Re: winners and losers.
Winners (really, really big winners): multinational corporations with the money to move production to countries with low wages.
Losers: workers in both countries.
Jonathan Weisman: SOME workers in both countries. There are just too few workers in Central America to represent a wholesale threat to U.S. workers.
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Munich, Germany: What is the current extent of economic integration among Central American countries themselves? Is there a tendency toward greater economic (and political?) integration within Central America? Do you see any developments towards something like an E.U. structure in Central America?
Jonathan Weisman: I think integration in Central America has been moving forward, but CAFTA would be a big driver. It's one of the best arguments for its passage.
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New York, N.Y.: Realistically, the U.S. asks individuals to bear most of the costs of economic dislocation. Wouldn't there be more support for free trade, fair trade or whatever, if there was some realistic assistance for the dislocated? After all, the big economic winners also got big tax cuts.
Jonathan Weisman: Yes. Clinton's approach was always to link trade deals with increased spending on dislocation aide, worker retraining and education funds.
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Munich, Germany: Do you think that CAFTA will raise the standard of living of the poorer people in Central America?
If not, then this agreement has the potential to enrich the business-elite in Central America and promote sweatshop labor conditions, while sapping jobs away from the U.S.
Jonathan Weisman: Theoretically, yes, over time, trade will raise living standards, but that's theoretical.
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Jonathan Weisman: Sorry folks, gotta go. Thanks for participating.
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