After months of trying to convince House legislators to rally around the Central American—Dominican Republic Free Trade Agreement (CAFTA), President George W. Bush won. The bill passed by a razor thin margin of 217 to 215.
CAFTA would create a free-trade area between the United States, the Dominican Republic, and five Central American countries–Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. Its supporters say it would make more than 80% of U.S. manufactured goods duty-free immediately, increase U.S. sales exports by approximately $3 billion in the first year, and increase agricultural exports by $1.5 billion per year.
In economic terms, the six Latin American nations have far more to gain than the U.S. According to Rep. Maxine Waters (D-Calif.), CAFTA is a bad deal for American workers and businesses. “These trade agreements allow the exportation of jobs to third-world countries for cheap labor. For all of the jobs that leave [the U.S.], African Americans get fewer jobs. We’re losing our manufacturing base in particular,” says Waters. She says that the North American Free Trade Agreement, passed in 1994, has been devastating to American workers, exporting almost 1 million manufacturing jobs to Mexico and turning a $2 billion trade surplus with that country into a $45 billion trade deficit. Waters also charges that small and medium-sized businesses will suffer under CAFTA, losing contracting opportunities from larger corporations that prefer cheap foreign labor.
Bill West, senior vice president and COO of Mays Chemical Co. (No. 25 on the BE INDUSTRIAL/SERVICE 100 list with $159 million in sales), has mixed views. “Our customer base is 99.9% manufacturing, so we lost some fairly major customers who relocated their manufacturing to Mexico. We’ve also done some business that was made easier by NAFTA,” says West. “Do I think that [either agreement] will ultimately be positive from an overall standpoint? I don’t know. One side of me says yes, because it hopefully will allow U.S. goods and services to be more easily marketed in the rest of the Western hemisphere. But then the other side of me says that many of the markets are not economically positioned to move substantial amounts of our products.”
Rep. Bill Jefferson (D-La.) was one of just a few Democratic legislators who openly supported CAFTA from the start, because it stands to bring significant export opportunities to his district. In a concession to the spotty labor enforcement records of some of the CAFTA nations, Jefferson, who sits on the House Ways and Means Committee, worked to include a reporting mechanism that will strengthen labor commitments.
Jefferson argues that the trade agreement will benefit Americans by providing lower costs on a variety of products. “Imports broaden the shopping choices and if they’re cheaper than domestic-made products, they put pressure on domestic manufacturers to lower their prices. For those of us who represent low-income communities, that’s not a small deal,” he says.
But what will lower prices really cost us? According to an Economic Policy Institute economic snapshot, the U.S. trade deficit is currently at a record high.