Global Exchange Updates on CAFTA

As you may know, the Central American Free Trade Agreement negotiations were
just completed. Since many of us are on break, it's a good time to use your
free time to fight against CAFTA. Below please find:

1. A sample Letter to the Editor, from our friends at the Citizens Trade
Campaign - please modify to fit your area and send it in!!
2. A short introduction and further resources on CAFTA
3. A New York Times article about the negotiations
4. A Knight Ridder article from our friends at the Center for Economic and
Policy Research about CAFTA.

Please note that it is likely that CAFTA will be sent to Congress for
approval as early as this January. Prepare for a grassroots fight against
the expansion of corporate rule! Central America Is Not For Sale!

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Sample Letter to the Editor:


Dear Editor:

[Workers and/or farmers and/or environmental advocates] in [your town]
should brace themselves for another [storm or natural disaster common in
your region]. This one's gathering hot air in Washington DC and is hell-bent
on a path that will spell disaster for our community if we are unable to
stop it. The Central American Free Trade Agreement or "CAFTA" was finished
in Washington DC on Wednesday and is yet another in the seemingly endless
line of new trade agreements the Bush Administration is pushing in an effort
to line the pockets of a few more CEO's and Wall Street investors.
Unfortunately for us, this agreement would yet again [weaken environmental
standards, sell our jobs down the river, undermine global food security,
push thousands into poverty in Central America, undermine local government
control, bankrupt family farms in this country . . . etc.]. And, after 10
years of NAFTA we're quite sure we've had enough. People here have seen the
disastrous results of corporate led globalization and we sure don't need a
new expanded version. Isn't it bad enough that under NAFTA [Mexico's middle
class has been wiped out, the American manufacturing sector has been bled,
corporations are still suing governments for having environmental laws,
family farms are disappearing every day ]?

It's time for Congress to stand up for the people they represent instead of
merely holding fast to the wishes of U.S. based multinationals and their
lobbyists. It's time for us to make some noise about this new agreement
since [ Your Representative to Congress] should know by now that [Your
region/town] can't withstand any new free trade agreement that rhymes with
NAFTA - tell [her or him] to vote NO on CAFTA.

Sincerely,

[Your name]
[Your address]

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Short Summary of CAFTA

CAFTA is essentially a mini-FTAA, as it includes many of the same harmful
provisions that have led to job loss, poverty, and environmental destruction
that we have experienced under ten years of NAFTA. CAFTA, modeled on NAFTA
like the FTAA, is an agreement between the U.S. and 4 Central American
countries, as Costa Rica walked out at the last moment. But far from being a
source of economic growth for Central America, it would lead to increased
exploitation of workers there, greater poverty, increased erosion of
democracy and destruction of the environment as it would allow large
corporations to sue Central American governments over environmental and
public interest protections.

More information about CAFTA:
http://www.stopcafta.org
http://www.citizenstrade.org/cafta.php

Fair Trade or Free Trade? Understanding CAFTA
http://www.wola.org/economic/cafta_briefing_packet_final_dec03.pdf

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The New York Times

A Pact on Central America Trade Zone, Minus One
By ELIZABETH BECKER

Published: December 18, 2003

WASHINGTON, Dec. 17 - The United States sewed up its first new trade
agreement in a year marked by reversals and setbacks, completing
negotiations on Wednesday with four Central American countries to create a
regional free trade pact.

But it fell short of its goal of including Costa Rica, the richest nation
of the group, and prospects are cloudy for trade progress in the year
ahead.

Robert B. Zoellick, the United States trade representative, saluted his
partners from El Salvador, Guatemala, Honduras and Nicaragua, saying they
had the courage to agree to open their economies further to United States
services and goods. Still, the agreement is but a fraction of the Bush
administration's ambitious trade agenda.

That agenda has faltered on several fronts this year: global trade talks
collapsed in Cancún, Mexico, in September; bilateral talks for trade
agreements with Morocco and Australia have been delayed; and the agenda for
a free-trade agreement for the Western Hemisphere had to be watered down to
avoid a debacle.

Free trade advocates say these disappointments reflect deepening concern in
the United States and around the world about the direction of trade
liberalization and questions about its benefits.

"Part of the reason this year has not been kind to these trade pacts is the
advocates of free trade are too fundamentalist in their approach," said
Julia Sweig, a senior fellow at the Council on Foreign Relations and Latin
America expert. "They don't give the same level of priority to human
capital - immigration and labor rights - as they do to inanimate issues
like property rights and goods and services."

In the United States, some lawmakers and others are gaining traction in
their complaints that free trade agreements have helped propel the
country's growing trade deficit, which now stands at $500 billion, and
contributed to the loss of three million manufacturing jobs since President
Bush took office.

Though the new pact, the Central American Free Trade Agreement, or Cafta,
was warmly received by many industry groups in the United States,
representatives from the sugar and textile industries as well as some
members of Congress were already complaining that it would cost more jobs
in return for little benefit.

"In order to get a trade agreement, they had to trade our jobs in sugar,"
said Dalton Yancey, executive vice president of the Florida Sugarcane
League. "But people are more concerned today about jobs, and this agreement
means sugar producers and industries in rural America are going to lose
more jobs."

Those issues will make it difficult for the administration to win passage
of Cafta in Congress in the coming election year. Besides the potential
loss of jobs and growth in the trade deficit, lawmakers say they are
concerned about labor and environmental standards.

With the administration's tepid trade record and the loss of jobs looming
as a major campaign issue, it is questionable whether any of the
presidential candidates will be full-throated advocates for free trade and
globalization.

This year, the administration has also completed two free trade agreements
begun by President Bill Clinton, one with Chile and one with Singapore, but
it has won little support on the global stage. World Trade Organization
talks in Cancún broke down when a group of 20 developing nations challenged
the contention by the United States and Europe that current trade rules are
effective in the fight against poverty in the poorest nations.

And the Bush administration backed away from its steel tariffs this month
after losing to Europe at the W.T.O., a test of the America's commitment to
being policed by an international organization.

Cafta exemplifies the free trade dance the administration is having to
perform.

Currently, the annual trade between the United States and the four Cafta
countries is valued at $15.4 billion, with nearly three-fourths of the
products from Central America already entering duty free under special
preference programs.

The United States insisted that the Central American nations open up their
protected service areas and agricultural products markets. But at the same
time, the United States is resisting a full opening of its borders to
sensitive agriculture products like sugar.

Trade officials made no direct claims on Wednesday that the new agreement
would lead to an improved trade balance or more jobs for Americans.

Instead, said one, "Cafta and other trade agreements are important
components to creating an overall robust economic picture of expanding jobs
and exports."

There is growing criticism that social programs, particularly in the public
health arena, suffer disproportionately under these new trade agreements.

The talks over a new free trade agreement with Australia had to be extended
in part because the Australian government balked at demands by United
States officials to water down the system under which the Australian
government negotiates the prices it pays for prescription drugs.

The new Cafta agreement was criticized by global health advocates who said
that the provision strengthening intellectual property rights would weaken
generic drug manufacturers in the region.

"This is the worst case scenario," said Rachel Cohen of Doctors Without
Borders. "By limiting the ability of generic pharmaceutical companies to
compete, it will mean these people lose the lever of generic competition
that keeps prices down and gives poor people access to medicine."

Costa Rica, which could still join Cafta, resisted doing so this week
because of American demands to open up its services industries and tourist
trade, which could mean giving up control of its coastline and its emphasis
on ecotourism.

Still, the administration won strong support for Cafta from many industry
groups, including the United States Chamber of Commerce.

Mark Smith, the director of Western Hemisphere affairs at the organization,
said Cafta was "a strong, high-value and comprehensive agreement."
He said that the United States was correct to insist that Costa Rica open
up its services sector.

"Telecommunications has been a state-run monopoly for quite some time,''
Mr. Smith said. "It's been linked with social programs by extending
telecommunication links to rural areas, but the fact is Costa Rica has some
of the highest rates in the region."

Similarly, Mr. Zoellick said the textile and apparel industries would be
strengthened by closer integration between American yarn and fiber
producers and Central American manufacturers.

The industry is facing stiff competition from China and other nations, Mr.
Zoellick said, and the agreement will help "to prepare for an increasingly
competitive global market."

Senator Ernest F. Hollings, Democrat of South Carolina, complained that the
South Carolina textile industry had "already lost 62,400 jobs to Mexico,
China and other countries."

"This agreement will get rid of the rest," he said. "This is about all of
the Bush jobs policy that we can stand."

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CAFTA Not Likely to Do Better Than NAFTA
Knight-Ridder
December 18, 2003
By Mark Weisbrot

NAFTA, CAFTA, do we hafta? That was one of the slogans that thousands of
demonstrators brought to Miami last month, as they protested the ministerial
meeting of the Free Trade Area of the Americas. After having trouble
bullying some of the bigger South American countries into an agreement that
is mostly pain and little gain, Washington has decided prey upon the small
and the weak.

This week's agreement is with Nicaragua, El Salvador, Guatemala and Honduras
-- the misnamed "Central America Free Trade Agreement." It's not really
about free trade, since it will -- as did NAFTA -- help ratify an increase
in the most costly form of protectionism that exists today. That
protectionism is not for workers, but for the pharmaceutical industry.

The economic distortions created by patent monopolies are many times greater
than those caused by the sugar quotas, for example, that CAFTA is supposed
to phase out. So for all the Econ 101 reasons that economists oppose quotas
or tariffs -- just multiply that by 20 or 30, and you have the reasons why
CAFTA is likely to reduce overall economic efficiency by increasing
protectionism.

What about the overall economic impact on Central America? The agreement
comes as NAFTA approaches its ten-year anniversary, and of course this is
the main argument for CAFTA. NAFTA has been put forth as a success story.
The World Bank gave its qualified endorsement this week, releasing a report
just as CAFTA was signed: "Lessons from NAFTA for Latin American and
Caribbean Countries."

"NAFTA has had positive effects in Mexico but they could have been better,"
said David de Ferranti, World Bank Vice President for Latin America and the
Caribbean. That is much too generous. The most basic measure that economists
have to evaluate the success or failure of economic policy is the growth of
income per person. This ignores distribution; but from a purely economic
point of view, if the economy grows there is at least the possibility that
everyone can improve their living standards.

By that measure, NAFTA is a terrible economic failure. From 1994 through
2003, the Mexican economy has grown by only 11 percent per person. This is
less than on fourth the rate of growth that Mexico experienced in the 1960s
and 1970s.

This is the relevant economic comparison, for anyone who wants to honestly
evaluate Mexico's experience with NAFTA. Of course, the reforms that NAFTA
embodied in an international treaty did not begin in 1994 -- they started in
the early 1980s. But if we take the longer view, it looks even worse: from
1980 to the present, income per person in Mexico has grown by about 19
percent. This compares to 93% for the 1960-1979 (somewhat shorter) period.

In other words, there is no economic evidence that the NAFTA model is a
success. In fact it appears that past performance, when the Mexican
government had a much larger role in the economy, was much more successful
-- in spite of any inefficiencies. The same is true for the region as a
whole. Replacing development policy with a mere opening up of the economy to
international trade and investment, as these agreements seek to do, simply
has not worked.

Many Latin American leaders are aware of this problem, and they are also
aware of the growing discontent with the region's long-term economic
failure. That is why Washington has ended up signing an agreement with those
who are too weak to resist. Even Costa Rica, the most developed of the five
countries negotiating, dropped out this week -- leaving four countries with
a combined total of 2.8 percent of Latin America's income. Ironically, it is
a region that was devastated by decades of bloody civil war -- especially in
Guatemala, El Salvador, and Nicaragua -- that was either caused, aggravated,
or prolonged by Washington's intervention.

These agreements have also lowered wages and salaries for the majority of
U.S. employees, as even the research of pro-trade economists clearly
demonstrates. After 40 consecutive months of manufacturing job losses, some
Republican strategists are wondering aloud whether they want to try and
squeeze this agreement through Congress in an election year. They might ask
President Bush: NAFTA, CAFTA, do we hafta?

Mark Weisbrot is Co-Director of the Center for Economic and Policy Research
(http://www.cepr.net), in Washington, D.C.

--
Deborah James, Global Economy Director
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