CAFTA signed by US

[Mith242]

I mentioned this in another topic but it seemed worthy enough to have it's own topic. The US has now signed the CAFTA agreement. It is similar to the NAFTA agreement but involves Central America. I believe Canada, the US and Mexico comprise NAFTA. The US and I believe all the Central American countries comprise CAFTA. I haven't heard any mention of Mexico or Canada yet. But maybe it simply hasn't been signed or dealt with in their governments. I'm not aware of any economic blocks or anything in South America. Does anyone know of any there? I've wonder if there will eventually be some sorta of free trade agreement between South American and the US. Or maybe even having all of the Americas as one free trade zone. But it might be harder to get the US to make an agreement with South America. I believe the US has already butted heads with some of the South Americans countries. Particularly Argentina over beef and other commodities. Does anyone have any comments on this topic?

[Mith242]

Hmmm...this didn't seem to get big headlines in the news here. Doesn't seem many people are paying attention to this. I guess this isn't as big as NAFTA. Even the people who opposed CAFTA didn't seem to put up that big of a fight.

[Captain Obvious]

Even the people who opposed CAFTA didn't seem to put up that big of a fight.

<{POST_SNAPBACK}>

That's because they had nothing to fight with. Free trade is a good policy that creates wealth. Trade protectionism helps produce economic stagnation. The hard data on this is quite clear.

None of the anti-Nafta doomsday predictions ever happened. The anti-CAFTA people were basically left to argue that NAFTA hadn't been quite as sucessful as first projected. Now, that's a pretty weak case.

Also, there are no true economic blocks in SA, but Chile has bilateral free-trade agreements with pretty much anyone who wants them (hence their stronger relative economic growth). But bilateral agreements aren't as effective as large free-trade zones like the EU (agricultural subsidies aside), so hopefully we will see one giant Western Hemisphere free-trade zone in our lifetimes.

[zed]

There is plan to create a trade zone spanning the entire Americas called FTAA - you can Google for it if you like.

CAFTA was able to win approval in Congress because it basically makes it easier for American corporations (who own Congress) to make more money. It's been roughly 13 years and I can't think of anything obvious about NAFTA that has benefitted the average American. If anything, NAFTA has helped to hollow out the Mexican economy (by crushing family farmers) and helping to encourage illegal immigration to the USA.

Agreements like CAFTA are designed by mostly American interests and are intended to exploit developing countries that are fundamentally different than the USA. CAFTA has no provision for labor standards, thus allowing the creation of sweatshops that would be illegal in the USA. No environmental practices are enforced either, thus allowing corporations to cheaply operate industries that would be environmentally problematic in the USA. It allows the enforcement of developed-nation style intellectual property rights, making pharmaceuticals and software even less affordable than they already are in the developing world. Capital controls are eliminated by CAFTA, making it easier for predatory investors to move money in and out of economies that aren't capable of handling this type of 'hot money' (see the 1998 Asian financial crisis).

Of course most of the corporations who will take advantage of this agreement are American. I can't think of a single way in which American capital is harmed by CAFTA, which is why American media outlets praise things like CAFTA and even have the gall to call it "free trade". Developing nations get screwed - CAFTA is simply a way to wring wealth out of Central America, plain and simple. American workers also lose as manufacturing jobs are sent out of the country.

The basic problem with CAFTA is that it presupposes that developed and developing nations can trade on an equal basis. This is false - developing nations can afford little of what a country like the USA exports, and what they can afford (agricultural products) is often not needed. Developed nations have massive amounts of capital and the well-developed ability to move it around to take advantage of discrepancies in labor, environmental, and capital controls. Developed countries typically have an infrastructure for regulating labor, business, and environmetal practices, which is typically missing in developing countries.

I don't see massive harm coming to Americans from CAFTA, but I feel sorry for the Central Americans about to have their world changed by massive inflows of capital that local businesses cannot compete with. And if local economies crash for any reason, foreign capital will be quickly withdrawn leaving ruined economies with Central Americans to pick up the pieces.

[Mith242]

I guess my viewpoint is more in the middle. I see there being positive and negative influences. But I am glad to see people willing to share their viewpoints on a matter like this.

[Ruso]

That's because they had nothing to fight with. Free trade is a good policy that creates wealth. Trade protectionism helps produce economic stagnation. The hard data on this is quite clear.

None of the anti-Nafta doomsday predictions ever happened. The anti-CAFTA people were basically left to argue that NAFTA hadn't been quite as sucessful as first projected. Now, that's a pretty weak case.

Also, there are no true economic blocks in SA, but Chile has bilateral free-trade agreements with pretty much anyone who wants them (hence their stronger relative economic growth). But bilateral agreements aren't as effective as large free-trade zones like the EU (agricultural subsidies aside), so hopefully we will see one giant Western Hemisphere free-trade zone in our lifetimes.

<{POST_SNAPBACK}>

I agree that free trade is the only way. Just remember that many of today's economic powers started with extreme protectionist policies. (USA, for example)

I know things change, but just wanted to comment on that.

[Captain Obvious]

Zed - while your theories sound very compelling on the surface, real world experience just doesn't back it up, in my opinion. For one, the 1998 Asian financial crisis did not have a causal relationship to free trade policy. Japan, a relatively protectionist nation, felt the crisis as much as free traders like Singapore - if not more. You do raise a very important issue about young economies "crashing" under the pressure of new trade opportunities. But my counter-argument is this: give a pattern of examples, because I don't think they exist. In fact, when I think about recent "third world" economic crashes I think about countries like Argentina, Brazil, Zimbabwe ... all massively protectionist. (Nevermind the truly authoritarian countries like Cuba, Myanmar, and N Korea - all protectionist with weak economies and slow development or outright economic regression). Now think about the young economies that have shown the most progress over the past decade: Singapore, S Korea, Chile, Thailand, Ireland, Central Europe. They were all much less protectionist - low tariffs, fewer local industry subsidies (though there's always room for improvement)

I also suggest a contradiction in your basic argument ... that somehow Nafta hasn't helped the US, yet only a few paragraphs later you argue that CAFTA will exploit Central America to the benefit of US interests. Well, which is it? Are we exploiters or the exploited? Who's right, Ross Perot or Howard Zinn? Also, even most critics admit that Mexico has greatly benefited from NAFTA, and use that to argue against NAFTA. So I definitely don't agree with your argument that NAFTA has harmed Mexico.

Also, I take great exception at your mention of the disappearing "family farmer" as evidence of economic turmoil. I'm not joking, it actually makes me angry. THE LESS FAMILY FARMERS WE HAVE THE BETTER!!! I could not possibly be more serious about that point. All four of my grandparents were born family farmers. They were dirt poor and has a terrible quality of life - but their families were fortunately outcompeted by the much more efficient corporate farms. All four of my grandparents became something else ... richer, happier, with more fulfilling professions and lifestyles. Small scale farming is a recipe for poverty. The wealth of a country tends to be greater, the smaller the percentage of its population is engaged in farming. It's one of the most basic truisms of economic development.

But anyway, i'm really getting off topic. Zed and I could probably have a truly fascinating debate on this subject - but it sounds like our basic assumptions about economics and comparative politics are so massivly different, that we'd spend hours (and pages) just trying to agree on our premises. So I should stop now.

Ruso - It's very true - wealthy countries like the US and Japan used to be very protectionist (and still are in many respects). But did it help us develop into economic superpowers, or did it actually slow down our inevitable progress? There have been some great articles in The Economist talking about how harmful Japan's massive subsidies of local industry have become (and perhaps always were).

I really love this subject (if you all couldn't tell). But, I really can't post here again or I'll be wasting hours of my life typing responses.

[zed]

I agree with Captain Obvious that this shouldn't turn in to a huge debate, but I'll throw in a few points.

The Asian Financial Crisis was exacerbated by a lack of capital controls in Asian countries, allowing foreign money to move in and out with little restraint. Of course, when it all goes out is when the problems begin. CAFTA is designed to eliminate capital controls on member nations.

I will clarify my other point - NAFTA has not benefitted the average American very much. It has definitely benefitted the owners of large American companies who have been able to move production outside the US or have benefiteed from captive markets (as for agribusiness).

I also believe that corporate monoculture agribusiness as it has been practiced by the USA is a dead end. It is completely dependent on fossil fuels (pesticides/fertilizers), fossil water (i.e. aquifers) and will eventually fail spectacularly. Thus I believe spreading or entrenching this paradigm is a bad idea. But that is a topic for another post.

The developing countries that have flourished the most (like China, South Korea, etc.) have all had capital controls and protectionist policies. I believe this is smart because it recognizes the differences between developing and developed countries. The developing countries are protected from the worst depradations of large capital flows and can develop export-driven economies under a sort of safety net. The "Asian paradigm" has been quite successful in allowing countries to develop.

On the other hand, the "American paradigm" is kind of a religion that advocates eliminating all capital controls, protectionist policies, government subsidies, budget deficits, etc. Of course the US itself engages in all of those things, but I digress. This model is represented by NAFTA, CAFTA, IMF, and the World Bank (also FTAA if it ever happens). These organizations represent a long line of disasters visited upon countries (the entire Asian financial crisis, Russia, Argentina, and Ethiopia come to mind) with more likely to come. It pretends developing and developed countries can trade as equals but unsurprisingly the countries with the most capital (like the USA) tend to profit from disasters while the developing countries consistently lose.

[Snowguy716]

I strongly oppose CAFTA mainly on one ground:

The sugar beet industry of North Dakota and northern Minnesota are under serious threat of collapse because of undercutting by poorer central American nations.

I seriously hope that CAFTA is repealed. Minnesotans are angry about this agreement and will probably respond by getting rid of politicians that voted for it (In MInnesota, those politicians were the republicans.)

Would you send your livelihood to Central America in the name of globalization? I think not.

[Mith242]

I strongly oppose CAFTA mainly on one ground:

The sugar beet industry of North Dakota and northern Minnesota are under serious threat of collapse because of undercutting by poorer central American nations.

I seriously hope that CAFTA is repealed.  Minnesotans are angry about this agreement and will probably respond by getting rid of politicians that voted for it (In MInnesota, those politicians were the republicans.)

Would you send your livelihood to Central America in the name of globalization?  I think not.

<{POST_SNAPBACK}>

I suppose anything is possible but I have my doubts it will be repealed at this point. I think they might have a better chance pushing for the subsidies that sugar cane growers get in Florida.

[Ruso]

I strongly oppose CAFTA mainly on one ground:

The sugar beet industry of North Dakota and northern Minnesota are under serious threat of collapse because of undercutting by poorer central American nations.

I seriously hope that CAFTA is repealed.  Minnesotans are angry about this agreement and will probably respond by getting rid of politicians that voted for it (In MInnesota, those politicians were the republicans.)

Would you send your livelihood to Central America in the name of globalization?  I think not.

<{POST_SNAPBACK}>

It is funny that you mention that, because am used to hear latinamericans fearing the destruction of theis business by american products. Curious, lol

[Snowguy716]

Unfortunate, it seems, that no matter what happens... somebody gets screwed.

[Ruso]

Unfortunate, it seems, that no matter what happens... somebody gets screwed.

<{POST_SNAPBACK}>

I dont know much about economics, but from the little I know and have heard, CAFTA and a globalized economy would be really beneficial to the world. After a while, of course.

[Mith242]

Unfortunate, it seems, that no matter what happens... somebody gets screwed.

<{POST_SNAPBACK}>

Well it seems to pretty much work that way with everything. Most choices have positive and negative aspects to them. I guess you just have to decide which outweighs the other.

[daniel18]

Terrible for Central America.

[Ruso]

Terrible for Central America.

<{POST_SNAPBACK}>

Your reasons?