FacebookTwitterGoogle+RedditEmail

CAFTA will Further Depress US Wages

by MARK WEISBROT

The proposed Central America Free Trade Agreement is generating a political battle over foreign commercial policy that we haven’t seen since the North American Free Trade Agreement was passed more than a decade ago.

As with NAFTA, there is widespread misunderstanding of the economic issues involved. First there is the label ”free trade,” which is not an actual description of these accords but a marketing slogan, like ”Lose the carbs . . . not the taste” or McDonald’s “I’m loving it.”

In reality, CAFTA will increase some barriers to trade while lowering others. One of the barriers that it increases is on patented pharmaceutical drugs. This is the most costly form of protectionism in the world today.

The benefits from free trade in these goods are much appreciated by the millions of Americans who cross the Canadian or Mexican border to get their prescription drugs. But CAFTA will make it more difficult for countries like Guatemala to get access to affordable medicines — even for life-saving drugs like those needed to treat people with HIV/AIDS.

In the United States, labor unions and those who care about working people have made much of the loss of jobs, particularly in manufacturing, that NAFTA and the World Trade Organization have caused and that CAFTA would presumably continue. But the much-bigger effect for most Americans is on wages.

During the last 30 years the typical (median) wage in the United States has hardly grown — only about 9 percent. Productivity — output per employee — has grown by 82 percent over the period.

Normally we would expect wages and salaries to grow with productivity. These trade agreements have helped keep wages from growing here by increasing competition with workers making 60 cents an hour and by making it easier for employers to threaten to move when workers demand their share of rising productivity.

The result is that our society is becoming increasingly divided into the ”two Americas” that Sen. John Edwards made his campaign theme last year in the Democratic presidential primaries.

The Bush administration has appealed to farmers in the United States, saying that CAFTA will help them by opening foreign markets to their products. But this argument makes no economic sense: U.S. farmers can sell all the corn they want at the world market price. The only way that opening foreign markets can help them is if it raises the world price. Markets in CAFTA countries — five Central American countries plus the Dominican Republic — are too small to affect world prices.

In Washington policy circles, CAFTA is being sold as a boost to economic development for our neighbors to the south. But we have now had 25 years of experience with this kind of economic integration, and the results are in: Income per person in Latin America has grown by a meager 12 percent since 1980, as compared to 80 percent the prior 20 years (1960-79). By any economic measure, these reforms — including NAFTA — have failed.

CAFTA countries are being promised access to a growing U.S. import market, but this is about to be reversed. Our trade deficit is now so big that it cannot be sustained even at its present level.

Over the next decade, the dollar will fall further and our trade deficit will shrink. Measured in non-dollar currencies, the value of U.S. imports is expected to decline over the next decade. This means that CAFTA countries are making costly concessions for a prize that most likely won’t be there.

In sum, the economic arguments for CAFTA just don’t hold water. No wonder its proponents rely on slogans, repetition and millions of dollars of lobbying money to make their case.

MARK WEISBROT is co-director of the Center for Economic and Policy Research, in Washington, D.C. He is the author, with Dean Baker, of Social Security: the Phony Crisis. He can be reached at: weisbrot@cepr.net

 

 

 

 

 

 

 

 

 

 

 

Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. and president of Just Foreign Policy. He is also the author of  Failed: What the “Experts” Got Wrong About the Global Economy (Oxford University Press, 2015).

More articles by:
June 28, 2016
Stephanie Van Hook
The Time for Silence is Over
Ajamu Nangwaya
Toronto’s Bathhouse Raids: Racialized, Queer Solidarity and Police Violence
June 27, 2016
Robin Hahnel
Brexit: Establishment Freak Out
James Bradley
Omar’s Motive
Gregory Wilpert – Michael Hudson
How Western Military Interventions Shaped the Brexit Vote
Leonard Peltier
41 Years Since Jumping Bull (But 500 Years of Trauma)
Rev. William Alberts
Orlando: the Latest Victim of Radicalizing American Imperialism
Patrick Cockburn
Brexiteers Have Much in Common With Arab Spring Protesters
Franklin Lamb
How 100 Syrians, 200 Russians and 11 Dogs Out-Witted ISIS and Saved Palmyra
John Grant
Omar Mateen: The Answers are All Around Us
Dean Baker
In the Wake of Brexit Will the EU Finally Turn Away From Austerity?
Ralph Nader
The IRS and the Self-Minimization of Congressman Jason Chaffetz
Johan Galtung
Goodbye UK, Goodbye Great Britain: What Next?
Martha Pskowski
Detained in Dilley: Deportation and Asylum in Texas
Binoy Kampmark
Headaches of Empire: Brexit’s Effect on the United States
Dave Lindorff
Honest Election System Needed to Defeat Ruling Elite
Louisa Willcox
Delisting Grizzly Bears to Save the Endangered Species Act?
Jason Holland
The Tragedy of Nothing
Jeffrey St. Clair
Revolution Reconsidered: a Fragment (Guest Starring Bernard Sanders in the Role of Robespierre)
Weekend Edition
June 24, 2016
Friday - Sunday
John Pilger
A Blow for Peace and Democracy: Why the British Said No to Europe
Pepe Escobar
Goodbye to All That: Why the UK Left the EU
Michael Hudson
Revolts of the Debtors: From Socrates to Ibn Khaldun
Andrew Levine
Summer Spectaculars: Prelude to a Tea Party?
Kshama Sawant
Beyond Bernie: Still Not With Her
Mike Whitney
¡Basta Ya, Brussels! British Voters Reject EU Corporate Slavestate
Tariq Ali
Panic in the House: Brexit as Revolt Against the Political Establishment
Paul Street
Miranda, Obama, and Hamilton: an Orwellian Ménage à Trois for the Neoliberal Age
Ellen Brown
The War on Weed is Winding Down, But Will Monsanto Emerge the Winner?
Gary Leupp
Why God Created the Two-Party System
Conn Hallinan
Brexit Vote: a Very British Affair (But Spain May Rock the Continent)
Ruth Fowler
England, My England
Jeffrey St. Clair
Lines Written on the Occasion of Bernie Sanders’ Announcement of His Intention to Vote for Hillary Clinton
Norman Pollack
Fissures in World Capitalism: the British Vote
Paul Bentley
Mercenary Logic: 12 Dead in Kabul
Binoy Kampmark
Parting Is Such Sweet Joy: Brexit Prevails!
Elliot Sperber
Show Me Your Papers: Supreme Court Legalizes Arbitrary Searches
Jan Oberg
The Brexit Shock: Now It’s All Up in the Air
Nauman Sadiq
Brexit: a Victory for Britain’s Working Class
Brian Cloughley
Murder by Drone: Killing Taxi Drivers in the Name of Freedom
Ramzy Baroud
How Israel Uses Water as a Weapon of War
Brad Evans – Henry Giroux
The Violence of Forgetting
Ben Debney
Homophobia and the Conservative Victim Complex
Margaret Kimberley
The Orlando Massacre and US Foreign Policy
David Rosen
Americans Work Too Long for Too Little
Murray Dobbin
Do We Really Want a War With Russia?
FacebookTwitterGoogle+RedditEmail