Click amount to donate direct to CounterPunch
  • $25
  • $50
  • $100
  • $500
  • $other
  • use PayPal
Support Our Annual Fund Drive! CounterPunch is entirely supported by our readers. Your donations pay for our small staff, tiny office, writers, designers, techies, bandwidth and servers. We don’t owe anything to advertisers, foundations, one-percenters or political parties. You are our only safety net. Please make a tax-deductible donation today.
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:

2016 Fund Drive
Smart. Fierce. Uncompromised. Support CounterPunch Now!

  • cp-store
  • donate paypal

CounterPunch Magazine

minimag-edit

Weekend Edition
September 30, 2016
Friday - Sunday
Henry Giroux
Thinking Dangerously in the Age of Normalized Ignorance
Stanley L. Cohen
Israel and Academic Freedom: a Closed Book
Paul Craig Roberts – Michael Hudson
Can Russia Learn From Brazil’s Fate? 
Andrew Levine
A Putrid Election: the Horserace as Farce
Mike Whitney
The Biggest Heist in Human History
Jeffrey St. Clair
Roaming Charges: the Sick Blue Line
Rob Urie
The Twilight of the Leisure Class
Vijay Prashad
In a Hall of Mirrors: Fear and Dislike at the Polls
Alexander Cockburn
The Man Who Built Clinton World
John Wight
Who Will Save Us From America?
Pepe Escobar
Afghanistan; It’s the Heroin, Stupid
W. T. Whitney
When Women’s Lives Don’t Matter
Howard Lisnoff
What was Missing From The Nation’s Interview with Bernie Sanders
Julian Vigo
“Ooops, I Did It Again”: How the BBC Funnels Stories for Financial Gain
Jeremy Brecher
Dakota Access Pipeline and the Future of American Labor
Binoy Kampmark
Pictures Left Incomplete: MH17 and the Joint Investigation Team
Andrew Kahn
Nader Gave Us Bush? Hillary Could Give Us Trump
Steve Horn
Obama Weakens Endangered Species Act
Dave Lindorff
US Propaganda Campaign to Demonize Russia in Full Gear over One-Sided Dutch/Aussie Report on Flight 17 Downing
John W. Whitehead
Uncomfortable Truths You Won’t Hear From the Presidential Candidates
Ramzy Baroud
Shimon Peres: Israel’s Nuclear Man
Brandon Jordan
The Battle for Mercosur
Murray Dobbin
A Globalization Wake-Up Call
Jesse Ventura
Corrupted Science: the DEA and Marijuana
Richard W. Behan
Installing a President by Force: Hillary Clinton and Our Moribund Democracy
Andrew Stewart
The Democratic Plot to Privatize Social Security
Daniel Borgstrom
On the Streets of Oakland, Expressing Solidarity with Charlotte
Marjorie Cohn
President Obama: ‘Patron’ of the Israeli Occupation
Norman Pollack
The “Self-Hating” Jew: A Critique
David Rosen
The Living Body & the Ecological Crisis
Joseph Natoli
Thoughtcrimes and Stupidspeak: Our Assault Against Words
Ron Jacobs
A Cycle of Death Underscored by Greed and a Lust for Power
Uri Avnery
Abu Mazen’s Balance Sheet
Kim Nicolini
Long Drive Home
Louisa Willcox
Tribes Make History with Signing of Grizzly Bear Treaty
Art Martin
The Matrix Around the Next Bend: Facebook, Augmented Reality and the Podification of the Populace
Andre Vltchek
Failures of the Western Left
Ishmael Reed
Millennialism or Extinctionism?
Frances Madeson
Why It’s Time to Create a Cabinet-Level Dept. of Native Affairs
Laura Finley
Presidential Debate Recommendations
José Negroni
Mass Firings on Broadway Lead Singers to Push Back
Leticia Cortez
Entering the Historical Dissonance Surrounding Desafinados
Robert J. Burrowes
Gandhi: ‘My Life is My Message’
Charles R. Larson
Queen Lear? Deborah Levy’s “Hot Milk”
David Yearsley
Bring on the Nibelungen: If Wagner Scored the Debates
FacebookTwitterGoogle+RedditEmail
[i]
[i]
[i]
[i]