Article written by Michelle Akane Storey
The Dominican Republic - Central America Free Trade Agreement (DR-CAFTA) narrowly passed through US Congress a few weeks back. Here's a look at the opposition to and possible effects of this accord.
The recent passage of the Dominican Republic - Central American Free Trade Agreement (DR-CAFTA) in US Congress leaves most global justice seekers discouraged and unhopeful for the future. Despite broad opposition in all countries involved in DR-CAFTA (Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica and the Dominican Republic), triumphant capitalist values favoring large corporate interests once again crush civil society’s demands for community values of health and wellbeing, sustainability, and human rights. The most vulnerable will suffer the most. Communities throughout Central America and the US can look forward to decreasing living standards, falling wages, eroding ecosystems, and disappearing small family farms, all so that big business can prosper. Already the Americas have spent too much money, lost too many lives, and suffered too many great setbacks from regional conflicts that had basic inequalities at their roots. CAFTA will merely deepen these inequalities.
The US has a long, horrific history of regional intervention, domination, and control in Central America. US actions in the Americas have frequently been justified under the Monroe Doctrine, which stated to European powers that the American continents were off limits to European colonization, and that any attempts to interfere with American lands would be seen as an expression of an unfriendly disposition towards the US. President Theodore Roosevelt’s corollary to the Monroe Doctrine in 1904 claimed that the US could intervene in any Latin American Country guilty of internal or external misconduct. This set a precedent for subsequent U.S. intervention in Latin America. During the Cold War era fear of communism brewing on the continent gave the US reason enough to help overthrow democratically elected Latin American leaders in Guatemala, the Dominican Republic, Chile, Bolivia, Uruguay, and Argentina, to name just a few. Huge amounts of US military and economic aid was sent to finance the so called “dirty wars” in the region and train Contra troops in Nicaragua. At the height of the conflict in El Salvador, as much as $1.3 million US dollars were sent to finance terror each day! The US even went so far as to train Latin American troops on its own soil at the infamous School of the Americas, an institution which continues to operate as the Western Hemisphere Institute for Security Cooperation. With the civil wars over with and the communist threat outdated, the US has put the spotlight on fighting drugs trafficking and terrorism. Promoting neoliberal trade pacts is how the US government intends to continue its legacy of regional command.
The initiation of talks toward the establishment of a US-Central America Free Trade Agreement was announced by the administration of Bush the first in 1992, declaring the accord would advance “regional stability, democracy and economic development.” The recently passed agreement between the US, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic will eliminate barriers to trade and investment, opening the region to US goods and services and strengthening protections on intellectual property. According to the current President Bush, “strengthening our economic ties with our democratic neighbors is vital to America's economic and national security interests.” Bush the second also claims that the agreement will help strengthen still-fragile Central American democracies, enabling them to them to better defend against “forces that oppose democracy, seek to limit economic freedom, and want to drive a wedge between the United States and the rest of the Americas” (Raum, 2005).
A central theory of the arguments in favor of the accord hinge upon the projected theory that free trade delivers economic prosperity and that CAFTA will deliver development to poor Central Americans because they will have increased access to US goods and services. Yet it takes only a quick look what free-trade has already done in Latin America to see that opening markets, privatizing basic services, deregulating industry, lowering tariffs, orienting production for export, and sanctifying intellectual property rights does not deliver promised benefits of development and prosperity, but rather, create blankets of protection for multinational corporations to control wealth and decision making power at the expense of people. Latin America has experienced the lowest rate of economic growth in its history since it began following the free-trade doctrine 25 years ago, at less than .5% a year in the last 25 years, compared with a total of 80% during the previous 20 years (James, 2005).
We can take NAFTA as an example to speculate how DR-CAFTA will affect the economies and peoples of the countries involved. Economic studies conducted before NAFTA was enacted predicted that eliminating barriers to trade would not create jobs, reduce consumer prices and reduce poverty as its proponents claimed, but rather, that it would have catastrophic effects in all countries involved. Twelve years after its passage, over one million jobs have been lost in the US and the precarious life of millions of Mexicans has been exacerbated. Subsidized US corn dumped into the Mexican market has forced 1.5 million Mexican farmers from their lands, and each year over 50,000 more producers flee the countryside (Pickard, 2005). Estimates to the number of people that will ultimately be displaced from these corn imports run as high as 15 million people, or 1 in 6 Mexicans. Mexican corn prices have fallen 70% since NAFTA went into effect, but, ironically, the price of corn tortillas (which represents half of the calorie intake for many poor families), has risen by 50%. The Mexican economy increasing depends upon remittances sent back from family members that have migrated to the US, while the US economy increasingly keeps itself afloat by exploiting immigrant labor. In 2004 remittances from the US was the number one income for the country, totaling $16.6 billion, or $45.5 million per day. Also, some 38,000 family farms have disappeared in the US in exchange for huge corporate farms. This is the situation that NAFTA has created: the weak Mexican economy depends increasingly upon remittances sent back from family members in the US, while the US economy keeps itself afloat by exploiting immigrant labor.
Central Americans look with alarm at the experience of Mexico with NAFTA, realizing that their shaky economies are much more vulnerable than Mexico’s. In spite of long, brutal struggles for social equality, poverty and civil strife are still widespread Central America, and infrastructure still absent. Central Americans have a lot to loose by entering into a NAFTA-like deal with the US. The agricultural sectors in some countries are the source of up to half of the local employment, which may well be devastated by imports of low cost US farm goods. Concerns vary from county to country, but opposition runs wide in all countries involved.
Guatemalans are concerned about the experiences of Mexico under NAFTA, seeing as agriculture makes up 23% of Guatemala’s GDP and is the source of up to 50% of its employment. A study conducted by the Coordination of NGOs and Cooperatives (CONGOOD) on DR-CAFTA’s potential impacts concluded the agreement could result in a net loss of between 45,000 and 124,000 jobs. The job losses among white corn producers, who account for 38 percent of the employment in the country, could be especially severe during the first year of implementation, when production could fall by as much as 80 percent. Concerns have also been raised about potential health effects from increased use of GMOs, Guatemala’s right to establish its own laws about generic medicines, and many civil society organizations have protested the lack of public debate regarding the accords (ART, 2005).
In El Salvador there have been massive protests against the accord and its potential effects on the country’s public health care system, labor rights, and its future democratic development. Since the late 90’s the government has been on a crusade to weaken unions in the public health care sector through huge layoffs and has begun to contract out certain health care services to private companies. There were huge fears that this would result in a sharp rise in prices for those essential services, based on the experiences of other countries that have privatized these services. Salvadorans worry that the accord will weaken protections for labor rights, as the provisions on labor and the environment are rhetorical and unenforceable. DR-CAFTA has only one enforceable labor rights requirement: that countries apply their own labor laws-even if they are grossly inadequate. If governments change their laws to eliminate rights, that’s okay, too, just so long as the new laws are enforced (Pier, 2005). El Salvador was the first country to ratify the accord, but the public debate is far from over. In February 2005, a legal challenge to DR-CAFTA's ratification was presented by the Sinti Techan network, alleging that the agreement violates constitutional guarantees for labor rights, healthcare, and other economic and social rights, and that it contradicts existing international commitments on regional integration and environmental protection (ART, 2005).
Many Hondurans in favor of DR-CAFTA argue that the accord will save 120,000 jobs in the maquila sector, ignoring potential impacts on the agricultural sector which makes up 36.6% of employment. Yet some groups feel it would be a mistake to wipe out the nation’s productive sector, destroying the agrarian reform process and the social sector of the economy, and essentially bet everything on the maquilas. Opponents believe DR-CAFTA will not lead to substantial chances in the maquila scheme, but rather will make jobs even more insecure and will demand even more government subsidies to compete with China. Honduras has already suffered from previous trade liberalization. Honduras was once self-sufficient in rice production; next year it will produce a mere 20% of national demand. Raf Flores, a local analyst, warns that DR-CAFTA could essentially protect 120,000 maquila jobs at the expense of 700,000 farmers and their families who would be thrown out of work and forced to seek employment elsewhere. There are also concerns about the agreement’s contradictions with the Honduran constitution, and that the government’s ability to implement development policies would be severely constrained. In September, 31 members of the Honduran Congress from all major political parties signed a letter to the U.S. Congress stating that “DR-CAFTA is a pre-announced Mitch. The negative impacts on the Honduran population will be equal to or greater than the disasters caused by that hurricane in 1998. . . We urge you to vote no on DR-CAFTA.” Since 1998 the economy has been slowly recovering from the severe devastation caused by Hurricane Mitch. Yet the government estimates that nearly a third of the economically active population is still either unemployed or underemployed (ART, 2005).
Many Nicaraguans are concerned that DR-CAFTA will devastate food production and limit access to water, which many argue should be considered a basic human right. Agriculture accounts for 28% of the country’s GDP and 42% of employment. Competition with the highly subsidized U.S. foods could be devastating. In the first year alone U.S. exports of corn to Nicaragua could increase by 10,000%. According to Nicaraguan economist Adolfo Acevedo, “what is at stake for the long term is not just the possibility of preserving a large part of the national food production, assuring food sovereignty, or of losing the possibility of developing a multi-functional and sustainable rural economy, which on its own has fundamental importance, but the fate of the labor force itself, and, more deeply yet, the fate of the human beings linked to this production.”
Further privatization of water is also a huge concern. The International Development Bank’s water modernization proposal for Nicaragua includes contracting out the management of water systems. Carlos Pacheco explains that despite government claims that the agreement would not mandate water privatization, the government’s procurement provisions in DR-CAFTA would require more than one-third of the country’s municipalities to open the management of their water systems to bidding by private and foreign companies. More than half of all Nicaraguans lack potable water in their homes and turning this vital service into a commodity to be sold for profit is seen as a threat to basic human rights (ART, 2005).
Costa Rica has a publicly owned electricity and telecommunications system providing telephone services to 90% of the population, at prices comparable to those in the US and lower than any other Latin American country. Currently, profits from internet and cell phone services are used to subsidize rural telephone services and internet services in public schools. DR-CAFTA will bring competition from foreign companies, leaving the public system with only regular telephone service. The likely results will be sharp increases in prices to consumers and massive layoffs.
Many Costa Ricans also worry about investment provisions in the agreement that could threaten the country’s high environmental standards. The Costa Rican government recently denied U.S. based Harken Energy Corp. a permit to conduct offshore oil exploration. The company attempted to sue the Costa Rican government for $57 billion USD but the government was able to avoid the arbitration process because they had not signed any bilateral investment treaties with the U.S. According to the former finance minister and current head of the progressive Partido de Accion Ciudadana (Citizen Actin Party), Otton Solis, “The U.S. promotes CAFTA as a tool to enhance democracy, but it would actually weaken our democratically built judicial institutions by creating supra-national mechanisms for U.S. companies to bypass our courts and sue governments when they believe their profits are being harmed by regulations” (ART, 2005).
In the US, critics say the DR-CAFTA will cause flight of more jobs overseas, particularly in the sugar and textile industries. They also claim the labor rights provisions in DR-CAFTA will push down worker’s quality of life in all countries involved. There are even fewer labor provisions and environmental safeguards than in NAFTA. Many protest the likely affects of increased hunger, out-migration, and instability the accord will create in Central American. The largely trade-driven US deficit is another cause of concern. Free-trade has resulted in a greater number of imports than exports, and critics claim that a soaring deficit undermines the economy’s strength (Carlsen, 2005).
Overall, the dividing line between DR-CAFTA proponents and opponents is economic. The rich like it while the poor are fearful. It’s really no surprise, since historically the universal effect of US-led policies in the region has widened the disparity between rich and poor.
If the Bush administration is truly concerned about the US’s security and supporting regional stability, democracy, and economic development, perhaps it should focus on creating an atmosphere that is supportive of collective health, wellbeing, and basic security for all Americans (North, Central, and South), rather than policies that breed insecurity, anti-US sentiment, and destroy democracy via trade pacts that benefit a few and negatively affect the many. A good first step would be respecting the sovereignty of other nations, acknowledging that free trade is an economic route that not all nations may want to pursue, and seeing merit in the more integral initiatives of other types American leaders like Venezuelan President Hugo Chavez and Cuba’s Castro.
Though we definitely have reason to mourn, we also should not loose all hope. In the US, the vote margin for DR-CAFTA was razor-thin, and many are aware of last-minute vote purchases. Moreover, the Dominican Republic, Nicaragua, and Costa Rica have yet to ratify the agreement. The Bush administration has been negotiating the expansion of NAFTA to Colombia, Peru, Ecuador, and Bolivia through the Andean Free Trade Agreement (AFTA). Negotiations have stumbled over chapters on agriculture and intellectual property, and have been stalled amidst the popular overthrow of governments in Ecuador and Bolivia. Recent negotiations in Miami ended inconclusively. DR-CAFTA and AFTA are both stepping-stones for a larger, hemispheric Free Trade Agreement of the Americas (FTAA). But with the slim DR-CAFTA margin and stumbling AFTA talks, hopefully negotiators will take the get the drift that, even among the US public, free trade agreements under this model are unpopular. We must take this loss and organize
Works Cited:
ART (2005). Central Americans speak out against dr-cafta: major issues and mobilizations, Alliance for Responsible Trade, Available: [On-line] www.art-us.org
Carlsen, L. (2005). Opening borders to inequality, AlterNet, Available: [On-line] www.alternet.org
Cavanagh, J. (2005). Turning the cafta loss to a win, AlterNet, Available: [On-line] www.alternet.org
James, D. (2005). Cafta: democracy sold out, AlterNet, Available: [On-line] www.alternet.org/story/23788/
Pier, C. (2005). Dr-cafta falls short on worker’s rights, Human Rights Watch, Friday, July 29
Raum, T. (2005). Cafta battle casts doubts on future pacts, The Associated Press, Tuesday 02 August
