Myth:  Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) is an impressive achievement that should be celebrated throughout the United States and Central America. 

“As Congress begins to debate CAFTA, President Bush’s trade policy should be celebrated for what it is — a bold return to the outlook on trade embraced by our Founding Fathers. President Bush’s policy most resembles the outlook of one previous American government: the Continental Congress of 1776.” (John O. McGinnis, The Second American Trade Revolution, National Review Online, 06/30/05)

“Take trade and Central America. The status quo there is widespread poverty. The administration has proposed doing something about it: a free trade agreement encompassing five Central American countries and the Dominican Republic.  It's a no-brainer. If we have learned anything from the last 25 years in China, India, Chile and other centers of amazing economic growth, it is that open markets and free trade are the keys to pulling millions, indeed hundreds of millions of people, out of poverty. The Central American Free Trade Agreement (CAFTA) is a chance to do the same for desperately poor near-neighbors.”  (Charles Krauthammer, “If Dems Cared for Campesinos, They’d Embrace CAFTA,” The Houston Chronicle, 07/04/05)

Reality

In actuality, DR-CAFTA is one of the most controversial trade agreements in years, with opponents on both sides of the aisle.  The difficulty with which the Administration finally garnered 54 Senate votes should indicate that there are plenty of flaws in this trade agreement, even from a free trader’s viewpoint.  To put that into perspective, the Chile FTA, passed 65-32 (H.R. 2738, RC:  319, 07/31/03).  DR-CAFTA is highly controversial for several reasons:

• The negotiation almost completely shut out Democrats.  As a result, the Administration made no secret of their willingness to resort to pork barrel politics to get the necessary votes for passage.  According to an anonymous trade official, "If you take 170 Democrats off the playing field, it means we're going to have to cut some deals"  (Jonathan Weisman, “For CAFTA, Party Pressure and Pork,” The Washington Post, 06/22)

Secondly, the economic impact of DR-CAFTA is minimal.  According to Dan Tarullo and Don Restrepo of the Center for American Progress, "The gains from trade, on either the export or import side, however, will be minimal in the case of DR-CAFTA, since the other countries in the agreement have very small economies and together account for barely 1% of U.S. trade.”  The aggressive pursuit of a trade agreement with such a minor economic impact exposes a fundamental flaw in the Bush Administration’s approach to trade:  They view trade almost exclusively as an instrument of foreign policy.  According to Tarullo and Restrepo, “the Administration's almost exclusive pursuit of trade agreements as rewards for countries that support its foreign policies has come at the expense of concentrating on larger markets for high-value U.S. exports."

 

Without question, it is appropriate to think about foreign policy when negotiating a trade agreement, but the Bush Administration appears to privilege foreign policy considerations over economic considerations to a large extent. 

Furthermore, the Administration has once again refused to include enforceable labor standards in a trade agreement.  Like the Chile and Singapore FTAs before it, CAFTA does not contain real labor provisions that have the potential to bring poor workers out of poverty.  Without such standards, the benefits of trade are not shared equitably.  According to the International Labor Rights Fund: “In practice, labor laws on the books in Central America are not sufficient to deter employers from violations, as actual sanctions for violations of the law are weak or nonexistent.  If the proponents of CAFTA were as serious about fighting world poverty as they say they are, they would get behind labor provisions in trade agreements.

Finally, the Administration has actually tightened the eligibility requirements for Trade Adjustment Assistance (TAA) when they should be doing precisely the opposite.  All trade agreements have losers; consequently, TAA—which provides temporary aid to workers who lost their jobs due to imports—is an essential program that eases the impact of trade on American workers in certain sectors.  President Bush’s failure to strengthen the program is another slap in the face to American workers.

Reasonable people can disagree about trade, but DR-CAFTA clearly contains some unprecedented flaws recognizable to observers across the political spectrum.