CAFTA fight boils down to who will benefit in trade

By Don McIntosh, Associate Editor

With the day of decision looming in Congress, CAFTA – the Central American Free Trade Agreement — is shaping up to be the most important trade policy battle since NAFTA.

CAFTA, negotiated by the Bush Administration, would place the United States in a “free trade” zone with Guatemala, Honduras, El Salvador, Costa Rica, Nicaragua and the Dominican Republic. It would reduce tariffs, limit import quotas and increase legal protections for foreign investors. U.S. corporations would profit, and U.S. workers would lose, especially in the textile and apparel industries.

But first, CAFTA has to be approved in an up-or-down vote by both houses of Congress, with no amendment allowed. Republican leaders of Congress hinted a vote could be scheduled before the end of May, but it was not clear as of press time whether there was enough support to pass it.

More Republicans have expressed doubts about CAFTA than about other recent NAFTA-style trade agreements, mostly due to pressure from the sugar industry. CAFTA would raise the quota on sugar from Central America 153,140 tons — about 1 percent of U.S. production. Though that amount is small, industry analysts say the increased imports could upset the framework that determines the price of sugar.

Democrats — divided on previous trade treaties — have been unusually united against CAFTA. The New Democrat Network, a grouping of Clinton-style centrist Democrats who have backed NAFTA-style trade deals in the past, declared its opposition to CAFTA May 9.

A big factor for Democrats has been opposition to CAFTA from unions and working people. In recent decades, U.S. manufacturing employment has been decimated by outsourcing, and most workers see NAFTA-style trade agreements as responsible for the decline. With trade deficits breaking a new record every year, it doesn’t seem like a good time for more deficit-increasing trade agreements.

Elizabeth Drake, international policy analyst in the Public Policy Department of the AFL-CIO, acknowledged that opposition to recent NAFTA-style treaties with countries like Australia and Singapore has been muted.

“But CAFTA is a different story,” Drake said, “because workers’ rights conditions are so egregious in Central America.”

Central America’s Workers:
Poor and Unfree

Central America’s economy has historically been based on a handful of key agricultural commodities: sugar, bananas, and coffee. To diversify, in the last several decades most countries in the region created special export processing zones — with no import tariffs, lower taxes, and concentrated infrastructure to make it easy to ship in raw materials and ship out finished goods. These zones were an attempt to make an economic selling point out of the region’s low wages.

With an annual gross domestic product that ranges from $745 per capita in Nicaragua to $4,375 in Costa Rica, most of the 47 million people in the six CAFTA countries are poor. Two-fifths of the region’s workers labor for less than $2 a day.

“We’re not against trading with countries where workers are poor,” Drake said. “We’re against trading with countries where workers are not free.”

Central American workers by and large aren’t free to unionize. Strikes are declared illegal. Employers refuse to bargain. Union organizers still face threats and violence.

Five out of the six CAFTA countries are less than a generation removed from military dictatorship and/or civil war. For over a century, the region has suffered from deep economic inequality, which has fueled political conflict between right and left — with workers and peasants, sometimes Marxist, on one side, and landowners, the rich and the military on the other. In these conflicts, pro-union workers and labor organizers have often been the targets of violent repression.

The dictatorships are gone for now, Drake said, but the legacy of violence remains.

Labor laws in Central America still fail to protect workers, and have been criticized by the U.S. State Department and human rights organizations. Jeff Hermanson, senior advisor with the AFL-CIO Solidarity Center, says Central American governments are more interested in not upsetting foreign investors and local businesspeople than they are in enforcing workers’ rights protections.

“Even when there are laws on the books, there’s no effective enforcement. You bring them the most blatant cases, and they do nothing for you.”

Central American unions are strongest in the public sector, but in recent years they’ve had to do battle with budget cuts and privatization.

With the exception of Nicaragua (where an estimated 50 percent of the workforce has been unionized since the time of the Sandinista government) the percentage of workers who are unionized is minimal in the CAFTA countries: 8 percent in the Dominican Republic, 7 percent in Honduras, 5 percent in El Salvador, and 3 percent in Guatemala. In El Salvador and Costa Rica, there are unions, but they’re not considered independent of employers. In El Salvador, no independent trade unions have been registered in the past four years.

As Hermanson of the Solidarity Center puts it, “in Central America, the facts speak for themselves.”

The following are profiles of America’s prospective free-trade-zone partners:

Guatemala

It’s been just nine years since Guatemala officially ended a 36-year civil war that killed an estimated 200,000 people. The war was fought between left-wing guerrillas and a succession of repressive right-wing military regimes, often supported by the U.S. government. A 1999 truth commission blamed the army for 93 percent of the atrocities committed during the war. Though technically at peace, Guatemala is still one of the most violent places in the world, with over 2,000 murders last year and continuing human rights abuses.

Unions are legal in Guatemala, but have made little headway. The U.S. State Department reported 45 incidents of violent intimidation of labor union organizers in 2004; only one resulted in conviction. It has its effect. Out of as many as 250 factories in Guatemala’s maquiladora sector, no more than three are unionized, and just two have union contracts, both of them bare-bones agreements Hermanson said.

Guatemala is a deeply unequal society, with a small, land-owning white elite amid an overwhelmingly Indian population mostly engaged in subsistence agriculture.

In the world economy, Guatemala’s role is primarily as a producer of coffee, sugar and bananas, and textiles and clothing for the U.S. market.

Bush’s negotiating partner in the CAFTA talks was president Alfonso Portillo, a close associate of Efrain Rios Montt — the former right-wing dictator responsible for Guatemala’s bloodiest period of repression in the early 1980s. In 1982, as a political science professor in Mexico, Portillo shot three students, killing two. He was later acquitted. Portillo left office in 2004, and fled to Mexico after being investigated for taking $1.5 million in bribes from the Taiwanese government.

El Salvador

It’s been 13 years since the end of El Salvador’s civil war, in which 75,000 people were killed. The war was fought between left-wing guerrillas and the U.S.-supported military, aided by paramilitary death squads. The war went on for 12 years, and came on the heels of 48 years of military dictatorship. The most horrific human rights abuses were committed by the Salvadoran military, including the murder of American nuns, massacres of entire villages and a massacre of Jesuit priests in downtown San Salvador.

El Salvador, too, is deeply unequal. It used to be said that 14 families owned and controlled the entire country.

Unions are legal under Salvadoran law, but there is little protection for workers to unionize, and no provision for reinstating workers fired for supporting a union.

And the war may be over, but El Salvador is still a dangerous place for union organizers. Last November, Gilberto Soto, a Teamsters union organizer from New Jersey, was assassinated while trying to unionize truck drivers.

Honduras

Population 7 million
Minimum wage $2.97/day in agriculture, $4.88/day in other sectors.

Honduras is the prototypical “banana republic,” long dominated by United Fruit Company, which has since merged and been renamed as Chiquita Brands. Honduras was run by military juntas until 1982. Primarily a producer of coffee and bananas, it remains one of the poorest nations in the Western Hemisphere.

Costa Rica

Population 4 million
Minimum wage $133/month to $523/month depending on occupation.

A democracy since 1882, Costa Rica is the historic oasis of stability in the region. It’s still a relatively poor country, with a primarily agricultural economy specializing in coffee, bananas, sugar and beef. Manufacturing for export has grown in recent years, especially in textiles and electronic components. Unions exist, particularly in the public sector, where they have fought privatization of the country’s energy and telecommunications systems. But most unions in Costa Rica have a degree of employer domination that would be illegal under U.S. law. And Costa Rican employers prefer to negotiate accords with employer-dominated associations; independent unions are responsible for only one in 15 union agreements.

Nicaragua

Population 5.5 million
Minimum wage $41.53/month in agriculture, $55.74/month in manufacturing.

Nicaragua’s civil war ended 18 years ago. The war was fought between the left-wing Sandinista party government, which toppled military dictator Anastasio Somoza in 1979, and the U.S.-armed-and-trained Contras, led by former officers in Somoza’s military. Since 1988, a succession of anti-Sandinista presidents have won election.

Nicaragua is primarily agricultural, specializing in coffee, cotton, and sugarcane, but like its neighbors, it too has an export processing zone.

Dominican Republic

Population 8.9 million
Minimum wage $164/month ($119/month in the export processing zone).

The Dominican Republic, which shares with Haiti the island of Hispaniola, has been free of military dictatorship since 1965. That’s the year a left-wing rebellion against a right-wing dictatorship was cut short by a U.S. Marine occupation. Thereafter, power changed hands democratically, mostly between one right-wing candidate and another, until 2000. The re-election of a right-wing president Leonel Fernández in May 2004 accounts for the Dominican Republic’s late addition to CAFTA, which had already been signed by the other five nations. Sugar is the main product of the Dominican Republic; there is also coffee and other tropical fruit commodities, and mining. In recent years, the country has also become a major exporter of apparel manufactured in special free trade zones.

Can the U.S. help improve conditions in Central America?

In a region both poor and unfree, what can the United States do to help improve conditions?

That matters, Drake says, and not just for moral reasons. Workers in the U.S. are more and more in direct competition with workers in other countries, so it’s in the best interests of U.S. workers to raise conditions abroad so they’re not lowered at home.

Accordingly, U.S. unions have pressed for greater protections for workers in trade agreements. But they’ve have had no influence over the U.S. stance in recent trade treaty negotiations.

In fact, CAFTA’s labor rights provisions are weaker than those in the unilateral accords that currently govern trade between the United States and Central America and the Caribbean. The Generalized System of Preferences and the Caribbean Basin Initiative offer the incentive of increased quotas to countries that improve workers’ rights.

Cafta, on the other hand, only requires that countries enforce labor laws they already have. And it gives workers’ rights second class status in enforcement when compared to investors’ rights. Under CAFTA, only commercial violations can lead to international sanctions.

To Drake, CAFTA’s economic impact isn’t as important as its political impact. It’s a test to see whether the interests of workers will continue to be shut out of U.S. trade policy.

© Oregon Labor Press Publishing Co. Inc.