 Email |
 Print |
 Post Comment
|
Share |
|
|
|
 |
|
|
The much-contested free trade pact recently passed with the barest of margins, but the rancorous debate is far from over. Deliberate the consequences:
| Related Stories |
| Burning Question: Yea or Nay to CAFTA? |
| What’s Good for Wal-Mart is Good for Manufacturing |
| Congress Passes 3 Free Trade Agreements |
Winning by a 217-215 House vote, CAFTA–the free trade pact with five Central American nations and the Dominican Republic–was as hard-fought as they come. In a nutshell, the agreement with Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic eliminates trade barriers and opens up the region to U.S. goods and services. It also makes it easier to invest in the area and bolsters protections for intellectual property.
While the economic impact of CAFTA is nowhere near that of the North American Free Trade Agreement with Canada and Mexico–the six countries involved collectively export to the U.S. in a year roughly what Mexico exports every five weeks–the agreement became the medium for a highly charged debate over the future of U.S. trade policy, according to this AP news item. Additionally, another AP story notes that the victory in Congress was so “narrow and grueling that it cast doubt on the future of other trade-opening pacts the administration is negotiating.”
Now that CAFTA has passed, what can manufacturers expect? Hear what proponents and opponents have to say and then weigh in below.
The Good
• A bonus for small businesses. Many small U.S. exporters would benefit from the lower transaction costs facilitated by the pact, says Jim Morrison, president of the Small Business Exporters Association. More than 13,000 American small and medium-size businesses already export to Central America and the Dominican Republic, accounting for 37% of total U.S. merchandise exports to the region, and with the removal of tariffs and other trade barriers, smaller orders would be less costly. (Source: Dayton Business Journal)
• Savings for U.S. companies. According to this food industry news source, companies are expected to save nearly $15 billion per year through the tariff elimination. The Grocery Manufacturers Association (GMA) says the pact has positive implications for U.S. food makers in particular. “With the elimination of these onerous tariffs, food companies will be able to increase their exports to the CAFTA-DR [Dominican Republic] region by as much as 84%,” says GMA president Manly Molpus. “Companies will also save $8.8 million from tariff reductions and quota expansions in the first year of the agreement–savings that will increase to $28 million annually when it is fully implemented.”
• An increase in exports. The National Association of Manufacturers estimates that CAFTA will spur $1 billion in additional manufactured exports. Additionally, NAM expects the measure to protect an existing $4 billion in U.S. manufactured exports that could have been in jeopardy if the Central American countries lose their apparel industry to Asian competition.
• A $756-million reduction in the U.S. trade deficit. The Business Roundtable, a Washington, D.C.-based association of chief executive officers which lauds the measure, cites a study by the U.S. International Trade Commission that says CAFTA would reduce the U.S. trade deficit by that amount. (Source: Dayton Business Journal)
• A more even playing field. NAM also says that the pact will help level the playing field between the U.S. and Central America, since nearly 80% of imports from CAFTA countries already enter the U.S. duty-free, according to the association, as reported in this story.
The Bad
• The flight of more U.S. jobs overseas. Democrats have pointed out that free trade agreements negotiated by both the Clinton and Bush administrations have spurred the defection of American jobs overseas. According to Dan Radford, executive secretary of the Cincinnati AFL-CIO, NAFTA led to the loss of 1 million American jobs, as reported in this news item.
• Unfair competition. According to this Milwaukee Journal Sentinel news story, opponents contend that CAFTA will trigger more direct competition from these low-wage countries as well as open a back door for Chinese textile companies to export more products into the U.S. via duty-free Central America.
• More sweat shops. Democrats have pointed out that the labor rights provisions in CAFTA are too weak to protect workers in impoverished Central American countries from exploitation. When NAFTA went into effect 11 years ago, people thought the standard of living in Mexico would improve, but the country has only grown more impoverished, Radford says.
• Environmental exploitation. According to Kathleen Gmeiner, president of the Ohio Conference on Fair Trade and member of the Ohio Working Group on Latin America, CAFTA puts the rights of investors above the abilities of local governments to establish environmental and human rights regulations–just like NAFTA does. And even worse than NAFTA, it extends to services and not just goods, making CAFTA even more dangerous, she says, as reported in this story.
The Hey, CAFTA-Is-No-Big-Deal Argument
According to this USA Today piece, the six countries involved…
• Have a collective economy that is about 1/160th that of the U.S.
• Have a population less than 4% of China’s and seven of India’s provinces.
• Engage in significant trade with the U.S. that would be unaffected by CAFTA.
Now, what’s your take?
Many of you already declared NAY to CAFTA back in May, but now that it has passed, what say you?
| Share | |
|
|
|
|
Follow Discussion
Recommend 
See More Comments
See Less Comments
|
||||
|
||||
|
Advertisement
 |
Browse IMT by Date
Browse IMT by Date
| Also Featured in IMT |
| Expert’s Corner |
| How Food Companies Can Trim the Fat |
| The food industry is struggling to cope with market fluctuations. In this Expert’s Corner, Jonathan Daiker, a partner at CFO services firm the Interlochen Group, identifies strategies to stabilize costs and boost profits. |
| Sites We Like |
| Harvard Business Review |
| IEEE Spectrum |
| Lifehacker |
| Popular Science |
| Shopfloor |
 |
Perception, perception, perception.
The CAFTA agreement will further facilitate the economics rule of core competency. The removal of tariffs and barriers will only further facilitate the core competencies of these emerging nations and their abilities.