How To Think About CAFTA
Tyler Cowen summarizes in convenient bullet-point format what I think most free traders think of CAFTA -- that it's a mixed bad, but basically not the way we want to see trade policy done. The contentious thing is his point nine, "Failure of the treaty would be a disaster, again for symbolic reasons. Trade negotiations would slow down significantly, and the age of trade agreements might be over." I think that's totally wrong.
CAFTA is the culmination of a number of bad trends in American trade policy. If the treaty is defeated, I think it's more likely that the symbolic effect will be to reverse those trends and put us back on the path of bipartisan agreements with less non-trade issues and more Trade Adjustment Assistance than an end to trade deals. Conversely, if CAFTA passes, the interests that have been driving the degeneration of trade policy will be vindicates in the eyes of the broader business community and the focus will shift toward a similarly ill-conceived FTAA deal rather than an effort to get things back on track.
What I think Tyler and the other "pass CAFTA or we'll never trade again" folks are failing to understand is that while many Democrats are never going to meet a trade deal they like, many others feel very awkward about being backed into opposition by a White House that's unwilling to throw liberals the merest bone while tossing off huge hunks of steak to the intellectual property industry. Lots of factors drive this discomfort, including high-minded ones, petty pride (nobody likes appearing to have surrendered in a long-run intra-party fight), and most crassly simple fundraising.
Moderate Democrats would, I think, be thrilled to help the administration out and re-assert their historical centrality to trade policy debates if the GOP were willing to meet work cooperatively. What's more, the dread AFL-CIO is, for those who haven't been paying attention, in the midst of splintering with a big block of unions whose workers are overwhelmingly in non-tradeable sectors (or, in the case of the Teamsters, who's trade-related issues relate exclusively to Mexico -- nobody going to drive a truck here from Australia or Chile) preparing to seceed and focus more on organizing in growing economic sectors rather than using politics to defend jobs in shrinking sectors.
I generally agree that lowering trade barriers is a good thing. The WTO, to my mind, gets it right; it forbids participating countries from using trade barriers like tariffs unless the body allows them to in targeted response to an extant trade barrier. However, a big problem with CAFTA, according to the link supplied by Marginal Revolution, is that its remedy for putative trade barriers is a private cause of action against any level of government for damages measured by speculative lost profits. Any statute or regulation is fair game. NAFTA has this bad provision, too, and CAFTA is apparently even worse. This clause is a gold-plated invitation to conservative judicial activist mischief.
June 23, 2005 9:46 AM | Reply | Permalink
Though this does spring off an idea I read in the Economist (the train to work is very long), I think they make a good point: the CAFTA treaty provides a signal to the rest of the world that the US is willing to negotiate on the Doha Round, which is really what we should be worrying about. This whole CAFTA deal (as Cowen notes in point 7) is really pretty small potatoes; the real deal to watch is the deal (in whatever form it takes) that comes out of Doha.
But here I think many of the moderate Dems that Matt was talking about should be perking their ears up. This may in fact be the first trade deal that actually benefits third world countries, an issue that should reverbrate strongly in the Democratic party. There's a reason that this round is also known as the "Doha Development Agenda." After the Uruguay round, third world countries began to realize just how shafted they really were from the deal, especially from the agreement on agriculture that was attached to it 1995.
The point here is that there is this great issue right here that is waiting for Dems to poach from Repubs. It's fiscally conservative (in the sense that free trade is "conservative"), but socially liberal in its effects on the third world and other developing countries. And the Republicans haven't touched it. So that's the import of CAFTA, IMO, that it is a stepping stone towards stealing the Doha round right out from under the noses of the Repubs.
June 23, 2005 9:56 AM | Reply | Permalink
Gut reaction is Matt's right about this.
June 23, 2005 10:11 AM | Reply | Permalink
Isn't UNITE, the textile worker's union, also in the Stern coalition? How is it that they're doing well despite the easy tradability of those jobs?
June 23, 2005 11:08 AM | Reply | Permalink
BY LAW A TRADE AGREEMENT CANNOT BE RATIFIED IF IT DOES NOT ENFORCE US INTELLECTUAL PROPERTY RIGHTS. ALSO, THE US IS ADRESSING DEVELOPING COUNTRY CONCERNS UNDER THE AUSPICES OF THE WTO. THE US OFFERED A RESOLUTION TO THIS A YEAR AGO IN THE WTO BUT IT WAS TANKED BY BRAZIL AND THE EU TO THE DETRIMENT OF THE DEVELOPING WORLD.
I BELIEVE ALL THE CA COUNTRIES HAVE RATIFIED MORE ILO CONVENTIONS THAN THE US WHICH IS ONE OF THE KEY CONDITIONS DEMS PUT ON CAFTA BEING SIGNED. IT WAS MET. THE AGREEMENT DOES FOR LABOR RIGHTS WHAT ALL OUR AGREEMENTS HAVE DONE WHICH DEMS HAVE SUPPORTED AND PASSED IN THE PAST (PREVISOULY APPROVED IN CHILE, SING, MORROCO AND AUSTRALIA, NOT TO MENTION PASSAGE OF TWO TPA ACTS) THIS IS A TACTICAL MOVE ON THEIR PART TO OPPOSE CAFTA, NOT B/C OF CAFTA ITSELF, BUT IN ORDER TO EXTRACT MORE CONCESSIONS IN GENERAL ON LABOR FROM THE ADMIN. THAT NEEDS TO BE CLEAR.
IN TERMS OF ENVIRON, CAFTA SAYS ONLY TO ENFORCE YOUR ENVIRON LAWS ON THE BOOKS AND THAT YOU DONT HAVE TO DO ANYTHING IN THE TREATY THAT UNDERMINES YOUR PROTECTION OF ANIMAL/HUMAN SAFETY.
June 23, 2005 11:11 AM | Reply | Permalink
I wrote the post that Tyler was nice enough to cite. One of its points was that CAFTA seems to contain a version of NAFTA's horrible Chapter 11, which allows corporations that think they have been harmed by some law to bring suit against the country in which the supposedly harmful law was passed. The NAFTA version has been used by corporations to sue for what they say are profits they don't get to make because of (most commonly) environmental laws, and some of those corporations have won. (The most famous case involves a company that makes a component of MTBE; it sued for profits lost because of California's MTBE ban.)
One of my concerns about this is: the mere prospect of such suits might deter some countries from passing environmental laws, especially if the countries in question are small and poor, which most of the CAFTA countries are. In general, we presumably want trade agreements to encourage countries to adopt higher environmental standards, both for their own sake and because it means that we don't have to compete against firms that can successfully externalize part of their costs. But Chapter 11 - like provisions instead put a ceiling on environmental laws, above which any action can expose a country to lawsuits. And that's just nuts.
June 23, 2005 11:16 AM | Reply | Permalink
If you pass CAFTA, what Democrats get stuck with is the template for all future trade agreements and it is a crappy template. Look at the deal with Jordan for a better model. I'd write Cowan's sentend this way "Passage of the treaty would be a disaster, and not for symbolic reasons. Trade negotiations would adopt this as the template, and the age of trade agreements as a tool for anything other than levelling down might be over."
And the Change to Win unions wouldn't exactly be deciding to change their ecnomic philospohy becasue they are not in with UAW and USWA anymore. And to the extent that nurses coming in from the Phillipines are strikebreakers these days and the outsourcing of services continues apace I think that the real issue is that preoccupation with the division in AFL will prevent good coalition action.
June 23, 2005 12:20 PM | Reply | Permalink
Haven't there been demonstrations in Central America against this treaty? It would be helpful to know why.
June 23, 2005 12:39 PM | Reply | Permalink
"Don't worry that the agreement does little for labor rights or environmental protection in Central America. Imposing such policies, before the recipient countries are wealthy enough to support them, is usually counterproductive."
The core labor rights unions are demanding is not a similar minimum wage in the CAFTA countries, but the right of those workers not to be fired, or in some cases murdered, for joining a union. Basic human rights are not a luxury and what labor rights in trade treaties require is that it be the workers, not the government, that decides what wages are acceptable given the poverty of the country.
If workers are worried that jobs will go overseas, they will negotiate appropriate wage levels. But that decision should be up to the workers-- which is all that labor rights clauses require.
June 23, 2005 1:22 PM | Reply | Permalink
<p><em>Isn't UNITE, the textile worker's union, also in the Stern coalition? How is it that they're doing well despite the easy tradability of those jobs?</em></p><p>UNITE has been organizing such industries as dry cleaners and industrial laundries (that process things like hotel linens), which are less fungible; they've also branched out into non-textile industries (such as airport and hotel workers), much as the UAW has.<br /> </p><em />
June 23, 2005 6:15 PM | Reply | Permalink
Don't forget that the cases are decided by a three person tribunal. I'm not sure how the tribunal is chosen, but it is not democratic. We have anonymous individuals making decisions about what laws our legislatures can pass.
June 23, 2005 6:20 PM | Reply | Permalink
Nathan -- I agree. Or, rather, I disagree with Tyler's analysis of that point. If I were negotiated a trade deal, I would try to strengthen labor rights. If I had to vote on a trade deal someone else negotiated that didn't strengthen labor rights, I'd consider that too bad, but not a dealbreaker. Part of the problem with CAFTA is that it weakens labor rights for a lot of economic sectors. That didn't happen to be the point I really wanted to debate with Tyler, since we had similar overall assessments of the treaty (bad), but different assessments of what follows from it. The July Prospect on newstands Monday does, however, feature a brief piece by me on the subject of CAFTA and labor rights.
June 23, 2005 10:58 PM | Reply | Permalink