Monday, September 10, 2007

CAFTA...and free trade

At the beginning of October, Costa Rica will be voting on CAFTA, the Central American Free Trade Agreement. I’m not sure what “free trade” is. I’d be willing to bet the name’s a bit misleading. On the surface it’s a treaty between Costa Rica and the United States to do business without tariffs. But there’s a lot more to it than that. If it were that simple it wouldn’t have the intense debate that seems to be swirling around it.

I just heard about it last week, so I’m not going to pretend I know anything about it.

But, a few things: When the United States embarked on free world trade, we didn’t vote on it. Congress, or the president—someone or somebody; see I don’t even know who—just said this is the way it’s going to be. Costa Ricans get to vote on it. Score one for the Costa Ricans.

Another thing: Last week I was in Costa Rica working with a company that builds Web sites for the agency I work for. There are about 150 people working at the company, 150 jobs that aren’t in the United States. I’m not grousing about the loss of job. I only point that out because at a company like that, one that clearly stands to benefit from CAFTA, or TLC as it is known by its Spanish lettering in Costa Rica, there are opponents to the agreement. Doesn’t make sense, does it? You’d think these people would see the clear benefit of such an agreement. More jobs offloaded to Costa Rica from the U.S.

But maybe they know something others don’t know.

Way back when, when the so-called paradigm shifted in corporate America, corporations said they could no longer guarantee a lifetime job, but what they could provide was training and growth, and when it was time to move on, workers could take that training and growth to their new companies. This could keep corporations competitive, lowering costs and overhead. Workers thought this was a deal, the old what’s good for GM is good for America. (Imagine they swallowed that old chestnut!) The big thing was, American workers had all of their money tied up in stocks and 401(k)s. So, basically, American workers opened up a vein to keep the Dow Jones pumped up and so they could have money when they retired. What they missed was there was a whole lot of living to do before they retired. There were cars to buy and fix and mortgages to pay and college tuition bills to absorb. But those jobs corporate America promised weren’t there. They were in India and obviously places like Costa Rica. So they couldn't afford cars and houses and education. We know, said all the big, fat, white men is suits, let's come up with free trade, since no one can afford our stuff here in the U.S., let's come up with a way to sell it in other countries. (See, the middle-class, which traditionally bought all the stuff America produced was shrinking, so corporate America had to build another middle-class somewhere else.)

Production (jobs) went off-shore and we started down that road to being information-driven. The U.S was going to strategize. Ideas were the only thing we’d manufacture. Information would be the only product the U.S. ultimately produced, while the rest of the world actually made the hard product itself. The advice here was change…change jobs, the way you think, the way you work. Hell, change your underwear, as long as you changed something. But it doesn’t always work out, because there are too many chiefs and not enough Indians. Exactly how many MBAs do you need to write a marketing plan?

The only reason I bring this up is because any time rich businesspeople float an idea past you, you can be certain the first people who are going to benefit from the idea is them.

1 comment:

CT said...


You inadvertently channel Groucho Marx’s revulsion at joining any club that would have him as a member when speaking so critically of U.S. trade policy. And you miss entirely the direct benefit that trade-based foreign investment, such as CAFTA, has in bolstering U.S. foreign policy, the overall U.S. economy, and the economic standing of our trading partners.

There’s a sentiment in your entry that expresses sympathy for the American worker. I share that. Too little was done from a public education standpoint to adequately prepare the men and women who propel our economy for the demands of competing in a global job market. But debating exactly how and why that happened is ultimately as futile as trying to reverse the trend toward increased intercontinental trade.

And why is it that foreign investment is always cast as a net-negative? Are you forgetting its importance during the 1990’s? By tackling—and by tackling I mean paying down—the federal deficit, we drastically decreased the value of the U.S. savings bond, which nation’s like China and the former Soviet Union used as collateral to lobby the IMF and other international funding bodies for capitol. This forced countries to invest in U.S. corporations as a way of maximizing their investment returns. Our most innovative companies took this infusion of capitol and heaved it into their research and development divisions. New ideas became new products, which had to be manufactured—which means new workers were hired at a blistering pace. Every two weeks, those workers became consumers and helped to author the greatest period of economic expansion in our nation’s history.

The economic boom of the 90’s started with foreign investment. (Coincidentally, it ended when a large number of those who benefited from that investment cashed in their stock earnings and began to act as venture capitalists, pouring their winnings into internet-based start-ups with no hope whatsoever of turning a profit.) Why then are you against taking this formula and giving it too, let’s say, Haiti (a late entrant into the CAFTA trade proposal)? Wouldn’t that country benefit from having U.S. goods, services and jobs bolster its economic infrastructure—goods, services and jobs as opposed to U.S. troops or U.N. peacekeepers?

Think also of the ensuing foreign policy benefits (the sentence before this hints at this). In our respective lifetimes, we’ve seen a shift in U.S. foreign policy away from sending troops and/or billions in foreign aid into various Latin American countries as unofficial/ungratified trade has increased. In truth John, you really have only two choices with regard to trade agreements: policies similar to The Reagan Doctrine or those very much like NAFTA/CAFTA.

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