CAFTA – a disaster for US workers’ jobs

Vigil for Jean-Charles de Menezes in Parliament Square on July 29
Vigil for Jean-Charles de Menezes in Parliament Square on July 29

Backers of the Dominican Republic-Central American Free Trade Agreement (CAFTA) claimed the bill would increase US textile jobs – but a new study by the University of Michigan says those assertions are false, says the AFL-CIO trade union federation.

The bill the AFL-CIO refers to authorising CAFTA, was passed by the US congress last week.

AFL-CIO warns: ‘Passed by Congress and signed into law by President George W Bush last week, CAFTA cuts tariffs among the United States, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua – but does not contain adequate environmental protections or enforceable protections for such core workers’ rights as the freedom to form a union.’

A snapshot of the report from the union-linked Economic Policy Institute says: ‘Some proponents of the Dominican Republic-Central American Free Trade Agreement (CAFTA) believe that it will stimulate apparel industry employment in Central America. 

‘According to a University of Michigan study, CAFTA will increase textile and apparel employment in Central America by 283,000 jobs, or 41 per cent.

‘The US Trade Representative’s (USTR) office claimed that, because “garments made in the region will be duty-free and quota-free under the Agreement only if they use US or regional fabric and yarn, thereby supporting US jobs,” CAFTA would in turn “provide regional garment-makers – and their US or regional suppliers of fabric and yarn – a critical advantage in competing with Asia.”

‘Similar claims were made for the North American Free Trade Agreement (NAFTA), but new data reveal that the US – Mexico textile and apparel complex has been unable to compete with the flood of imports coming into the United States from China.

‘Since 2000, Mexico’s share of US apparel imports has fallen 4.9 percentage points, and total apparel imports from Mexico have declined by $1.5 billion.

‘Imports from Mexico have been displaced by an increase in apparel imports from China.

‘Imports from the rest of the world, as a share of the US total, peaked in 2002, shortly after China entered the World Trade Organisation (WTO), and their share has fallen by 3.7 percentage points since 2000.

‘Furthermore, as US apparel imports from Mexico have fallen over the last four years, US exports of fibre, yarn, fabric, and textiles to Mexico have declined 1.4 per cent, or by about $50 million between 2001 and 2005.

‘Thus, it appears that the strategy of using NAFTA to unite the US textile industry with Mexico’s apparel producers has not proven successful in the long run.

‘China’s share of US apparel imports has increased at an accelerating pace since it entered the WTO in 2001, particularly since the global system of apparel quotas was eliminated on January 1, 2005.

‘Its total share of US imports increased 8.6 percentage points between 2000 and 2005.

‘Given these trends, it is highly unlikely that textile and apparel producers in the CAFTA countries, or the US textile industry, will effectively “Unite to compete with Asia,” as the USTR claimed.

‘Since July 2000, over 500 factories and 90,000 apparel jobs have disappeared in Mexico’s export processing zones.

‘In the same period, the United States has lost 212,000 textile jobs and 305,000 apparel jobs.

‘The notion that 283,000 textile and apparel jobs will be created in Central America as a result of CAFTA is a pipedream.

‘It is based on a model that is driven only by changes in tariff and non-tariff barriers, and it ignores the role played by the enormous surge in China’s exports.

‘Those who believed that this treaty will save US textile jobs or build up these industries in the CAFTA countries will be badly disappointed.

‘The rise in the US trade deficit with Canada and Mexico through 2004 has caused the displacement of production that supported 1,015,291 US jobs since the North American Free Trade Agreement (NAFTA) was signed in 1993.

‘Jobs were displaced in every state and major industry in the United States. Two thirds of those lost jobs were in manufacturing industries.

‘The proposed Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) duplicates the most important elements of NAFTA, and it will only worsen conditions for workers in the United States and throughout the hemisphere.

‘Since NAFTA took effect, the growth of exports supported approximately one million US jobs, but the growth of imports displaced domestic production that would have supported two million jobs.

‘Consequently, the growth of the US trade deficit with Mexico and Canada caused a net decline in US production that would have supported about one million US jobs.’

The Economic Policy Institute had warned last month: ‘Before adopting an agreement such as DR-CAFTA, it is important to understand the following about NAFTA’s effect on US jobs:

• The one million job opportunities lost nationwide are distributed among all 50 states and the District of Columbia.

‘Those affected most in terms of total jobs displaced include: California (-123,995), Texas (-72,257), Michigan (-63,148), New York (-51,582), Ohio (-49,886), Illinois (-47,701), Pennsylvania (-44,173), Florida (-39,987), Indiana (-35,157), North Carolina (-34,150), and Georgia (-30,464).

l The 10 hardest-hit states, as a share of total state employment, are: Michigan (-63,148, -1.44 per cent), Indiana (-35,157, -1.19 per cent), Mississippi (-11,630, -1.03 per cent), Tennessee (-25,588, -0.94 per cent), Ohio (-49,886, -0.92 per cent), Rhode Island (-4,482, -0.91 per cent), Wisconsin (-25,403, -0.90 per cent), Arkansas (-10,321, -0.89 per cent), North Carolina (-34,150, -0.89 per cent), and New Hampshire (-5,502, -0.87 per cent).

‘NAFTA is a free trade and investment agreement that provided investors with a unique set of guarantees designed to stimulate foreign direct investment and the movement of factories within the hemisphere, especially from the United States to Canada and Mexico.

‘No protections were contained in the core of the agreement to maintain labour or environmental standards. As a result, NAFTA tilted the economic playing field in favour of investors and against workers and the environment, causing a hemispheric “race to the bottom” in wages and environmental quality.

‘NAFTA has also failed to deliver on its promised benefits to the poorest citizens of the hemisphere, many of them living in Mexico.

‘Real wages of Mexican manufacturing workers have fallen despite a decade of strong GDP growth.’