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George Shuster
For the first time since the passage of the North American Free Trade Agreement (NAFTA), the U.S. Congress is seriously debating the ramifications of America's so-called "free trade" policy in deciding whether to pass the Dominican Republic-Central American Free Trade Agreement (CAFTA). With three million manufacturing jobs lost in the past five years, stagnant wage growth, and a skyrocketing $617 billion trade deficit, such a debate is long overdue. CAFTA, like NAFTA, is a continuation the flawed policy responsible for emasculating many of the wealth-creating sectors of the U.S. economy. Take the experience of my industry, textile and clothing manufacturing. With Mexican wages a fraction of those paid in the United States, it is unsurprising that U.S. textile and clothing companies raced south under NAFTA's banner. Combined with a surge in imports from Asia, the results were disastrous. Since 1994, nearly 900,000 U.S. textile and clothing jobs disappeared. In addition, U.S. textile output fell by approximately 26 percent, while that of clothing dropped by more than double, 57 percent. One would like to think that the U.S. government would have learned from the mistakes of NAFTA. Unfortunately, that is not the case. Today, the U.S. government is pushing CAFTA, a carbon copy of NAFTA's flawed model of outsourcing high-wage jobs and maximizing imports. In fact, 85 percent of the language in CAFTA is identical to NAFTA. The other 15 percent is worse. Like NAFTA, the CAFTA model involves the granting of free access to the U.S. market for producers that use low-wage labor and lax environmental standards to undercut U.S. domestic manufacturers. In return, America gains access to markets worth less than 2 percent of the value our own. We only need to look at NAFTA to predict the results of CAFTA. Under NAFTA, the United States has gone from a $1.6 billion surplus with Mexico in 1993 to a stunning $48 billion deficit in 2004. CAFTA will be just the same. Already promotional groups like ProNicaragua are using CAFTA as lure to convince U.S. manufacturers to outsource. As if low wages and lax environmental standards are not enough attraction to outsource, CAFTA is riddled with loopholes that discourage the use of U.S. suppliers by allowing for U.S. duty-free treatment for products assembled with component parts from China, Mexico, and other non-CAFTA countries. These provisions are even worse than the NAFTA model that led to the outsourcing of 1.8 million U.S. jobs. Clearly, a new policy different from the NAFTA/CAFTA model is needed staunch the bleeding of our wealth-creating manufacturing sector. Such a policy should include the following: First, the United States should only focus on trade agreements with countries like Germany, Britain, France or Italy that have the ability purchase substantial amounts of finished U.S. goods. Second, the United States must insist that all future trade agreements share the benefits only between the contracting parties. CAFTA and other trade deals often include loopholes to benefit third-party countries like China at the expense of U.S. manufacturing. Third, the U.S. must tackle our $162 billion trade deficit with China head on. This can only be done using access to the U.S. market as leverage to persuade China to stop its U.S. job-destroying subsidies, intellectual piracy and other predatory trade practices. Fourth, Congress must reassert its constitutional authority over trade policy. Instead of embracing this responsibility, Congress has severely diluted it by passing laws designed to place trade policy in the hands of the Executive Branch, a forum where more U.S. jobs are likely to be outsourced, regardless of the party in power. Fifth, Congress should require an independent study prior to the consideration of all proposed trade legislation that produces a Trade Deficit Impact Statement. This would let Congress know in advance whether the proposed trade deal would lessen the trade deficit or make it worse. Finally, and most important, we must reverse the current trade policy by which all the governmentally-imposed conditions of trade are designed to punish U.S. exports relative to imports. The average U.S. tariff is 1.6 percent, hardly protectionist, but our exports face an average of 40 percent. This distortion is replicated in all the other government-imposed conditions of trade, whether non-tariff barriers, regulation, subsidies, state-sponsorship, currency manipulation, tax policy, and so on. In conclusion, the cumulative impact of our flawed trade policy is devastating. To those who claim that America's burgeoning trade deficit and mass outsourcing are the "inevitable result of globalization," I say no; it is a wound self-inflicted by Congress and the White House. America can and must fight back. A good start to stopping the bleeding would be to defeat NAFTA's identical twin CAFTA. George Shuster is the CEO of Cranston Print Works of Cranston, RI and Co-Chair of the American Manufacturing Trade Action Coalition. |