| The American Manufacturing Trade Action Coalition (AMTAC) strongly opposes the Central American Free Trade Agreement (CAFTA) because it copies the flawed trade policy model of the North American Free Trade Agreement (NAFTA). The results of this failed model are predictable. CAFTA will exacerbate the already astronomical $617 billion U.S. trade deficit. One need only study the impact of NAFTA to determine the outcome - 85 percent of the text of CAFTA is identical to the NAFTA, while the other 15 percent is even worse, granting greater loopholes that will displace current exports of U.S. yarns and fabrics to the region. In the early 1990's, NAFTA was sold to the American public as a vehicle to increase the modest U.S. trade surplus with Mexico in order to sustain and create millions of high-paying and high-valued added manufacturing jobs in our country. Assertions like the bold claim made below by the Institute for International Economics in October 1993 were common: "… with NAFTA, U.S. exports will continue to outstrip Mexican exports to the United States, leading to a U.S. trade surplus with Mexico of about $7 billion annually by 1995 … rising to $9 billion to $12 billion between the years 2000 and 2010." Eleven years after adoption of NAFTA, nothing could be further from the truth. The United States has gone from a $1.6 billion surplus with Mexico in 1993 to a stunning $45 billion deficit. Hundreds of U.S. factories closed and relocated south of the border to take advantage of the low production costs in Mexico, while still enjoying free access to the valuable U.S. market. Even more troubling, the U.S. Department of Labor reports that 1.8 million workers filed for Trade Adjustment Assistance because their jobs were eliminated in the U.S. and sent to Mexico because of NAFTA. CAFTA is a continuation of the failed NAFTA policy that drives our rising trade deficits and mounting job losses. This model grants free access to the $12 trillion U.S. market for offshore producers that take advantage of pennies-an-hour wages and low labor and environmental standards to undercut manufacturers in the United States. In return, U.S. manufacturers gain access to markets worth only a fraction of the U.S. market. The combined GDP of the CAFTA countries is less than 2 percent of the U.S. economy. Per capita GDP for the region is only $4,632. Moreover, as reported by CAFTA governments, 49 percent of Dominicans and Central Americans live in poverty. Clearly, consumers in CAFTA countries have little power to buy finished U.S. goods. The one asset that CAFTA countries do have, however, is a sizeable pool of cheap labor that can be exploited to send billions in job-destroying exports to the United States. This is especially true in the textile and clothing sector, as CAFTA countries already ship $9.5 billion in exports of those products to the United States. Currently, textiles and clothing imported from CAFTA countries must be manufactured with U.S. components to receive duty-free treatment. CAFTA throws this rule out the window. There is no requirement to use a stitch of U.S. yarn or fabric, as any product wholly manufactured in a CAFTA country will receive duty free treatment. Already promotional groups like ProNicaragua are using CAFTA as lure to convince U.S. manufacturers to outsource. There are other provisions in CAFTA designed to benefit third-party countries like China and Mexico at the expense of U.S. exports. Loopholes like tariff preference levels, cumulation, single transformation and exemptions for pocketing and non-visible lining will hit North Carolina and other domestic manufacturers very hard. If all of CAFTA's textile loopholes are utilized fully, 550 to 750 million square meters in exports, worth an estimated $1 billion, will disappear. This jeopardizes tens of thousands of U.S. jobs and nearly 25 percent of our current textile and clothing exports to CAFTA countries. The impact will be especially severe on North Carolina, where the textile and clothing industry still employs 100,000 people and where 160,000 textile and clothing jobs have been lost since the enactment of NAFTA. Lastly, to those that argue the U.S. textile industry needs a CAFTA to compete with China, we say look at the numbers. In clothing categories open to competition from China, Mexican market share, even with NAFTA, declined from 8 percent in 2001 to 2 percent in Nov. 2004. Rather than pushing a job-killing CAFTA, the U.S. government should tackle Chinese unfair trade practices head on with more safeguards. In conclusion, there's no doubt that CAFTA will be a job killer just like NAFTA. The best thing the U.S. Congress can do is to defeat it as quickly as possible. |