My BA is in Economics. I remember from freshman Econ101, like most of us do, the concepts of comparative advantage and the theoretical advantages of free trade (
ceteris parabus all parties gain from free trade). Back in the 90's I supported NAFTA. I
used to be a big proponent of free trade, but I've come to realize it will never be that simple. Ceteris parabus (all things being equal) only exists in theory. Writing a free trade agreement will never be as simple as writing a 1 page document. Modern economies are just too complex. Consider some of these problems.
1) What will the US do about its agricultural subsidies? Ignore the farm lobbies from politically powerful states like Iowa and New Hampshire

and repeal subsidies entirely? Or leave them in place and somehow try to take back those subsidies just for any farm products that are exported? Either way is either politically or practically impossible.
2) What about environmental laws? Should our industries that are required by law to put in place expensive pollution controls be expected to compete on an "even" playing field (non-offsetting tariffs) with foreign manufacturers who are free to dump whatever they want into the air and water (as is happening in China)?
3) Workplace laws? Minimum wage, Ch*ld labor practices, workplace safety, employee health coverage - each of these translate to costs for our manufacturers that often don't exist or are much more limited in other countries.
Unless you address these and other issues, it will never be as simple as just eliminating tariffs. And should we dumb down our laws to the lowest common denominator or expect other countries to raise their business lawas up to ours. There are valid reasons for protecting your industries from competition even if it means higher prices for the consumer.
1) National security - not that our defense industry has much competition, but say it did, should we ever allow our weapons production or other key elements of our defense to be completely outsourced? Should we have allowed Dubai to takeover critical US ports as would have happened in your "free trade utopia"
2) Infant industries - the US and other industrialized countries have a competitive advantage in some industries not because of any innate ability but really just because we've been doing it for so long and those industries have simply been able to grow to a scale that grants them that advantage. Is it fair to freeze the developing countries out of those industries merely because they happened to come along late.
3) What is good for the corporate profits of the big MNC's and their shareholders is not necessarily good for their employees. Free trade may lead to lower prices, but if the average worker, who makes up the bulk of the consumer market also makes less money they still won't be able to buy any of it.
Since these issues are too complex to be boiled down to a one page document, someone has to sweat out the details. Invariably that will be done by the parties that hold the keys to the economy: the US gov't and economy over our much smaller trading partners, the MNC's over small business, US Agribusiness over the small farmer, business over labor, etc. And the fine details in the resulting documents will invariably favor those who already hold the most power.
The results of NAFTA, which I admitted I originally supported, bear this out.
1) US companies flood to Mexico where they're not subject to our much more stringent labor laws, environmental laws or higher labor costs.
2) As a result, high wage manufacturing employment in the US goes down to be replaced by low wage WalMart jobs, where the new working poor can then go to buy the cheap imports they once produced themselves.
3) Real income (ie adjusted for inflation) in the US for the bottom 4 quintiles declines. So while prices do decline, the average consumer sees no improvement in after-tax purchasing power.
4) Because of the flood of manufacturers who moved their operations over the border to evade US regulations, The maquiladora region on the other side of the Rio Grande becomes a toxic polluted environmental disaster.
5) Of course jobs are also created in those factories but they don't pay enough to keep the Mexicans in Mexico and many cross the border in search of income sufficient to support their families back in Mexico.
6) The farm sector in Mexico that was supposed to gain from NAFTA can't compete with modern US agribusiness and farmers who used to be able to eke out a living on their small plots of land find themselves forced to join their urban brothers in the northward migration.
ID, asked what these previous free trade issues have to do with CAFTA and the answer is maybe not much but I think there is enough similarities in the underlying issues that the past history can provide important lessons for what might happen if this pact goes into effect.
I'll repeat a quote that ID seems to have overlooked:
Quote:
We are told that CAFTA increases exports and increases Foreign Direct Investment (FDI) and that this will increase employment. Nevertheless, none of this reasoning is true. On the one hand, CAFTA does not guarantee an increase in exports nor in FDI. In fact, last year Guatemala, Honduras, and El Salvador, with the agreement in place, actually saw their exports to the United States decrease.
No increase in foreign investment is guaranteed. Last year foreign investment in Costa Rica, without the treaty in place, was greater than that which was invested in all of the other Central American countries put together. Also, an increase in exports and in FDI does not guarantee that employment rates will rise. Between 1994 and 2006 in Costa Rica FDI rose by 500%, exports by 300%, and nevertheless unemployment also rose. This is because FDI displaced national production, and in doing so sometimes generated more unemployment than employment. This also was a result of an increased rate of displacement of national producers and employees. All such effects would be exaggerated if the agreement were to be approved.
CAFTA advocates maintain that this pact will increase CR exports and thus create jobs, but recent history with
CAFTA itself in the other countries that have already adopted it shows differently. Exports to the US from those countries have actually decreased. CAFTA advocates maintain that this pact will increas US investment in CR (and the rejection will lead to a flight of capital) and that investment will create jobs. But CR over the last 12 years without CAFTA has been able to increase FDI 500% and exports by 300% and experienced increased unemployment in spite of that. So how why do they really need CAFTA to increase exports and investment and even if they do why would those exports and investment translate to increased jobs any more than they have in the past?