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Free trade at all costs?

By Lou Dobbs

Lou Dobbs
International Trade
Treaties and International Organizations

(CNN) -- The Bush administration is trying to push the Central American Free Trade Agreement through Congress quickly and quietly.

The White House, however, couldn't find the votes for this so-called free trade agreement before his re-election in the fall, and the president likely doesn't have the votes for it now. And that's a good thing for American workers.

CAFTA advocates say the agreement would open up free trade between the United States and the Dominican Republic and five countries in Central America: Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua.

But this agreement represents the same free trade at all costs policy that has led to a 70 percent increase in the trade deficit since 2001. We're not signing trade agreements to open new markets for our exports. Instead we're continuing to enter into outsourcing agreements with countries that cannot possibly buy our goods.

If you add up the gross domestic products of the six CAFTA economies, the total market comes to about $85 billion, according to the latest available figures. That's only slightly larger than the economy of New Haven, Connecticut and less than a fifth of the size of New York City. As such, expanding trade with this bloc cannot possibly be a serious growth driver for the $11 trillion U.S. economy.

The CAFTA trading partners are simply too poor and too small to serve as major consumer markets for anything made in America, if indeed we still are manufacturing anything in this country. But with 40 percent of workers in Central America earning less than $2 a day, CAFTA will pit the working poor of these countries against American workers, especially textile workers and small farmers. U.S. multinationals don't exactly have a great track record when it comes to keeping jobs at home in the face of cheaper labor overseas.

More than 35 percent of all U.S. goods exports to the six CAFTA countries consist of turnaround exports, which are unfinished textile, apparel and other materials that are not ultimately consumed in these countries. These "round-trip" imports are assembled by low-wage workers and exported right back to the American marketplace.

As a result, U.S. exports to CAFTA countries generally produce greater imports to our market, which further swells the worsening record trade deficit. In fact, turnaround exports have contributed to the U.S. trade deficit with the six CAFTA nations rising by nearly 60 percent from 1997-2004, according to the U.S. Business & Industry Council.

And at least three of the six CAFTA countries are in such a weak financial position they couldn't possibly boost imports. The Dominican Republic is currently receiving a $665 million standby loan from the International Monetary Fund to help the country emerge from its economic crisis of 2003. The program is set to last until mid-2007, and the country will be under pressure to increase exports and curb imports. Unless, of course, those imports are turnaround imports that are shipped right back into the U.S. market.

Honduras and Nicaragua are also receiving special debt relief from the IMF because of their great indebtedness and high poverty rates. While they're not austerity programs like the Dominican Republic's, neither country has much capacity to sharply increase net imports.

"Americans know a bad trade deal when they see one," says Ernest Baynard, executive director of Americans for Fair Trade. "They've already had to live through one for 10 years under NAFTA."

U.S. workers have lost nearly 900,000 jobs as a result of the North American Free Trade Agreement, most of them in the higher-paying manufacturing sector, according to the Economic Policy Institute.

But NAFTA's effects are even more evident in our exploding trade deficit. Exports to Canada and Mexico have more than doubled since 1993, but imports to our neighboring countries have risen by 173 percent, from $151 billion to $412 billion. As a result, the trade deficit with Canada and Mexico has ballooned from $9.1 billion in 1993 to $110.8 billion last year.

CAFTA may bring lower prices to consumers, but it would most likely lead to more jobs being shipped to cheap foreign labor markets. And a new poll on CAFTA shows American consumers do not want to give up their jobs for lower prices, according to the nonprofit organization Americans for Fair Trade. In fact, 74 percent of those polled said they would oppose CAFTA if it reduces consumer prices but eliminates jobs for American workers.

"The only people who stand to gain from CAFTA," Baynard adds, "are people who are offshoring jobs already or want to offshore jobs."

That is something we simply cannot afford. Working Americans know all too well the high cost of free trade. I can only hope Congress has learned that lesson as well.

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