CAFTA:CAFTA:Paving the way for the FTAA

Prepared for the

By: Labor Education Service, University of MN

Minnesota Fair Trade CoalitionMinnesota Fair Trade Coalition

(April 2005)

Why CAFTA? Why now? Why CAFTA? Why now?

• FTAA expansion deadlocked– 2003: Miami & Mexico talks

collapse– Political pressure here and abroad

and South American opposition

• Alternative strategy– Bilateral and smaller regional

agreements – Isolate recalcitrant countries– Jump start FTAA and WTO talks

DR-CAFTA (Dominican Republic - Central American Free Trade Agreement)

DR-CAFTA (Dominican Republic - Central American Free Trade Agreement)

• Covers 5 Central American countries– Guatemala, El Salvador,

Honduras, Nicaragua, and Costa Rica – plus the Domincan Republic

• Extends NAFTA model to Central America

• Negotiated quickly – less than a year

• Up for vote in 2005

“Five small countries took a courageous decision last year to seek a free trade agreement with their giant neighbor to the North. They placed their faith in free markets, in openness, and in democracy. We have worked with them to produce an agreement that will bring benefits to workers, farmers and consumers in all countries.”

-- Robert Zoellick U.S. Trade Representative

“Every human institution … should be for the development of life and not to the contrary; and what does not contribute to life is not Christian and is undesirable. … [A]n economic system that is not capable of nourishing the entirety of its population under its care … goes against the justice of the kingdom of God. Considering these theological foundations, we denounce the Free Trade Agreement between Central America and the United States.”

-- Pastoral Letter (Church representatives from Nicaragua, Costa Rica and Panama)

Trade liberalization has already failed

the United States and Central America.

Trade liberalization has already failed

the United States and Central America.

NAFTA Lessons: NAFTA Lessons:

• 750,000 U.S. jobs lost to NAFTA• U.S. wages have stagnated• Threats of plant closure used

against U.S. workers• 10% drop in Mexican

manufacturing wages

Workers have been hurt Workers have been hurt

NAFTA Lessons: NAFTA Lessons:

• Small and medium farmers hurt• ADM and Cargill profits have

doubled and tripled• 1.3 million Mexican farmers

displaced

Farmers and rural communities hurt Farmers and rural communities hurt

NAFTA Lessons: NAFTA Lessons:

• Corporations have filed 42 cases for $28 billion in damages under Chapter 11

• Most cases attack policies protecting public health and the environment

Environment and Civil Society hurt Environment and Civil Society hurt

Central America Lessons: Central America Lessons: Trade liberalization has occurred in Central

America for two decades with devastating results.

Debt

Investment in education and

public services

Malnutrition, poverty, income

disparity

Productivity

Ask who wrote the rules. Ask who wrote the rules.

Who wins under CAFTA? Who wins under CAFTA? Q:Q:

A:A:

The farmers, workers, and local communities who had no say.

Who loses?Who loses?

Who loses under CAFTA? Who loses under CAFTA? Farmer and rural

communities.

• Free trade has hurt small and medium sized farmers

• Commodity dumping by large agribusinesses like Cargill and ADM has hurt U.S. farmers and farmers in other countries.

• CAFTA opens up U.S. farm markets to illegal dumping.

Case Study:Case Study:Minnesota Sugar Beet Industry

Case Study:Case Study:Minnesota Sugar Beet Industry

• Sugar industry supports small farmers and communities– U.S. = 11,000 farmers and 146,000

indirect jobs; – MN = 2,500 farmers; $2 billion economy

• One of the few commodities not subsidized by federal government– Prices controlled through supply

management programs, steep tariffs and import quotas

– Most of U.S. sugar produced domestically

Case Study:Case Study:Minnesota Sugar Beet Industry

• CAFTA erodes sugar policy– Opens door for 2 million more

tons of dumped sugar – 25% of market

– Will drive prices down 60+%– Would devastate Red River

Valley

• May also reduce corn prices– Cheap sugar substituted for

corn fructose– Potential $1.5 billion loss

Who loses under CAFTA? Who loses under CAFTA? Worker and labor rights

• No meaningful labor rights protections

•Procurement rules like the FTAA –Covers purchasing by federal government and 21 states (not Minnesota)–Limits bid specifications only to the supplier’s technical and financial ability to do job–Prohibits any further requirements on how a good is made or a service provided

Case Study:Case Study:Government purchasing policies

• Preferences for local workers• Prevailing wage and project labor

agreements• Labor peace agreements• Human rights based purchasing• Living wage agreements• Green purchasing, renewable

energy, and recycled content laws

•CAFTA’s Chapter 10 –Like NAFTA’s Chapter 11–Allows foreign corporations to sue a government over regulations they see as limiting their right to make a profit–Case heard before secret trade tribunal

Who loses under CAFTA? Who loses under CAFTA? Environmental protection

Case Study:Case Study:Harken Costa Rica Holdings

Case Study:Case Study:Harken Costa Rica Holdings

• Costa Rica announces moratorium on oil exploration and open pit mining

• Harken Costa Rica Holding (close ties to Harken Energy of Texas) wants to drill off Talamanca coast

• Secures a waiver conditional on an environmental impact review

• Fails environmental assessment and Costa Rica denies them the permit

Case Study:Case Study:Harken Costa Rica Holdings

• Harken sues Costa Rica under World Bank rules for $57 billion – 11 times its annual budget

• Since Costa Rica had not signed the specific agreement, the case was sent back to Costa Rica courts

• Under CAFTA, Harken could have sued under Chapter 10 investor protection rules and the case would be heard before a secret trade tribunal

•Mandates privatizing public services•Covers all services unless specifically excluded

–U.S. has excluded all services not already under the WTO–Central America to open up health care, water, education communications among others

Who loses under CAFTA? Who loses under CAFTA? Public services

Case Study:Case Study:Costa Rica Telecommunications

Case Study:Case Study:Costa Rica Telecommunications

• Costa Rica Telecommunications Services– State run; high functioning– Internet and cell phone revenues subsidize

rural phone service – 97% coverage– Popular support to keep system public

• CAFTA specifically opens Costa Rica’s cell phone and internet services to privatization by U.S. corporations

•Extends 20 year intellectual property patent protections•Creates “test data” protections

–Test data is data used to test a drug’s efficacy–Ban effectively prohibits making generic drugs for 5 years

•Poor countries can’t afford name-brand drugs

Who loses under CAFTA? Who loses under CAFTA? Affordable medicines

Case Study:Case Study:Guatemala and generic drugs

• 2004: Guatemala repeals 5-year ban on test data– Had been put in place under earlier trade

liberalization programs– Ban made it almost impossible to market

generic drugs – Popular support demanded its repeal

• U.S. Trade Rep: reinstate the ban or risk being left out of CAFTA– CAFTA contains 5-year test data ban

What can be done?What can be done?• We can beat CAFTA!

– educate your membership– write opinion piece or letter to editor– write articles for local newsletter

• Winning on CAFTA helps us defeat other issues– Social Security privatization– FTAA– Permanent tax cuts for the wealthy

• Contact Congress– write Congress about specific issue– encourage your organization to contact

Congress

Key Minnesota Congressmen Key Minnesota Congressmen

Sen. Norm Coleman

Rep. Mark Kennedy

Rep. John Kline

Rep. Gil Guteknecht

Join the

Minnesota Fair Trade Coalition

more than 60 allied groups fighting to make respect for working people, family

farmers, our environment, and our democracy an integral part of the global economy

Contact:

Octavio Ruiz612-276-0788 x19

oruiz@americas.org

See also: www.citizenstradecampaign.org