Rationale from Commissioners' Resolution for G.A. Action on the Central American Free Trade Agreement (CAFTA)

In 2003, numerous religious, humanitarian, development, labor, and public policy organizations called on the United States to honor a set of standards of fairness and justice in trade negotiations with Central America.1 CAFTA, as negotiated, will harm, rather than help, farmers and workers in Central America who are struggling to overcome poverty. We believe as well that CAFTA will not benefit ordinary people in the United States. The CAFTA will not contribute to equitable, just, and sustainable development in the United States or Central America.

The following impacts would occur in Central American countries and in the United States:

1. Central American Countries

a. Destroy subsistence farming.

b. Create a threat to food security.

c. Create inadequate environmental protections.

d. Cause negative impact on fair trade enterprises and cooperatives.

e. Erode essential services.

f. Create loss of national sovereignty.

2. United States

a. Increase forced migration of people from Central America to the United States.

b. Increase militarization of the border between Mexico and the United States.

c. Export additional jobs from the United States.

The Central America Free Trade Agreement builds on the foundation of the North American Free Trade Agreement (NAFTA), which went into effect in 1994. Ten years of NAFTA are indicative of some of what can be expected under CAFTA. Additional information is available online at www.citizenstrade.org, which includes signatures from forty-eight organizations, including the PC(USA) Washington Office.

1. Under NAFTA, more than a million Mexican farmers and their families have had to abandon their land and livelihood because they are unable to compete with subsidized food crops from the United States. They migrate to cities, where jobs are scarce and wages low, or migrate to the United States, through dangerous border crossings.
2. Between 1994 and 2003, the percentage of the Mexican population living in poverty rose from 58 to 79 percent. This represents a 36 percent increase in the poverty suffered. For women-headed households, poverty increased by 50 percent. Increasing poverty both arises out of, and leads to, lower wages, sweatshop conditions, deterioration of health, increased marginalization, and instability.
3. Food security has been threatened by the export to Mexico of subsidized corporate foodstuffs from the U.S. and Canada, undercutting local producers in Mexico.
4. Threats to the environment have increased as industrialized agriculture has replaced small farms, and export-driven economic growth has led to over-use of natural resources. Dumping of hazardous wastes near factories has caused birth defects in children and other illnesses.
5. Foreign corporations have been allowed to bring lawsuits against governments that pass labor, public health, or environmental laws that reduce corporate profits.

In addition, the Central American Free Trade Agreement:

1. does not include adequate enforcement for violations of internationally recognized labor and environmental standards;
2. threatens essential services, in that it promotes privatization and deregulation of services including education, health care, postal service, construction, energy, transportation, and water supply;
3. specifically discriminates against products of nongovernment organizations and producer cooperatives. This would include fair-trade enterprises such as Equal Exchange and Just Coffee, which provide a living wage to farmers and producers.

The trade agreement was not negotiated within a framework of democratic accountability and did not include broad-based citizen participation. The text was only made public after the negotiations were completed. There were no social reviews or impact assessments by independent bodies on the potential impact of CAFTA on workers, people living in poverty, women, indigenous and ethnic groups, or the environment. The CID Initiative, a Central American coalition that participated in a side room of the negotiations, called for a moratorium mid-way through the process, due to the limited participation.

WORKER RIGHTS: The agreement merely states, “[a] Party shall not fail to effectively enforce its labor laws, through a sustained or recurring course of action or inaction, in a manner affecting trade between the Parties.”2 For countries where labor violations are egregious and systemic, this clause is insufficient to guarantee protection of workers’ rights. Although fines may be levied against a trading partner, the money collected is not required to be used to remedy the labor rights violation, but is designated vaguely for “appropriate” labor initiatives. Suitable labor initiatives are never defined. The CAFTA allows a trading partner to re-impose import duties if the violating government does not pay the fine, but not for failure to correct the labor rights violation. The labor provision in CAFTA will also replace the Generalized System of Preferences (GSP), which includes a petition process, leading to the loss of a useful, if modest enforcement mechanism. Finally, no protection systems are established for rural or urban workers adversely affected by the trade agreement.

AGRICULTURE: Central American countries will be required to eliminate import tariffs on rice, beans, yellow corn, and dairy products, staple products on which the livelihoods of 5.5 million small and medium producers depend. The U.S. refused to negotiate the agricultural subsidies and supports it provides that enable U.S. agribusinesses to export goods at below the costs of production, undermining Central American farmers. Without the compensating protection of tariffs, Central America’s doors will be opened to the dumping of U.S. farm products, risking massive displacement of rural workers and increased food insecurity in Central America.

TRADITIONAL KNOWLEDGE & THE RIGHT TO ACCESS TO MEDICINE: CAFTA provisions on intellectual property threaten to place HIV/AIDS treatment beyond the reach of many Central Americans in need. CAFTA provides for expanded patent rights for brand-name medicines and new restrictions on using inexpensive generic versions. This will drive up the cost of lifesaving drugs, and delay or obstruct generic competition. It will become almost impossible for Central Americans to acquire affordable medicines for HIV/AIDS and other diseases. In addition, CAFTA will place restrictions on Central America farmers’ ability to use and save certain seeds, undermining traditional agricultural practices. The CAFTA goes beyond World Trade Organization (WTO) regulations, and violates the spirit of the Doha Agreement and the Convention on Biodiversity.

INVESTMENT RULES: Under CAFTA, national development needs will be secondary to the rights of foreign investors. A USTR fact sheet on free trade with Central America states that U.S. investors will enjoy “in almost all circumstances the right to establish, acquire and operate investments in Central American countries on an equal footing with local investors, and with investors of other countries.”3 Accordingly, governments will not be able to harness foreign investment for economic development strategies that promote domestically oriented growth or support new domestic industries. “Furthermore, CAFTA includes NAFTA-like investor-to-state lawsuits, which will allow corporations to sue governments over regulations that they believe infringe on their business interests.” Finally, investors do not have binding responsibility to comply with International Labor Organization (ILO) standards.

ESSENTIAL PUBLIC SERVICES: CAFTA negotiators did not exempt essential public services from the national treatment standards. Governments will lose the flexibility to subsidize these services and guarantee adequate provision of these services to citizens.

As Presbyterians, we affirm the right of all people to meet their basic needs, including enough food, clean water, housing, healthcare, and education, all of which presuppose a living wage. We affirm the right of farmers to make an adequate living on their lands, and of local businesses to succeed without the threat of competition of large foreign corporations. We affirm the rights of nations to set their own standards for labor, public health, and the environment, without the threat of lawsuits by corporations. We support trade that is fair. We therefore stand in opposition to the Central American Free Trade Agreement.

Endnotes

1. These standards were expressed in two documents: “Principles of Unity on Trade with Central America,” October 2003, and “Equitable Trade and Central America: Does CAFTA Measure Up?,” July 2003.

2. See http://www.ustr.gov/new/fta/Cafta/text/index.htm).

3. See http://www.ustr.gov/new/fta/Cafta/2003-12-17-factsheet.pdf

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