Got an email from Sojourners this morning about CAFTA, the Central American Free Trade Agreement. The email linked to SoJo’s stance on CAFTA:

Why We Oppose CAFTA

* CAFTA could be used to promote privatization and deregulation of essential services, such as health, education, and water, resulting in prohibitive price increases, reduced access, and compromised quality.
* CAFTA would prevent governments from giving preferences to local firms and from promoting gender equity, social justice, and respect for human rights when granting contracts.
* CAFTA will be used to weaken national and international environmental standards. Companies would have the right to sue any government that obstructs their capacity for profit with environmental regulations. (Thanks to the American Friends Service Committee’s Trade Matters program for the information above.)

I still remember Ross Perot’s “giant sucking sound” when talking about NAFTA, and history has confirmed that Perot was right about that.

With a quick Google search I also turned up this analysis, which is well worth the read:

The truth of the matter is that agreements like NAFTA are not meant to increase trade between the U.S. and whichever country is under consideration. Rather, they have several features all designed to protect U.S. corporate interests.

First, such agreements are meant to provide a cheap source of labor for U.S. companies to manufacture goods. What’s humorous is that corporate apologists like Friedman don’t even deny this part. In his column today he writes that CAFTA is critical for U.S. textile corporations to compete with China. How does CAFTA help U.S. companies do that? Because it will allow U.S. corporations to set up factories in Honduras and El Salvador and Guatemala and so on, without having to follow U.S. labor laws that require them to pay a living wage, health care, and benefits, and that does not require them to follow U.S. safety regulations and health codes inside the factory itself. It will also allow them to suppress worker’s rights to organize and collectively bargain (even more than they already do now in the U.S.) since most of the countries do not recognize such rights.

In short, CAFTA will help U.S. corporations by allowing them to by-pass laws and regulations that cut into their profit. Once the products are finished, they will be shipped back to the U.S. to be sold in U.S. markets. The profit, of course, stays within the U.S. based corporation.

Think about it: when a U.S. corporation sets up a sweat shop in another country, makes the product there, and then ships it back to the U.S. where it will be sold, what is being traded? Everything is staying within the same company! I could not find the latest statistics, but something like over a half of all U.S. international trade actually takes place within corporations or between subsidiaries of corporations (i.e. along a transnational corporations global supply chain). By 1997, over half of U.S. trade with Mexico alone already consisted of these intra-firm transactions – a figure that began climbing immediately after Clinton signed NAFTA into law.

Free-trade agreements like NAFTA and CAFTA do not promote trade between nations: they promote the ability of U.S. corporations to spread out their supply chains to find the cheapest source of labor possible while keeping the transactions all within the same company. [And Friedman is happy to admit that.]

But second, such “free-trade” agreements, rather than “promoting trade,” as it were, actually promote what are known as “investor rights” – of course, all at tax-payers expense.

Consider the fact that NAFTA contains an “investor rights” clause that allows corporations to sue the government of any NAFTA country if they think that a decision made by the country (such as democratically passed regulation) would adversely affect their investment.

Remember when the U.S. based Ethyl corporation sued Canada because the government banned the use the gasoline additive MMT? The sovereign Canadian government made the decision to protect its citizens from what it considered to be a harmful ingredient. But under the rules of NAFTA, Ethyl was able to sue the government claiming that such regulation violated its investor rights. Canada was forced to back down. They repealed their law, now claiming that the gasoline additive was “safe,” and agreed to pay the Ethyl corporation $13 million in damages plus court costs. Canadian taxpayers were forced to come to the rescue of U.S. investors.

So free-trade agreements like NAFTA give more rights and power to “investors,” eroding national sovereignty and democracy - all in the name of “promoting trade.”

The U.S. has of course decided to protect its own investors in others ways as well. When the Mexican economy collapsed in 1994 as a result of NAFTA, the Clinton government jumped to “rescue” U.S. based investors in Mexico at tax-payer expense. Others have summarized the principle at work here: subsidize risk, privatize profit. Once again, the guise of promoting trade masked for investor protection. A corporation’s dream, no less.