WASHINGTON – The latest international trade agreement to hit Capitol Hill faces an uncertain future, as proponents say market openings in Central America will boost exports and help the U.S compete with China while critics charge that previous trade agreements have only resulted in job losses at home.
Deputy Secretary of State Robert Zoellick said Monday that the domestic debate over the Central American Free Trade Agreement (search), negotiated a year ago with Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Dominican Republic, "is about much more than trade," and spoke at length about the benefits to the Central American people.
"The people of Central America fought and struggled, and many died, because they believed that democracy would bring not only peace, but also a better life for them and their children," Zoellick told an audience at the Heritage Foundation. "Now the people of the region are asking the United States to help secure the work of democracy through a closer economic relationship that could provide a new foundation for building opportunity."
"You have to wonder what advantage it will have to the United States — I think the only advantage would be for companies who want to move overseas," said Rep. Michael Michaud (search ), D-Maine, who argues that his state has suffered enough under past trade agreements.
The Bush administration, flanked mostly by Republicans and some business and trade organizations, is pushing for congressional approval of CAFTA. The Senate is seeking to bring the agreement to a vote by early next month.
According to the administration, the treaty, among other things, would reduce the tariffs on U.S exports to the six countries, making it easier for American companies to sell their goods, particularly agricultural products. Right now, Central American imports come into the United States duty-free while American exports are subjected to tariffs of more than 15 percent.
"By passing CAFTA we would open up a market of 44 million consumers who already import more of our goods and services than Australia or Brazil," President Bush declared in a White House event last week with the leaders of the participating Central American countries.
Bush also conjured the specter of China, which has been largely blamed for the $600 billion U.S. trade deficit, due to its aggressive exporting and cheap labor.
"We would create incentives for factories to stay in Central America and use American materials rather than relocate to Asia where they are more likely to use Asian materials," the president said.
CAFTA supporters say not only would the agreement help farmers, but it will also help the textile industry send more fabric to these countries, which will be able to produce more goods to be sold in the United States.
But business industries are split over how much CAFTA can help them. Sugar interests, for instance, say the agreement will merely dump more Central American products on American markets. Other critics say U.S. jobs are at stake and lower tariffs will not result in any visible growth under CAFTA.
"I think not only would CAFTA encourage more outsourcing, but it is the primary purpose of it," said Alan Tonelson, a research fellow with the U.S. Business and Industry Council, which represents small and medium-sized companies in the United States.
Tonelson pointed to numbers by the American Manufacturing Trade Coalition, opponents of the treaty, which cite Bureau of Labor Statistics reports showing that the U.S. textile and apparel industry lost more than 373,000 jobs between 2001 and February 2005. According to Tonelson and AMTAC, unless serious revisions are made to CAFTA, the industry would suffer even greater losses.
Michaud, who said Maine lost 23 percent of its manufacturing base after the North American Free Trade Agreement (search) passed in 1993, said NAFTA taught a lot of lawmakers to be leery of trade agreements that promise job growth for American workers.
"I think when you look at NAFTA and what Congress was told — that NAFTA would open up different markets for the U.S. — that basically hasn't happened," he told FOXNews.com.
Michaud and others opposed to NAFTA and CAFTA say that such agreements have contributed to the displacement of high-wage jobs overseas.
Steven A. Camarota, director of research at immigration watchdog the Center for Immigration Studies, told FOXNews.com that he compared 2003 and 2004 U.S. Census Bureau data on employment and found that the United States experienced a net increase of 900,000 people holding jobs year over year. Of those jobs, 600,000, or two-thirds, went to both legal and illegal immigrants. Many of those jobs are in construction, farming, food preparation, sales and other areas requiring a high school diploma or less, according to Camarota's analysis.
Democrats have generally opposed new international trade agreements on two fronts: They hurt American jobs by giving companies better opportunities to move offshore for cheaper labor, and they do not enforce fair labor and environmental standards in participating countries outside the United States. But while Democrats typically come out against the agreements, this time around, some prominent Republicans have pointed to the impact of job losses on certain sectors in defending why they will not vote for CAFTA.
"There is no doubt our inability to enforce existing free trade agreements has hurt hard-working Americans [who need to] compete on a level playing field," said Sen. Lindsey Graham (search), R-S.C., who is leading a bipartisan Senate effort with Sen. Byron Dorgan, D-N.D., to defeat CAFTA.
CAFTA critics say they would like to see real U.S. efforts directed at creating jobs here. The AFL-CIO argues that better health-care policy, making insurance for workers more affordable to employers and reducing tax breaks to companies that move operations offshore would help bolster jobs. Tonelson suggested the United States should focus on trade agreements that open up markets for U.S. goods in places that can afford to buy them.
But supporters say NAFTA and other trade agreements have had little impact on the overall U.S. job climate either way. And while acknowledging that the increase of outsourcing of American jobs to places where labor is much cheaper has affected certain industries, CAFTA backers say a boom in service and health-care industries as well as more specialized, high-paying jobs has occurred in their place.
CAFTA, they say, will improve the markets here, not hurt them.
"The only studies that I've seen have showed gains," John Murphy, spokesman for the U.S. Chamber of Commerce, one of the major drivers behind CAFTA. "The reality is, that CAFTA is important for textile makers to compete with China. It will allow new flexibility and remove bureaucratic hurdles that currently impede the supply chain from the U.S to Central America."
Frank Vargo, the vice president for international economic affairs at the National Association of Manufacturers, another supporter, told Congress last month that passage of CAFTA would increase U.S. exports to the region by $1 billion a year and create at least 12,000 new jobs.
Combined with standing duties on European goods, "the total impact ... on U.S. exports could be as much as $5 billion and 60,000 related American jobs,” Vargo said in a statement.
Zoellick stressed what he called the positive impact of new export opportunities, too, noting that U.S. exports to Chile increased 50 percent after free trade was negotiated with that country in 2003. He also took a swipe at organized labor's resistance to CAFTA.
"We must decide whether we will leave hundreds of thousands of Central Americans in poverty and hopelessness because of the short-sighted protectionism of U.S. labor unions," he said.
Conversely, two business groups, the National Cotton Council and the National Council of Textile Organizations, threw their support behind CAFTA last week.
Sen. Charles Grassley (search), R-Iowa, chairman of the Senate Finance Committee, said he believes CAFTA will help every sector within the agriculture industry. He told reporters recently that he felt the debate was an excuse for critics of free trade agreements to vent.
"There's a lot of frustration in Congress from outsourcing, from the China currency problem, from the standpoint of losing manufacturing jobs," he said. "I see CAFTA as an opportunity to vent frustration about trade generally."
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