Groups Debate Impact of CAFTA Trade Bill

Dayton Business Journal - July 8, 2005
   

Study says NAFTA cost Ohio 50K jobs
by Yvonne Teems

Dayton Business Journal

While some say a free trade agreement to be voted on by the U.S. House of Representatives later this month may contribute to more lost jobs in Ohio, others say it will present more opportunities for small businesses and manufacturers.

The Dominican Republic-Central American Free Trade Agreement, or CAFTA, passed the U.S. Senate June 30 by a 54-45 margin and is similar to the North American Free Trade Agreement passed in 1994.

The agreement would lower transaction costs for U.S. exporters by removing tariffs and other trade barriers, reducing customs costs and improving infrastructure ranging from roads to e-commerce, said Jim Morrison, president of the Small Business Exporters Association.

But those opposing the policy are concerned about potential American job losses as well as human rights and environmental protection in Central American countries.

The National Association of Manufacturers and The Business Roundtable, a Washington, D.C.-based association of chief executive officers, including former NCR Corp. CEO Mark Hurd and AK Steel Corp. CEO James Wainscott, support passage of CAFTA.

The Business Roundtable cites a study by the U.S. International Trade Commission that says CAFTA would reduce the U.S. trade deficit by $756 million. The group of countries included in CAFTA represents the 12th largest U.S. export market and nearly 80 percent of the products from those countries already enter the United States duty free, according to the group.

NAM estimates that CAFTA would result in $1 billion in additional manufactured exports.

Additionally, NAM says an existing $4 billion in U.S. manufactured exports would be saved that are otherwise at risk if the Central American countries lose their apparel industry to Asian competition.

But CAFTA opponents cite studies that detail job losses that resulted from NAFTA.

NAFTA caused the loss of 1 million American jobs, said Dan Radford, executive secretary of the Cincinnati AFL-CIO. And 50,000 of those jobs were in Ohio, according to a report published in October 2004 by Policy Matters Ohio. The workers who lost their jobs because of international trade qualify for assistance under the Trade Adjustment Assistance program. From November 2003 to July 2004, 500 workers in Montgomery County were TAA certified, according to the report.

Montgomery County ranks seventh in Ohio with 2,056 lost jobs because of international trade on the 78-county list that ranks TAA workers certified between 1995 and July 2004.

Delphi Corp.’s Dayton-area plants had 500 workers TAA certified between October 2003 and October 2004 because it increased imports of foreign products, according to the report.

Dayton-based Deuer Manufacturing Inc. laid off 158 workers because the company shifted its tire winch assembly plant to Mexico, according to the report.

TAA certifications are not total numbers of people who lost their jobs because of trade, said report author Jon Honeck. Those certifications do not account for service sector jobs, and they don’t cover the entire manufacturing industry.

But American workers aren’t the only ones worried about this agreement. The Latin American public opposes the policy because of environmental and labor concerns. The average wage for workers in these countries is about $2 per day, and families are lacking adequate food, education and medical care, Radford said.

When NAFTA went into effect 11 years ago, people thought the standard of living in Mexico would improve, but the country has grown poorer, he said.

“The only people that are winning — the only group — is business that is going into a country that is impoverished to further take advantage of their unfortunate situation,” Radford said.

CAFTA is less a trade agreement than it is an investment protection agreement, said Kathleen Gmeiner, president of the Ohio Conference on Fair Trade and member of the Ohio Working Group on Latin America. As with NAFTA, CAFTA places the rights of investors before the abilities of local governments to set environmental and human rights regulations, she said.

But unlike NAFTA, CAFTA includes services and not just goods in the trade agreement, which makes the Central American agreement more dangerous, Gmeiner said.

However, the trade deal would be good for plenty of small businesses in the United States, Morrison said. More than 13,000 American small and medium-size businesses already export to Central America and the Dominican Republic, accounting for 37 percent of total U.S. merchandise exports to the region.

Lower transaction costs would make smaller sales more economical, he said. As a result, small businesses stand the most to benefit from increased trade with Central America, he said.

Most Central American customers are small businesses, “and they do small orders with small amounts of money,” Morrison said. “It’s not going to be a bonanza for the Fortune 500. It’s going to be a bonanza for companies that can afford to make small sales.”

But even with a potentially booming small-business economy in America, many are concerned about the cost of this bonus.

“Our fight is with the companies that actually go in and exploit children and the environment,” Radford said.

Kent Hoover, Washington bureau chief for American City Business Journals, contributed to this article. Reach him at khoover@bizjournals.com. Reach Yvonne Teems at yrteems@bizjournals.com.

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