Two separate trade agreements have been making news lately, the ten year old North American Trade Agreement and the brand new Central American Free Trade Agreement. Both treaties are said to strip away barriers to trade, eliminate tariffs, open markets, and promote investment, economic growth and opportunity, but in realty both agreements have pros and cons.
With its 10-year anniversary coming up on January 1st, it appears NAFTA is far from the resounding economic success it was predicted to be, but America has not experienced the “giant sucking sound” of jobs going to Mexico that was predicted either.
“NAFTA has locked Mexico on the road to modernization and reform. It has helped create a stable and dynamic Mexican economy, and it has also helped encourage democracy and political reform,” Dan Griswold, a trade policy analyst at the Cato Institute told a local paper.
Many feel that NAFTA is only a disappointment because it suffered from too much hype, but those who represent the interests of factory workers in the U.S. see it as a total failure. “There have been winners and losers, but we think there have been a lot more losers than winners, especially the average worker,” Thea Lee, chief economist for the AFL-CIO told a local paper.
In the end the best way to judge NAFTA is to estimate what would have happened without the deal. University of California San Diego economics Professor Gordon Hanson told to a local paper that without NAFTA, the U.S. would not have been able to take advantage of the Mexican labor force and, “there would have been lots more competition from Asia…” he said.
Looking ahead to the CAFTA agreement, which still must be approved by Congress before it goes into affect, it seems the U.S. economy will help to stabilize a few more of our neighbors.
CAFTA establishes a regional trade agreement between the U.S. and El Salvador, Guatemala, Honduras, and Nicaragua. Combined annual trade between the U.S. and these four countries amounts to about $15.4 billion.
The only Central American country not to sign the agreement was Costa Rica, who left the negotiations early, citing U.S. demands for opening its telecommunications and insurance industries to foreign competition. It is expected to resume talks on the deal in January.
It is hard to predict the impacts this deal will have on the U.S. workforce or Corporate America because the details of the agreement are being kept secret.
Proponents of the deal say this will increase the standard of living for these Central American countries and at the same time provide a larger workforce for manufacturing companies. With the details kept under lock and key it is impossible to say who is right.
