Ehlers Outlines CAFTA Gains

August 1, 2005
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WASHINGTON, D.C. — Having cleared the Senate last month, the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR, or simply CAFTA) faced a vote in the House late last Wednesday night. The agreement passed 217 to 215, with two Republicans not voting. The yea votes were predominantly made by Republicans, though 15 Democrats chose to vote in favor of the agreement. Among the dissenters were 27 members of the GOP, including Candice Miller and Thaddeus McCotter from Michigan.

The vote came after several weeks of delays, as Republican leaders tried to win over support among their ranks. The main GOP objectors represented constituencies involved in the sugar and textile industries. Those groups feared that the removal of industry-specific import tariffs on Central American sugar and textiles would drive U.S. producers out of business. After weeks of discussions, the GOP leaders apparently made enough concessions to these groups to curry their votes.

The passage of CAFTA is expected to be a boon to American businesses looking to expand their markets in Latin America.

"CAFTA will instantly eliminate tariffs on 80 percent of U.S. manufactured goods, and the remainder of tariffs will be phased out within a few years," read a statement released by the White House after the passage of the pact. "As a result, manufacturers and workers will benefit from increased sales of information technology; farm, construction, medical, and scientific equipment; paper products; and pharmaceuticals."

The major players in those industries — firms such as Pfizer, Intel and Microsoft — were among the administration's biggest allies in pushing for passage of the agreement.

"I think on balance, it's good for our country. It's good for Michigan. We have a situation where they're sending their goods into our country duty-free and, at the same time, charging roughly 20 percent duty on anything we're shipping there," said U.S. Rep. Vern Ehlers, R-Grand Rapids. He said that on several visits to Central America he has noticed a market hungry for American products.

"They like the American cereals, so that'll be beneficial to the Battle Creek area. They like some models of American cars. And having a sudden 20-percent drop in the price of cars means they're likely to buy more. And of course cars are made in Michigan and many auto parts are made in Michigan, so you can go right down the line. I expect we'll benefit from it."

Opponents say CAFTA will damage the local economies of Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua — the six countries involved in the pact with the United States. Detractors also say that the agreement does not provide enough protection for workers' rights. Ehlers said that this is the first agreement that added clauses and requirements supporting labor rights, though he did not know how those requirements would be enforced.

Some critics, including U.S. Senator Debbie Stabenow, say that CAFTA will mean more manufacturing job losses for areas that have already been hard hit by economic downturn.

"This pact will ship jobs overseas and provide few export markets for American companies," Stabenow said after the Senate approved the agreement. "After Congress passed NAFTA, hundreds of thousands of American jobs were lost to Mexico. And it is still happening. Just last year, Electrolux closed a plant in Greenville, Michigan, and put 2,700 highly paid workers on the street. Under NAFTA we see that over the past 11 years U.S. workers have lost nearly one million jobs due to growing trade deficits with our NAFTA partners."

"(CAFTA) offers more leverage for employers against workers with the notion that, 'We'll move production to Central America where workers will be happy to do your job for next to nothing,'" said Jeff Smith, a local activist who organized a campaign to stop CAFTA. "The other impact will be that even more Central Americans will flee their countries and end up in places like West Michigan, where a sizeable Guatemalan population already exists. Many of those that come will be undocumented, which creates all kind of problems for the community as a whole."

CAFTA/NAFTA supporters such as Ehlers don't agree with that logic. Ehlers told the Business Journal this spring that NAFTA has had a positive net effect on Michigan's economy. The National Association of Manufacturers has distributed a statistical analysis that suggests that NAFTA had nothing to do with manufacturing job losses in the U.S.—that those job losses only took place after the economic downturn beginning in 2000.

Critics remain skeptical.

"Ask the former workers at Electrolux, Johnson Controls, Bissell, Brunswick, LifeSavers, H.H. Cutler, JR Simplot, Batts, Grand Haven Brass Foundry, Tecumseh Metals, Baker Furniture, Target Components, Cambridge Industries, or GenCorp if there has been a negative impact from NAFTA," said Smith.

Having been approved by the U.S. Congress, the final details of the agreement will be ratified by the member countries. The agreement will likely go into effect in January 2006.    

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