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Central American Free Trade Agreement Passes By 2-Vote Margin

Posted on: Thursday, 28 July 2005, 21:00 CDT

Jul. 29--WASHINGTON -- The grueling struggle over the Central American Free Trade Agreement revealed a deep and growing skepticism of free trade among members of Congress.

In marked contrast to NAFTA, a far weightier trade pact that attracted broad support from both parties when it passed Congress 12 years ago, CAFTA barely squeaked by the House in a 217-215 vote Thursday.

Twenty-seven Republicans broke ranks with their party to vote against the deal, which received the backing of only 15 of the 205 House Democrats.

The Senate, which approved a CAFTA bill last month by a 54-45 vote, must vote on the House version, according to Senate Majority Leader Bill Frist, R-Tenn. It is expected to pass again.

The Democrats' determination to deal a blow to the President's trade agenda and a fierce campaign by the sugar lobby eroded support for the bill. But it was hurt more by the perceived link between globalization and American job losses and claims that China has used unfair tactics to boost its exports to the U.S.

"There's a lot of concern about globalization generally," said Joe McKinney, an economist at Baylor University. "The economic situation is changing faster than it did in the past because of the power of technological change and the globalization that technology made possible."

The agreement, which President Bush is expected to sign before leaving on vacation Tuesday, will lift barriers to trade between the U.S. and Costa Rica, Honduras, Nicaragua, El Salvador, Guatemala and the Dominican Republic.

The legislative battle was over a deal likely to have a modest impact on the U.S. economy. Eighty percent of imports from CAFTA already enter the U.S. duty-free, and the CAFTA countries represent relatively small export markets.

But the benefits fall unevenly, and many lawmakers were more concerned with their districts than fostering free trade.

"CAFTA may benefit the state of Texas as a whole," said Rep. Gene Green, D-Houston, whose district is predominantly blue-collar. "But there's a group that doesn't benefit, and it is the one I represent."

House Minority Leader Nancy Pelosi, D-Calif., predicted it would be a "pyrrhic victory" for Bush.

Under Bush, "we have lost millions of manufacturing jobs," she said. "As our manufacturing base erodes, as our industrial base erodes, we have a president who is contributing to the further erosion of that base."

But do trade deals really cause job losses?

Economists argue that they don't -- or at least the job gains offset the losses. Judging by America's strikingly low unemployment rate and strong job-creation numbers, workers who lose their jobs have generally found new ones.

However, blue-collar workers are more likely to be affected by trade agreements.

"It's the lower-skilled workers who are vulnerable to job losses under CAFTA, because the comparative advantage of the Central American countries is in labor-intensive goods," said McKinney.

But the real problem facing low-skilled workers, argued Texas A&M economist John Hanson, is an economy that puts a growing premium on skill and education.

"Traditionally, unskilled wages have risen in virtual tandem with skilled wages but, obviously, at a lower level," Hanson said. "In 1973, unskilled wages went flat, and have stayed that way for 30 years while skilled wages have kept going up."

But globalization is not the culprit, most labor economists agree. The weakening relative position of unskilled workers is "a terrible, terrible thing," Hanson said. "But it's not the trade deals creating it. It's the increasingly technological world."

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Source: Houston Chronicle

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