Si, CAFTA
VIEWPOINT
by Eldon Griffiths
After NAFTA, CAFTA.
That acronym is the latest buzzword at the U.S. Department of Commerce, and it puts me in mind of the days when I first fell in love with America.
It was the mid-l960s when, as a correspondent for Time, I drove across the continent several times each year, reveling in its spaciousness and the incomparable freedom of movement “from sea to shining sea.”
What a contrast with the Europe of those days, where every few hundred miles one had to stop and join a line of drivers fumbling with car ownership papers, and in the case of trucks, up to three pounds of documents covering customs and immigration, cross border travel permits, cargo and axle weights, checks on safety and exhaust. The cost of these delays to European business was estimated at not less than $80 billion per year.
No longer. Today, it’s just as easy to drive across seven different countries from the Baltic coast of Sweden to the Mediterranean shores of Italy as it is to drive from New York to L.A.,and in the case of trucks, it’s often easier.
Why? Because free trade in the European Union not only has swept away border controls, it’s standardized transcontinental vehicle regulations and largely abolished nationality rules for truck drivers and owners.
Compare that with what now happens to many of the 4.5 million annual truck journeys across the U.S.-Mexico border. In l993, the U.S. signed onto free trade with Mexico and Canada under NAFTA. Ten years later, Mexican trucks are still forbidden to travel beyond a 20-mile zone north of the border; and once there, must unload their cargoes into U.S. trucks with American drivers. One reason, which makes sense, is that many Mexican trucks being older and less well-maintained don’t meet the U.S. standards for safety and pollution that were imposed in l994. Another, less defensible, is that Mexican drivers, even in brand new trucks, are paid only $7 an hour, compared with $20 an hour that U.S. drivers expect.
For Americans this means higher prices, for Mexicans fewer jobs as drivers.
Enter Mexican President Vicente Fox, who suggested four years ago that the U.S. should allow all trucks that meet U.S. standards to drive on U.S. roads. Simple? George Bush thought so. Yet no matter that a Mexican company uses well-maintained post-l994 trucks that comply with U.S. requirements, the President’s order opening the border to them is still tied up in the courts by lawyers representing the Teamsters Union. Result: retaliation. Mexico now imposes restrictions on U.S. trucks traveling south.
Who gains from this travesty? The Teamsters bosses (and their lawyers). Who loses? Businesses and consumers on both sides of the border. And the U.S. gets egg all over its face as WTO members (unfairly) sneer that treaties signed with Washington aren’t worth the paper they’re written on.
Apply this experience to CAFTA, the free trade treaty just signed with Guatemala, Honduras, Nicaragua and El Salvador. How much gain,and how much pain,can Americans and the people of these small Central American countries expect as tariffs and quotas are slashed?
In theory, quite a lot. The combined GDP of our CAFTA partners, plus Costa Rica which expects to join next year, is not much larger than that of Orange County; but their imports from the U.S. are estimated by the L.A. Times to exceed U.S. sales to Russia, India and Indonesia combined.
Protectionists in Congress,which still must ratify CAFTA,nonetheless are up in arms about this latest extension of free trade. Scaremongers predict that U.S. companies will move to CAFTA countries to take advantage of the Central Americans’ cheap labor and free access to the U.S. market. Some will. Most will not. That is what free trade is all about. Call it comparative advantage: cheaper goods for American consumers, higher incomes for foreigners who produce them, which in turn creates larger markets for high-tech U.S. exports.
So CAFTA, like NAFTA, means winners and losers. Tens of thousands of U.S. jobs undoubtedly have been lost as a result of free trade with Canada and Mexico, but hundreds of thousands more have been created as exports to our two neighbors zoom. Mexico has replaced Japan as America’s second-largest market. And as the Business Journal pointed out in its Dec. l5 edition, 40% of Orange County’s exports now go to Canada and Mexico, compared with 23% when NAFTA took effect.
Let’s therefore welcome CAFTA. Industrially, because U.S. companies are well-placed to meet the demands of close neighbors whose penchant for American-style products is destined to grow far faster than their sales of coffee and ceramics to us. Politically, too, because the U.S. benefits from improving the living standards and helping to bring stability to a volatile part of the hemisphere where poverty and lack of opportunity otherwise are likely to breed civil wars, drug trafficking and terrorism.
The crucial lessons I learned as a U.K. Undersecretary of State negotiating freedom of movement for transport across the EU is that rule one for heavy trucks is strict and enforceable standards for safety, exhaust and driver hours, and rule two is to let freedom ring.
Free trade just doesn’t work if non-tariff barriers persist at the behest of special interests, be they steel, textile and prescription drug companies or the Teamsters union.
Griffiths, a resident of Laguna Niguel, is an author, lecturer, journalist and former member of the British House of Commons.
