CAFTA Cautions

When asked about the effect of free trade agreements on local economies, government officials tend to rely on the old clich? that there are winners and losers. If you’re a loser – especially of your job – they admit, free trade doesn’t look like such a good deal. Since Maine is likely to have more losers under the proposed Central American Free Trade Agreement than many southern states, Sen. Olympia Snowe is rightly wary of the benefits of the pact, which will soon be considered in Congress.

The states with the largest economic interest in CAFTA are in the Southeast. Florida represents nearly 20 percent of U.S. exports to the Central American countries in the trade pact; Alabama relies on the region to buy its apparel and fabric-mill products. The countries covered by the trade pact are Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua.

The benefits to Maine are more speculative, if they exist at all.

Andrew Rudman, director of Inter-American Affairs at the Department of Commerce, said it is not easy to gauge the effects of free trade pacts such as the North American Free Trade Agreement. Studies have indicated that with both 1 million jobs created and 1 million jobs lost nationally, the effect of NAFTA has been neutral, Mr. Rudman said during a recent visit to Bangor, his hometown.

In many ways, international trade is producing real benefits for the Maine economy. From 1998 to 2003, Maine’s exports increased by 20 percent. Maine companies benefit from this expanded market in which to sell their goods.

Yet, in recent years, more than 20,000 jobs have been lost in Maine.

“Jobs, admittedly, is a tough issue,” Mr. Rudman said.

That isn’t much comfort to those who worry that the latest free trade agreement could mean the loss of their job.

There is good reason for such worries. Last year, the U.S. trade deficit hit an all-time high of $666 billion, which represents 5 percent of the nation’s gross domestic product. The growing trade deficit means that fewer U.S. goods are being sold overseas. At the same time, the United States is becoming increasingly indebted to other countries, an unstable situation that could lead to less investment in U.S. companies. In addition, the growing national debt is also hindering international investment.

Given local concerns about the issue, the Legislature last year created the Maine Citizen Trade Policy Commission, the only such group in the country to hear the concerns and ideas of state residents. Earlier this year, the commission was in Bangor to hear about CAFTA. They heard that CAFTA is not the way Mainers want to go. Instead, the three dozen people who testified said U.S. trade policy should focus on ensuring good jobs, accessible public services, a healthy environment, working family farms and small businesses, a strong democracy and supportive, respectful relationships with citizens in other countries. The hearing also raised questions about whether the rules were fair and whether they were benefiting working families, small businesses, the environment and democracy in Maine and around the world.

Many of the weaknesses of the North American Free Trade Agreement, such as dispute resolution mechanisms and labor and environmental protections, have been fixed in CAFTA. However, until it is clear the agreement will produce more winners than losers, Congress should not approve it.