Oxfam GB
The Dominican Republic and Central America Free Trade Agreement with the USA: Some
Concerns
Author(s): Sherrow O. Pinder
Source: Development in Practice, Vol. 19, No. 2 (Apr., 2009), pp. 227-232
Published by: Taylor & Francis, Ltd. on behalf of Oxfam GB
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Development
inPractice, Volume 19, Number 2, April 2009
& Francis
Taylor
Group
iRoutledge
<
"?
O
and Central
The Dominican
Republic
with
America
Free Trade Agreement
the USA: some concerns
z
H
Sherrow O. Finder
This article examines the role offree-trade agreements that integrateprofoundly asymmetrical
economies in simultaneously benefiting themore powerful nation and exacerbating inequalities
within and between the countries involved. The latest in a series of such agreements in the
Americas, the Dominican Republic and Central America Free Trade Agreement (DR
CAFTA), opens up the economies of these small nations toUS investmentand exports, as multi
national companies are able to take advantage of lowerproduction costs and weak labour legis
lation. In the global economy, South-South trade agreements offer afar better alternative for
countries with weak institutionsand little economic or political leverage.
Key Words:
Globalisation; Latin America and theCaribbean; NorthAmerica; Rights
Introduction: setting the stage forDR-CAFTA
By January 2005, theFree Trade Area of theAmericas (FTA A) was supposed to have created a
single free-trade area between theUSA and Latin America and theCaribbean, with the excep
tion of Cuba. Fortunately, the process came to an abrupt halt afterArgentina, Bolivia, Brazil,
and Venezuela refused to sign. Undeterred, theUSA then began to push for the creation of a
Central America Free Trade Agreement (CAFTA), to cover tradewith Costa Rica, El Salvador,
Honduras, Guatemala, and Nicaragua. With little prior deliberation, theDominican Republic
also joined the negotiations.
Despite thewell-documented absence of basic labour protections throughoutmost of the
region, the Bush Administration was unable to include enforceable labour standards in the
Agreement. This issue, for reasons far removed from concerns about labour exploitation in
Central America and theDominican Republic, had created some controversy within theUS
was concern about US labour. In the
Congress. The main argument against DR-CAFTA
to
Bolle (2000), Congress attempted to protect US workers from cheap
past, according
foreign labour. However, with recent trade pacts such as the Canadian United States Free
Trade Agreement (CUFTA) and theNorth American Free Trade Agreement (NAFTA), many
North American companies have relocated to take advantage of cheap labour: 'Canadian
ISSN 0961-4524
Print/ISSN
Routledge Publishing
DOT.
1364-9213
Online 020227-6 ?
2009 Oxfam GB
10.1080/09614520802689485
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All use subject to JSTOR Terms and Conditions
227
Sherrow
O. Pinder
companies are moving toMexico and theU.S. South to take advantage of cheap labor and the
lack of union legislation. Many U.S. multinational companies are moving to theCaribbean, the
export processing zones inAsia, and Latin America, especially Mexico's maqu?adorcC (Pinder
2007b: 207).
It is
Despite this, some Republican legislators continued to push hard for DR-CAFTA.
to
Like
the
earlier
with
such
countries.
free
trade
for
USA
the
indeed important
agree
pursue
is a 'strategic response by theUnited States to global trends such as the
ments, DR-CAFTA
increasing economic threatarising from an expanded and unified Europe and a more assertive
Japan' (Grinspun and Cameron 1993: 16); and, as Panitch (1997: 97) points out, itprovides 'an
exemplary "staging post" for a renewed US imperialism throughout [Central] America and the
was approved by theUS Congress on 27 July2005, and by
Dominican Republic'. DR-CAFTA
and 1 July 2006. In a referendum held on 7 October
1
March
between
countries
all the other
a
51
Rica
voted
2007, Costa
per centmajority to ratify the agreement.
finally by
losses
forUS workers in themanufacturing sector,1 amajor
the
Notwithstanding
potential job
concern
for many
observers,
including
women's
groups,
human-rights
and
civil-rights
activists,
and labour unions, is that free-trade agreements with theUSA are 'anything from damaging to
an all-out economic disaster' (Hellman 1993:196). The practical question is whether DR
CAFTA is likely to bring about tangible benefits for the citizens of Costa Rica, theDominican
Republic, El Salvador, Guatemala, Honduras, and Nicaragua, where many work in themost
does not require labour laws in Central
deplorable conditions. Given that DR-CAFTA
America and the Dominican Republic to meet ILO standards, which include the right to
form unions and to strike, the question arises as to whether it would serve to exacerbate
what is already a desperate situation for the region's workers. In 2002, for instance, 30 union
ised workers were fired from a baked-goods factory in El Salvador. Human Rights Watch
(2005) identified at least 27 areas inwhich labour laws in the region fall shortof international
standards, for example by severely restrictingworkers' right to strike.
will create winners and losers. The obvious losers are the countries of Central
DR-CAFTA
America and theDominican Republic. The USA of course is thewinner. Asymmetrical power
relations between theUSA and its tradingpartners are the real issue. Of course, there are other
economic interests at stake, such as those of theEuropean Union (EU) and South Korea, but
these lie beyond the scope of this article. Suffice it to say that the EU and South Korea have
strong
economic
links,
reflected,
for
example,
in
the Trans-Eurasia
Information
Network,
launched in 2001 with a view to securing the EU's position in the global market, in which
theUSA is also manoeuvring for a strongposition and leadership. Joan E. Spero, Under Sec
retary of State forEconomic, Business, and Agricultural Affairs (1993-1997), made clear in
a 1994 speech inCharlotte, North Carolina that the goal is tomake theUSA 'themost competi
tive nation in global market and theworld's economic leader'.
Why DR-CAFTA?
To answer thisquestion we need to look at the process of capitalist globalisation. Capital needs
constantly to look for raw material, cheap labour, and largermarkets. Built into the globalisa
tion process is themigration of multinationals to take advantage of cheaper labour costs in
'ThirdWorld' countries. Some former 'ThirdWorld' countries have now found a niche as pro
ducers of manufactured goods. Others have been relegated to the 'FourthWorld', or what the
United Nations refers to as the 'least developed countries', because of theirhuge indebtedness
to the international financial institutions (IFIs).
Like the rest of the Fourth World, the countries in Central America and theDominican
as avenues for
Republic are not a part of theworld system as partners in future growth, but
228
Development
inPractice, Volume 19,Number 2, April 2009
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DR-CAFTA:
some
concerns
the exploitation of cheap labour.While theDR-CAFTA
does not offer greater mobility for
remove
to
it
the
barriers
the
flow
of
US
does
workers,
capital, goods, and services into these
It
does
follow
the
countries.
not, therefore,
poor
logic of other South-South Agreements,
Trade
the
Global
of
Preferences
(GSTP), which came into effect on 18
including
System
to
main
of
which
is
the
purpose
April 1989,2
provide a framework for tariffsand non-tariff
barriers and direct trade among developing countries. Other examples of South-South co
the Caribbean
operation include the Association of Southeast Asian Nations (ASEAN),
Market
the
former
and
Common
Caribbean
Free
Trade
Association
(CARICOM),
Community
the
American
Common
Market
and
South
A
(MERCOSUR).
reportby theUnited
(CARIFTA),3
Nations Economic and Social Commission forWestern Asia (ESCWA 2004) points out thatone
of themain benefits of South-South agreements is the understanding that such co-operation is
based on the recognition ofmutual advantages for all parties. This is far from the case with the
DR-CAFTA.
Some
concerns about DR-CAFTA
It iswidely known thatworkers in theDominican Republic and Central America are often paid
less than theminimum wage, while standards of health and safety are poor. In Costa Rica,
for example, the problem of child labour on the banana plantations persists. Such abuses are
allows for the furtherweakening of existing
likely to intensify,given that theDR-CAFTA
labour
laws
in order
to attract
foreign
companies.
For
instance,
in Guatemala
the
'swallows'
(so-called because the assembly-plant owners leave for better climates as and when they
choose), known elsewhere as themaquila, do not allow union organisers in theworkplace. If
Guatemalan workers exercise their right to join a union, they risk losing their jobs and may
be subject to violent intimidation. This head-on attack on organised labour severely restricts
collective bargaining. Equally troubling, women and other sectors who have traditionally
faced workplace abuse will have still less protection underDR-CAFTA
from sexism and multi
dimensional forms of inequality at work or at home. It seems clear that an already desperate
situation formany workers, especially women, is likely toworsen.
maintain that itwill provide access to theUS market, which
The proponents ofDR-CAFTA
will lead to significant economic gains forCentral America and theDominican Republic. This
claim poses another grave concern. Doern and Tomlin (1991) remind us thata major shortcom
ing of CUFTA is the failure of Canadian exporters to achieve even moderately secure access to
theUS market.4 And even ifCentral America and theDominican Republic were to succeed
where Canada has failed, which is highly questionable, the gains would be minimal, given that
theircombined economies account for less than 3 per cent ofUS trade.Furthermore, theywould
face thewhole array of social, economic, and political problems implied by tryingto guarantee
access
to the US
market.
claim that free tradewith theUSA will help countries in one
Supporters of theDR-CAFTA
of theworld's poorest regions to develop theireconomies and enjoy the benefits of a globalised
economy. This textbook claim finds support in neo-classical trade theory,which essentially
asserts thatwhen a small country tradeswith a large one, the benefitswill flow predominantly
to the small country. If this is so, an obvious question iswhy theUSA would want a free-trade
agreement with the very small countries of Central America and the Dominican Republic.
would be atypical if theUSA gained nothing from
Common sense tells us thatDR-CAFTA
it.Because theUSA ismanoeuvring for a position within the global market, we can reasonably
assume thatUS companies want to reduce theirproduction costs; it is therefore likely that they
will seek to locate production in areas where the overall costs, including labour, corporate taxes,
and workplace health and safety laws, are minimal or non-existent. The countries of Central
Development
inPractice, Volume 19, Number 2, April 2009
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229
Sherrow
O. Pincler
America
and the Dominican Republic offer exactly such conditions. Sacrificing health and
standards
is a high price to pay for entry into a free-trade agreement with theUSA,
safety
that
free
trade with theUSA is detrimental for small economies and runs counter
suggesting
to the stated goal of economic well-being for the citizens of Central America and theDominican
Republic.
On the evidence of the failed models of CUFTA and NAFTA, which have resulted inmajor
hardship formany North Americans, and the failure of the respective governments to address
the needs of the poor in these nations, we can expect thatDR-CAFTA
will have a pernicious
on
some
the
economies
and
the
citizens
of
of
the
poorest countries inLatin America. The
impact
combination of stagnant economies and heightened social inequalities bodes ill.Without funda
mental economic and social rights, civil and political rights are oftenmeaningless. A sound
economy is a prerequisite for political stability, whereas economic insecurity can lead to
political instability. The late President of Guyana, Cheddi Jagan, in his speech at the 1995
World Summit on Social Development, summarised the situation with unmatched lucidity.
He recognised that 'the spread of poverty unchecked .. .the continuous swelling of the ranks
of the unemployed and those that are underemployed [will] lead to increasing social tension'
(cited in Pinder 2007a). Given recent Central American history of authoritarian regimes, and
the fact thatmany citizens are still denied theirfull rights,while social and economic inequality
is rife,we can predict thatDR-CAFTA
will exacerbate rather than alleviate these shortcomings
in democratic
governance.
Conclusion:
some
reflective comments
cannot be analysed in isolation from the broader policies underpinning the neo
DR-CAFTA
conservative agenda of economic restructuringand revitalising US hegemony. However, the
will create severe hardship for people inCentral America and the
reality is thatDR-CAFTA
Dominican Republic. As these countries' economies decline and corruption flourishes, the situ
ation for the poor will become increasingly precarious. Yet the theme of increased poverty
within these already poor nations is not part of the narrative when the proponents of DR
CAFTA preach about its 'benefits'.The DR-CAFTA
is almost an archetype ofUS imperialism
inCentral America and theDominican Republic. These countries will continue to be consigned
to the periphery and then re-colonised as they succumb to the needs and dictates of US
multinationals and investment.Eventually, theUSA will control a huge part of theirnational
economies?an
outcome
not
to be
encouraged
but
condemned.
The dramatic move by the region's governments towards trade liberalisation, including their
decision to enter DR-CAFTA,
is clearly short-sighted. I would argue that the question of
enhanced access to the US market, which seems to be their prime concern (and is in any
case something of a myth), is a big mistake, since these poor countries lack the leverage to
earn theirway into theUS economy by being truly competitive. DR-CAFTA,
then, is not
the answer.
Economic
restructuring
and
growth
can be best
addressed
through
'state capitalism'
(to invoke Robert Cox's phase), which moves away from a neo-liberal model towards co
ordination between the state and business, with input from business as well as labour. In a
highly globalised economy, the real advantages forpoor nations depend on their strategic readi
ness to engage in long-termplanning thatfocuses on industrial and regional policies to enhance
economic
growth.
Mechanisms
such
as
the various
South-South
agreements
cited
earlier,
for
example, could be advantageous for the countries of Central America and the Dominican
Republic. Like the countries involved in the Global System of Trade Preferences among
Developing Countries (GSTP), which share an economic perspective, an equivalent measure
230
Development
inPractice, Volume 19,Number 2, April 2009
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some
DR-CAFTA:
concerns
for theDominican Republican and Central America would place them at a strategic advantage
in tradingnegotiations with more powerful countries such as theUSA.
servesmainly to promote US interests, it is couched in terms such as
Although DR-CAFTA
to the region and thus bringing about economic growth and a
investment
attracting foreign
These
standard
of
poor nations are apparently lured into embracing trade liberal
higher
living.
isation and the ideology of the freemarket, and then they become trapped in theweb. Conver
sely, for theUSA the agreement offers a powerful tool by which to promote its own version of
free tradewith countries thathave littleor no bargaining leverage. For the latter,DR-CAFTA
is
a step in thewrong direction, promoting US interestswhile at the same time constraining the
governments of these poor nations and further limiting their scope to embark on any alterna
tives.
For poor countries to benefit from free-trade agreements with more powerful nations, these
agreements have to be equitable and not based on asymmetrical relations between the trading
partners. In the final analysis, then,mainstream politicians and other proponents of DR
CAFTA need to be reminded that itmakes no sense for any government, especially govern
ments of poor nations, blindly to follow economic doctrine in a world economy driven by
avarice, free enterprise (the privatisation and deregulation of the public sector), and, to use
Karl Polanyi's great phrase (1957), the 'self-regulatingmarket', because such doctrine serves
the interests of themultinationals that profit by it and produces destitution for themajority,
in particular women, who are relegated to themargins of society.
Notes
has long played a key role in the US economy. The long-term decline
in the country's
sector started in the 1970s and has continued.
manufacturing
a major
2. Since the 1955 Bandung
Conference,
goal was to adopt extended South-South
co-operation
countries.
among 40 developing
1. Manufacturing
3. CARICOM,
the Organization
4. Besides,
Canada
of Caribbean
nations and dependencies,
in 1973.
replaced CARIFTA
not exempted
from the provisions
of the Omnibus
Trade
and Competitiveness
in 1988 during CUFTA's
bill that was passed by Congress
ratification.
was
a protectionist
Act,
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Critical
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Sherrow
O. Finder
Sherrow
Pinder,
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The author
Sherrow
O.
Pinder
is Assistant
Professor
of Political
State University,
Contact
details:
Chico.
Street, Chico, CA 95929, USA.
<[email protected]>
California
232
Development
Science
California
and Multicultural
State University,
and Gender
Chico,
Studies
400 West
at
First
inPractice, Volume 19,Number 2, April 2009
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