Monday, August 01, 2005

A CAFTA round-up

To start things off, CNS STORY covers "Church groups that opposed CAFTA decry its passage by House" The Catholic Social Justice lobby Network, Pax Christi USA and Catholics for Faithful Citizenship led the charge for 34 others, according to Rep. Bart Stupak, D-Mich. Network, in particular, had a strong negative assessment of CAFTA's passage:
Network, a social justice lobbying organization, cited media reporting that described the late-night negotiations to flip opposition votes as "resembling the wheeling and dealing on a car lot."

"How apt," said the Network statement, released shortly after the early-morning vote. "This vote was not about people; it was about big business."
Interestingly, USCCB neither endorsed nor opposed the treaty:
The U.S. Conference of Catholic Bishops neither supported nor opposed CAFTA, and instead emphasized a series of principles guided by church teaching that the bishops said should guide any trade agreement.

The bishops' concerns echoed the goals Network said its members would continue to seek. They include global agreements that promote five principles of fair trade and investment: respect for the dignity of individuals, care for vulnerable people, transparent negotiations, respect for governments to set their own policies and safeguarding the environment.
. Not that this matters, for according to Canon Law, Bishop's conferences can make no juridicial decisions regarding Faith or Morals for Catholics. Individual Bishops within their Local juristiction, however, can. Some made determinations on CAFTA:
Bishop Arthur N. Tafoya of Pueblo, Colo., issued a statement July 14 saying that the effects of the governing principles of the free trade regime in Latin America "have not been very favorable (to) poor people and poor nations."

"CAFTA is inconsistent with the principles of our faith and our efforts to build a culture of life," he said. Congress should instead make changes to free trade practice to ensure that it is just and moral, he added.
Network's press release quoted Bishop Alvaro Ramazzini Imeri of San Marcos, Guatemala, who testified in Congress in opposition to CAFTA.

"Currently trade discussions begin by asking how policies will be good for business and economic growth," he said. "We need to ask how trade policies will be good for those who live in situations of poverty."
Acton Institute's Power Bloggers David Michael Phelps and John Couretas beg to differ. Says Mr. Phelps:
But here’s the other side of it that detractors will not draw your attention to in coming months: Central Americans will have access to cheaper goods. Cheaper goods mean higher productivity. Higher productivity means more wealth creation. More wealth creation means more prosperity, less poverty, and friendlier neighbors. Why friendlier? Because now, Central American workers have greater access to something that is indespensible in the market, something that affirms their dignity as workers and as persons: freedom. Free trade is nothing more than individuals and bodies excercising the truth about themselves, that they are free beings and ought to come into agreements freely, without governmental impediments like tariffs.
and Mr. Couretas:
imagine a business person sitting in the pews on Sunday and the pastor hauls out the Interfaith Trade Group’s Statement on International Trade and Investment in lieu of a real sermon. This business person learns that the free economy has brought about “mounting global inequities” and “growing disparities and injustices” and we should be working for “distributive justice.” And so on.

A better way to prepare a sermon on the justice of trade would be to first absorb some real understanding. Maybe start by reading this analysis from the Dallas Fed which informs us that:

Entering into regional trade agreements has well-documented positive effects on participating nations, rich or poor, even though the impact on the United States would be lessened by the small market sizes of the DR-CAFTA countries. From the DR-CAFTA countries’ perspective, the agreement’s impact would be large. Even the most populous of these nations, Guatemala, has less than half as many people as the state of Texas. Moreover, despite what the habitual detractors of trade liberalization claim, there is much evidence that trade openings typically have positive effects on income per capita -- generally including that of the poorest fifth of the population, even in developing countries.

Increasing the opportunities for trade is precisely what people of faith should be demanding for the impoverished. Unless we want the impoverished to stay that way.
In answer to the Bishops that have decried or questioned CAFTA, the irrepressible Fr. Robert Sirico has some persepective for them to consider:
Through CAFTA, the United States and its trading partners will promote a freer climate for enterprise, which is another way of promoting the free expansion of individual human initiative. It is hard to understand how an agreement such as CAFTA that ensures more freedom from economy-crushing tariffs, more freedom for investment in Central America, and more resources for social development can be presented as a hindrance the welfare of the poor.

The governments of both the United States and Latin American nations who would join in a CAFTA are doing the right thing by removing barriers to economic growth and development. This role of the Centesimus Annus:

Economic activity…presupposes sure guarantees of individual freedom and private property, as well as a stable currency and efficient public services. Hence, the principle task of the State is to guarantee this security … Another task of the State is that of overseeing and directing the exercise of human rights in the economic sector. However, primary responsibility in this area belongs not to the State but to individuals and to the various groups and associations which make up society.

If there is one thing we know for sure, the quickest way out of poverty is by allowing the impoverished a fair place in the markets. It also means everyone, legislators and rights activists, Americans and Latins, ought to recognize the individual’s right to economic initiative. Bishop Ramazzini criticized the fact that “trade discussions begin by asking how policies will be good for business and economic growth.” But what is economic growth if not the greater productivity of the human worker in meeting the needs of others? Should we not encourage the freedom that allows workers and entrepreneurs to thrive in creating the wealth that makes social development possible?
The Congressional Budget Office would appear to agree with the gentlemen of the Acton Institute. On July 31, 2003, the CBO issued the following Economic and Budget brief: The Pros and Cons of Pursuing Free-Trade Agreements. Among the points this brief makes:
Like the North American Free Trade Agreement--which was examined in a recent Congressional Budget Office (CBO) paper, The Effects of NAFTA on U.S.-Mexican Trade and GDP--the new FTAs should have a net beneficial effect on the U.S. economy. In most cases, all of their effects--good and bad--should be extremely small. However, the arguments for and against FTAs extend beyond their net economic effects on the United States to considerations of foreign policy and tactics for achieving multilateral free trade.

The net effects of the new FTAs on the other countries involved should also be beneficial but much more significant than the effects on the United States because of the much smaller size of those countries' economies. FTAs thus provide a way for the United States to help various countries for foreign policy reasons while having little effect on the United States.
The most-direct economic benefits from international trade arise from the fact that countries are not all the same in their production capabilities. They vary from one another because of differences in natural resources, levels of education of their workforces, relative amounts and qualities of physical capital, technical knowledge, and so on. Without trade, each country must make everything it needs, including things it is not very efficient at producing. When trade is allowed, by contrast, each country can concentrate its efforts on what it does best relative to other countries and export some of its output in exchange for imports of products it is less good at producing. As countries do that, total world output increases. World output may also grow because of greater use of economies of scale, as a factory in one country can serve a market the size of two or more countries rather than one. Trade can benefit countries' economies in a number of other ways as well, such as by expanding the variety of goods available to businesses and consumers, by increasing competition and thereby reducing the extent of monopolistic pricing and the inefficiency that results from it, and possibly by pushing up the rate of productivity growth. Market forces generally ensure that all countries involved in the trade share in the benefits from the increased output.
In looking at the possible effects of CAFTA on Central American Nations, the brief analyzed the benefit NAFTA provided Mexico:
The effects of the FTAs on the economies of the partner countries are likely to be much larger, however, because those countries have much smaller economies than the United States does. The NAFTA-induced increase in U.S. exports to Mexico by 2001 indicated by the CBO model, although trivial in comparison to the U.S. economy, equaled 1.9 percent of Mexican GDP. Likewise, the NAFTA-induced increase in U.S. imports from Mexico by that year equaled 1.7 percent of Mexican GDP. The disparity in size between the U.S. economy and the economies of many of the countries for which free-trade agreements have been proposed is even larger than that between the U.S. and Mexican economies. Thus, the benefits to those economies relative to the benefits to the U.S. economy are likely to be even larger than was the case for Mexico with NAFTA. Moreover, the economies of many small developing countries are less diversified than the U.S. economy, producing one or two main products for export. An agreement allowing those products into the United States would be of tremendous benefit to such a country's economy.
In light of these findings, the protests from groups like Network that CAFTA "was not about people; it was about big business." sound a little hollow. And unless greater economic growth--and the corresponding rise in people's place in such an economy--is "is inconsistent with the principles of our faith and our efforts to build a culture of life", then I can't understand Bishop Tafoya condemnation of the new FTA.

The only argument that CAFTA may disrupt social justice in CA is that the countries themselves are unprepared to practice the appropriate free market economy that CAFTA benefits. In other words, these nations may have too many nationalized industries for people's private economic choices to make much of a difference. They may have far too many people in such abject poverty that the gain they receive in buying power from decreasing goods isn't enough. Their governments may be too securely invested in the interests of the handful of the country's wealthy. Their governments may not be sufficiently democratic enough to truly represent the people. These considerations could give one a more valid reason to withold support for CAFTA.

One could argue, however, that these issues are not the direct responsibility of the treaty. However, the implementation of CAFTA to nations that experience these circumstances could make a bad situation worse.

On the other hand, free trade can free these countries to pursue more appropriate economic strategies. With the freedom to import goods from the USA that cost less, CA nations can prioritize their economies to produce what they have the best capacities to produce. This will increase the value of their economies even more, for they can sell as exports these products that they've made the best. This combination of less expensive imports and more valuable, and assumably more efficiently produced, exports will increase the economies of these nations as a whole. This will increase the living standard of the people as a whole. Again, assuming the economic and financial institutions do not engage in the corruption that has often plagued developing countries throughout the world.

CAFTA may make things worse. However, it may also make things much better. In fact, there's greater benefits for the people as a whole if CAFTA works than costs if it fails. Catholics should welcome this new FTA as an opportunity for nations in CA to grow their economies and help their people. The short-sighted and economically misguided protests of the Catholic "left" should not obscure the reality that CAFTA provides. The people of CA will not be helped by their ignorance.