DR-CAFTA Agreement Badly Flawed; Smart Trade Policy Needed

DR-CAFTA Agreement Badly Flawed; Smart Trade Policy Needed

Having ignored the needs of U.S. workers and failing to engage in bipartisan consultation on trade policies for four years, the Bush administration is now facing the likely prospect that its controversial new trade agreement with the Dominican Republic and Central American nations may be rejected by Congress. Judged against the standards of smart trade policy, DR-CAFTA fails to make the grade and should be opposed in its current form.

• Smart trade policy should contribute to U.S. economic growth. Trade agreements should spur creation of the good jobs associated with exports and result in the wider consumer choice associated with imports. The gains from trade, on either the export or import side, however, will be minimal in the case of DR-CAFTA, since the other countries in the agreement have very small economies and together account for barely 1% of U.S. trade. Although not every trade agreement need itself provide significant gains to be worthwhile, the administration's almost exclusive pursuit of trade agreements as rewards for countries that support its foreign policies has come at the expense of concentrating on larger markets for high-value U.S. exports.
  
  
• Smart trade policy should promote development and respect democracy in other nations. The other six countries in DR-CAFTA will see some benefits in this agreement, likely in the form of an improved investment climate. For an agreement that is being advertised as important for development and democracy in the region, however, DR-CAFTA does relatively little to affect the region's development challenges and to spread the gains from trade more broadly. Indeed, the rule of origin in the textile provisions is sufficiently restrictive that it may impede the ability of industries in the DR-CAFTA countries to remain competitive now that global textile quotas have been ended. The refusal of the administration to include enforceable labor standards in the agreement, despite the well-documented absence of basic international labor protections in some of the DR-CAFTA countries, is a missed opportunity to spread the benefits of development to the average working person in these countries.
  
  
• Above all, smart trade policy should be part of comprehensive efforts to ensure economic opportunities for U.S. workers. Trade policy does not exist in isolation from other economic policies. Existing safety net programs such as extended unemployment insurance and trade adjustment assistance (TAA) already fall far short of needed support. Yet instead of trying to help more workers make the transition to new businesses or careers, the administration has tightened the eligibility requirements for TAA, denying many workers even the modest resources available under that program. Although the number of workers likely to be directly affected by DR-CAFTA is small, the administration again offers nothing to those who will be affected.