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Explaining Union Opposition To CAFTA and Free Trade

Ross Kaminsky - 8/1/2005

On Wednesday, July 27, 2005 the House of Representative passed the Central American Free Trade Agreement on a nearly party line vote of 217-215 after much arm twisting by President George W. Bush and House Republican leadersship. Cutting through the Democrats' bluster, analysis of the arguments against CAFTA are demonstrably wrong, representing a misrepresentation of the current situation, a misunderstanding of basic economics, and shameless political pandering.

Twenty-five Republicans voted against the bill and 15 Democrats voted for it. Those Democratic votes took serious courage, given the intense pressure from big labor against this and every other free trade agreement.

Note that while labor unions say that the issue is very important to them, and that they will withhold financial support from any Democrat who votes for CAFTA, they never say why it is important to them.

The letter is a wonderful example of the true nature of the relationship between unions and the Democratic Party: Democrats fight free trade and competition in order to keep union income up, then the unions donate a chunk of that income to the Democrats. Basically, the unions use Democrats to make anti-competitive legistlation, supporting the existence of inefficient industry which would fail in a free market - at the expense of all American consumers.

Democratic (and the occasional Republican) shills for labor shed crocodile tears about workers' rights and "living wages" in countries we trade with, trying to make us think that they care about the quality of life of blue collar workers in Guatemala.

The reason labor cares about wages in the Third World countries, the reason they want to force up not only those wages but also every other cost of doing business (e.g., when they argue for "environmental protections") is to make it more difficult for those countries to compete with American workers on a cost basis.

Their income (as unions, not individuals) depends on minimizing competition. But the rest of us should understand that the result of their arguments means higher prices for nearly everything we buy which is or can be produced in Central America. Imagine you went into WalMart or Target and every t-shirt or plastic food container or running shoe or small electronic device was 10% more expensive. Over the course of a year that extra money could be the difference between your family having a summer vacation or not, your child going to the school of your choice or not, your spouse being able to afford the better doctor or not.

The goal of unions is to make the lives of Americans more expensive. If Central American workers can't compete with American workers in the most low-tech industries, which is generally where the competition is, then these labor unions can maintain their membership. Whereas if a textile worker loses his job and retrains into another industry, the textile union has lost that member and, more importantly, his dues.

Let's take a (brief) look at the bogus arguments against CAFTA in particular:


1) That it will create unfair competition against US workers.

Response: In addition to the explanation above, this charge is particularly irrelevant in the case of CAFTA because 80% of what we buy from the CAFTA countries already comes into the US duty-free. But at this time there are tariffs on what we sell to them, so this particular free trade treaty is substantially to the benefit of American manufacturers with little impact on competition against our workers.


2) That NAFTA has created unemployment, so CAFTA will too.

Response: Let's take a look at a "textile state" which should have been hurt by NAFTA, the free trade agreement with Mexico and Canada passed in 1994.

Here are Bureau of Labor Statistics historical data for North Carolina.

With a brief blip up in 1995, North Carolina was on a straight up-trend in number of people employed in the state and down trend in unemployment rate (as a % of the workforce) until the Nasdaq bubble burst in mid-2000.

The data could be read as showing a small and brief dislocation of jobs just after NAFTA passed followed by those workers (and more) being reabsorbed into the work force. The textile unions probably lost members which they didn't recover but the textile workers simply became workers in other areas, an inconvenience to some and bad for the union's coffers, but hardly the economic disaster that labor wants us to belive.

3) Finally, let's talk about the major issue that few people are talking about: Sugar.

Most Americans don't know that our sugar industry is protected, with a government-set minimum price per pound (higher for beet sugar than cane sugar) which causes Americans to pay the world's highest wholesale prices for refined sugar.

For a chart of historical world sugar prices, see http://www.sugaralliance.org/library/2004/27-ref_sug_hfcs_prices.pdf

While CAFTA will open our markets to more imported sugar, we're talking about a small single digit percentage of our sugar usage. But given the "camel's nose under the tent" possibilities here, the sugar industry has been a significant opponent of CAFTA, and was the cause of several Republicans voting against it.

The sugar industry had to be fairly quiet while fighting the bill, and they were. If more Americans were to realize how much more they pay than they should for a commodity we all use every day there could be a serious backlash against this blatant soaking of Americans to benefit this relatively small industry group.

What's important to notice here is that this is also an opponent whose direct goal is to keep costs to American consumers as high as possible. This is what opponents of free trade are ALWAYS about, and generally they are well aware of it.

While they ply citizens with sob stories and lies, unions and other foes of free trade simply want our lives to be as expensive as possible. President Bush and the Republican leadership should be congratulated on passing CAFTA, at least as much for showing that they can as for the relatively modest economic effects we'll see from this particular treaty.