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Fool Me Twice? Chamber of Commerce Distorts NAFTA Record, Hides CAFTA Costs

By Public Citizen's Global Trade Watch

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In early 2005, the U.S. Chamber of Commerce released a study projecting possible gains to the United States and to several U.S. states’ economies from the proposed Central America Free Trade Agreement (CAFTA) NAFTA expansion. CAFTA would extend NAFTA to six additional countries: Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua.

In an eerie repeat of NAFTA promises from a decade earlier, the Chamber study claimed that, if implemented, CAFTA would create over 100,000 U.S. jobs, over $17 billion in increased sales and $3.5 billion in increased earnings for employees in all industries during its first nine years. The study also made specific mention of projected CAFTA gains for the state economies of Alabama, California, Florida, Georgia, Louisiana, New Jersey, New York, North Carolina, Pennsylvania and Texas, and will continue to add additional states. Regarding these states, the report made a variety of glowing predictions of CAFTA benefits.3 Given that CAFTA would expand NAFTA to six additional countries – including the expansion of NAFTA’s foreign investment provisions that incentivize relocation of production to lower-waged countries – the notion that CAFTA would create U.S. jobs or economic gains seems dubious on its face.

An examination of the methodology and assumptions underlying the Chamber study’s predictions about CAFTA’s effect on both the national and state economies reveal that, in fact, the very design of this “study” ensures that the Chamber’s conclusions would be wildly inaccurate. First of all, the Chamber study assumes that U.S. imports from Central America would not grow under a CAFTA – a dangerous and misguided assumption, out of line with the historical record under NAFTA and other U.S. trade agreements. Secondly, to create a scenario under which CAFTA could benefit the U.S. economy, the Chamber study must assume a growth in U.S. exports to Central American countries which goes far beyond these poor countries’ consumption capacity. According to the study’s assumptions, by 2013, U.S. exports to Honduras would comprise 80 percent of that country’s economy. Finally, the Chamber study repeatedly misrepresents facts about the history of U.S. job loss due to NAFTA and corporate globalization more generally.