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U.S. Chamber of Commerce Distorts NAFTA Record, Hides potential CAFTA Costs to United States, Central America

New Study Analyzing Chamber of Commerce Report Demonstrates Flawed Methodology, Misleading Numbers on NAFTA, CAFTA

WASHINGTON, D.C. – While Central American ambassadors continue to travel the United States as part of a U.S. Chamber of Commerce-sponsored public relations tour to promote a proposed Central America Free Trade Agreement (CAFTA) NAFTA expansion, a new study by Public Citizen exposes the flawed methodology around the Chamber’s claims about CAFTA’s potential effects on the United States and Central America.

The Chamber study projects possible gains from CAFTA to the United States and several states, including California, Florida, New Jersey, New York, North Carolina and Texas. CAFTA would extend the North American Free Trade Agreement (NAFTA) to six additional countries: Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua.

The Public Citizen study was featured today at a press conference with Georgia Latino, labor, environment and faith leaders outside the Metro Atlanta Chamber of Commerce where Bush administration officials and Central American ambassadors have stopped to promote the proposed NAFTA expansion. The study will be featured in events around the country during the congressional recess (March 21-April 5).

“We heard the same projections about news jobs and economic gains from NAFTA and now a decade later we know these were lies,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.   “Here’s the same special interest source using the same fraudulent methodology to try to get us to buy the same old rotten NAFTA wine poured into new CAFTA bottles.”

In a haunting replay of NAFTA promises a decade ago, the Chamber study claims that CAFTA would create 20,000 new U.S. jobs in its first year and 100,000 jobs over its first nine years. During the NAFTA debate, the administration and proponents said that the U.S. would gain 170,000 new jobs per year. Yet those rosy NAFTA job promises stand in sharp contrast to the actual net job losses that actually occurred during the decade of   NAFTA and other “free trade” agreements that proponents promised would create new U.S. jobs. From 1989-2002, the U.S. lost over 2.3 million jobs as a result of NAFTA and increased trade with China, according to a study reviewing U.S. government trade and employment data conducted by the Economic Policy Institute, a non-partisan Washington, D.C. think tank. This study, unlike the Chamber’s report, calculated the balance between U.S. jobs gained due to increased exports and U.S. jobs lost due to increased imports. The Chamber study simply assumes that there will be no new imports resulting from CAFTA and thus only looks at potential gains from new exports.

Another major methodological failure of the Chamber of Commerce study is its assumption that U.S. exports to Central America will grow at a rate that is far out of line with the developing countries’ purchasing power.   The combined annual economic activity of the six developing countries that would be covered by CAFTA is only the size of New Haven, Connecticut’s annual economic activity – or half of that of San Diego. An analysis of the Chamber’s export growth assumptions relative to the size of the CAFTA target countries’ economies shows that for the Chamber’s predictions to become reality, by 2013 as much as a third of Central America’s economies – and over 80 percent of the Honduran economy – would have to be absorbed by U.S. export sales. The no-new-imports assumption also relies on the bizarre implication that Central America would not stand to gain anything from the agreement, a claim contradicted by the ambassadors on the Chamber PR tour.

“The Chamber’s absurd assumptions about the level of U.S. exports that such poor countries could absorb defy logic and arithmetic, let alone political reality,” said Todd Tucker, Global Trade Watch’s research director. “If these trends began to occur, we would likely see revolution in Central America before U.S. jobs gains could accrue.”

The Chamber’s assumption that CAFTA would not result in new U.S. imports from Central America directly contradicts NAFTA’s 11-year record. Further, CAFTA contains the same foreign investor protections in   NAFTA, which create incentives for the relocation of production to lower-wage countries with goods imported back for sale to the United States. The Chamber bases the no-new-imports assumption on the fact that Central American countries already enjoy favorable access to the U.S. market under a program called the Caribbean Basin Initiative. In the early 1990s, the Chamber made the same claims that NAFTA would not increase imports because Mexico already had favorable access to the U.S. market under the maquiladora trade program.

Yet, after 11 years of NAFTA, a $1.7 billion dollar U.S. surplus with Mexico exploded into a $45 billion deficit.  Over 1.8 million U.S. workers qualified for NAFTA Trade Adjustment Assistance (TAA), a narrow program providing benefits to certain categories of workers who can prove that they lost their jobs due to increased imports or plant relocations. Given the TAA program’s limited scope, these numbers both disprove the no-new-imports assumption and indicate the real cost to U.S. workers of misguided trade agreements.

To see the full report, click here.