Senator Russ Feingold Statement on CAFTA From the Senate Floor June 30, 2005 Mr. President, I rise to oppose the Central American Free Trade Agreement, known as CAFTA, the latest expression of the disastrous trade policies of this Administration -- which are, unfortunately, a continuation of the disastrous trade policies of previous Administrations. Mr. President, I hold listening sessions in each of Wisconsin's seventy-two counties every year. I've held those listening sessions for over 12 years, now, listening to tens of thousands of people from all over Wisconsin. I recently completed my 900th of those sessions, and I can tell you that there is nearly universal frustration and anger with the trade policies we have pursued since the late 1980s. Even among those who would have called themselves traditional free-traders, it is increasingly obvious that the so-called NAFTA model of trade has been a tragic failure. I voted against NAFTA, GATT, and Permanent Most Favored Nation status for China, in great part because I felt they were bad deals for Wisconsin businesses and Wisconsin workers. At the time I voted against those agreements, I thought they would result in lost jobs for my state. But, Mr. President, even as an opponent of those trade agreements, I had no idea just how bad things would be. And things could hardly be worse. You can see the results of those policies in hundreds of communities around my state. As one might expect, our largest communities - places like Milwaukee, Madison, and Green Bay -- lost thousands of jobs as a result of those trade policies, most notably NAFTA and permanent Most Favored Nation status for China. But less obvious to some may be the devastation experienced by smaller towns and cities across my state. In those communities, the legacy of our trade policy has been especially cruel. Even if we only use the extremely conservative statistics collected by the Department of Labor - statistics which many argue grossly understate actual job loss - smaller communities all over Wisconsin have been the victim of the trade policies of the past decade. NAFTA's legacy of lost jobs includes places such as: Baraboo, with 190 lost jobs DeForest, with 40 lost jobs Elkhorn, with 354 lost jobs Hawkins, with 443 lost jobs Marinette, with 54 lost jobs Mauston, with 48 lost jobs Merrill, with 263 lost jobs Montello, with 70 lost jobs Oconto Falls, with 100 lost jobs Peshtigo, with 95 lost jobs Platteville, with 588 lost jobs Spencer, with 23 lost jobs Waupaca, with 130 lost jobs Some might suggest that 23 lost jobs in Spencer, Wisconsin aren't all that many. But when a small town loses a business, and the dozens or possibly hundreds of jobs that business provides, the impact surges throughout the entire community. Families are left without a breadwinner, or sometimes even two breadwinners. Stores are left without customers. New homes aren't built. Families may be forced to move away. Schools lose children. The tax base drops, putting an increased burden on those who remain. When a bad trade deal results in lost jobs, it's not only those who lost a job who suffer. And the suffering in Wisconsin has been considerable. Altogether, Wisconsin has a net loss of more than 23,000 jobs because of NAFTA, and thousands more because of the other trade agreements into which we have entered in recent years. And now we have CAFTA, which is based on that same failed model of trade. I should note at this point, Mr. President, that in too many instances, these trade agreements have been lose-lose trade agreements. They have been bad deals for our workers as well as the workers of our trading partners. This is a vital point, because many who are advocating CAFTA argue that the agreement is critical for promoting economic growth and reducing poverty in these Central American nations. In fact, the experience of the flawed trade model has been just the opposite. Eleven years of NAFTA have lowered living standards in Mexico, both for urban workers and in rural areas. Professor Riordan Roett of Johns Hopkins wrote on this very issue in a recent column, and this is what he had to say: "Mexican workers under NAFTA lost precipitously through the 1990s, despite the extravagant promises made by proponents of the model on which CAFTA is based. At least 1.5 million Mexican farmers have lost their livelihoods under NAFTA. According to a 2004 report by the Carnegie Endowment for International Peace, "Agricultural trade liberalization linked to NAFTA is the single most significant factor in the loss of agricultural jobs in Mexico." Thus far, limited employment growth in Mexico's manufacturing sector has failed to absorb displaced rural workers. This does not bode well for the CAFTA countries. A 2004 U.S. International Trade Commission study on the potential impacts of CAFTA leads one to conclude that the agreement will displace many in the rural sector in Central America. Following a recent visit to Guatemala, United Nations Special Raporteur for Food Jean Ziegler determined that CAFTA will increase hunger and poverty once the agreement fully kicks in….. one is left to wonder where the displaced rural population of Central America will find employment." Mr. President, if the arguments made by the proponents of CAFTA sound familiar, its because they are. CAFTA's advocates are making exactly the same arguments today that the proponents of NAFTA made a little over 10 years ago. Because our markets are already largely open, they argue, it will be American businesses and American workers who will benefit from this trade agreement. It's an argument that sounds neat and simple, but let's compare the rhetoric to the record. In 1993, before NAFTA was implemented, our trade deficit with Canada and Mexico was $9 billion. In 2004, ten years after NAFTA was implemented, our trade deficit with those two countries has ballooned 1,200 percent -- 1,200 percent! -- to $111 billion. By one estimate, the massive growth of imports into this country from Canada and Mexico relative to exports to those two countries has displaced almost one million jobs. Giving China permanent Most Favored Nation trading status and ratifying the creation of the World Trade Organization have only made matters worse. Our trade deficit is now more than $600 billion. Far from improving our trade balance, NAFTA and these other trade agreements have only made matters worse. Mr. President, our trade policy is fundamentally flawed. This is not a new problem, nor is it the fault of only one political party. The leadership of both parties have pushed these deeply flawed agreements, and too many Members from both parties were ready to support them without scrutiny. When questions were raised about the actual provisions of these flawed agreements, supporters were quick to play the free trade card and label those who questioned these policies as "protectionist." It is somewhat encouraging that some who blindly accepted these agreements are now beginning to read the fine print. Mr. President, one might think it obvious, but apparently it needs to be reiterated - these aren't your father's trade agreements, and the elegant theories of Adam Smith and others do not apply to the agreements we are asked to approve. As Thea Lee wrote in a recent column in the Wall Street Journal -- "We should all understand by now that modern (post-NAFTA) free-trade agreements are not just about lowering tariffs. They are about changing the conditions attached to trade liberalization, in ways that benefit some players and hurt others. These are not your textbook free-trade deals. These are finely orchestrated special-interest deals that boost the profits and power of multinational corporations, leaving workers, family farmers, many small businesses, and the environment more vulnerable than ever." Mr. President, millions of working families across Wisconsin know this. I sometimes think that if instead of exporting manufacturing goods China exported editorial writers, the opinion pages of our newspapers might reflect an understanding of this as well. The argument we hear is that trade deals like CAFTA may cause some short-term pain but they are ultimately good for all countries concerned. Maybe we lose a few jobs to Mexico or China, the argument goes, but we would also gain jobs. Each country would engage in the economic activity for which it has a so-called "comparative advantage" and everyone wins. But this nice, neat academic theory bears little relation to what is actually happening in the real world. And one of the reasons for this disconnect is that in an arena that has been fundamentally changed by technical advances, such as the Internet and the rapid flow of capital, we are not playing by the same rules as our trading partners. The trade agreements into which our country has entered in recent years too often lack even the most reasonable of standards to prevent a race to the bottom, and ensure that our businesses and workers can compete on a level playing field. This is certainly the case with CAFTA, which fails to include meaningful labor standards, and the weak standards that it does include are effectively unenforceable. Mr. President, CAFTA states that member countries cannot, for their own benefit, fail to enforce their labor laws. But the agreement also states that nothing in the agreement "shall be construed to empower a Party's authorities to undertake labor law enforcement activities in the territory of another Party." Thus, Mr. President, any protections that might be afforded by the requirement to enforce current labor laws are left to each government to self-enforce. Unlike the commercial provisions in CAFTA, the labor provisions cannot be enforced through binding dispute settlement, or trade sanctions. If a country violates its commercial obligations, sanctions can be imposed quickly, but a violation of workers' rights is only subject to a possible fine. And in the unlikely event that a country is forced to pay a fine, it pays that fine to itself. While the fine is supposed to be used to fund domestic labor initiatives, we all know that such revenues are fungible, and there is no way to prevent a violating country from also transferring money out of its labor budget, so the fine adds no new net resources for enforcement. This is not an academic concern. Studies have documented serious labor violations in Central American countries. Mr. President, American businesses and American workers should not have to compete with countries with such flawed labor records. Mr. President, CAFTA also fails to include adequate environmental safeguards. What environmental provisions there are in CAFTA are largely cosmetic in nature. As with worker standards, the environmental standards that are in the agreement lack the kind of enforcement teeth provided to commercial provisions in the agreement. For example, Mr. President, while the agreement includes the establishment of a process under which citizens can identify failures to enforce environmental laws effectively, advocates note that the proposed citizen process has no clear enforcement mechanism to ensure action on public complaints. By contrast, the enforcement mechanisms for investment related provisions are real. Investors can demand monetary compensation of governments under CAFTA's investment rules. In fact, Mr. President, any hope that CAFTA countries might, on their own, strengthen environmental standards to make the playing field a bit more level is undermined by the investment rules included in the trade agreement. Those rules allow foreign investors to challenge environmental laws and regulations in front of international trade panels, circumventing local courts. Moreover, the threat of having to pay investor interests heavy monetary damages if a challenge is successful is certain to have a chilling effect on the willingness of CAFTA governments -- both federal and local -- to establish the kinds of environmental protections that might help that region and provide better balance for American firms that must live under our own strong environmental laws. Mr. President, among the rosiest of predictions made by the proponents of CAFTA are the positive impacts they claim for U.S. agricultural sectors. But our experience with NAFTA again leaves me deeply skeptical of such claims. The promises made to farmers have largely failed to materialize. But even setting aside for the moment the failure of NAFTA to deliver on those promises, even if we accept the most optimistic of projections by CAFTA's proponents, there is no scenario under which this helps small family farmers in Wisconsin or the nation. The American market dwarfs the CAFTA market, so any benefits will be miniscule and concentrated in the middlemen and large agribusinesses. That's the up side. The down side is that CAFTA sets up an unfair playing field that could put our farmers at a long-term competitive disadvantage. As my visits with Wisconsin farmers have shown me, American farmers are not afraid of competition and I would not hesitate to put them up against any other farmers across the world on an equal footing. The problem is that CAFTA does not provide this fairness. Instead, Wisconsin and the rest of America's farmers are required to meet environmental and labor standards to both keep the water, air and land clean and at the same time pay their employees a living wage. But, as I have noted, CAFTA does not require the same standards in other countries. Mr. President, our farmers can attest that our environmental and labor standards are very real and enforced. CAFTA does nothing to level the field on which our farmers will be asked to compete. And that tilted playing field apparently extends even beyond CAFTA countries. For example, Mr. President, ethanol production has long been considered an opportunity for American farmers to reap greater and consistent income from their crops, while helping to reduce our dependence on foreign fuel. But under CAFTA, Central American countries could become a conduit for cheap ethanol exports to the United States, importing unlimited amounts of ethanol tariff free even if they were blended with 50% ethanol from non-CAFTA countries like Brazil. Mr. President, perhaps most concerning to me is that while CAFTA would put American farmers at a competitive disadvantage with the relatively small CAFTA market, its impact could be far greater. CAFTA will likely be used as the blueprint for the much larger Free Trade Agreement of the Americas. If this retreat from the principle of fair trade is repeated there, the negative effects could be dramatic and felt throughout US agriculture. Mr. President, Wisconsin has paid a heavy price for CAFTA's predecessors. Since 2000, Wisconsin has lost nearly 92,000 manufacturing jobs. NAFTA, the GATT, and Most Favored Nation treatment for China have devastated local businesses and punished working families, taking away family-supporting jobs, and offering lower-paying jobs, if any, in return. When the impact of these agreements comes crashing down on people's lives, it's clear that we have already traded away too much in a series of bad deals. CAFTA promises more of the same devastation brought by the agreements that have come before it - putting our businesses, workers and farmers at a competitive disadvantage, while also undermining the economic development that might benefit workers, farmers and small businesses in Central America. Mr. President, this trade agreement fails on every count. I urge my colleagues to scrap it and tell the Administration to come back with a deal that is fair to American businesses, workers and farmers, as well as the small businesses, workers and farmers of our trading partners. I yield the floor.

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