CAFTA battle part of larger issue

WASHINGTON – The fight over CAFTA – the Central American Free Trade Agreement – is a stand-in for a much larger debate over economic policy and political leadership. Its implications go well beyond the immediate stakes in the battle.

The prominent lobbying role of some conspicuous interest groups – the sugar and textile industries and organized labor on the opposition side; the U.S. Chamber of Commerce and the Business Roundtable, in support – is enough to turn off most people. And at times, the arguments become so arcane that only the experts can decipher them.

But the larger question is whether the world has changed so much that the old ways of thinking about America’s stake in the global economy have to be redefined.

CAFTA in itself is small potatoes. The six countries involved – Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic – are smaller in combined economic clout than a middle-sized American city. Most of their products already enter the United States duty-free. Our exports to them are modest.

But CAFTA – pushed by the Bush administration as a prelude to broader future hemispheric and global trade pacts – comes before Congress this summer in an environment of increasingly serious economic debate.

Part of the public unease measured in every recent poll stems from the forces of globalization, notably the easy flow of investment across national borders and the shift of many jobs to previously laggard countries such as India and China. And part of it stems from the Bush administration’s tax and budget , which have added to income inequality and created an economic recovery in which profits and productivity have grown while wages and incomes have stagnated. As a result, the political alignments have changed in Congress, shifting the odds against approval of CAFTA and requiring a massive effort from the administration to avert a significant foreign policy setback.

Spokesmen for the administration argued to me that it is partisan opposition from Democrats that really is at the root of the CAFTA problem. It is certainly the case that few Democrats can be found who have much good to say about the agreement, and most are vehemently opposed to it. But you have to remember that when President Clinton put NAFTA – the North American Free Trade Agreement with Mexico and Canada – before a Democratic Congress, most of his fellow-partisans, including key leaders of the House and Senate, opposed him.

Much of the opposition is generated by organized labor, a key Democratic interest group. But the notable thing about the CAFTA debate is that New Democrats – the Clinton disciples, who historically have been strong supporters of liberal trade agreements – are opposing this one.

Try as they may, the administration lobbyists cannot blame this defection on the unions. Organized labor has rarely been weaker in decades than it is at this moment. Its membership continues to decline and the AFL-CIO is wracked by a bitter internal fight over the leadership of its president, John Sweeney.

No, the reason the New Democrats have balked on CAFTA is that they believe it does not address the realities of the new economy in which their constituents, many in the high-tech world, work. Simon Rosenberg, head of NDN, formerly known as the New Democrat Network, and Rob Stein, a Clinton administration Commerce Department official, argue that Democrats should not support CAFTA until its labor and environmental standards are strengthened and steps are made to help American workers cope with the pressures of globalization.

On the first point, Rob Portman, the able new chief U.S. trade negotiator, argues that CAFTA’s provisions are superior to those of the free trade agreement with Jordan, signed at the end of the Clinton administration.

Portman is a serious, sincere person and open-minded about ways to improve the standards in those Central American countries. But the administration is not prepared to do what Clinton did in the Jordan agreement – to apply exactly the same remedies to violations of labor and environmental standards that it would impose for violation of the agreement’s commercial standards. To many Democrats, that represents retreat.

But more important is the lack of commitment from the administration to the kind of measures that would address the anxieties of American workers – expansion of health insurance, controls on health care costs, a higher minimum wage and generous funding of education at all levels.

When the benefits of liberal trade – and of overall economic growth – are more widely shared, political support for CAFTA and similar measures will be easier to find. Until then, it will be a battle.