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The Central American Counterexample



One of the things that drives me most crazy about the self-congratulatory rhetoric promoters of trade deals routinely use is that free trade is awesome because of the Asian economies and so we should embrace more, more, more unrestricted free trade! There are a number of problems with this. First, this narrative totally leaves out the actual workers in Asia and their own demands on the system. Second, they serve as apologies for exploitative American corporations. Even if the ultimate claim is true, that doesn’t mean that corporations should be able to recreate the American Gilded Age in Bangladesh. 1138 workers don’t actually have to die. Quit apologizing for that.

But the other obvious problem with this rhetoric is that it totally leaves Central America out of the analysis. To say the least, trade agreements have not raised living standards or created stability in Central America. In fact, they’ve been pretty bloody disastrous. Cole Stangler and Maria Gallucci on the failure of trade agreements in Guatemala:

Things were supposed to be different in Guatemala. When the country joined the Dominican Republic-Central America Free Trade Agreement in 2006, proponents of the deal said it would improve conditions for workers, raise wages and make it easier for laborers to organize. Seven years later, Guatemala was named the most dangerous country in the world for trade unionists. Critics say basic rights of workers to form unions and speak out without facing discrimination are not enforced.

Supporters of the Trans-Pacific Partnership (TPP) are making many of the same promises. As they aim to shore up support in the U.S. Congress, proponents of the hotly contested trade deal say it will improve labor standards across signatory nations — especially in those countries known for mistreating workers and failing to enforce employment laws. According to U.S. officials the TPP “has the strongest protections for workers of any trade agreement in history.”

Cafta supporters struck a similar tone a decade ago. Seeking support from Congress, then-United States Trade Representative Rob Portman said the deal had the “strongest labor and environmental provisions of any trade agreement ever negotiated by the United States.”

Since the deal was signed, violence and intimidation of labor activists in Guatemala has spiked.

“Despite many years of promises by successive governments to take the steps necessary to respond to this crisis, the situation has only worsened with each passing year,” found a 2013 report from the International Trade Union Confederation, the world’s largest trade union federation.

Murder is a constant problem for workers who organize unions in Guatemala. Since 2007, more than 70 labor activists have been killed, according to the nonprofit Solidarity Center, which is affiliated with the AFL-CIO. Kidnappings, break-ins and death threats are fairly common as well.

Export-oriented factories, or maquiladoras, have thrived under Cafta. While the facilities are supposed to respect labor law to receive generous tax breaks, Guatemalan authorities rarely enforce this requirement. Bosses regularly block efforts to organize unions, use subcontractors to avoid legal liabilities, demand uncompensated overtime and oversee hazardous working conditions.

At hospitals, workers can go weeks or months without a paycheck from their employer: the Guatemalan government. In Santa Elena, many of the nearly 500 people who work at the San Benito Hospital — from doctors and surgical assistants to janitors and administrative personnel — are awaiting two months’ pay. “It’s demoralizing,” said a surgeon, who asked not to be named for fear of repercussions.

Cathy Feingold, director of international affairs with the AFL-CIO, said the structure of Cafta left little incentive for the Guatemalan government to monitor and improve labor standards. It allowed Guatemala to start reaping the rewards of the trade pact without first showing evidence it was complying with the deal’s labor standards.

Critics say TPP commits the same error. Without immediately demanding that countries comply with its labor provisions, it extends benefits to countries like Malaysia, where a recent report found nearly a third of all migrant workers in the nation’s booming electronics industry are working under forced labor conditions, and to Vietnam, which bans all unions that are independent of a top-down labor federation tied to the Communist Party dictatorship.

Guatemala also suffers from the ravages of the inter-American drug trade, sends tens of thousands of migrants north a year to try and make a better life in the United States, has enormous problems with gang violence and political corruption, etc., etc. Trade agreements like CAFTA have done nothing to protect workers or union organizers, haven’t led to a better standard of living, or done anything at all they promise. Some of these problems, like the murder of union organizers, are definitely issues in Asia as well and almost certainly will be under the TPP as well. Others may be worse in Guatemala than Bangladesh. But then again, maybe not. In any case, if promoters of free trade agreements are going to make an honest argument about their benefits, they have to take Central America as seriously as they do Asia.

The reality of course is that for different reasons depending on country that different groups benefit from these agreements and that other groups do not benefit or even suffer. And certainly said trade agreements could be applied much more fairly to help people lived dignified lives. But that’s a level of complexity you rarely see from free trade prophets who would just prefer to forget that Guatemala, El Salvador, and Honduras exist when making their public arguments while being very happy to remember them when seeking to move factories around for the cheapest possible labor.

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  • fledermaus

    It doesn’t matter, no lie is too much in the service of “free trade agreements” They don’t even bother to come up with new ones.

    Besides Vox said TPP is, like, totally gonna disrupt the auto industry and we’ll all get cheap Porsches.

  • Phil Perspective

    Seven years later, Guatemala was named the most dangerous country in the world for trade unionists.

    Criminy! It must be really bad if it tops even Colombia.

  • Murc

    According to U.S. officials the TPP “has the strongest protections for workers of any trade agreement in history.”

    It’s worth noting that this can be 100% true and still make the TPP a vile aggression against workers. Whether or not the protections in it are strong relative to prior treaties is no measure as to whether or not they are adequate.

  • Scott P.

    To say the least, trade agreements have not raised living standards or created stability in Central America. In fact, they’ve been pretty bloody disastrous. Cole Stangler and Maria Gallucci on the failure of trade agreements in Guatemala:

    A quick search shows that per capita GDP in Guatemala has risen from $2500 in 2007 to $3700 today. Maybe that’s not all due to the trade agreement, and certainly the country has serious problems, but a 50% increase in seven years is nothing to sneeze at.

    • Joshua

      Who is that increase going to? Guatemala’s GINI coefficient is very high (52.4), which means that the economy is highly unequal. It seems like most of those gains are going to the crooks that are running the place.

      • Scott P.

        Of course.

        Still, some of that ends up on the bottom. To say that the trade agreement has not raised living standards you’d have to prove that 100% of the additional income has remained at the top. That requires an argument, not a mere statement.

        (Not that I am endorsing trickle-down economics; a more egalitarian distribution is always preferable).

        Moreover, if you want to improve living standards, having 50% more money to spread around seems like a good starting point.

        The counterargument always seems to be that we need to first immiserate everyone, rich and poor, before we can try and build a more egalitarian society.

        • It’s a lot more complicated than that. First, with a nation that has as high of income inequality and corruption as Guatemala, a lot of that money is being spent out of the country, especially in the United States. The Caribbean Basin elite LOVE their trips to Miami. Yeah, I suppose their daily supplies are being purchased in Guatemala City and probably at more expensive department stores than the local market, but with wages so low, don’t expect much of that to trickle down to workers.

          There’s also the issue that a lot of farmers have been forced off their land through the American dumping of agricultural products making subsistence farming not sustainable any longer and thus creating a growing class of urban poor.

          Moreover, when you are talking about a nation like Guatemala, saying things like the left shouldn’t try to “immiserate everyone” is really out of touch. There’s been open warfare against the poor of Guatemala by the elites for a half-century or more. That’s the immiseration that’s already happening. It’s a whole other world than the U.S., as bad as things have become here.

          • Brett

            If they’re only subsistence farmers, then how would dumping American farm products drive them off their land? Any income they had would be coming from non-farm work anyways – they’d be farming just to eat regular meals.

            Did you mean that rich folks are driving them off the land to use it for agriculture exports?

      • Brett

        I went looking for median household income data and didn’t find any for Guatemala – just the mean income, which is heavily skewed by inequality. All we have are anecdotal accounts of how trade agreements have affected the country, with no real systemic data aside from GDP-related figures.

        • I agree that there is not nearly enough data and that the mean income is a pretty meaningless stat without income inequality taken into account.

          • Brett

            Honestly, considering how poor much of Guatemala’s population is and the high crime/violence rates, getting any sort of reliable macroeconomic data is nothing short of heroic. I don’t even know how they got the mean income figure.

    • wengler

      Ah the GDP argument. Farley used it on an earlier post about India. I’ll pass it on to those hospital workers that haven’t been paid in two months.

  • Joshua

    I’m not an expert on Guatemala. But if the trade agreement opened up a spigot of cash without the institutions to protect the rights of workers, this situation is totally foreseeable. That cash can easily make a corrupt situation much worse. The idea that all we need to do is write down a few policies buried in page 378 of the trade agreement is really foolish.

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