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Farm and Food File for the week beginning Sunday, April 17, 2005

CAFTA’s math still enchants farm groups
Alan Guebert

The Congressional battle to approve the Central American Free Trade Agreement (CAFTA) began in earnest last week with the usual suspects mouthing the usual platitudes to the usual inside-the-Beltway audiences.

But the usual suspects, farm groups like the American Farm Bureau, the National Cattleman’s Assoc., the American Soybean Assoc., and the National Pork Producer Council, were so ardent in offering their platitudes--democracy! increased exports!--that none explained where their bold free trade prescriptions have taken, or will take, American farmers and ranchers.

Moreover, if the 1993 NAFTA script is followed, no explanation will be forthcoming before a mid-May House vote on CAFTA. So, sigh, it’s up to us little people to do the big boys’ heavy lifting--again.

First, CAFTA is a free trade deal between the U.S. and Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the late-coming Dominican Republic. Combined, the six nations hold 45.5 million people and $204 billion in Gross Domestic Product.

Quick math pegs CAFTA’s GDP per capita at a paltry $4,500. By contrast, the U.S. GDP per capita is $38,500. Those two facts almost guarantee the U.S. will be a far more likely CAFTA ag importer than a CAFTA ag exporter. We have the money; they don’t.

Indeed, that’s the case already. Since 2000 the U.S. has been a net $1 billion CAFTA ag importer. In 2004, the ag trade gap was $1.1 billion.

Yet even if the CAFTA nations were as rich as, say, Canada or Mexico, a fatter American ag trade balance under CAFTA is as empty a promise as it was when NAFTA was sold to American farmers and ranchers in 1993.

Under NAFTA, the free trade deal with Mexico and Canada that served as CAFTA’s template, U.S. ag exports did climb. From 1994 through 2004, U.S. ag exports, including fish and lumber, to Mexico and Canada grew 93 percent, from $11.5 billion to $21.3 billion.

That good news was obliterated, however, by the flood of ag imports from our NAFTA neighbors. Food, fish and lumber imports from Mexico and Canada rose from $15.4 billion in 1994 to $35.9 billion in 2004, or an even fatter 133 percent.

The abbreviated NAFTA story for ag is short and not sweet: The American ag trade deficit to Canada and Mexico has grown from $3.9 billion in 1994 to $14.6 billion in 2004, or 274 percent.

The widening ag gap confirms another trade fact that all the gassy hope of CAFTA cannot hide: As the 1990s pilgrimage to free trade heaven ensued, the American ag trade surplus collapsed from very black $27 billion in 1996 to a no-color-at-all, barely breakeven for 2005.

American farmers and ranchers are not alone in watching their export superiority slip to inferiority in this global trade panacea. Since 1994 the U.S. trade deficit has ballooned from $106 billion to 2004’s staggering $617 billion.

Despite these very clear, read-‘em-weep facts, free trade continues to enjoy the undying support of most big ag groups.

More importantly, absolutely nothing--not rising cattle imports, not the sell-out of their sugar producers, not the World Trade Organization’s indictment of American cotton programs, not Brazil’s blindingly fast rise in ag production, virtually nothing--has led these groups to question how their members, U.S. agriculture and the nation actually benefit from CAFTA or their relentless push for free trade.

Others are, however, and signs are now emerging that their blind faith isn’t casting its usual “we-got-faith, brother” spell over a CAFTA-doubting Congress.

“I told these farm groups recently,” says Minnesota’s Rep. Collin Peterson, the ranking minority member on the House Ag Committee, “that the only problem with their free trade promises is that none ever come true. It didn’t happen under NAFTA and it won’t happen under CAFTA.”

Peterson guesses if a CAFTA vote were held in the House today “maybe only 50 percent of the Ag Committee would favor it,” a big switch from previous trade votes. “Few are being fooled by the usual rhetoric,” he offers.

Well, some still are but they’re just your farm group leaders.