The Central-American Free Trade Agreement, or CAFTA, was signed into law five years ago today, August 2, 2005, (later expanded to include the Dominican Republic to become CAFTA-DR). Facing vicious opposition from labor, the anti-trade Global Trade Watch, and others, the agreement had passed Congress by just two votes. Opponents vilified the agreement, predicting it would hurt American manufacturing.

Global Trade Watch’s Lori Wallach, for instance, called CAFTA a “catastrophe”, “a moldering corpse waiting to be buried,” and confidently predicted U.S. deficits and job losses. The U.S. International Trade Commission, the National Association of Manufacturers and other responsible organizations, on the other hand, predicted the agreement would spur U.S. exports and result in significantly stronger growth.

The record shows how wrong Wallach and other trade detractors were. As is clearly shown in the inserted graph, far from greater deficits, the CAFTA-DR agreement has changed deficits to surpluses. In the years prior to CAFTA, American manufacturers ran deficits with the CAFTA countries averaging $1.1 billion a year. After CAFTA went into effect, those deficits quickly turned to surpluses that have averaged $3.5 billion a year.

The improvement in the trade balance with CAFTA-DR occurred because the dollar value of U.S. manufactured goods exports grew faster than imports. In the years prior to the agreement, U.S. manufactured goods exports to the region grew less than 5 percent a year. In the years immediately after the agreement, they soared almost 14 percent a year.  And even after the global trade collapse in 2009, manufactured goods exports to CAFTA-DR so far this year have boomed 30 percent, much faster than the 22 percent increase of U.S manufactured goods globally.

It is time for Lori Wallach to stop talking about a “failed CAFTA trade policy.”  The only thing that is failing here is her rhetoric.

We happened to catch two excellent speeches in Congress this week on the importance of Free Trade Agreements.

Rep. Kevin Brady (R-TX) spoke Wednesday during the House debate on H.R. 1875, to establish an Emergency Trade Deficit Commission. The full debate started on page H6813 of The Congressional Record. Brady, who managed the Republican side of the debate, spoke beginning on page H6188, noting that the day marked the fifth anniversary of House passage of the U.S.-Central American Free Trade Agreement, or CAFTA.

Trade agreements … give us a chance not one-way trade in, but two-way trade where we have a level playing field. The world has changed. It’s not enough to simply buy American. We have to sell American. We have to sell our products and goods and services throughout this world. In fact, over 80 percent of our trade deficit today is with countries that are not trade agreement partners, that are not level playing fields for the United States. That’s why we push hard for those agreements.

For example, 5 years ago the United States had a $1.2 billion trade deficit with Central America. Last year, the United States had turned that around, because of the agreement, to a $1.2 billion trade surplus, and we’re on track to surpass that surplus again this year. Last year, the United States had a trade surplus in manufactured goods with our Central American partners of almost $2 billion. We’re on track again this year.

 Nor is CAFTA the only example of how trade agreements can improve the U.S. trade balance. This week also marks the eighth anniversary of the final House vote on the Trade Act of 2002, under which we have resoundingly successful trade agreements with 13 countries now in force. Last year, the United States had a trade surplus of over $25 billion with these 13 countries. And so far this year, we have a surplus again.

Looking at just trade in manufactured goods reveals that these agreements were even better for American manufacturing workers. Last year, the United States had a trade surplus of over $29 billion in manufactured products with these countries that we have free trade agreements. And again, we have this year a surplus already of nearly $16 billion. Without question, these trade agreements have reduced U.S. trade deficits and increased U.S. trade surpluses.

Rep. Geoff Davis (R-KY) also spoke on the floor, emphasizing the importance of trade to the manufacturing sector: “In my home State of Kentucky, nearly 50,000 manufacturing jobs are dependent on exports. The simple fact is that 95 percent of the world’s consumers live outside the United States, and the fastest growing markets are outside our borders. So success in those markets is critical to growing our manufacturing sector and creating good paying jobs.”

In the Senate, Sen. Chris Dodd spoke on Thursday, making a strong case for enacting the U.S. Free Trade Agreements with Colombia and Panama. He argued that the agreements had value for both foreign policy and U.S. domestic economic reasons, and concluded: (continue reading…)

Perhaps overlooked in the holiday rush, the winter storms and media slumber was the U.S. recognition of Costa Rica’s official entry into Central American Free Trade Agreement, also known as CAFTA-DR (the DR being Dominican Republic). The completion of CAFTA represents an important reaffirmation of trade’s economic value and importance in supporting Latin America’s democracies. We hope the Obama Administration recognizes the opportunities that should be embraced.

Reuters, “Bush clears way for Costa Rica to join CAFTA“:

WASHINGTON (Reuters) – President George W. Bush cleared the way on Tuesday for Costa Rica to formally join a regional free trade agreement between the United States, the Dominican Republic and four other Central American countries.

Bush issued a proclamation that brings the pact into force between the United States and Costa Rica on January 1.

“This step marks an important milestone in our relationship with Costa Rica, building on our strong economic and political partnership,” U.S. Trade Representative Susan Schwab said.

More…

• Presidential proclamation, “To Implement the Dominican Republic-Central America-United States Free Trade Agreement with Respect to Costa Rica and for Other Purposes.“
• U.S. Trade Representative, “Statement of U.S. Trade Representative Susan C. Schwab Regarding Entry into Force of the CAFTA-DR for Costa Rica.“
• The USTR’s website with the text and background of CAFTA-DR is here.

Usually this sort of Christmas week release is designed by the releasing party, in this case the White House, to bury the news. That seems less likely this time, as various delays and process steps ran up against a December 31, 2008, deadline for action. (See this article from Inside Costa Rica for the timeline.)