(July 25, 2005) — For a trade agreement that even its supporters say has all the economic power of a deal with, say, the metro area of Sacramento, Calif., the Dominican Republic-Central American Free Trade Agreement is generating a whole lot of fuss in Washington.
Much of that fuss has less to do with the impact of DR-CAFTA than it does with the bigger question of the direction of trade policy. Within plastics, as in all of manufacturing, the proposed deal exposes some deep differences in how companies view the changing global economy.
On one hand, traditional Washington groups like the Society of the Plastics Industry Inc. and the National Association of Manufacturers are for it, and are furiously lobbying a closely divided Congress, where a vote is expected soon.
They see opportunities. SPI, citing U.S. government statistics, said the plastics industry has a surplus with the DR-CAFTA region, which includes Costa Rica, El Salvador, Honduras, Guatemala, Nicaragua and the Dominican Republic.
The U.S. plastics industry exported $894 million to the six countries in 2004 — $485 million in resins, $386 million in products, $9.8 million in molds and $1.9 million in machinery — according to SPI. The region imported only $179 million, with more than $170 million of that in products. That's about 1 percent of total plastic imports.
SPI and other supporters say there is unlikely to be a flood of imports, because the six countries have had duty-free access to the U.S. market for years, and the deal lowers tariffs that U.S. companies face in those markets.
On the other side stand groups that typically focus on smaller companies, like the U.S. Business and Industry Council and Save American Manufacturing Now, which has strong roots in the mold-building sector. They, too, are lobbying furiously.
They're concerned less with the impact of lower tariffs, and more with whether the trade deal will, as they see it, make it easier for multinational corporations to move manufacturing jobs offshore — taking with them work that smaller firms compete for.
They can claim some success. DR-CAFTA passed the Senate in June by a narrow margin, 54-45, leaving supporters scrambling to secure votes in the House, in part by promising to consider tough legislation aimed at China.
That's the heart of the argument. Supporters look at DR-CAFTA and see Mexico, where the plastics processing industry had a $2.9 billion surplus in 2004. NAM sees DR-CAFTA meaning $5 billion in new exports and 60,000 new jobs in U.S. industry.
Opponents see China, its $4.5 billion (and growing) deficit in plastics products last year, growing manufacturing trade deficits in general and a trade policy that they view as tilted toward multinational companies.
Feelings are strong: “The administration and most of Congress has an interest in keeping the multinationals happy, and keeping NAM and the U.S. Chamber and the Business Roundtable happy,” said Mike Retzer, SAMNOW's spokesman and an executive at mold builder W.G. Strohwig Tool and Die Inc. in Richfield, Wis.
Which gets to government policy. You can make strong factual arguments for specific trade deals. But absent a more forceful policy in terrorism-obsessed Washington on how to deal with the changing global economy, those deals will continue to be a very tough sell.