In October, Costa Rica became the last signatory nation to ratify the U.S.–Dominican Republic–Central America Free Trade Agreement (CAFTA). A little more than half (51.6%) of Costa Rican voters said “sí” to the accord in the world’s first popular referendum on a trade agreement. U.S. reporting on the referendum largely simplified the CAFTA question as a matter of geopolitical rivalry between Venezuela and the United States, and it failed to seriously examine whether CAFTA would benefit Costa Rica. This was evident in two widely reported stories: a scandal over a memo leaked from the Costa Rican government, and the Bush administration’s threat to cancel Costa Rica’s trade preferences if its voters rejected CAFTA.
The first story broke in September, when the Costa Rican press reported on a secret memo, co-authored by Costa Rican second vice president Kevin Casas and addressed to President Oscar Arias, outlining suggested tactics to secure a “sí” victory. These included a propaganda campaign that would focus on job loss and link the “no” campaign to Hugo Chávez and Fidel Castro. The memo also advocated threatening mayors with losing federal funds if their municipalities voted no. Casas resigned soon after the news reports.
U.S. editorials and op-eds, almost all of which supported CAFTA, echoed the PR strategy advocated in Casas’s leaked memo—linking CAFTA opponents with Chávez and Castro, and predicting an economic downturn if Costa Rica did not ratify CAFTA. (According to a Nexis search, the sole exceptions to the pro-CAFTA line were an October 6 column in the San Antonio Express-News and an October 7 editorial in the Wisconsin State Journal, both of which strongly criticized CAFTA and previous U.S. trade agreements.1) Many of the writers condemned the Casas memo—not for what it advocated, but for the anti-CAFTA backlash it sparked. A Washington Post editorial (October 9, 2007) printed after the referendum, for example, criticized the memo suggesting it was partly responsible for a close vote, while reaffirming the link between a “no” victory and a supposed triumph for Chávez:
The victory probably would have been wider if not for the release, late in the campaign, of a regrettable internal memo showing that the yes campaign, led by President Oscar Arias, was thinking of trying to expand its margin by stoking voter fears of such free-trade opponents as Fidel Castro and Hugo Chávez. The fact remains, though, that the referendum was a defeat for Mr. Chávez and his populist “Bolivarian Alternative” to trade with the United States.
This editorial, like all of the opinion pieces and most of the news stories on the topic, failed to mention a crucial piece of context: the collapse of negotiations for the Free Trade Area of the Americas (FTAA), which would have expanded NAFTA to the entire hemisphere. Venezuela alone did not defeat the FTAA; Brazil and Argentina were also strongly opposed, as were other governments. Indeed, the clash suggested by these and other opinion pieces—pitting the United States and its CAFTA trading partners on one side against Venezuela, Cuba, and Nicaragua on the other—misrepresents the more complicated reality of Latin American regional integration, and of U.S.–Latin American relations. A number of regional initiatives, including most prominently the Venezuela-initiated Bank of the South, have emerged recently, and most South American countries support them.
A month after the memo scandal, the Bush administration threatened to eliminate Costa Rica’s trade preferences in textiles, tuna, and other sectors if its voters rejected CAFTA. “The fact is, the United States has never faced a situation where one of our trading partners rejects a reciprocal trade agreement with the United States, but continues to seek unilateral trade preferences,” U.S. Trade Representative Ambassador Susan C. Schwab said in a statement released three days before the referendum. The White House reiterated the threat hours before voting began.
In reporting this story, the press quoted congressional Democrats who criticized the threat and attempted to reassure Costa Ricans that there would be no penalties for a “no” victory. But few reports attempted to determine whether the Bush administration’s threats were, as the Democrats alleged, hollow. Some research would have revealed that most (over 90%) of Costa Rica’s already existing trade preferences are permanent under the Caribbean Basin Initiative and other trade preference regimes, and only a small portion would need to be renewed by the U.S. Congress.2 Even some of the nonpermanent preferences for Costa Rica’s textiles will almost certainly be renewed by Congress. The country would therefore gain little access to the U.S. market with CAFTA that it does not already have.
What’s more, the U.S. import market should hardly be an attractive one for Costa Rica or anyone else. As the U.S. dollar declines (and with an already high U.S. trade deficit), imports become more expensive, making it tougher for exporters to elbow their way in.3 As Dean Baker, co-director of the Center for Economic and Policy Research, wrote in The Hankyoreh about South Korea and its FTA with the U.S., “the country is being asked to give up a great deal to gain access to the shrinking U.S. import market” (September 20, 2006). The same could easily be said of Costa Rica under CAFTA. Under the agreement, the country will open up its insurance and telecommunications industries to privatization in a “phased approach” (as Schwab’s office describes it); increase patent protections (resulting in higher prices for medicines and medical equipment); open its agricultural sector to cheap U.S. imports; immediately remove tariffs on 80% of industrial imports from the United States; and become subject to investment dispute settlement (including in cases in which companies will be able to sue the Costa Rican government under CAFTA’s Chapter 10); and more.
But the media’s failure to critically examine CAFTA goes beyond assessing the impact it will have on Costa Rica; it lies more profoundly in the media’s designation of CAFTA as a “free trade” agreement. Take, for example, United Press International’s description of it: “The agreement would establish largely free trade between Costa Rica, other central American countries and the United States” (October 8, 2007). This is misleading because, although it is true that CAFTA has reduced some tariffs, quotas, and other trade restrictions, it also raises new protections, some of which are far more costly in economic terms. For example, CAFTA spells out new protections on intellectual property, including patents, that go well beyond existing World Trade Organization rules and are likely to significantly increase the cost of medicines. The accord thereby protects corporate profits—and the livelihoods of highly paid professionals—while exposing lower-wage workers to greater international competition.
Reporters might also have considered the record of other developing countries that have signed so-called free trade agreements with the United States. Mexico is an obvious example, since it has been partner to the North American Free Trade Agreement (NAFTA) for 14 years. The country’s agricultural sector suffered greatly as it went from being a net exporter of corn to becoming dependent on the United States for corn imports, while many of the jobs created under NAFTA soon relocated to China and elsewhere. Mexico’s per capita GDP growth since ratifying NAFTA has been about one third of what it was before 1980.
These trends in the reporting on Costa Rica’s referendum fit a consistent pattern in U.S. media coverage of trade deals in the NAFTA and post-NAFTA era. Economic analysis was generally lacking, which, combined with an overwhelming pro-CAFTA editorial slant, made it difficult for consumers of the U.S. media to get an accurate picture of what was at stake in the referendum.
Dan Beeton is International Communications Coordinator at the Center for Economic and Policy Research (www.cepr.net).
1. A lengthy anti-CAFTA response by Senator Bernie Sanders appeared in The Wall Street Journal, reacting to an op-ed criticizing his trip to Costa Rica in which he spoke against the Bush administration’s threats.
2. Henry Mora and Todd Tucker, “Costa Rica Doesn’t Need CAFTA to Benefit From U.S. Trade Preferences,” Public Citizen’s Global Trade Watch, September 2007, www.citizen.org/documents/CAFTA-CBI_report.pdf.
3. The dollar’s devaluation, together with the record-level U.S. trade deficit and the massive current-account deficit, is resulting in a downward adjustment. See Mark Weisbrot and David Rosnick, “A Shrinking Market: Projections for U.S. Imports,” www.cepr.net/documents/import_market_2006_07.pdf.