By Rebecca Lindegren
In 1994, the United States, along with representatives from Canada and Mexico, agreed on something called NAFTA, also known as the North American Free Trade Agreement. This agreement was designed to remove the barriers that kept the three countries from being able to freely trade their products. NAFTA did this by removing the heavy taxes and tariffs that followed when those products crossed borders. However, many other countries were affected by NAFTA, through more indirect means. One of those countries affected was El Salvador.
El Salvador is the smallest country in size in Central America, but it is also has the most people per square mile. Following the success of NAFTA, and the way it helped to significantly increase Mexican imports in the U.S., a new treaty called CAFTA was created in 2004. This treaty was much like the original NAFTA agreement; however it focused on Central American countries. These countries included Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and later, the Dominican Republic.
CAFTA was designed to eliminate tariffs on exports from the U.S. to Central America. The goal of these reduced prices was to create an environment where price was more competitive. This is particularly true for the people of El Salvador. Currently, El Salvador has the most open trade and investment environment in Central America. The annual trade of El Salvador accounts for approximately $12 billion per year. The majority of this trade is imports into the country and as a result, El Salvador has become a large service based industry.
Impact on Local Industries
However, with this influx of investment and increased trade came certain downfalls. In order to gain the interest of foreign investors, many companies in El Salvador are attempting to offer the lowest price. This results in reduced wages for workers and poorer working conditions. CAFTA offers no protection for workers. Local companies in El Salvador that want to gain U.S. investments pay their workers as little as possible and often have unsafe working conditions.
Central America has long been known for its less than ideal labor laws. Nothing in NAFTA or CAFTA protects the people who will be completing the labor. In fact, CAFTA actually allows participating countries to ignore the standards set by the International Labor Organization. Instead, the only standards set are the ones already in place in the country. This creates an influx of corporations using CAFTA to skirt these laws, and the workers suffer for it.
Textiles are one of the biggest exports from El Salvador. The farmers who create these textiles are slowly being forced off their land, so that large corporate farms can take over. CAFTA doesn’t help those small, family based organizations. Instead, it supports the large corporations that want to take over those farmlands. The workers are then forced into working for these large corporations instead of running their own farms.
Impact on El Salvador’s economy
El Salvador’s agriculture industry is not food based. When people in El Salvador are buying staples like corn and grain, they are buying them from the U.S., because the price is lower. While this might seem like a good thing, it actually damages the economy. The farmers who do grow food are then forced to compete with the rock bottom prices of U.S. imports. Without the ability to mass produce to compete with the U.S. imports, farmers are often forced off their lands and have to find new ways to earn a living.
Treaties like NAFTA and CAFTA have opened borders between countries and helped encouraged trade, but at what cost? For countries like El Salvador, free trade has limited the ability to maintain family farms and smaller businesses. Instead, these individuals are forced to compete with huge U.S. corporations. They quickly lose. These treaties also encourage poor labor practices, putting the native people’s health and safety at risk. Instead of getting locally owned items, the people of El Salvador are quickly becoming dependant on U.S. imports and sending their money out of the country.
Rebecca Lindegren is the Community Relations Manager for American University’s Master’s in International Relations graduate program. Additionally, she manages an international relations blog and an underground hip hop blog, and enjoys writing, cycling and sustainable development.