Tuesday, April 12, 2005

CAFTA, Do We Hafta?

I've been reading up on CAFTA, the Central American Free Trade Agreement. The Bush Administration has been pushing for the enactment of CAFTA and I'm not so sure where I stand.

On one hand, this trade agreement will allow Central American economies to better compete with China, which has a strangle hold on US trade. Think of it this way, Central American products are typically made with ~60% US goods. Chinese products are often made with little to no US materials. The argument goes, CAFTA will increase manufacturing and lead to more jobs within the United States. Moreover, it will provide Central America with a competitive edge over China, since Central American goods will then be allowed to enter the US duty free.

On the other hand, CAFTA also provides limitations on generic drug competition within Central America, thereby benefiting US pharmaceutical companies. If you've been reading my blog, you know that I'm totally against such limitations.

Take a look at the following editorial from the Washington Post and the rebuttal. What do you guys think? Will CAFTA really benefit the United States and Central America?


Blogger mindful said...

Yes, I think we probably should. It will help people out down there, and it will help keep prices down here. Sounds like a good idea to me.

But the US is completely correct to be insisting that our pharmaceutical companies do not get undercut by local generic producers. If another company wants to compete, let them spend their own money to develop the drug, or buy in with the original producers, or something. Letting them skip the costs of drug development and reap all the benefits will have just one effect in the long run: no more drugs.

7:56 PM  
Blogger Vavoom said...

mindful: These are people that simply cannot afford full price prescription drugs. Will forcing generics off the market be detrimental for an impoverished people?

10:17 PM  
Blogger mindful said...

But if there are no prescription drugs to buy, at any price, then what will they do? I'm not saying we should categorically deny them these drugs. But there are better solutions than just granting generic drug companies carte blanche. One such solution that comes to mind (be kind, this is spur-of-the-moment) is that manufacturers desirous of producing some new drug can pay the original developer of the drug some fee based on the original development cost. Given the monopolies available now, this could presumably be enforced by law. I'm sure there are other, much better ways of doing it than the one I suggested, though.

10:29 PM  
Blogger Vavoom said...

Mindful: I'm concerned that such practices will only lead to a strong black market for drugs. As we both know, the quality of drugs on black markets is quite low. Considering the fact that a black market is certain to arise, why not simply allow generics? At least their safety and quality control can be regulated.

10:38 PM  
Blogger Jenn said...

I'll leave the politics to you guys ;)

I don't like Bush. Does that count? Oh yeah, no! I'm never voting again.

Hi Vavoom!

5:08 AM  
Blogger Vavoom said...

Hey Jenn! Thanks for swinging through. If you hate Bush, there's always a place for you here at Tedrow Drive! (read: I can't stand Bush either!)

12:41 PM  
Blogger Hoagie1 said...

Why can't there be the bst of two worlds.

I wish people would stop attaching different agenda on the same bill.

2:43 PM  
Anonymous little john said...

CAFTA will help Central America. Mexico is our number two trading partner (after Canada). I think NAFTA helped Mexico and Canada.

3:38 PM  
Blogger Vavoom said...

Hoagie: How right you are...
little john: Do you think the agreement will help the US?

6:44 PM  
Anonymous little john said...

V-That's the $64,000 question. U.S. consumers may benefit from low-cost textiles although I don't know how any labor force can undercut Chinese wages. It may help the U.S. commodity market in terms of raw materials being used by the textile manufacturers of Central America. (Like they need more help considering the government subsidies!) CAFTA will probably hurt what is left of our textile industry except for the boutiques...you know the $1,000 per yard carpets, etc. Stockholders of drug companies may get a reprieve if competition from generics is truely enforced. But like Chinese copyright enforcement, who knows what El Salvador et al will do in terms of seriously halting generics. It's probably a wash for the U.S. That's my guess. As an aside, I am not a big believer in the outsourcing boogeyman.

9:52 PM  
Blogger An80sNut said...

Seems hypocritical to me to want to "open" up anything but "limit" something else in the same act. But then again, we are in America.

2:18 AM  
Blogger Vavoom said...

lj: As far as textiles go, how would it harm the US? Considering that Central American goods utilize more US textile products than do their Chinese counterparts it seems like the textile industry can only benefit. Remember, CA goods will enter the US duty free, leading to lower prices than Chinese goods and hence an overall market increase in CA goods purchased. Seems like that would only drive the US textile industry. Am I missing something?

1:58 PM  
Anonymous little john said...

I meant that in terms of jobs the U.S. textile industry may be hurt by very low-wage competitors. Maybe this could be counterbalanced by increased raw material demand from the U.S. by manufacturing countries. Hell, I thought all of the world's cotton was grown in India and China nowdays.

12:23 PM  

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