Free Trade's Winners and Losers in Latin America

Scrapping tariffs can hurt poor farmers, and a deal with Colombia might boost coca production.

By Jess Hunter-Bowman

President Barack Obama is traveling to Latin America, seeking refuge from budget battles at home by promoting increased trade with countries across the region. During his trip to Chile, Brazil, and El Salvador, he's expected to highlight the benefits of so-called "free trade" to U.S. and Latin American businesses.

While the U.S. Chamber of Commerce and many conservatives in Congress will cheer him on, the truth is that free trade has been a curse for farmers and the poor throughout Latin America for years. It's time for a better approach.

Avid free-traders will tell you trade between the U.S. and Mexico has grown nearly five-fold since NAFTA was enacted in 1994. They'll say two-way trade between the United States and Central America and the Dominican Republic was $37.9 billion in 2009, a significant expansion thanks to the CAFTA-DR free trade agreement.

While free trade can dramatically increase exports--and boost corporate profits--its impact on the working class and poor isn't so rosy.

Examining impact of NAFTA--the hallmark free-trade agreement among the United States, Canada, and Mexico--provides a glimpse at free trade's impact on Latin America's poor. Research has shown that the 1.3 million jobs created in Mexico during the peak period of the maquiladora industry between 1994 and 2001 only provided a small portion of the jobs needed to cover the millions of workers pushed off their farms or forced out of Mexico's devastated domestic industries.

Researchers have found that only 10 percent of Mexicans have seen any rise in their incomes or standard of living thanks to NAFTA. In fact, the vast majority are far worse off.

Mexican corn farmers--the cornerstone of Mexico's agricultural economy before NAFTA--have been hit the hardest. Some estimates suggest millions of Mexican corn farmers were driven off their land, unable to compete with highly mechanized U.S. corn imports. Left with no job options at home, many have come here.

Now Obama wants Congress to ratify a free-trade agreement with Colombia signed during the Bush administration. This deal won't just turn a blind eye towards egregious labor rights violations in Colombia, where more union leaders were assassinated in 2010 than the rest of the world combined. Most likely, it will push more farmers into producing coca, the raw material for cocaine.

A free-trade agreement with Colombia would devastate that country's small farmers--just as NAFTA did in Mexico. The escape valve for Mexican farmers has been emigration to the United States, with an estimated 30 crossing the border every hour. The escape valve for Colombian farmers will be farming coca.

Colombia is already the world's leading cocaine manufacturer and a top producer of coca, the drug's main ingredient, with an estimated 120,000 hectares in production. It's slightly more profitable than farming food crops. A free-trade agreement that floods Colombian markets with cheap U.S.-produced grains would put poor farmers in an unenviable position: fall deeper into poverty or switch to coca production.

That's why the Chamber of Commerce isn't the only group salivating over the prospect of Congress ratifying the U.S.-Colombia free-trade agreement. Drug traffickers would welcome the surge in coca production that tariff-free trade with that South American nation would trigger.