Travel Reference
In-Depth Information
FREE TRADE VS FAIR TRADE
In March 2006 Nicaragua ratified the Dominican Republic-Central America Free Trade Agree-
ment (DR-CAFTA). An agreement between an economic superpower like the US and various
struggling nations was always going to be controversial, and plenty of political mileage was
made, but it's worth remembering that, in the end, the agreement was approved by liberals and
Sandinistas alike.
The central question to any such agreement is this: who benefits? The US stood to gain from
cheaper imports, wider markets, investment opportunities and access to cheap foreign labor, but
what was in it for Nicaragua?
The short answer was exports, foreign investment and jobs. What
kinds
of exports, investment
and jobs? Well, there's been a little spike in the export of primary products such as beef and sug-
ar, but the biggest change to Nicaragua's economic landscape has been the spread of the
maquil-
ladoras
(clothing assembly factories) across the country. These factories provide much-needed
work (Nicaragua's underemployment rate runs at around 46%), but critics say the
maquilladoras
are no real solution - they set up in Free Trade Zones (Nicaragua has four), which aren't bound
by Nicaraguan law, so they don't pay minimum wage or respect workers' rights. When exported,
goods don't incur export duty, so Nicaragua ends up earning very little. It's a process that work-
ers' rights and environmental activist Ralph Nader calls 'the race to the bottom,' where poor
countries end up competing to see who can offer the most favorable deal to investor nations.
