The Biggest Loser
Coffee farmers ... worried about the Central America Free Trade Agreement
Robert Knight argues free trade is not always win-win.
Marcos Gonzalez barely ekes out a living on his 16-acre farm in the mountains of Cedral. Each square-inch is worked year round to generate the produce that has sustained his subsistent level lifestyle year after year. It is a life typical of rural Costa Rica. But his biggest worry these days is Costa Rica’s free trade agreement with the U.S., which will only encourage the stiff market competition he already has with some of America’s biggest corporations.
A man who does just about everything with a machete, Mr Gonzalez depends on selling about 13 tonnes of coffee a year to finance the rest of his tiny operation. Since Costa Rica’s legislature approved the Central America Free Trade Agreement (CAFTA) in October 2007, Mr Gonzalez has faced the prospect of competing with the large, mechanised American producers that are expected to invade the market over the next few months. His modest surplus is bound to suffer.
As part of a team of Australian and Canadian volunteers, our role was to develop a long-term working project that would ensure the longevity of Cedral’s financial future in the face of powerful corporate competition.
“Corporations have little incentive to pursue the ‘just profits’ that will keep domestic markets profitable for local farmers.”
However, it is more or less assumed that these vulnerable communities should be the ones undergoing substantial structural change or else ‘risk losing the lot’. Defendants of the pact believe it encourages development and foreign investment. By contrast, critics understand it as a one-way street benefiting U.S. multinational corporations at the expense of Central America’s small businesses and farmers.
From this perspective, the presumption of ‘change’ should originate in the decisions of multinational corporations. But serious consideration is seldom given to such a suggestion. Indeed, it would seem nonsensical for corporations to expand their operations if those expansions were exactly the reason for restrictions and change.
As such, corporations have tended to approach these areas with little regard to their social impact. Corporations have little incentive to pursue the ‘just profits’ that will keep domestic markets profitable for local farmers.
Coffee farmers in particular see the treaty as an unmitigated disaster that provides “U.S. companies … who already have better technology and receive huge subsidies … with further profits”. It costs about U.S.$450 to produce a tonne of coffee in both countries, but the Americans sell it on the world market for much less.
“The least we can do is support our local businesses through our consumption choices.”
In an attempt to dampen the impact free trade will have on rural Costa Rica, poor farmers with fragile lifestyles are having to undergo huge structural changes at high cost. Ideally, U.S. corporations should be taking the initiative to monitor the impact their decisions have at the grassroots level. Realistically, such ethical behaviour can’t be taken for granted. With the treaty coming into effect in October this year, farmers like Mr Gonzalez will be bracing themselves for strangling financial shortfalls.
The least we can do is support our local businesses through our consumption choices. The money we save in choosing cheaper, heavily subsidised foreign goods cannot possibly reflect the reciprocating pressure this choice puts on the lifestyles of those commanding these struggling businesses.
