Tweaking US Trade Policy Could Hold the Key to Reducing Migration from Central America

Yves here. This post contains some critically important data, presented in chart form. Many of us, and I include myself in that cohort, have attributed the large-scale Central America exodus to the US destabilization of many countries in the region.

That nation-breaking is no doubt a factor. But an apparently additional one is the way the Dominican Republic-Central America Free Trade Agreement, which confusingly applies to six countries and became effective in 2005. The chart shows a marked decline in apparel exports from Central America to the US starting then, with a close-to-symmetrical increase in exports from East Asia in the initial years of the pact, with Southeast Asia showing a steady increase over time.

The past delves into the specific provisions of the pact and how they hurt Central American exports.

Needless to say, if a region is already unstable, or tending that way, an economic blow will only make matters worse.

By Raymond Robertson, Professor of Economics and Government, Texas A&M University and Kaleb Girma Abreha, Assistant Research Scientist, Mosbacher Institute for Trade, Economics, and Public Policy, Texas A&M University. Originally published at The Conversation

Small changes to U.S. trade policy could significantly reduce the number of migrants arriving at the southern border, according to our peer-reviewed study, which was recently published in The World Economy.

Our research delved into the effectiveness of existing trade agreements in creating jobs in migrant-sending countries, with a focus on Central America. We analyzed the impact that the Dominican Republic-Central America Free Trade Agreement, or CAFTA-DR, has had on apparel exports and jobs since being ratified by the U.S. and six countries – Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic – from 2005 to 2009.

CAFTA-DR was aimed at encouraging trade and investment ties. But restrictive provisions, particularly its rules of origin, have hindered the region’s ability to benefit fully from the agreement. Under a “triple transformation” clause, only garments assembled in one of the countries from fabrics and constituent fibers originating from the region qualify for free-trade benefits.

This significantly limits the scope for trade expansion because of the limited range of fabrics produced in the region compared with the global market. For example, it means that many modern fabrics, like the kinds used in some stretchy jeans, do not qualify.

Loosening the rules to allow for new fabrics would not only attract investment and create more jobs for Central Americans, it could also reduce immigration from the region by as much as 67%, according to our estimates.

At present, about 500,000 people work in the apparel industry in Central America. It is labor-intensive, and expanding exports would increase employment. Our research shows that loosening the rules of origin to include new fabrics from outside the region would create about 120,000 direct jobs.

If a stronger relationship between exports and employment is assumed, this figure could even rise to about 257,500 jobs, our figures show.

And these jobs would be boosted by additional indirect employment around the expanding factories in Central America needed to accommodate the increased trade.

If would-be migrants in Central America instead chose the new apparel jobs in their home countries, we estimate that migration from Central America to the U.S. could fall by 30% to 67%.

Why It Matters

The migration crisis has taken center stage in U.S. political discourse, with Republicans in Congress holding up legislation, including aid to Ukraine, over their demands that tougher border security measures be included as part of any package.

In December 2023, the number of U.S. Border Patrol encounters with migrants at the U.S.-Mexico border hit a record high of almost 250,000, and it remained high during the first few months of 2024.

While human rights violations, security issues and corruption in migrant-sending countries are often cited as driving factors, in many cases, immigrants are seeking job opportunities that are unavailable in their home countries.

But despite the increased political attention on immigration, trade policy – which could be used to address the scarcity of secure, well-paying jobs in Central American countries with heavy migrant outflows – has largely been absent from either party’s strategy to address the “root causes” of migration.

We believe addressing the root causes of the current border crisis requires creating good jobs in migrant-sending countries.

What Still Isn’t Known

We looked only at one industry – apparel – in Central America and the Dominican Republic, a Caribbean nation.

Academic reviews suggest that as many as half of all trade agreements have no significant effect on trade flows, and only about one-quarter of them increase trade. In fact, trade agreements may even create barriers to trade by adding additional clauses that are complicated or too restrictive.

The key question is how to make all trade agreements more effective at creating jobs in migrant-sending countries. Identifying and relaxing barriers within trade agreements is, we believe, an important first step toward reducing emigration.

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  1. John

    How about simply giving these countries the right to trade with who ever they want to, after all if they do not they are not nations but vassals.

    1. JBird4049

      The right to trade with whom they want as well as the right to control one’s borders is one of those essential rights and reasons for existing of any country. The ability to support and protect one’s citizens is also essential for the legitimacy and survival of any country.

      The United States of America has been profiting from (looting really) and destabilizing to ease the looting of most every country south of the Rio Grande since at least the freebooter John Walker’s Central American escapes in the 1850s. The Mexican-American War of 1846-48 and the immediate decade that led to it are also a good starting point. (I wonder what all the Native Americans living in what is now the 11 or so states of the areas being claimed by Mexico and then the United States as “theirs” would have thought? “Whatever happens, we have the Maxim, and they do not.”)

      That is about 170 years of frakery including outright wars, mere invasions, frequent coups, many assassinations, and the occasional embargoes and blockades.

      This one of the reasons I am not anti-immigrant, but I am anti-immigration. It would be nice to fully fund U.S. Immigration because IIRC it has a century long backlog of cases, which makes it rather hard to immigrate the right way, doesn’t it, especially as Central America’s economic disaster is the United States’ fault. A similar story can be said of Haiti and the American colony of Puerto Rico. (General Smedley D. Butler did steal the Haitian national bank gold supply for America’s National City Bank in 1914 or 15.)

      However, Americans, and I am not speaking about the Professional and Managerial Class or their patróns, are getting economically squeezed as well, and realistically they do not have anywhere else in go to. Add the growing anger, nihilistic despair, and the over 300 million guns we have here, just what are the likely consequences for allowing millions more people into the United States?

      And may I mention the increasingly visible homeless population here in the San Francisco Bay Area or Los Angeles hellish Skid Row? It’s over two thousand dollars for a cheap, single bedroom apartment here. Bleating about lazy Americans seems akin to bleating about the Deplorables and with similar results. It is also an excuse for importing more people to replace those “lazy Americans,” keep reducing wages, and further crush unions.

      Any changes in economic policy needed to be done forty years ago, starting with NAFTA’s giant sucking sound of disappearing American factories, Mexican family farms, and jobs. Tinkering at the edges will not do it, but I don’t see our elites doing even the tinkering until the guns come out, which will be too late.

  2. JonnyJames

    “…We believe addressing the root causes of the current border crisis requires creating good jobs in migrant-sending countries…” I could not agree more.

    This so-called crisis is almost totally due to US policy, as outlined in article. I would add that (illegal) unilateral sanctions, regime change, coups, and political meddling could be an even bigger driver of displacement and migration.

    Then when the migrants arrive in the US, they can be abused, exploited, and used as political scapegoats and distractions during the election-year freak show. Then the lazy, fat, ignorant murkens can blame the victims while the immigrants do the hard labor.

  3. Adam Eran

    I’ve read that between 1798 and 1994 the US is responsible for 41 changes of government south of its borders. This creates a constant stream of political and military refugees. Even worse are economic attacks like NAFTA. The complaints that it has cost the US jobs may be true, but shipping a bunch of subsidized Iowa corn to Mexico clearly impaired Mexican corn farmers’ income–in fact the treaty bails out the big farmers. The little farmers, on the other hand, were bankrupted in droves.

    Sure, corn is only arguably one of the world’s most important food crops, and those little subsistence farmers in Mexico were only keeping the diversity and disease-resistance of the corn genome alive, but hey, they weren’t making any money for Monsanto! Let’s keep in mind what’s important.

    Ravi Batra’s Greenspan’s Fraud says Mexican median real income declined 34% in the wake of NAFTA–a figure not seen in the US since the Great Depression. Imagine if the Okies came to California where they were caged and separated from their families.

    I doubt any attention will be paid what this article proposes. The object of US policies is to have cheap labor and xenophobia, not much else. Racism and xenophobia placates restless labor in the US by providing convenient receptacles for blame. Divide and rule is the motto of disaster capitalism.

    For all the discussion of changing immigration policies, I’d settle for the US just ceasing its attacks, political, military and economic.

    1. spud

      yep. its the free trade stupid. we cannot address the problems caused by free trade, with more free trade. most of the people forced to work for almost nothing in those factories, had small farms and businesses, wiped out by mega corporations under free trade.

      so making sure free trade is more efficient to increase exports into the u.s.a., those exports which has wiped out our middle class and civil society, these guys think this is the answer?

      and of course no speaking about labor rights, after all, if the workers increased wages through unionization, well, they would no longer be efficient then could they.

      what a pile of steamy crap!!!

      1. Yves Smith Post author

        Did you miss that we are allowing tons of migrants in as the solution, and even giving them cash cards in NYC? And those garments are coming in from Asia anyhow, so it’s not as if we are going to get a garment industry back.

        1. JBird4049

          A century ago the garment industry was in the Northeast. Fifty years ago, it was in the South. Thirty years ago, in Central America. Today, it is in Asia. Each move leaving a mass of unemployed people, but supported by the American government’s economic policy with the clothing increasingly of poor quality. Next, I think some desperate African country is where this increasingly awful clothing is going to be made.

          Maybe we should reshore the garment industry. It is true that it would take decades, but it would be nice to have quality American made clothing, and reducing the energy costs of shipping clothing all over the Earth just some corporations can make bank paying wages almost impossible to live on would also be a good goal.

          And stopping the United States being the wealthy’s murderous goons would also be good. We have murdered enough people for the wealthy, the corporations, and the connected.

          1. spud

            yep, no amount of efficiency will increase wages under free trade. just look at productivity in america, how much has labor gained since 1993 of productivity increases? no much!

            so the we can make free trade work crowd, is just another layer added to to create doubt and confusion, to take weak minds off of the facts that free trade can never work.

            i have said repeatedly, what bill clinton did might not be reversible, we shall see.

        2. spud

          i have not missed the wave of desperate human beings coming to america because their small farms and businesses were wiped out by free trade. i have been speaking about this since 1993.

          the we will make free trade work crowd, have never been able to make it work.

          best to do what Honduras is trying to do. get out of free trade, and reform the economy so that people can work small businesses and farms, instead of relying on mega corporations for their jobs.

          no amount of efficiency will increase wages, it will be pocketed by corporate parasites.

          really trump did mexico and america a favor with the retooled nafta. its still not very workable, but it no longer can be considered a free trade agreement, mexico now has the ability to govern.

  4. ChrisRUEcon

    > Many of us, and I include myself in that cohort, have attributed the large-scale Central America exodus to the US destabilization of many countries in the region

    Thanks for reinforcing this fact. Immigration is not solely a problem about the “here”. It’s really about the “there”. The world still functions in a quasi-colonial set of center-periphery relationships that set up the haves and have-nots.

    Eleven years ago the Colombian garment industry was the subject of an NPR Planet Money piece:

    ‘Our Industry Follows Poverty’: Success Threatens A T-Shirt Business

    … the title says it all.

  5. spud

    the minute the parasites can save one penny per unit, off they go to another country flattened by free trade.

    its a race to the bottom period.

    here is reality,

    The Race To The Bottom: Why A Worldwide Worker Surplus And Uncontrolled Free Trade Are Sinking American Living Standards Kindle Edition
    by Alan Tonelson (Author) Format: Kindle Edition
    4.3 out of 5 stars 20
    See all formats and editions

    “With the end of the 1990s economic boom, The Race to the Bottom deftly explores how the United States has entered a no-win global competition in which the countries with the lowest wages, weakest workplace safety laws, and toughest repression of unions win investment from the U.S. and Europe. Tonelson analyzes how the entry of such population giants as China, India, and Mexico into the global market has accelerated the erosion of wages and labor standards around the world. And he describes how an ever-larger share of this low-wage competition is hitting not just sectors like apparel and toys, but also many of America’s highest wage industries like aerospace and software. Tonelson explains why the re-education and retraining programs touted by many political leaders offer little but false hopes to most U.S. workers as he outlines the real decisions Washington needs to make to ensure long-term prosperity for the U.S. and the rest of the world. Updated with a new prologue from the author.”

    ” This book details the depressing details of globalization, and debunks the promises of free trade, like Mexico being a huge market(it isn’t), most workers that lose their factory jobs would get new and improved high tech jobs(they haven’t), and we’ll do the high tech stuff and the Third World will do the low tech(not true). We are living in an age where business can relocate almost anywhere. Our corporations are dumping our highest paying jobs overseas and/or importing Third World workers to do them (like Indian programmers). The result is a slowly sinking standard of living. Between mass immigration and globalization it appears we may be at the beginning of a new age of poverty.
    For “fun” scroll down to the first review of the book, down to the guy that gave it one star (apparently after reading only part of chapter one). Print it out and keep it with this book. After you read the book, re-read his review and then see if you can answer the question: What planet are the globalists living on?
    This just in: According to NPR, one of the last textile factories in the US closed on October 22, 2002. It was a fancy high-end shirt factory in Maine. It had been in business for decades. The women there worked so fast that their hands were just a blur. Not fast enough apparently, as they couldn’t compete with the sweat shops of the Third World. (NPR said “foreign competition”) Some of the women had worked there for twenty years and cried when they left. I seem to remember the globablists saying that foreigners only took jobs Americans didn’t want. Perhaps those women were just crying tears of joy.”

    the authors of this Tweaking US Trade Policy Could Hold the Key to Reducing Migration from Central America, are B.S. artist, who have repeatedly said since the battle in Seattle, we can make free trade work.

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