The G8 and International Debt

In a historic accord, the G8 leaders may agree to dismiss nearly $40 billion in debt to 18 primarily African countries in the hopes that a lack of debt will strengthen development, healthcare and education. In a plan that recalls President Franklin D. Roosevelt’s ideal of the U.S. as “Good Neighbor,” rather than a dominant power, contributions from the developed nations –specifically the U.S. – will cover the lost funds. Why is debt in developing countries such a main issue? What strings are attached to talks of reducing/erasing debt?

• Eligible for debt relief: Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia.
  
  
• The deal would free the countries from making $1 billion in interest payments each year to international lenders. They had not been able to make the payments, leaving them mired in debt and unable to fully engage in the global economy.

Who are the global creditors for developing nations? How do we make up the balance after completely erasing the debts of others? What kind of impact will relieving global debts have on U.S. taxpayers and our national debt? Will relieving enormous debt be enough to jump start the development of nations deep in the hole?

CAFTA and Trade

In spite of the North American Free Trade Agreement’s (NAFTA) disappointing impact on North American economies, the U.S. is full-steam ahead on a new version of the trade agreement aimed at Central American countries: CAFTA. Facing a growing trade deficit and hotly pursued by a China flexing its economic strength even without being a democracy, will CAFTA help us get an edge over China and the EU in the global market? What does democracy have to do with how the U.S. does business?

• Gary C. Hufbauer, an economist at the Institute for International Economics, said the United States goes deeper in debt to other countries each year. The nation's net external debt to other countries is about 28 percent of its gross domestic product.
  
  
• CAFTA would remove all tariff and non-tariff barriers in the U.S. and in El Salvador, Honduras, Nicaragua, Costa Rica, Guatemala and the Dominican Republic to goods.
  
  
• The Bush administration’s "China card,” warns U.S. jobs will migrate to very low-paying Chinese firms, unless Congress approves the Central American Free Trade Agreement.

Removing trade tariffs between countries will pit small scale family farms here and across borders against government subsidized mega-farms. Key industries, medicines and services will also be impacted. The biggest beneficiaries of this newest trade policy may be U.S. corporations. If CAFTA lacks the support of Hispanic Congressional leaders and national Latino and labor organizations will its passage mark the U.S. as a good neighbor or a neighborhood bully?

• CAFTA does not require that countries meet core labor standards as established by the International Labor Organization.
  
  
• Some fear CAFTA would encourage the proliferation of sweatshops in “free trade zones” where investors are able to import goods to assemble for export while exploiting workers.
  
  
• CAFTA could devastate small farmers in both the U.S. and Central America. Under NAFTA, 1.3 million small to medium-size Mexican farmers have been forced off their land because they were unable to compete with large multi-national producers. The employed farmers and agricultural workers of 10 years ago have become the undocumented immigrants of today.
  
  
• CAFTA would grant exclusivity on medical test data to pharmaceutical companies for 5 years. This would act like a 5-year patent monopoly - even where patents do not exist.

If our trade goal is to help other countries become good trade partners, what is the best tactic to attain this goal—what do people need to succeed at becoming good trade partners? What development assistance programs are working to alleviate poverty and build strength for trading partners? What does free trade mean? Under the pressure of the ever deepening U.S. trade deficit and China’s ever-increasing trade surplus, how are we going to position ourselves in the global economy? When it comes to healthcare, education, jobs, prosperity, etc., what are the parallels/differences between what U.S. Americans want for themselves and how they perceive the wants/needs of the outside community? How is this reconciled with the actual wants of other nations? Why is it important as to how they perceive our influence over their abilities to attain these goals? How has our image in the world affected our safety and ability to do business? Is the “opportunity” to work in a sweatshop as opposed to working the streets the only solution to improving the standard of living in poorer countries? When the discrepancy in wealth in the U.S. is higher than ever before, is it appropriate that we are the ones proposing solutions for bridging the wealth gap in other nations? How do we use American power and wealth to make better choices that will improve the world that we pass to our children and grandchildren?

Talking Points