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The
Free Trade Agreements and the local productive
capacities
Ever since George
W. Bush announced the possibility of a free trade agreement (TLC, in Spanish)
with the countries of the Central American area, the governments revealed
that they are extremely interested to participate in that process. After the
initial euphoria, now they are integrating negotiation teams to define the
necessary procedures to reach, as soon as possible, a first agreement.
In the case of El Salvador, the expectations are higher, since this is the
Central American Country that has put more emphasis on the signature of a
free trade agreement. In this context, different agreements have been signed
with Panama, the Dominican Republic, Chile, and Mexico, and different
results have been achieved. In the case of the agreement with the Dominican
Republic, the governmental propaganda sustains that now it is easier for the
Salvadoran products to penetrate in that country. The propaganda also
indicates that the importations grew larger than the exportations.
However, even in a hypothetical situation, in which El Salvador were able to
take advantage from the free trade agreements -to increase the volume of the
exportations and reduce the level of the importations-, the truth is that
this would bring, as a counterpart, the displacement of a portion of the
domestic production from another country. The free trade cannot guarantee
the benefit for all of those involved in it; that is, some sectors or
countries are unavoidably harmed.
It would be important to remember how the Central American Common Market (MERCOMUN,
in Spanish) -formed by the Central American countries with the exception of
Panama and Belize during the sixties- generated very different results from
country to country. Those countries with more of a relative development,
such as Guatemala, Costa Rica, and El Salvador were able to penetrate into
the markets that had a smaller relative development, such as Honduras and
Nicaragua. In the end, the conflicts that surrounded the inequitable
distribution of the benefits and the poor effectiveness of the compensation
chamber that intended to redistribute them, were the elements that
contributed with the failure of the MERCOMUN.
Therefore, no negotiation should ignore this reality, or intend the people
to believe that the sustainable development of a country is assured by the
simple negotiation of the Free Trade Agreements. In the same way, none of
the serious strategies that can promote a sustainable development can deny
that the expansion of the external commerce and the commercial openness are
the elements that must be used in the most productive way.
The Salvadoran government has adopted a dogmatic posture. It understands the
free trade agreement as an objective per se, and not as a tool to reach
higher dimensions of development. This is the first perspective under which
the negotiation process with the United States is being handled -and with
any other country that could be interested-overlooking some important
considerations about the capacity of the country to handle the commercial
openness successfully. This is a especially delicate matter when it comes to
consider the tendencies of the external sectors and the relatively low
activity of the productive sectors, which are reflected in the basic
economic indicators of the balance of trade, and in the composition of the
GNP.
During the nineties, and in the context of an accelerated tax exemption
process, El Salvador witnessed the deficit of its trade of balance grow
steadily, for 2001 it reached $2,162 million. In order to illustrate the
accelerated growth of this deficit, it would be convenient to mention that
in 1999 the deficit of the balance of trade reached $1,584 million. This
means that between 1999 and 2001 the deficit grew by $578 million, that is
by 36.5%.
This behavior also suggests that the global offer has an imported component
that expands itself practically every year. It replaces the national
production or, in the best of the cases, it covers the new added demand,
which emerges from the expansion of the consumption levels and could be
covered with the domestic production.
Therefore, it should not seem odd if by examining the composition of the GNP
it is discovered that the productive sectors keep a low profile or that they
have reduced their participation. This is the case of the agricultural
sector, which contracts itself every year (for 2001 it only generated a
11.8% of the total GNP). On the other hand, the manufacturing industry keeps
its participation levels between 22% and 23%, which, although they might be
considered respectable percentages, they hide the fact that a considerable
amount of the impulse is generated by the activity of the textile maquila
and not because of the domestic industry.
This issue is also reflected in the composition of the exportations of 2001:
57.6% belonged to the textile maquila; 35% were non-traditional exportations,
and only a 7.4% came from the traditional sectors. This means that the
domestic productive base is only producing a 42.4% of the total amount of
exportations, while the rest depends on the foreign investment that flows
depending on the commercial privileges granted by The United States. For
example, the textile maquila has expanded its operations only because the
American government grants a preferential access for the clothing items
manufactured in any of the countries of the Caribbean Basin.
The interest for a free trade agreement with The United States responds –in
part- to the confirmation that a preferential access to that market turns
into an attractive feature for the foreign investments. However, it seems
that this vision is not actually considering that the sustainability of the
economic growth and that the increase of the welfare levels not only depend
on the foreign investment, but also depend on the added value that the
privileged activities generate.
Without the intention to deny the importance of the maquila as a source of
industrial employment opportunities, it must be considered at all times that
the kind of employment that it generates is poorly remunerated. The wages
barely reach the minimum legal salary levels, and that those employment
opportunities are absolutely not a viable option to guarantee that those
employed at the maquila industry will receive an income that goes beyond the
poverty line. That is why to intend to negotiate a free trade agreement
without a higher level of accumulation of the productive capacities, and
specially the accumulation of the human resources, means that the process of
a free trade agreement will start with a disadvantage. Even if the access to
the markets is opened, we will not be able to take much advantage from it if
we do not count with an adequate productive apparatus to face the challenge,
and this is the case of El Salvador.
The support to the agricultural diversification and to the industrial
conversion was conceived during the early nineties as a desirable objective
for the government. However, little by little, this idea lost its importance,
and to this date the results are not relevant in this area, such as the
composition of the GNP and the level of exportations reveal. The possibility
that the free trade agreements actually work, obliges us to think about the
strategies that could strengthen the local productive capacity, and generate
a synergy between the process of the commercial openness and the promotion
of a sustainable development. In the end, as it was mentioned earlier in
this article, the commercial openness is not an objective per se.
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