Foreign Direct Invasion: What “Free Trade” means for small producers

By Riahl O'Malley
Witness for Peace International Team - Nicaragua

In Spanish, the verb “invadir” can mean a number of things: to encroach, to overwhelm, or to invade or attack. This is the verb that Maria Selina Valladares, co-founder of a small womens’ sewing cooperative operating out of Somoto, Nicaragua used to describe the role of big producers in Nicaragua under the Dominican Republic - Central American Free Trade Agreement (DR-CAFTA). “Nos invaden,” she told me. “They’re invading us.”

Yesterday Congress passed three new Free Trade Agreements with Panama, Colombia and South Korea, respectively. These agreements follow the same model as DR-CAFTA. By reducing taxes on imports and exports and expanding the ability of companies to set-up abroad they are said to create “a level playing field for U.S. investors.” But since DR-CAFTA came into effect, María Selina has felt anything but level with large multi-national corporations.

Four years ago María Selina was one of 12 women in Nicaragua’s rural town of Somoto who decided to start a sewing cooperative.

“The idea was to generate employment, find the market and export our product abroad, to let them see that we have the capacity to work and to make a good product,” she said.

They received legal council, attended meetings with the Nicaraguan Ministry of Investment, Industry and Business, and even received a government grant to purchase their equipment. So far they have had few opportunities to sell their product. Even people in their own region would rather import than buy their local product, which ends up being more expensive.

“We have to charge the cost of the cloth, the thread, all of the materials plus our labor,” she explained. “We have very strong competition… The products that come from Managua don’t give us the opportunity to work.”

Foreign textile and apparel producers have been on the rise in Nicaragua since DR-CAFTA came into effect. They are said to benefit hugely from the agreement. Under DR-CAFTA, they can import a significant amount of cloth from a cheaper country like China, assemble it in Nicaragua and ship it duty-free to the U.S. in a box labeled “made in Nicaragua.”

It was mostly foreign companies from countries like the U.S. that were included in the negotiations that formed DR-CAFTA, so it is of little surprise that the agreement was designed for their benefit. Meanwhile, those who have little access to the same networks and resource as large multi-national corporations, like María Selina’s sewing cooperative, are, according to María Selina, “completely drowned out.”