Politics & Policy

As Congress begins debate on the Central American Free Trade Agreement today, it must decide not merely whether to advance America’s economic interests, but also whether to reaffirm Washington’s decades-long commitment to Central American democracy. The answers to these questions should be obvious, but an alliance of powerful lobbies and preening left-wing moralists has thrown the outcome into doubt.

CAFTA would liberalize trade between the U.S. and Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic. These six nations, taken together, are America’s 13th-largest trading partner, and their 45 million people make up America’s second-biggest export market in Latin America.

Most imports from these countries already enter the U.S. duty-free under existing trade agreements; U.S. exports to the region, however, still face trade barriers. From a U.S. perspective, then, CAFTA is principally about opening their markets to us. But there will be benefits for all involved. A University of Michigan study estimates that CAFTA will bring to the U.S. a gain in economic welfare of $17.3 billion, and will produce a $5.3 billion gain in Central America.

CAFTA is the centerpiece of the Bush administration’s trade agenda and a logical extension of the pro-trade policies of the last three decades. Even Jimmy Carter has endorsed the pact. Nevertheless, Democrats in Congress oppose it almost to a man.

For this, we may thank AFL-CIO president John Sweeney, who never met a trade deal he didn’t hate, and who has darkly threatened that any Democrat voting for CAFTA will be “held accountable.” It is, of course, not the role of the U.S. government to protect the narrow interests of unions to the detriment of the nation’s overall economic welfare. Employment as a whole stands to benefit greatly from CAFTA, even if some union jobs are lost. One should recall here Ross Perot’s famous warning that, with NAFTA, we would hear a “giant sucking sound” of jobs heading south toward Mexico. A dozen years later, we’re still listening.

Also striving mightily to scuttle CAFTA is the domestic sugar industry, which employs only about 52,000 people and accounts for roughly one percent of U.S. farm revenue, but wields political influence grossly disproportionate to its size. For years, it has won federal price supports from Congress, with the result that sugar in the U.S. is three times the average world price. The burden of such dirigisme is borne not only by consumers, but also by the sugar-refining and candy industries, which have lost thousands of jobs over the past decade as a result of the high prices they must pay for production inputs.

“AFL-CIO president John Sweeney

never met a trade deal

he didn’t hate.”

CAFTA is, in fact, embarrassingly deferential to the sugar lobby. It would increase sugar imports by only one percent in its first year. After 15 years, that number would rise to a staggering 1.4 percent. Incredibly, even these increases are too much for U.S. sugar producers, with whom the president is under no obligation to remain gentlemanly, and who might attenuate their opposition if Bush, taking up a suggestion from the Wall Street Journal’s editorial page, threatened to use his executive authority to raise sugar imports by 10 percent if CAFTA is defeated.

Sweeney and the sugar industry are joined by the Left’s usual sentimentalists, who denounce trade agreements with any nation where labor and environmental standards differ from those found in Ann Arbor, Mich. That group includes even the supposedly pro-trade New Democrats, who, when it comes down to it, would support CAFTA only if it were tied to regulations that would put large numbers of Central Americans out of work. As always, these critics betray themselves as both arrogant and ignorant. Arrogant because they are unsatisfied with CAFTA’s requirement that participating states enforce internal labor and environmental laws, and would instead hold sovereign nations accountable to their own unrealistic standards. Ignorant because they fail to grasp the simple truth that trade and foreign investment are among the surest ways of raising environmental and labor standards. This has been empirically proven across the globe, in such places as–Central America. Since the beginning of U.S. trade liberalization with Central America in the 1980s, literacy rates have risen and the incidence of child labor has fallen.

This highlights the fact that CAFTA’s advantages will not be solely economic. A prosperous Central America will be a Central America whose people are less inclined to cross U.S. borders illegally or participate in the trafficking of narcotics. More important, by bringing greater prosperity and openness to the region, CAFTA will strengthen democracy. The 1983 Caribbean Basin Initiative–which essentially created the Central American textile industry and, with it, a middle class–helped undermine the dictators and Communist revolutionaries who for decades had kept the region poor, violent, and miserable. But the triumph of Central American democracy is not irreversible. Daniel Ortega remains a powerful force in Nicaragua, and, throughout Latin America, the anti-democratic, anti-American message of Venezuela’s Hugo Chávez gains ever-wider currency. For the U.S. to reject CAFTA would only strengthen the hand of would-be despots. Instead, Congress should turn its back on the protectionists.


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