- The Washington Times - Thursday, May 16, 2002

There's a goofy pipe dream being shared by many Democrats and Republicans in Washington these days, and it goes something like this: Just renew the Andean Trade Preferences Act, and four critical South American countries will flood the United States with legal goods like apparel and steel and cut flowers instead of cocaine. It's just the latest sign of how addicted to hype U.S. trade policy has become.

The Act, passed originally in 1991, provides trade preferences on certain products to Bolivia, Colombia, Ecuador and Peru, which together generate virtually all the cocaine sold in the United States. In 2000, the program expired, and a one-time extension of its benefits runs out today.

As explained by Deputy U.S. Trade Representative Peter Allgeier, the Andean Act seeks to "promote export diversification and broad-based economic development that provides sustainable economic alternatives to drug crop production." Predictably, supporters (including many Senate Democrats) consider it a roaring success. But their standards are peculiar, at best.

Andean Act proponents talk about the doubling of trade with the United States it has encouraged since 1991. They talk about the jobs it has created in the four countries. And they talk about the export diversification that has been achieved. In fact, they talk about everything but the central issue drugs.

One look at the figures shows why. As of 1996, the Clinton administration concluded, cocaine on American streets was as cheap, as pure and as abundant as ever. In 1999, the State Department reported that coca leaf production in the four Andean pact countries had more than doubled since the trade agreement's passage, to more than 600,000 tons.

Like the arguments for most other recent trade agreements, the case for the Andean Act looks good on paper, but falls apart in reality. It would indeed be nice if peasant farmers in South America could find alternatives to growing drug crops. And since their domestic markets are so small, and since the world's other wealthy countries have little interest in importing from the developing world, selling more of these alternatives to the United States seems like the key to success.

The Andean Act's alleged effects, however, pale beside the immense scale of the drug trade and its economic impact on South America. U.S. Trade Representative Robert Zoellick claims that the trade generated by the measure created 140,000 new jobs in the four supplying countries together between 1992 and 1999. Yet according to Rensselaer Lee, perhaps America's leading authority on the global drug trade, as many as half a million Andeans worked in cocaine production and trafficking in the mid-1990s. And unemployment throughout Latin America climbed during the 1990s.

Further, despite the impressive growth in legitimate Andean exports to the United States during the past decade, the $9.5 billion figure for the four countries combined in 2001 (some 40 percent of which comes in through the Andean program's provisions) is not much larger than estimated annual cocaine earnings in Colombia alone as high as $6.5 billion in 1996.

Then there are the economics of drug cultivation and the drug trade, which doom any hopes for crop substitution for three main reasons.

First, the coca plant is unusually hardy, resistant to most predators, tolerating poor soil, and growing on steep slopes unsuited for many other crops. Therefore, even farmers who begin growing legal crops on prime land have every incentive to maintain their coca plots on marginal land.

Second, most specialists estimate that growing coca can be up to 5 times more profitable than growing legal crops, and nowhere does such money talk louder than in peasant societies.

Third, the price paid by drug traffickers to coca leaf growers is a tiny portion of cocaine's street price as little as one one-hundredth of 1 percent. Therefore, traffickers have ample room to make sure that coca always fetches more than legal crops.

But if the Andean Act can achieve little for South America, is it hurting the United States? Recently, not much though since its inception, America's merchandise trade deficit with the Andean countries has nearly tripled, to $3.2 billion in 2001. Nonetheless, the administration is pushing to broaden the measure's coverage, which can only mean more net imports and more job and wage pressure on America's working poor.

Moreover, the Andean Act is just one of a series of trade openings granted recently to Third World countries whose main effects are to plunge them all into competition for shares of a U.S. market that simply can't absorb their output. In fact, as admitted by Senate Majority Leader Tom Daschle, South Dakota Democrat and an Andean Act supporter, this futile competition is one prime reason for its renewal: "[T]he bill we passed last year to expand U.S. trade with Caribbean countries has had the unintended effect of putting the Andean nations at a competitive disadvantage with other nations in the region."

Of course, the Caribbean trade preferences were meant to create a level playing field with Mexico, which was previously given NAFTA preferences in recognition of its alleged primacy in U.S. strategic and economic thinking.

Where this merry-go-round stops, no one knows least of all U.S. trade policymakers or the Senate leadership.

But perhaps most disturbing about the Andean Pact is its contribution to the myth that more and bigger NAFTA-style trade agreements are the cure for whatever threatens American security, prosperity, or social health. Open the U.S. market further and dictatorship, global terrorism, and drug abuse will magically vanish. You might say globalization has become the policy drug of choice for American leaders.


Alan Tonelson is a research fellow at the U.S. Business and Industry Council Educational Foundation. His recent book on globalization, "The Race to the Bottom," will be issued in paperback this fall by Westview Press.


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