- The Washington Times - Sunday, December 21, 2003

With a single agreement, the United States moves closer to free trade throughout the Western Hemisphere, while domestically setting the stage for a battle in next year’s elections over exports and jobs.

The Bush-backed accord worked out by U.S. Trade Representative Robert B. Zoellick and the governments of Guatemala, Nicaragua, El Salvador and Honduras follows in step with Ronald Reagan’s vision of a free-trade zone stretching from Canada to the tip of South America.

Under the Central American Free Trade Agreement (CAFTA), more than 80 percent of American consumer and industrial products would immediately be allowed into the four countries, tariff-free, as soon as Congress approves the agreement. Everything would be duty-free within 10 years, except for U.S. farm products. They would take 18 years to achieve full free-trade status.

Protectionists will undoubtedly compare CAFTA to the North American Free Trade Agreement (NAFTA) with Mexico and Canada. But, despite involving more nations, CAFTA has a smaller economic impact. For example, the four Central American countries combined produced more than $100 billion in goods and services last year, a relative pittance compared to Mexico’s $900 billion.

Regardless, CAFTA will open up a juicy new target for the labor unions and other neo-Luddite forces of trade protectionism who caution it will exploit the world’s impoverished nations and eliminate millions of U.S. jobs.

“It’s a very big issue for us,” said Thea M. Lee, chief international economist for the AFL-CIO. “This represents the cutting edge of the flawed Bush trade policy.”

But the way I see it, such free-trade agreements will strengthen impoverished Central and American economies by creating desperately needed, better-paying jobs, helping reduce poverty and, eventually, stem the migration from poor nations to currently more prosperous countries like the United States.

Remember the gloom-and-doom forecasts we heard during the early 1990s after President Clinton pushed NAFTA through Congress? Ross Perot warned of “a giant sucking sound” that would send millions of jobs into Mexico and irreparably hurt the U.S. economy.

Pat Buchanan and others in and out of the trade union movement said the issue would be one of the central campaign battles of our time. But it barely garnered half a percent of the vote for the former Nixon aide.

The big story of the 1990s was not U.S. job losses, as these people wrongly predicted, but of jobs becoming so abundant that America’s No. 1 economic problem turned out to be finding enough workers, skilled and unskilled, to fill them all. Unemployment did not rise as Mexican imports and exports rose under NAFTA — it fell to 4 percent or less — a level all economists consider full employment.

The economy began to slow and unemployment started to rise at the end of the last decade — not as a result of too much trade but because of too little trade. Economies in Europe and Asia weakened, and thus U.S. export sales fell. U.S. manufacturing went into a slump and was forced to cut jobs and other overhead costs.

One of the ways to cut was to raise productivity and reduce the per-unit cost of manufacturing. Some manufacturers moved businesses abroad to slash labor costs, but many more eventually found high-tech methods to manufacture their new products faster, cheaper, better and with fewer workers. Those jobs are not coming back.

But these improvements will boost supply, which over time will lead to higher demand. The jobs created in this environment will no doubt require a degree of technical skill. America’s economy is undergoing structural changes to remain competitive in a rapidly expanding global economy. If we are to keep up with the rest of the world, we are going to have to find new markets for our products, and those markets are overseas and, of course, here in our own hemisphere.

The administration’s plan to reduce and ultimately eliminate trade tariffs in Central and South America — which is, let’s face it, nothing more than another government tax on businesses and consumers — is opening up these markets to increased trade that, as I see it, is a win-win game for all of us.

The election year debate over CAFTA will be full of hyperbolic forecasts of lost jobs. The answer to this dubious charge is simply this: Spurred by the robust economy of the ‘90s, American jobs bloomed in the trade expansion. As our current economy continues to improve and CAFTA takes root, these trade sector jobs will no doubt bloom again.

Donald Lambro, chief political correspondent of The Washington Times, is a nationally syndicated columnist.

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