Central America returns to center stage as Congress debates trade policy, globalization and the relationship with our hemispheric neighbors.
Unfortunately the U.S. free trade agreement with El Salvador, Costa Rica, Honduras, Nicaragua, Guatemala and the Dominican Republic — called DR-CAFTA and which has passed the Senate — continues to be battered by the usual overheated and off-target rhetoric about defending domestic jobs versus growing export revenues and open markets versus protected special interests.
What is missing is a basic understanding of DR-CAFTA and why it is naive to view the pact through the all-too-predictable anti-trade lens.
For starters, DR-CAFTA simply completes a trade circle begun under Presidents Carter and Reagan: The Caribbean Basin Initiative, enacted to accelerate peace and stability in Central America and the Caribbean in 1983, has allowed some 80 percent of DR-CAFTA country exports to enter the United States free of tariffs. What this new agreement does is give U.S. exports to the six partner countries the same free-trade advantages and then slowly expands to cover almost all two-way commerce. End result: a leveling of the hemispheric-trade playing field so that U.S. companies can export to consumers in these emerging Central American economies as easily as DR-CAFTA companies can get products onto U.S. shelves.
Also, this is not an agreement with some go-where-labor-is-cheapest, undeveloped banana republics. DR-CAFTA nations are emerging economies built on the principles of market access, investments in technology and liberal trade policies. U.S. companies already doing business in the DR-CAFTA region include Intel, Cargill, Proctor & Gamble, Hewlett-Packard, UPS and Pfizer. The six nations together comprise the second-largest export market in Latin America after Mexico, with $32 billion in two-way trade supporting about 200,000 American jobs.
Other critical issues involved include U.S. support for democracy, regional leadership and hemispheric cooperation. After all, the DR-CAFTA countries are in positions to either help or hurt U.S. interests — on needs ranging from immigration management to drug interdiction to port and shipping security — and the economic stability and growth catalyzed by expanded trade will help more closely align us with our neighbors.
Both Republicans and Democrats in Congress have been increasingly reluctant to support any free-trade expansions. While traditional concerns like labor rights and environmental standards still play a role in this reticence, the primary opposition is concern over the further job loses through outsourcing and relocations. Even though DR-CAFTA is no significant threat to U.S. workers, and more likely will create and sustain U.S. jobs through expanded exports, it has been battered by the reflex reaction of negativism that attaches to any trade bill.
But DR-CAFTA is really being weighed down by the same failures to articulate why trade is central to U.S. economic vitality and global growth. No nation in history has ever moved itself from poverty to developed-world living standards without trade. Job creation and job loss are the nature of free-market economies, and while the U.S. economy lost 44 million jobs at Sears, Chrysler and AT&T between 1980 and 1998 it also gained 73 million at Microsoft, Dell, Genentech and the like; and while Americans buy $50 and $100 sneakers, auto parts and cell phones from abroad we sell million- and billion-dollar jet aircraft and medical imaging equipment, with the cheaper imports saving U.S. families $2,000 a year from lower consumer costs and high-tech exports supporting high-paying jobs.
Beyond the DR-CAFTA debate, we should not be struggling to protect our economy from the natural competition that comes with open markets and maturing worldwide economies. Instead, U.S. political leaders and policy-makers should be sorting through how this country can always be leading the process by rolling out the technologies, products, R&D and ideas that drive growth, prosperity and job-creation at home and around the world.
This free-trade agreement does have flaws. It was negotiated with the public excluded until presented with a final pact. This only fuels suspicions that multilateral agreements are being crafted by big-money special interests at the expense of the public good. And while resources to address job and industry dislocations have grown — including a $1 billion U.S. trade-adjustment assistance program to help workers and communities in this country, a $1.6 billion Inter-American Development Bank ‘loan pipeline’ to ease trade transition in Central America and a $20 million U.S. fund to help the six trade partners better enforce labor and environmental laws — they give the appearance of buy-offs at the end. If transparency drove the free-trade process from day one, the merits of DR-CAFTA would define today’s debate more than amorphous globalization fears.
DR-CAFTA may not be a perfect trade vehicle — if one actually exists — but it is an important policy tool to knit the U.S. together with its closest neighbors in the name of homeland security, friendship and common interest. The gains heavily outweigh the concerns — with economic growth rippling broadly through the U.S. economy and catalyzing positive changes that improve our own security, prosperity and international standing. It is hard to ask for more from any international agreement.
Bob Graham served three terms as a U.S. senator from Florida, serving on the international trade subcommittee. Mack McLarty was President Clinton’s chief of staff and later special envoy to the Americas. He is president of Kissinger McLarty Associates in Washington.