The Wall Street Journal details CAFTA’s benefits:
Start simply with the appeal of greater two-way trade: The vast majority of Cafta-made products already enter the U.S. duty-free under the Caribbean Basin Initiative. Cafta opens the way for more U.S. products going south. The agreement also boosts intellectual property protection in Cafta countries, as well as competition in financial and other services in which the U.S. excels. American farmers alone expect to increase exports to Central America by some $1.5 billion a year. All that goes away if Cafta fails.
We are also told that Cafta can’t work because the North American Free Trade Agreement of 1994 didn’t work. And while it’s true that Nafta didn’t cure cancer or turn Mexico into Switzerland, those who argue that Nafta failed are ignoring the evidence.
In Nafta’s first decade, annual two-way trade between the U.S. and Mexico almost tripled, to $232 billion from $81 billion. During that same period the U.S. created 18 million net new jobs and, even after the dot-com implosion and the recession of 2001, the current U.S. jobless rate of 5% is lower than it was (6.4%) when Nafta became law. U.S. productivity and wages have all climbed steadily. Ross Perot’s prediction of a “giant sucking sound” proved to be a fantasy.
But what about “the trade deficit”? Well, the National Association of Manufacturers (NAM) reported last week that, since the birth of Nafta, U.S. exports to Canada and Mexico have grown 55% faster than they have to the rest of the world, while imports from Mexico and Canada have only grown 20% faster. NAM says that Nafta partners make up just 10% of the U.S. trade deficit in manufactured goods.
“Those who cite experience with Nafta as a pretext to oppose the U.S. Central America-Dominican Republic Free Trade Agreement are substituting emotion for reasoned judgment,” says NAM President John Engler (who recently joined the board of Dow Jones, which publishes this newspaper).
Nor have Nafta’s benefits been limited to dollars and cents. When a rebel uprising, two political assassinations and a financial crisis hit Mexico in 1994, Nafta arguably helped to prevent the kind of political lurch to the authoritarian left that has been common in Mexican history. Nafta created economic and political interests in Mexico that had a stake in relations with the U.S. and global integration.
The economic competition induced by Nafta pushed Mexico’s political system forward toward fuller democracy, helping to end 70 years of one-party rule. Compare this progress with isolated Argentina’s reaction to its 2001 financial crisis, which has revived the authoritarian Peronism of the 1970s in Buenos Aires. Given Central America’s own history of authoritarianism, this is no small point for Cafta. Venezuela’s Hugo Chavez will be overjoyed if it fails.
Protectionists are also trotting out another old reliable, the “sovereignty issue,” claiming that U.S. regulatory powers will somehow be ceded to Cafta arbitration panels. But Nafta’s panels have hardly obliterated Congress’s powers, and Cafta’s couldn’t overrule any U.S. health or safety rules. All Cafta does is insist on “non-discriminatory policies,” which means that U.S. laws and regulations must be transparent and can’t be disguised trade barriers. If a Cafta country challenged a U.S. rule and won, the U.S. could refuse to change and the only Cafta recourse would be to deny comparable trade benefits to the U.S.
With so much to recommend Cafta, the shame is that the Bush Administration has had to hold a vote-buying bazaar to pass it. These include the usual courthouses and nominations, but also payoffs for the sugar, textile and cotton industries. If Cafta still loses, we hope the White House is already exploring ways to pay them back with free-trade regulations, among other measures.
Cafta opts for integration over isolation, for building bridges rather than walls. Killing Cafta would signal to the world that America is afraid of competition and in retreat, both commercially and politically. That can’t be good for U.S. workers or consumers, nor for spreading prosperity to the developing world.