| Partial Victory |
22 December 2003
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US Signs Free-Trade Deal with Central American Republics
The Bush administration's dream of a free trade zone extending from Alaska to Tierra del Fuego took a huge step closer to reality last week when it signed a trade deal with four Central American nations. The Central American Free Trade Association, CAFTA, will add Guatemala, Honduras, Nicaragua and El Salvador to the list of countries with which the US is ending trade restrictions. What is missing is an adjustment policy.
No serious student of economics can dispute the truth that free trade enriches the overall economies that engage in it. No serious student of politics can dispute the evidence that the benefits of free trade are not evenly shared throughout an economy. As he has done with Mexico, Chile and Singapore, Mr. Bush has agreed to free trade without creating adequate adjustment arrangements for those who will be adversely affected by free trade with these states.
To his credit, he has not insisted on an immediately laissez-faire approach -- if only because there are certain political forces in Central America that will insist on some protections at that end. However, US labor unions are already gearing up to defeat the agreement because of lack of protection of workers whose jobs will leave the country. And this is where Mr. Bush needs to refocus his policies.
Going from managed trade to free trade is good for everyone in the long-run. The deal protects American producers of poultry and rice by continuing tariffs against the Central Americans for 18 years, and dairy products will have 20 years of tariffs. The Central Americans got breaks on white corn protections. What was not done was establish a framework in American law to ease the shift of resources to a free-trade regime. Jobs will be lost in certain fields; it is a metaphysical certainty. Yet, there is inadequate retraining and reallocation efforts in the US labor market.
Mr. Bush is close to succeeding in a foreign policy area here, and it is painful to see him miss the opportunity to create a system that lets all Americans (including the United States, as they say in Hispano-America) trade freely while at the same time taking care of the people whom he represents. It is a solid "B" for a "D" president, but an "A" would help the average so much.
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