Economic Liberty –Just what the DR ordered


Get ready for silly season. As Congress prepares to debate the Central American Free Trade Agreement this spring, you’re going to detect an unusual amount of hot air emanating from Washington. There are still quite a few special-interest groups that benefit from trade barriers and these blowhards will fight desperately to prop up the protectionist policies that hurt most Americans.

You may need a gas mask to defend yourself against their inflated rhetoric. So take a deep breath and know that for all their noxious vapors, CAFTA is good for the United States.

Everybody should understand a few basic facts about this important agreement. First of all, none of the five Central American countries involved in the deal is especially big. Costa Rica is home to 4 million people; about the same number live in Kentucky. Three of the other nations are only a bit larger: El Salvador (6 million people, comparable to Indiana), Honduras (7 million, Virginia), and Nicaragua (5 million, Maryland). The biggest is Guatemala (12 million, Pennsylvania).

Combined, however, their population is roughly the size of California’s. Then there’s the deal’s late addition of the Dominican Republic (9 million, almost as populous as Michigan). It technically turns CAFTA into DR-CAFTA, making everything that much sweeter. But I’m going to keep on calling the whole thing CAFTA because CAFTA is a word I can pronounce. Also, Doctor CAFTA sounds like a bad soft drink.

Speaking of soft drinks, the Dominican Republic jeopardized its place in the agreement last year when it threatened to slap a special tax on high-fructose corn syrup–an important ingredient in a lot of drinks that fizz. Fortunately, the office of the U.S. trade representative made it clear that this none-too-subtle attempt at protectionism would destroy any hope of the Caribbean nation participating in CAFTA. Think of it as Doctor CAFTA losing his medical degree. The Dominican Republic backed off, and the experience demonstrated that our government can talk tough and expand economic liberty at the same time.

Economic liberty is one of the vital issues of our day. “The survival of liberty in our land increasingly depends on the success of liberty in other lands,” said President Bush in his inaugural address last month. “The best hope for peace in our world is the expansion of freedom in all the world.”

The president was talking primarily about democracy and political rights. But as Bush has said on other occasions, it is difficult if not impossible to enjoy these freedoms without benefiting from economic freedom as well. We must remember that the nations of Central America are fragile democracies. As recently as the 1980s they were national-security risks to the United States.

That’s a long-term reason for supporting CAFTA–to make sure these struggling countries continue on the road to stability and prosperity. Another reason for supporting CAFTA is that it’s in our immediate economic self-interest.

Approval of the trade pact would instantly eliminate most of the tariffs now imposed on the consumer goods and farm items we export to these six nations. The few remaining tariffs would be phased out according to a specific timetable. As it happens, most of what the CAFTA countries export to the United States is already duty free.

Because of that fact, many analysts and economists believe the American farmers stand to gain a lot from CAFTA because it would create an improved export market for everything from corn and soybeans to pork and poultry. We already trade heavily with Central America because it’s not far from our borders. Houston is closer to Honduras than Detroit. And Detroit is closer to Guatemala City than Los Angeles. And Los Angeles is closer to San Salvador than Miami.

You get the picture–it’s a scene of interlocking economic dependence, and the fewer artificial barriers we throw in the way the better.

Our 2003 exports to the five Central American nations in CAFTA were worth nearly $11 billion–more than what we exported to India, Indonesia, and Russia combined. And we trade more with the Dominican Republic than we do with Argentina. All together, this trading bloc represents our biggest Latin American trading partner, with the exception of Mexico. Two-way trade is already worth $32 billion–and it would only rise under CAFTA. That would benefit exporters and consumers everywhere.

CAFTA can serve as a useful building block, too. There’s talk of adding Panama to the deal in the future. More ambitiously, CAFTA can serve as a model for the Free Trade Area of the Americas–the ambitious plan to promote trade from the Arctic Circle to the southern tip of Tierra del Fuego.

In the meantime, our lawmakers in Congress have an opportunity to pass a sensible trade agreement in the next few months–and it’s an opportunity they should seize without delay.

Dean Kleckner

Dean Kleckner

Deceased (1932-2015)

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