WS>>Crossing the CAFTA bridge
carl william spitzer iv
cwsiv_2nd at JUNO.COM
Mon Mar 8 09:21:13 MST 2004
By Donald Lambro
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 Repre-
sentative Robert B. Zoellick and the governments of Guatema-
la, 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 com-
pared 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 impov-
erished 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
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 666percent 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 manufactur-
ers 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 hemi-
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 govern-
ment 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 dubi-
ous 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.
Copyright =A9 2003 News World Communications, Inc. All
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