Articles

Region Needs the Freedom to Trade in Central America

Monday, May 5, 2003
by Marc J. Lane

Reprint permission from the May 5, 2003 issue of Crain's Chicago Business.

President George W. Bush is leading a brand-new "coalition of the willing." Once again, its troops are under fire and, once again, they deserve our unconditional support.

The president has opened negotiations to ink a free-trade agreement with five Central American countries, the next step in a carefully plotted campaign to create a free-trade zone throughout the Western Hemisphere by 2006.

 

When the deal is struck by yearend, as U.S. Trade Representative Robert B. Zoellick and his counterparts in Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua expect, U.S. investment should rush to the Central American countries, whose economies have been plagued by social problems, natural disasters and protracted civil wars. As economic development is stimulated, the fragile region will inevitably regenerate.

Eliminating tariffs and other trade barriers would be good for the United States and good for its neighbors.

Yet, the proposed Central American Free Trade Agreement (Cafta) is under attack.

Critics point to the experience of independent farmers in Mexico and Canada, who saw their prices plummet and their land taken over by mega-companies after the North American Free Trade Agreement (Nafta) was signed.

Cafta's detractors also argue that free traders in Central America aren't the populists they profess to be, but instead are fostering the rollback of labor protections, environmental standards and human rights.

But long-term economic development depends on freedom, and Cafta promises to elevate the region's economic, political and social condition. The president's initiative would guarantee property rights, lower trade barriers, open markets to foreign investment and reduce government regulation.

And Cafta wouldn't stand alone; it would be buttressed by the resources of the federal government.

The U.S. Department of Labor has committed to fund programs to improve the lives of workers. The U.S. Agency for International Development and the U.S. Department of Agriculture intend to provide training to improve food safety and animal health inspection systems. The Inter-American Development Bank has agreed to finance small businesses and involve them in international trade. And the U.S. Environmental Protection Agency is eager to train environmental compliance inspectors. All told, the president's 2003 budget request, still subject to negotiation, included $47 million in U.S. trade-capacity-building assistance to Central America, a 74% increase over 2002.

Cafta and related reforms in Central America would help raise personal incomes and help build nascent democracies. It would also benefit U.S. businesses. High tariffs on U.S. agricultural and industrial goods would be slashed. Restrictive licensing practices would be scrapped. Intellectual property would be protected. And markets would be opened to U.S. service providers.

Central America is a large and growing market, and the U.S. is its main supplier of goods and services. Promoting prosperity in the region is both good government and good business.

 

Marc J. Lane ([email protected]) is a Chicago lawyer and financial planner and an adjunct professor of law at Northwestern University School of Law.

 


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Copyright © 2003 by Crain Communications Inc.

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