Jagdish Bhagwati, America's leading trade economist, has gone so far as to call free trade agreements "a sham" that are actually undermining the world trading system. He argues that the proliferation of such agreements by the United States is part of a long-term effort to pursue a unilateral trade policy. "Thanks to the myopic and self-serving policies of the world's only superpower, bilateral free trade agreements are damaging the global trading system," Bhagwati says.
A 2003 study by the Congressional Budget Office found that the economic potential of bilateral agreements is very limited. It noted that NAFTA, one of the largest such agreements, had virtually no effect on the U.S. trade balance with Mexico even after eight years. However, the study also noted that there might be important non-economic reasons to support free trade agreements. For example, they could support U.S. foreign policy objectives and aid democratic forces in those countries with which we have such agreements.
Indeed, it would appear that foreign policy is the best reason to support CAFTA. It is clearly in this country's interest to encourage economic growth and reform in Central America, even if the economic benefit for us is minimal. It also keeps alive the principle of free trade, which this administration has done so much to undermine.
Still, much more could have been accomplished with CAFTA if the White House had made more of an effort. For example, it could have used this as an opportunity to start dismantling the absurd U.S. sugar policy, which keeps domestic prices far above world levels just to enrich a few producers. Although CAFTA opens the sugar market a little, much more could have been done without making the sugar lobby any more opposed to the agreement than it is anyway.
Free traders have no choice but to support CAFTA. Its failure would be seen as a victory for protectionism and would crush the hopes of economic reformers throughout Latin America. I agree with economist Tyler Cowen: "This is probably a treaty we should pass, but it is not a treaty we should be proud of."
The effort shouldn't have been this difficult. If President Bush had been more consistent in his support for free trade over the last five years, he would now be in a stronger position to get CAFTA approved.
Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.
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