Free Trade in the Balance

Passage of the pending free-trade agreements is clearly a deal Congress should not refuse.

As Congress debates the merits of ratifying free-trade agreements with four countries, many arguments have been advanced from both sides. The politically charged climate on Capitol Hill obscures the underlying rationales favoring the treaties-and, broadly, free trade.

Agreements have been negotiated with Colombia, Panama, Peru and South Korea, each geopolitically and commercially important to the United States.

  • Colombia is our closest friend in Latin America. Washington has worked to strengthen U.S.-Colombian ties and to assist Bogotá in eradicating its narcotics production and stabilizing its democracy. Venezuela's autocratic socialist President Hugo Chávez presents an enormous external challenge.
  • Panama, created by a U.S.-Colombian treaty in 1903 as an independent entity to construct a Pacific-Atlantic canal, enjoys significant growth and is planning a major expansion of the critical waterway. China sought to become a major factor in the country before the United States ceded control of the canal to Panama in 1999. Hong Kong's Hutchison-Whampoa group has since operated the canal, so crucial to world trade.
  • Peru is one of three major centers of cocaine production in South America, with Bolivia and Colombia. President Alan García, elected in 2006, has committed his second term to free-market, democratic policies, in sharp contrast to his 1985-1990 first presidential term, which was characterized by a radical socialist agenda. García has also pledged to cooperate with Washington to replace cocaine production with economically viable, legal agricultural activities.
  • South Korea is a linchpin of free-market democratic stability in the Pacific basin, together with Japan, Singapore, Taiwan, Thailand and the somewhat problematic Malaysia. Its precarious position near North Korea and China makes South Korea strategically important to regional peace and stability.

Each of these nations plays a key role, respectively in Latin America and east Asia, for the region as a whole and for the United States.

 In The Wealth of Nations, Adam Smith considered free trade a great boon to the participating nations' economies, workers and consumers. Charles Rangel (D-NY), chairman of the House Ways and Means Committee, frequently opines that free trade is especially beneficial to unemployed workers in developing countries. Both assessments are correct, as we have witnessed in virtually every free-trade agreement  (FTA) enacted by recent administrations.

Most recently, the U.S.-Uruguay FTA changed Montevideo's political orientation from sympathy towards Hugo Chávez's populist, socialist Bolivarian Revolution to solid friendship with the United States, re-committed to the market economy. The Central American Free Trade Agreement (CAFTA) with four Central American nations and the Dominican Republic, also concluded during the current Bush Administration, has stabilized their economic and political climates.

Perhaps most important, the NAFTA agreement among the United States, Canada and Mexico, enacted during the Clinton Administration, has seen significant stabilization of all three signatory countries' economies and of Mexico's unpredictable political situation.

Two observations illustrate NAFTA's enormous positive impact. During the twelve years the agreement has been in force, the U.S. economy has added thirty million jobs and unemployment has steadily declined to the current five percent level-despite AFL-CIO fears to the contrary. While this did not happen solely because of the trilateral accord, economists generally agree that NAFTA has been a significant contributor.

Several Mexican analysts credit domestic economic improvements created by NAFTA with the victory of Felipe Calderón in last year's presidential election. Calderón won despite being a member of the same political party as the disappointing outgoing president Vicente Fox, defeating ultra-leftist Andrés López Obrador by less than 234,000 out of 41.6 million votes cast, a razor-thin margin of 0.56 percent.

President Calderón has further opened Mexico's economy, and is aggressively fighting endemic corruption by replacing thousands of corrupt police and sacking hundreds of conniving government officials. Calderón is also helping the United States' illegal immigration dilemma by deploying 20,000 army regulars to the border area. These troops are fighting the extremely powerful narcotics organizations who refine and ship 90 percent of the cocaine that enters the United States.

Uruguay and Mexico exemplify a critical benefit of free-trade agreements, well-understood by America's enemies: Fair and balanced economic relations set the stage for close relations at all levels.

Opposition in Bogotá to the pending U.S.-Colombia free-trade agreement comes virtually exclusively from the Left, particularly from those in open or covert alliance with Venezuela's Hugo Chávez.  Opposition to what Colombians call the TLC (for tratado de libre comercio, free-trade agreement) is based solely on critics' not wanting Colombia to have close economic, military, political or cultural relations with the United States.

Chávez's allies in Argentina, Bolivia, Ecuador and Nicaragua show no interest in being part of what Chávez refers to as the Bush "empire." They have been co-opted into close political-and anti-American-relations by the checkbook diplomacy of Venezuela's president. (In just the last two years, Venezuela has loaned Argentina's tottering government at least $6 billion.)