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Sunday, October 01, 2006

Free-Trade is Good

As a follow-up to this post noting some of the problems with the North American Free Trade Agreement (NAFTA) for Mexico, here's an argument strongly supporting free-trade agreements with Bolivia, Colombia, Ecuador, and Peru:

Don't Let the Andes Trade Pact Expire, by Sergio Muñoz, Comentary, LA Times: Salgado Chambi is a 30-year-old single mother who lives with her young children, Carlos and Ana, in a barrio in El Alto, Bolivia's third-largest city. She is one of tens of thousands of Bolivian artisans who owe their livelihoods to the Andean Trade Promotion and Drug Eradication Act, which the U.S. Congress first passed in 1991. The law allows about 5,600 Bolivian products — among them cut flowers, native fruits and vegetables, jewelry and traditional Indian clothing — to be sold duty-free in the United States.

Salgado, who learned the art of weaving from her Aymara Indian mother and grandmother, specializes in making alpaca coats, sweaters, bags and caps. Her clothing used to sell for less than $20 apiece in the local El Alto market. When the Andean trade law kicked in, ... and after a local bank loaned her $10,000 to buy the necessary equipment, she hired three women as weavers. Business has been good, and she now employs 15 women. She gets $50 for every clothing item sold in the U.S. for $90.

But the trade program that has created an economic miracle in El Alto — 80,000 new jobs and roughy $250 million in annual income from sales in the U.S. — may lapse in December.

The original goal of the Andean trade act was to combat drug production and traffic in Bolivia, Colombia, Ecuador and Peru by helping those countries create legitimate jobs, and it has largely worked. In 2001, Congress approved a five-year extension of the program, assuming that by 2006, all four countries would have negotiated free-trade agreements with the United States.

None have, although Peru and Colombia have signed deals that await congressional approval. Ecuador and the U.S. stopped talking free trade a few months ago. And Bolivia is not even on the table. ... Bolivian President Evo Morales' decision to nationalize the country's natural gas resources has only made things worse for Bolivia in the U.S. Congress...

For Bolivia, the expiring trade act is crucial to its economic vitality. ... Even Rep. Charles B. Rangel (D-N.Y.), whose free-trade voting record is mixed at best, has introduced a bill that would extend the trade provisions for Bolivia by two more years. But Sen. Charles E. Grassley (R-Iowa), chairman of the Senate Finance Committee, opposes any extension because of Morales' move toward nationalization, even though no U.S. companies would be affected.

To end Salgado's and other Bolivian artisans' competitive advantage in the U.S. marketplace would be shortsighted and counterproductive, and it would border on the petty. For Latin Americans, it would be hard to understand why the world's richest country turned its back on the second-poorest in the hemisphere by ending a trade program that benefits about 40% of El Alto's largely impoverished population and amounts to 65% of Bolivia's trade with us.

Washington has a broad interest in promoting democracy in the Andean region, where Venezuelan President Hugo Chavez is using his country's vast oil wealth to spread his "Bolivarian Revolution." With indigenous movements in Ecuador and Bolivia gaining strength, fighting in Colombia continuing and dissatisfaction with the market economy festering in Peru, it would be foolish for Washington to give Chavez more ammunition by denying poor Bolivian Indians access to the U.S. market. Extending the trade program not only would help solve Bolivia's enormous problems but would serve to restore regional trust in the U.S. commitment to democracy.

    Posted by on Sunday, October 1, 2006 at 01:08 AM in Economics, International Trade | Permalink  TrackBack (0)  Comments (7)


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