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Vote to pass CAFTA was vote for U.S. progress
The pact is a step toward Ronald Reagan's dream of a hemispheric free trade zone.

Posted Friday, July 29, 2005 - 6:00 am


By Thomas Ravenel

The litany of complaints about U.S. free trade agreements is trite and predictable. What has been said about the Dominican Republic-Central American Free Trade Agreement (which passed late Wednesday night) has been said before about other similar pacts by free trade opponents. And it still isn't true.

The complaints are familiar ones: The trade agreement will destroy hundreds of thousands of jobs in the United States; it will crush markets overseas; it will wreck the global environment; it will lead to further U.S. economic oppression of the developing world. It's time the opponents of free trade got a new script -- or at least a new ghostwriter. Free trade is good for the United States and it is good for South Carolina.

Aside from any political concerns, the reality is that, among economists, there is a near-universal consensus that all countries -- and the people of those countries -- benefit from free trade. Goods that can be purchased from overseas for less than the cost of manufacturing them in the United States free up scarce economic resources for use in high-value added areas like biotechnology, financial services and to produce quantum leaps in information-age equipment and systems.

Lower-cost imports are also a major factor in limiting inflation, which reduces the value of money and real property and, over time, makes everyone poorer. The U.S. Bureau of Labor Statistics, for example, has released consumer price data that strongly suggest the nominal price of non-petroleum imports is actually lower today than it was eight years ago.

The overall benefit of a free trade posture is a matter of historical record. A study produced jointly by The Wall Street Journal and the Heritage Foundation think tank over the last seven years found countries that trade freely have experienced much stronger economic performance overall than countries that jealously guard their borders against imports, consequently having grown slowly or not at all.

As the general impact of free trade agreements has been distorted, so have the realities of the DR-CAFTA deal. Close to 80 percent of imports from the Central American countries included in the agreement already enter the United States free of tariffs because of the Reagan-era Caribbean Basin Initiative and the Generalized System of Preferences. Even the textile industry, which is critically important to many South Carolinians, has expressed support for the pact, with the National Cotton Council and the National Council of Textile Organizations having issued strong endorsements.

The countries that make up the CAFTA-DR agreement are, as a bloc, already an important U.S. trading partner. Together, they represent the 10th largest export market for U.S. goods in the world. The American Farm Bureau Federation estimates U.S. farm exports could an increase by as much as $1.5 billion annually once CAFTA-DR is fully implemented. The National Association of Manufacturers estimates U.S. exports in their sector of the economy could increase by 7 percent, or almost $1 billion. All this, the U.S. International Trade Commission says, could reduce the trade deficit by more than $750 million annually.

Consumers, producers, manufacturers and retailers in all seven countries will benefit from the increased trade that will result from CAFTA-DR. They will experience a greater variety of product choices and lower prices while the increased competition will almost certainly lead to market-enhancing innovations at a much faster rate. At home, the reduced tariffs would have an economic impact quite similar to tax cuts for U.S. consumers, who are forced to turn over more of their hard-earned income in the form of higher prices resulting from duties imposed to protect special interests.

On a final note, the CAFTA-DR agreement represents a significant step forward in the fulfillment of Ronald Reagan's dream of a hemispheric free trade zone. Without it, the ambitious design of a free-trade-of-the-Americas zone could well die, leaving the more vulnerable nations in the region without hope for economic development. This, in turn, could further fuel guerilla movements on the left -- a not-too-fanciful concern -- that could be aided by anti-American governments such as Castro's Cuba and Chavez's Venezuela.

The key to enduring political liberty, as the Nobel Prize-winning economist Frederich Hayek observed so long ago, is to give people the chance to control their own economic destiny. The CAFTA-DR goes a long way in this regard. It is good for the region and it is good for America.