WorldCity Business Magazine

A foothold for free trade?

by Marcela Sanchez

Trade integration in the Americas is quickly approaching a major milestone. If agreements with Colombia, Peru and Panama are ratified in the coming year, more than half of Latin America will have free trade accords with the United States.

Yet despite greater levels of economic integration, political developments in the Americas would seem to suggest that the days of free trade expansion are numbered. Both in Washington and among those countries without free trade agreements, current or newly elected leaders are skeptical about trade deals with the United States, believing they have failed the poor.

In recent years, Democrats strongly objected as the Republican-controlled Congress barely passed fast-track authority allowing the president to negotiate such accords. The Democrats attempted to block a free trade agreement with the Dominican Republic and Central America. Now with a new majority, Democratic leaders are demanding that agreements already signed with Colombia and Peru be renegotiated.

Meanwhile, Evo Morales in Bolivia, Rafael Correa in Ecuador, Daniel Ortega in Nicaragua, Nestor Kirchner in Argentina and Hugo Chvez in Venezuela have settled into power. And they are riding a wave of anti-free trade sentiment.

Morales once accused former Peruvian President Alejandro Toledo of betraying the Latin American indigenous movement by signing Perus free trade agreement with the United States. Correa, a U.S.-trained economist, has said he will not negotiate such an agreement because it would be “tremendously harmful” to Ecuador. Chvez, a firebrand who has used the trade issue to taunt the Bush administration, boasts that the new left in Latin America “buried” U.S. hopes of a free trade agreement covering the entire hemisphere.

But Chvez aside, things are not as bleak as they might seem. Particularly telling is the behavior of Ecuador and Bolivia. Although both of their new leaders are seen as Chvez’s closest South American allies and like to talk his game, neither is about to sever trade relations with the United States.

With the election behind him, Correa says he hopes to negotiate a long-term extension of trade preferences with the United States. Bolivian Economic Minister Luis Arce, while in Washington to lobby Congress to extend trade preferences to Bolivia, told reporters that his government would consider signing a free trade agreement with the United States some day.

Before such an accord could be considered, he said he would prefer an interim arrangement that would take into consideration Bolivia’s disadvantages and inability to compete with a much richer nation.

Democrats should be sympathetic. U.S. Rep. Sander Levin, a Michigan Democrat tapped to chair the House Ways and Means trade subcommittee, insisted in an interview that his colleagues are not against expanded trade, but against trade that is not “shaped” to ensure those most adversely affected are protected.

Levin stresses that trade has not automatically solved the deep inequities that affect Latin America today. He said he plans to finally have a “good discussion about trade policy” and its implications for the poorer members of society.

Domestically, observers say, this means that trade initiatives will move forward in the new Congress as long as they are part of a larger competitiveness package. Such initiatives would need to be accompanied, for instance, by new opportunities for education and training for U.S. workers displaced by free trade.

Skeptics will be watching how that “good discussion” develops. For behind the facade of fair trade, they say, lurks the desire to kill trade. It is difficult, for instance, to believe Democrats’ altruistic concerns for labor practices in South American industries when they previously have gone on record to protect competing industries in their own states.

Whether trade becomes freer or fairer, wilder or tempered, it has already had a “stabilizing influence” in Latin America, suggests Robert Zoellick, former U.S. trade representative and deputy secretary of state.

In Peru, benefits stemming from trade preferences with the United States allowed Alan Garca to campaign for the presidency as a pro-trade leftist candidate, shaking his reckless image from his first turn in power.
The Dominican Republic-Central American Trade Agreement in turn may very well “put a constraint on how far [re-elected Nicaraguan President Daniel] Ortega can go,” Zoellick adds.

Those are important considerations to keep in mind as trade is reshaped in the months to come. Particularly ironic would be if Democrats end up working against, rather than with, left-of-center leaders who see trade with the United States as their best chance to generate jobs and opportunity for their people. WC

Marcela Sanchez is a columnist with the Washington Post. She can be reached at msanchez@worldcitweb.com.