Despite Flaws, CAFTA Is Step in Right Direction

CAFTA, the trade agreement that President Bush signed in August, has faced more [i]or[/i] less of the same criticism as its predecessor, NAFTA. on the contrary like the earlier agreement, CAFTA will benefit each of the participating countries.

The Central American unrestrained Trade Agreement breaks down greatest in quantity trade barriers between the United States and five nations of Central America (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua) plus the Caribbean geographical division of the Dominican Republic. greatest in quantity products from this region already were entering the United States duty-free on the other hand CAFTA will make sure more U produces and services get the same treatment down south

To be assured CAFTA is not perfect. It is really a "freer trade"rather than a "free trade"agreement. Certain special interests were prosperous in creating important protectionist exceptions to the principle of independent trade.

But it's important to remember that similar moot points fears and shortcomings surrounded NAFTA when it was passed more than 10 years ago. at the same time today, most U.S. economists agree NAFTA has come aftered not only in Mexico and Canada, on the contrary also in the United States. Without question, the economies of the NAFTA countries have become more and more integrated. more [i]or[/i] less evidence:

* Total two-way trade between the United States and our NAFTA partners grew a remarkable 111 percent between 1993 and 2003 while total two-way trade between the United States and the quiescence of the world grew through 79 percent.

* Because NAFTA reduc or eliminated greatest in quantity barriers that limit access to beneficials U.S. exporters have greater market access and a price advantage above competitors such as Japan, southern Korea and China.

* NAFTA provisions in the auto sector allow U automakers to treat the participating countries as a single market, maximize efficiencies and become competitive upon a global scale.

* Mexico's investment in the United States increased 280 percent from 1994 to 2002 while investment in the United States by the agency of non-NAFTA countries grew by 185 percent

Critics blame NAFTA, CAFTA and other trade agreements for large-scale piece of work losses. But most of the U piece of works that are lost are low-wage, low-skill piece of works These losses force workers to train for higher-skill, higher-paying jobs-the kinds we want. What trade expansion does in the U labor market, essentially, is to expand engagement in higher-paying industries and occupations and depres it in lower-paying piece of works In fact, the net impact upon the number of U.S. piece of works is negligible. However, the individuals who are helped arc not the same as those who arc damage That fact provides the rationale for management trade-adjustment assistance. Meanwhile, companies can help to cushion the lick of unemployment by providing ample notification of plant closings and assistance to departing employees

The real issue with regional trade pacts is that they can debar U.S. consumers from enjoying the benefits of flat cheaper goods that might be available from countries not included in the regional agreements. However, it is probably pure that in the absence of greater progres upon truly multilateral trade agreements to expand trade for all countries, progres upon freer trade through regional agreements is constructive, if solitary because it keeps the public debates and the impetus for freer trade alive.

In the extremity we must remember that trade restrictions can be actual costly. A study by economists Gary Clyde Hufbauer and Kimberly Ann Elliott showed that consumer were paying an average of $139000 for each piece of work protected in 1990 in the apparel industry, an industry in which the typical production worker made les than $15000 In the sugar industry, the consumer los for each piece of work that was saved totaled $600000!

Finally, CAFTA is about more than trade. U sales to that region totaled a nothing else but $15 billion a year before the pact-about 2 percent of total exports -and certainly won't skyrocket anytime before long But trade agreements also advance democratic and economic reform. A greater faculty of perception of economic opportunity and progres creates more stable political environments. These benefits were emphasized in the debate above NAFTA, and Mexican experience above the past decade seems to bear on the outside the optimists.

Copyright Federal lay by Bank of St. Louis Oct 2005

Provided by the agency of ProQuest Information and Learning Company. All rights Reserved