By David Keene - 06/07/05 12:00 AM EDT
Some years ago, Ed Feulner of the Heritage Foundation dismissed my fear that free traders were losing support among conservatives on the grounds that the economic benefits of free trade are so clear that every intellectually respectable economist dismisses protectionism as foolish.
Ed was right, but I warned him that I couldn’t find a single congressional district in which economists make up anything approaching a majority, though I could name quite a few in which voters feared losing their jobs to overseas competitors or suspected that their employers were about to pack up the entire company and ship it off to Mexico, Sri Lanka or someplace even more exotic populated by men and women willing to work for a 10th of what they make.
We aren’t all economists, and the plight of the unemployed factory worker who lost his job to foreign competition is far more visible than the overall benefits of that competition. How many, for example, know that, according to a recent Institute for International Economics study, we Americans can attribute as much as $10,000 a year of our current family income to the benefits of trade liberalization over the past few decades?
Through the ’80s and ’90s, most conservatives shared Ronald Reagan’s faith in our ability to take on any competitor as well as his vision of an emerging world in which free men and women from around the world could benefit from growing trade and interaction. That faith and vision were one of the reasons that, in announcing his candidacy in 1980, Reagan said that if elected he hoped to tear down hemispheric tariff barriers to create a free market stretching from the Arctic to Tierra del Fuego.
Unfortunately, the communists had other ideas and President Reagan was forced to spend much effort and more than a little treasure to keep many of the nations of Caribbean and Central America from falling into the hands of aspiring Marxist dictators such as Nicaragua’s Daniel Ortega. That effort proved successful, of course, and today Central America is dominated not by tin-pot dictators or Marxist thugs but by democratically elected leaders far more friendly both to the United States and to their own people than most would have believed possible a quarter-century ago.
Reagan’s success could prove ephemeral, however, if the economies of the fledgling democracies of the region founder, which is one of the main reasons the Bush administration is urging Congress to pass something called the Central America Free Trade Agreement, or CAFTA, which would lower trade barriers between the United States and many of the nations of the region. President Bush feels strongly — and correctly — that the measure would promote stability in the region, generate economic growth and strengthen the bonds between our country and our neighbors to the south.
Most of what we import from the nations affected by CAFTA already comes into the United States duty-free thanks to myriad other agreements we have with them individually, but our exports to them are subject to tariffs that CAFTA would wipe out. U.S. farm products and manufactured goods would benefit, as would an industry that has opposed virtually every trade-liberalization agreement submitted to Congress in the past.
That industry is the U.S. textile industry. Apparel produced in the region is allowed into the United States duty- and quota-free under CAFTA as long as those making it use U.S.-produced yarn and fabric. That encourages apparel makers in the region to buy from the United States and will give them an advantage here in competing with the Chinese.
The current numbers are sufficient to explain why this industry is supporting CAFTA: If you buy a shirt today that was made in Honduras or Nicaragua, there is a greater than 70 percent chance that it is made of U.S.-produced fabric; the chance that a competing product from China would be made of U.S. components is less than one-tenth of 1 percent.
So both economics and politics argue for CAFTA, but the growing congressional desire to retreat from the world economy or deny the benefits of trade could defeat it and Reagan’s vision. Such a defeat however would be neither a victory for the American worker or for U.S. sovereignty but for the Daniel Ortegas of the region (who are actively campaigning against CAFTA) and for those who believe Congress can actually repeal the laws of economics.
Keene, chairman of the American Conservative Union, is a managing associate with Carmen Group, a D.C.-based governmental-affairs firm (www.carmengrouplobbying.com).