South Florida Sun-Sentinel: Experience does not bode well-Washington-centered orthodoxy of liberalized trade has poor record-by Riordan Roett

Sun-SentinelOAS ASSEMBLY FORT LAUDERDALE : Experience does not bode well-by Riordan Roett

- Washington-centered orthodoxy of liberalized trade has poor record

By and large, the debate surrounding the Central American Free Trade Agreement is being waged by both sides as if the "neoliberal" model on which it is based had no track record in the region. For proponents, it is easier to make predictions of more growth and less poverty in Central America than it is to face cold, hard truths. For opponents, the debate is mostly waged upon familiar grounds regarding the absence of labor and environmental protections.

Neither side has clearly set forth the one reality that supersedes all else: CAFTA is the "horse and buggy" model of the 21st century. It is based on a flawed theory that has unquestionably failed in some areas of development in Latin America, and in some cases has even led to disastrous results. To be sure, there are fundamental problems in the economies of Central America. Unfortunately, the Washington-centered orthodoxy of liberalized trade has a poor record that shows it cannot be expected to resolve fundamental problems. In fact, it has shown that the model may indeed have a tendency to exacerbate them.

The most obvious failure of neoliberal reforms in Latin America over the last 25 years has been a drastic decline in the region's rate of economic growth. Latin America once enjoyed a healthy growth rate, with per capita income rising by about 80 percent from 1960 to 1979. However, the post-1980 period, which includes the so-called lost decade, has yielded disappointingly low levels of growth -- about 12 percent in the last quarter-century. Mexico, for example, enjoyed growth rates in the pre-1980 era three times higher than those in the post-NAFTA period (since 1994).

This does not bode well for the CAFTA countries. A 2004 U.S. International Trade Commission study on the potential impacts of CAFTA leads one to conclude that the agreement will displace many in the rural sector in Central America. Following a recent visit to Guatemala, United Nations Special Raporteur for Food Jean Ziegler determined that CAFTA will increase hunger and poverty once the agreement fully kicks in. A U.S. Agency for International Development study on the maquila sector in the Dominican Republic anticipates a 25 percent decrease in employment in this industry even under CAFTA, as the Multi-Fiber Agreement concludes. Thus, one is left to wonder where the displaced rural population of Central America will find employment. Riordan Roett is the Sarita and Don Johnston Professor and Director of the Western Hemisphere Program, The Paul H. Nitze School of Advanced International Studies, Johns Hopkins University.