Free-Trade Agreements Only Go Half Way; Trade Is a Tool, Not a Strategy

Byline: Marcela Sanchez

WASHINGTON -- The late Yale law professor Arthur Leff once illustrated the hazards of making choices in complex processes by imagining himself marooned on a desert island. While his island provided only coconuts and oysters to survive, across the bay he imagined "another island, lush and fertile.'' Leff wisely told himself, "I do not improve my position in life by swimming half-way across.''

Officials both here and in Latin America promote free trade today as a component of a much greater development strategy that promises passage to a more lush and prosperous future. Trade alone, they acknowledge, is but a tool for an overall solution to eradicate persistent poverty. Their rhetoric at least suggests they understand that freer trade only gets them half-way across the bay.

But looking at their efforts, it would seem that the agreements and the negotiating processare the only parts of the strategy they are executing. And sadly, no one is putting sufficient pressure on the officials to assist those certain to lose out on the deal. Indeed, protest leaders are so focused on the trade agreements that they have little time and energy to pressure the powers that be to do more than say the right thing.

Protesters in Guatemala clashed with police last week, as they demanded that the Guatemalan Congress refuse ratification of CAFTA, the Central American Free Trade Agreement with the United States. Two were killed and more than 100 injured. Meanwhile, CAFTA passed as expected, and Guatemala became the third country to ratify the agreement after El Salvador and Honduras.

The protesters complained that the negotiations, completed more than 15 months ago, had not been transparent enough. They demanded more consultations, even a referendum, on the agreement. Certainly, these trade agreements could always stand improvement. But having spent some time this past week on the sidelines during the latest round of trade negotiations between the United States and Andean countries held in Washington, I am convinced that no amount of access to negotiations will substitute for the efforts yet to be undertaken: ensuring that those segments of society most at risk from free trade will not be neglected.

These are not uncharted waters. We know the effects of free trade. Eleven years after the North American Free Trade Agreement (NAFTA) was ratified, small subsistence farmers in Mexico have yet to see sufficient technical, educational or infrastructural aid to adjust to the new free trade environment.

"Mexico never really focused energy and resources to make those kinds of changes,'' said former assistant U.S. trade representative Jon Huenemann, who participated in NAFTA negotiations. Had Mexico fought the good fight to make the trade agreement fit into a development strategy, he said, it would have addressed institutional weaknesses that prevented the country from taking full advantage of NAFTA.

To their credit, U.S. trade negotiators learned from the NAFTA experience and thus held parallel conversations during CAFTA negotiations (and are doing it now with the Andean countries) to discuss the sorts of things countries in the region will need to make the transition less painful. As a result of the dialogue with the Central American governments, Washington has provided them $146 million over the last two years, a positive step but not nearly enough. The Office of the U.S. Trade Representative also highlights that since the launch of negotiations, the Inter-American Development Bank (IDB) has approved more than $500 million in "CAFTA-related operations.''

The truth of the matter is no country has yet tapped into an IDB program dedicated exclusively to "meet the challenges of the trade adjustment process.'' Not enough attention and work has gone to what Robert Devlin of the IDB called "the real big chapter in the CAFTA story'' -- helping sectors adjust and compete. Devlin, deputy manager for integration, trade and regional programs, said the "natural tendency'' in many regional governments has been to judiciously allocate most of their resources to training their officials to become better negotiators.

Of course you want to negotiate the best trade agreement possible. And good trade agreements, in fact, put "much more pressure on domestic policies to perform,'' said Devlin. And if those policies are not in place and well funded, governments in the region may soon learn Mexico's painful lesson: free trade agreements "are not an automatic road map to success.''

Politically it couldn't be more urgent for governments to do the hard work of preparing the countries for the transition. Aware of building tensions, Guatemalan President Oscar Berger addressed his nation right before the congressional ratification to commit to a legislative agenda to "compensate'' the losers. Sadly those laws are only now under discussion.

Marcela Sanchez's e-mail address is desdewash@washpost.com.

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