CAFTA, the Central American Free Trade Agreement, is the wrong trade agreement at the wrong time.
Not that there's anything so wrong with CAFTA's provisions -- the United States gives up little and gets a lot in return. In the ideal world, it would be approved with great fanfare this week as Washington plays host to Central American presidents.
Instead, however, our visitors are likely to be treated to largely specious and patronizing arguments from Democrats about their lack of "labor standards," and equally specious and patronizing arguments from Republicans that these countries will slide back into military dictatorship if CAFTA is not approved.
In truth, in terms of its politics and its economics, it is the United States that is looking like a banana republic these days. The iron-fisted one-party rule. The politicization of the military and the judiciary. The dangerously high budget and trade deficits. The landed oligarchy with Congress in its pocket.
This last, of course, refers to the sugar lobby, which for decades has lavished money on politicians of both parties to preserve prohibitive tariffs and restrictive import quotas that cost Americans at least $1 billion a year in subsidies and artificially high sugar prices. During the most recent political cycle, sugar interests contributed $22 million to federal candidates, exceeding the generosity of other, much larger farm interests.
It should tell you everything that Bill Clinton interrupted one of his late-night assignations with Monica Lewinsky to take a call from Alfonso Fanjul Jr., Florida's top sugar baron, who was upset about a proposed penny-per-pound tax on sugar to pay for environmental cleanup of the Everglades. The restoration program survived; the sugar tax did not.
Now Alfonso and the rest of Big Sugar find themselves on the wrong side of history. Trade liberalization has gone as far as it can without the United States, Europe and Japan phasing out farm subsidies and opening their markets to agricultural imports.
By any standard, the sugar concessions negotiated by the Bush administration in CAFTA are minuscule -- over 15 years, import quotas would rise by less than 1 percent of current U.S. consumption. But in deciding to call in its chits and try to kill CAFTA, Big Sugar sees its chance to take sugar protections off the negotiating table once and for all.
The problem for the Bush administration is that CAFTA doesn't offer enough benefits to exporting industries to get them juiced up about this fight. Even supporters of CAFTA estimate that it will boost exports by $3 billion a year, a rounding error in an economy that is running a $600 billion annual trade deficit. For too many members of Congress, it will be too easy just to vote no.
Republicans from the Dakotas, Idaho, Oregon, Florida and Louisiana, for example, are lining up with "struggling" family sugar farmers back in their districts. Their defection, along with that of textile-state Republicans, will force House leaders to turn to Democrats to push the treaty through.
Democrats, however, aren't too receptive. Half are so reflexively protectionist that they actually voted against a free trade treaty with Australia, which has a minimum wage of nearly $10. And the other half are so angry at the heavy-handed tactics of the White House and Republican leaders that they have no interest in pulling the president's bacon out of the fire.
The danger in putting this treaty up for approval now is that a defeat for CAFTA will signal to the world that the United States can't walk the walk when it comes to curbing farm subsidies, thereby killing any prospect for the trade talks that really do matter -- those in Geneva aimed at a global trade treaty. To avert that defeat, a desperate White House might try to pick off enough sugar-state votes by promising not to include sugar in any future deals. But either way, the effect will be the same: Hundreds of thousands of high-paying export jobs in growing service and technology sectors will be sacrificed to preserve the livelihood of 10,000 subsidy-addicted farmers and agri-millionaires.
As economic outcomes go, that's about as bad as it gets.
Steven Pearlstein will host an online discussion at 11 a.m. today athttp://washingtonpost.com. He can be reached atpearlsteins@washpost.com.
