Victory for Costa Rica
The Central American democracy approves free trade with the United States.

Tuesday, October 9, 2007

IN A REGION where politics has too often been characterized by demagoguery, corruption and violence, Costa Rica has long stood out as a shining exception to the rule. Having abolished its army in 1948, the Central American country is set to complete six decades of uninterrupted civilian democratic rule. The latest demonstration of the Costa Rican people's common sense came on Sunday, when the electorate ratified the Dominican Republic-Central America Free Trade Agreement (DR-CAFTA), a tariff-slashing accord between the United States and six small countries to its south.

It was close: About 51.5 percent of the public voted yes, to make Costa Rica the last of the signatories to put the accord into practice. The victory probably would have been wider if not for the release, late in the campaign, of a regrettable internal memo showing that the yes campaign, led by President Oscar Arias, was thinking of trying to expand its margin by stoking voter fears of such free-trade opponents as Fidel Castro and Hugo Ch¿vez. The fact remains, though, that the referendum was a defeat for Mr. Ch¿vez and his populist "Bolivarian Alternative" to trade with the United States.

It was also a defeat for certain members of Congress, mostly Democrats, who had publicly leaned against DR-CAFTA ratification -- and now find themselves on the opposite side of the issue from a majority of Costa Ricans. Vermont Sen. Bernie Sanders, an independent who caucuses with the Democrats, and Rep. Michael H. Michaud (D-Maine) paid a supportive visit last month to opponents of DR-CAFTA in San Jose. Senate Majority Leader Harry Reid (D-Nev.)and House Speaker Nancy Pelosi (D-Calif.) wrote Costa Rica's ambassador in Washington to say that Costa Rica would not necessarily lose current U.S. trade benefits under the Caribbean Basin Initiative, which expires in September, if the pact were rejected. That prompted the White House to issue a reminder on Saturday that there would be no renegotiation of the deal if it were rejected; U.S. Trade Representative Susan C. Schwab added pointedly that there was also no guarantee that Caribbean Basin Initiative benefits would be extended.

Much has been made of these interventions, but the cross talk probably canceled itself out. More likely, Costa Ricans decided the issue on the merits. One of the biggest benefits will be unparalleled access to the U.S. apparel market. The biggest sweetener for the United States is an end to the existing state monopoly on insurance and telecommunications -- but this benefits Costa Ricans, too, because they will get lower prices and better service in industries that were previously insulated from competition. A 2005 World Bank study found that if DR-CAFTA follows the pattern set by previous trade agreements, it will increase growth by more than half a percentage point per year in Central America, making for nearly half a million fewer Central Americans living in poverty by 2010. Small wonder that Costa Rica spurned the shortsighted counsel of Washington Democrats and voted in its own self-interest.