AFTER A LONG period of gloomy trade news, things may be looking up. On Tuesday the Senate Finance Committee signaled its approval of a free-trade deal with the Dominican Republic and five nations of Central America, and yesterday the House Ways and Means Committee followed suit. The pact, known by the acronym CAFTA, is too small to matter much to the U.S. economy, but it would boost incomes substantially in the other signatory countries, creating new jobs for the poor workers in whose names Democrats have cynically opposed the deal.
At the same time, CAFTA will signal that the United States remains an attractive partner in the region. Given the current rise in anti-American populism in Latin America, that is a message worth sending.
CAFTA still faces a potential challenge on the House floor, and there is a more immediate hitch. To get the deal through the Senate committee, the administration has issued a vague promise to Sen. Craig Thomas (R-Wyo.) to discuss the deal's sugar provisions. These are exceedingly mild: Although CAFTA is billed as a free-trade deal, it increases the sugar quotas imposed on Central American exporters by an amount equivalent to 1.2 percent of annual U.S. consumption. But Mr. Thomas and other sugar senators feel that even this mild increase is unacceptable.
It's not clear what the administration will give Mr. Thomas, but the sugar lobby's suggestions thus far have been absurd. Its allies have recently suggested that the administration could renegotiate NAFTA to exclude Mexican sugar; that it could promise to leave sugar out of future regional trade agreements; and that, if Central American sugar has to come into this country, the U.S. government could prop up prices by ensuring that it be used to make ethanol. Even much more modest concessions to the sugar lobby would be hard to justify. Undoing the slight relaxation of sugar quotas envisaged in CAFTA would mean higher prices for American consumers and fewer jobs for Central American farmers -- all for the sake of protecting U.S. producers, notably the agro-industrial giants of Florida that contribute copiously to U.S. election campaigns. In Mr. Thomas's home state of Wyoming, a grand total of 181 farms grow sugar. Does he really want to hold U.S. trade policy and Latin America policy hostage to such a narrow interest group?
Short of renegotiating CAFTA, the administration may be tempted to buy the support of the sugar lobby by promising it other forms of federal largesse. But before it gets too generous, it should consider the precedent it would be setting. Trade creates prosperity because it forces sheltered producers to compete in a tough marketplace. If every trade deal is accompanied by a splurge of corporate welfare, the objective of increased efficiency will be undermined.