President Reagan, warning of the danger that "new Cubas will arise from the ruins of today's conflicts," yesterday proposed an economic plan for Central America and the Caribbean that includes increased financial aid and duty-free access to the United States for virtually all the region's exports.
In a speech to the Organization of American States, Reagan spelled out details of the long-awaited Caribbean basin initiative, conceived by his administration as a means of dealing with the poverty and social inequality that has produced such upheavals as the civil war in El Salvador.
To help solve these problems, Reagan, in what he called "the centerpiece of the program," said he will ask Congress to eliminate tariffs on all Caribbean products except textiles. That would mean duty-free entry to U.S. markets for such commodities as sugar, the economic lifeblood of many Caribbean countries.
In addition, the plan calls for increasing U.S. economic assistance to the region by $350 million in fiscal 1982, seeking a fiscal 1983 appropriation of $664.4 million for the area, providing tax incentives for U.S. firms willing to invest in the region,
Reagan has committed his prestige to controversial policy.Analysis, Page A13 offering technical assistance and training to private-sector business in the affected countries, and encouraging greater developmental aid to the Caribbean basin by other countries and international lending agencies.
El Salvador, where the administration has given top priority to supporting the civilian-military government's struggle against leftist guerrillas, clearly was the motivating force behind the plan outlined by the president. Although his stress was on the need for peaceful economic development, Reagan also laced his speech liberally with tough rhetorical warnings against Cuba and the Soviet Union attempting to extend their influence in the Western Hemisphere.
"I believe free and peaceful development of our hemisphere requires us to help governments confronted with aggression from outside their borders to defend themselves," he said. "Let our friends and our adversaries understand that we will do whatever is prudent and necessary to ensure the peace and security of the Caribbean area."
In this country, the president's words undoubtedly were listened to most closely for clues about the future course of his controversial El Salvador policy, which already has caused comparisons with Vietnam and triggered speculation about whether the administration might be weighing the dispatch of U.S. combat forces to assist the Salvadoran government.
In that respect, Reagan's speech contained no clear-cut signals that the administration is planning any dramatic changes of direction or escalation of the U.S. involvement in El Salvador, beyond previously announced increases in economic and military aid.
In its economic aspects, however, the speech had a significance that potentially goes far beyond the plan's connection to the immediate situation in El Salvador. Its "centerpiece" provision marks the first time that the United States has offered other countries a system of preferential tariff treatment that U.S. officials described as "one-way free trade."
Reagan said he will ask Congress to extend this duty-free treatment for 12 years. While the president noted that 87 percent of Caribbean exports already enter the U.S. market duty-free, the countries of the region long have sought preferential treatment for commodities such as sugar, which has been subjected to tariffs to help protect U.S. sugar producers.
As a means of maintaining safeguards for American producers and warding off potential opposition in Congress, the administration's plan would limit the duty-free treatment of sugar to 110 percent of the highest amount that each beneficiary country has sold to the United States in the past. In addition, the secretary of agriculture would be authorized to impose further limits if increased imports are found to be causing serious injury to U.S. producers.
Even with these limitations, U.S. officials, speaking at a briefing on the technical aspects of the program, stressed that the tariff-elimination provision could have major financial benefits for Caribbean countries. Thomas O. Enders, assistant secretary of state for inter-American affairs, noted, for example, that the Dominican Republic, the major Caribbean exporter of sugar to this country, could increase its sales revenues by "upwards of $50 million a year."
William E. Brock, the chief U.S. trade representative, said the administration, in trying to estimate the value of the program to Caribbean countries, had come up with "a rough figure of $800 million." Brock added, however, that "it would be unwise to predict what might result" since the real aim of the program is to encourage the development of new job-producing industries in the affected nations.
Reagan also emphasized that point in his speech. He noted that the exports covered by his duty-free proposal "cover only the limited range of existing products--not the wide variety of potential products these talented and industrious people are capable of producing."
The president stressed repeatedly that the program had been designed to promote development "on the strength of market-oriented policies and vigorous participation in the international economy." But, while his stress was on strengthening the private sector, he also conceded that the depressed financial condition of many governments in the region requires that the tariff and investment-inducing measures be complemented by increased U.S. monetary aid.
Administration officials noted that the planned $350 million aid increase would bring fiscal 1982 economic assistance to the region to $823.9 million, or $403 million more than in fiscal 1981. Brock said the hope is that recipient governments will use the money to stimulate or create local industries, but he conceded that many are so hard-pressed financially that they will have to use the aid for debt service or other balance-of-payments problems.
About $100 million of the proposed $350 million is expected to be earmarked for El Salvador. Enders, while saying that specific allocations for countries have not yet been decided, said large amounts also will go to Costa Rica, which is on the verge of bankruptcy, and Jamaica, whose conservative government is pursuing economic policies that the administration regards as a model for the region.
The president also said he will request an additional $60 million in security aid for the region, but he emphasized that he will maintain the 5-to-1 ratio of economic over military aid. Enders said that, while final decisions have not yet been made, the administration is likely to make new military assistance requests to Congress of up to $35 million for El Salvador, which already is receiving $81 million in the security area, and $17 million for Honduras.
Reagan and the other officials said eligibility for participation in the program will be based on negotiations between Washington and individual governments. Although the president said "we seek to exclude no one," both he and Brock made clear that they will not be favorably disposed to helping countries that seek to interfere in the affairs of others--a clear indication that the invitation is unlikely to be extended to Cuba or such allegedly Cuban client states as Nicaragua and Grenada.