Free Trade on a Roll

The past, the present and the best possible future of free trade in the Americas came fortuitously together last week in Washington.

First, former leaders of Canada, the United States and Mexico gathered to celebrate the 10th anniversary of the signing of the successful North American Free Trade Agreement. Even more important, negotiators from the United States and Chile wrapped up negotiations for a long-promised free-trade agreement between the two countries.

Finally, at the White House, President Bush met with Luiz Inacio Lula da Silva, Brazil’s newly elected president. These two countries will co-chair talks next year to establish a Free Trade Agreement of the Americas by 2005.

The agreement with Chile, which seems certain to be approved by Congress, would eliminate tariffs on 85% of goods immediately and on all goods within 12 years. President Clinton promised the deal seven years ago, but it had to wait for the so-called fast-track negotiating authority that Congress finally granted Bush.

The measure would allow U.S. financial, communications and insurance companies into Chile and establish a secure and predictable legal framework for U.S. investors. Neither country can weaken environmental protections to encourage investment. Both countries have pledged to observe internationally recognized labor standards.

NAFTA illustrates the net gain likely to occur. Yes, some companies did shift manufacturing jobs to cheaper Mexican labor. As former President Bush said at the anniversary celebration, since it went into effect in 1994, “350,000 manufacturing jobs were lost in the U.S. ... but 2 million better-paying jobs were created.” There was no “giant sucking sound.”

Consider this. To sell one of its U.S.-made tractors in Chile today, Caterpillar Inc. would have to pay $13,090 in tariffs. Once the free-trade agreement is signed, that same tractor enters Chile tariff-free.

The big story is still being written. To unite the economies of 34 countries in the Western Hemisphere into a single free-trade zone presents much bigger challenges. Some nations are industrialized and others poor and mainly agricultural. Education levels vary wildly. Engaging Brazil, with the largest economy in the Southern Hemisphere, will be essential to pulling in the rest and determining how poorer nations can be helped to join.

After his meeting with Bush, Lula, as the Brazilian president is widely known, told reporters he favors aggressive free-trade policies -- a turnabout from his fiery protectionist past. He urged the United States to end subsidies and trade barriers that keep Latin American farm products, such as Brazilian orange juice, from U.S. buyers.

With NAFTA running smoothly and a trade deal with Chile at hand, the U.S. can focus on Brazil as the next steppingstone to a regional trade deal.