The Benefits of Freer Trade with Latin America

The Benefits of Freer Trade with Latin America

New Study Examines the Pros and Cons of CAFTA-DR
May 26, 2005

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<?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Richard Morrison, 202.331.2273



Washington, D.C., May 26, 2005—The U.S.-Central American and Dominican

Republic Free Trade Agreement (CAFTA-DR) holds the promise of liberating economic markets throughout much of the western hemisphere, yet has faced opposition from labor unions, sugar and textile lobbies, and environmental groups. In a new study for the Competitive Enterprise Institute, Adjunct Scholar Frances B. Smith concludes that while some elements of the agreement leave much to be desired, bringing down trade barriers will ultimately benefit everyone involved.


“Freer trade will benefit consumers, households, and taxpayers in the U.S. and the CAFTA-DR countries by giving them greater access to goods and services, reducing prices, and providing significant welfare gains,” writes Smith in CAFTA-DR: Can Free Trade Hold Up to Special Interest Siege?


“More open trade with the U.S. would spur greater economic growth and improve incomes and employment opportunities in the CAFTA-DR countries. CAFTA-DR would also establish stronger economic ties for the U.S. with not only close trading partners but also close neighbors whose continuing economic and social stability is critical in the Western hemisphere.”


Ratification of the agreement could also help bolster the credibility of the U.S. in proposing a global reduction in agricultural tariffs before the World Trade Organization, an issue of special concern to developing nations with agriculturally dependent economies.


Despite being beneficial overall, however, CAFTA-DR still offers far too many exemptions for so-called “sensitive” U.S. products, while tying trade liberalization to a web of labor and environmental conditions which will only slow the growth and prosperity resulting from increased trade and subsequent worker and environmental improvements.