Trade in the Hemisphere

investmenttool.com Opinion

The leaders of the Western Hemisphere have gathered this past weekend to discuss setting up a free trade zone. This could be a good thing so long as its done with care for people. It is important to lower trade barriers, but not turn the treaty into a corporate welfare agreement.

Lowering the trade barriers will lead to increased exports of American products. In Latin America, trade tariff's are between 15% and 25% on most goods. This contrasts the U.S. which allows over two thirds of its import trade to come in without duties.

We need only look to the European Union to see the benefits of a large free trade zone. Business is booming because of a unified currency and the free flow of goods. There are problems to look at as well. Larger, more efficient business interests have grown larger and pushed many smaller firms out of business.

In the long run, when inefficient business is swept away by the more efficient, the overall economic output of the region increases. But, there is a grim reality. Many people lose their jobs in such transitions.

So, a large free zone must be implemented with a regimen that makes sure millions of Latin American workers will not be put out of work by American competition. U.S. Corporations have competed and won on a global playing field. Most in Latin America have not.

If a free trade agreement is not crafted carefully, millions of workers will lose their jobs. This could lead to political instability and ruin a market that imports $60 Billion in American goods every year.

Trade barriers need to be lowered on a gradual basis, to give Latin America time to compete.

There is another important factor to be considered. A trade agreement can result in the export of millions of American jobs to low wage workers in Latin America. To benefit from free trade, these nations need to agree to labor and environmental standards. It's important to take into account the millions of Latin Americans who live in abject poverty. Wages and working conditions must be taken into account.

This trade pact offers a unique opportunity to improve the economy of the region. It will never happen if Congress does not grant President Bush fast track trading authority. Nobody likes system where you negotiate a treaty and then negotiate it again after Congressional Republicans weigh in.

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Shmuel Protter
investmenttool.com

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