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Protectionism's Blowback

August 19, 2002

In Argentina, even in the wealthier area that includes Buenos Aires, half of the population lives in poverty in shantytowns. In Brazil, 10% of the people control half of the wealth. In Guatemala, about two-thirds of children under 5 years old are chronically malnourished. In Colombia, an average of eight people a day are kidnapped for ransom.

To blame the United States, the free-market economy and the Bush administration for these and other political, economic and social ills--as some Latin American leaders and U.S. critics have done recently--is foolish. But to ignore the problems that besiege neighbors of the U.S. would be reckless.

Consider the decisions made by President Bush and Congress that harm free trade. The farm bill that the president signed into law subsidizes U.S. farmers to the tune of $180 billion over the next decade ... as the administration tells poor countries to lower their subsidies to their own farmers.

That damage is done, and, given the realities of congressional election-year politics, Washington is not going to revisit farm aid or eliminate unwise tariff barriers imposed on foreign steel products.

However, the administration must not pretend it doesn't understand the effects of its actions on Latin America.

Protected by generous subsidies, U.S. farmers are flooding world markets with underpriced agricultural products. Driving down prices distorts markets and makes it impossible for unsubsidized farmers to export, compete and sometimes even survive.

Countries that produce corn, wheat, rice and soybeans are suffering the consequences of U.S. protectionism. Mexico's corn production has been negatively affected, and in Brazil and Argentina farmers are forced to accept lower prices for their most important export crops.

So while the administration preaches free-market theology in Latin America, its actions undercut its homilies. Many in the region now believe that a free-market economy is incapable of delivering the promised prosperity. That's wrong. The serious problems Latin America confronts are due to a combination of historical factors and new ones stemming from the realities of life after Sept. 11. But the fact remains that almost every big problem in the region has a repercussion in the United States.

Legal and illegal immigration to the U.S. from Mexico, Central America and some countries in South America increases with every crisis. Oil supplies to the U.S. from Venezuela could be threatened if the political crisis there goes out of control.

That is why the Bush administration should consider confidence-building moves in the region. At the top of the to-do list should be accelerating negotiations that would lead to a free-trade agreement in the Americas. To arrive at such an agreement, the United States must be willing to relinquish some of its protectionist barriers.

The Bush administration's challenge would be to make the case that protecting U.S. interests often requires thinking beyond the country's borders.

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