Out of Control Policy Blog

The Next Big Fear?

Yesterday it was the internet. Today it's outsourcing. Tomorrow it might be CAFTA.

The issue: efficiency seeking innovations that stir job security fears, but end up creating more than they destroy.

So it's a good time to turn to Russell Roberts. Here he's making his case before Congress:

    CAFTA remains highly controversial with concerns that the agreement will cost the United States jobs trying to compete with low-wage workers in Central America working in a less demanding regulatory environment.

    Having recently traveled to Costa Rica at the invitation of the State Department to speak on trade issues, I was struck by the similarity of the concerns raised in Costa Rica. Surely, little Costa Rica would have no chance of standing up to the United States economy. Jobs would be lost to the powerful American workers.

    Both arguments cannot be right.

    ...

    Costa Rica currently has a state monopoly on telecommunications. There are a lot of engineers employed by that state monopoly. What will happen to them when that monopoly is opened to competition by CAFTA? Some will keep their jobs working in areas like land-line phones that the government will probably still be able to provide competitively. Some will find work with American firms now free to operate profitably in Costa Rica. Some will lose their jobs and find work as engineers outside of the telecommunications industry. And some will lose their jobs and find work outside of engineering.

    The average Costa Rican who is not an engineer employed by the state-run telecom company will be better off. The average Costa Rican will enjoy lower prices and more choices. That will mean more resources left over to do new things with, new products and services to enjoy that were not affordable before. That in turn will mean more employment in Costa Rica as those products and services expand, offsetting any job losses in the engineering sector.

How interesting that CAFTA hardly touches policies that protect the U.S. sugar industry:

    Despite the words "free trade" in the title of the agreement, CAFTA would allow only the tiniest of expansions in sugar imports phased in over 15 years. CAFTA limits the expansion of sugar imports into the United States to less than 2% of US consumption over the next 15 years.

    ...

    So we negotiate a trade agreement with some of the poorest countries in the region but we make sure that one of the things that they do best, grow sugar, is essentially off the table. There is no attractive way to defend that policy when you're standing in the fields of a poor country.

And yet groups that aim to help the worlds' poor keep insisting that what developing nations need is more aid.

Ted Balaker is Producer


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