Time to embrace Central America with free trade
US Trade Representative Robert Zoellick has called for consideration of a free trade agreement with the nations of Central America. It's about time.Skip to next paragraph
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It was 10 years ago that the Salvadoran government signed a peace treaty with the Farabundo Marti National Liberation guerrillas, ending Central America's most brutal civil war. A year earlier, in 1990, Nicaragua's armed conflict had come to a halt. And by then the Guatemalan government had largely subdued its prolonged insurgency, although it took six more years to reach a formal peace accord.
During the 1980s, the United States massively aided its battlefront allies in the region, to the tune of some $10 billion over the decade - far more than what the US now provides Colombia and the rest of the Andean region to fight drugs.
With the wars over and freely elected governments in place in all five of the region's nations, most Central Americans are certainly better off today than they were a decade earlier. Still, the region's future is precarious. Only in Costa Rica are there solid democratic institutions and a fully viable economy. The other four Central American countries have had only limited success - with El Salvador somewhat ahead of the others - in building democratic practices and decent government, establishing a basis for economic growth, reconciling their divided societies, and dealing with immense social problems, including pervasive crime and violence.
All four are poverty stricken. They account for half of Latin America's eight poorest countries, and include two of its three poorest.
Political turmoil is growing in several Central American nations and, in some instances, territorial disputes between them threaten armed conflict.
It will come as no surprise that, with the onset of peace in Central America, US assistance dried up. Indeed, US development aid has been slashed to the bone almost everywhere in the world. Aside from the Marshall Plan support to Europe after World War II, Washington has always been more generous in helping governments fight wars than it has been in assisting nations to recover from them.
Most disappointing has been the US failure to replace its aid with secure access to US markets for Central America's exports, as Washington consistently pledged to do. As a Honduran diplomat remarked, the US kept only half its promise of "trade, not aid."
During the 1980s, as part of its war-related support, the Reagan administration approved the Caribbean Basin Initiative, which grants special trade privileges to a broad range of Central American and Caribbean products. The benefits to Central America were substantial, even though the package excluded many of the region's most important exports (such as textiles, sugar, and other items that directly competed with US-produced goods.)
With the passage of the North American Free Trade Agreement in 1993, however, Mexico gained an overwhelming competitive advantage, and the value of the Caribbean initiative to Central America's economies began to diminish. This past year, Washington extended some of NAFTA's trade benefits to the region - but the gains have been meager, in part because implementation has been unsatisfactory.
Central America (and perhaps the Caribbean as well) should be incorporated into NAFTA or the US should make its own free trade deal with the region (as our NAFTA partners, Canada and Mexico, are doing). And if it is not possible to make a deal with every Central American country, then Washington should begin negotiating bilateral arrangements with those countries that are ready to move ahead - as it is now doing with Chile in South America. Costa Rica and El Salvador should be at the head of the list.
And just as Washington is initiating serious talks with Mexico about migration, it would be helpful to open similar talks with Central American nations. The economic importance could be immense. The nearly 1 million immigrants from El Salvador in the US together send back more than of $1.5 billion a year - equivalent to more than 60 percent of El Salvador's export revenues and 10 times the amount it receives in foreign aid from all sources.
For its part, Guatemala receives some $550 million in remittances, Nicaragua $350 million, and Honduras $370 million. Many people sending these sums are undocumented or enjoy only temporary status. But their return would be a devastating blow to the economies of each of these countries - besides imposing terrible personal hardships on the families involved. As in the case of Mexico, a humane solution is needed, one that recognizes the contributions these immigrants are making to the US economy.
No less than Canada or Mexico, Central America is part of North America - as even a cursory review of the region's geography, foreign-trade and investment patterns, and migration flows reveals. US policy should start to reflect that fact.
Peter Hakim is president of the Inter-American Dialogue.