Saturday, October 06, 2007

"Free Trade"

Also in the current issue of The Economist is an interesting article about trade deals between the US and Central and South American countries.  It is interesting that Bush (and other Presidents) have espoused free trade and shunned protectionism, yet the US still subsidizes American farmers.

Commerce between friends and foes

From The Economist print edition

The United States may finally ratify a trade deal with Peru. But pan-American trade diplomacy remains a mess

IN HIS first term as Peru's president, in the 1980s, Alan García was a firm believer in protectionism, banning the import of foreign cars and even of Chilean wine. But since coming to office again last year he has embraced free trade with a passion bordering on mania. "More trade and more investment [means] less migration, less poverty and less environmental destruction," he told a meeting in Lima last month convened by the World Trade Organisation (WTO). "You might resign yourself to just having a free-trade agreement with the United States, but for me it's not enough," he told his audience, ordering his harried trade minister to secure similar deals with a score of other countries.

That Mr García was so pumped up was perhaps because at long last Peru's trade deal with the United States, negotiated 18 months ago, looks close to ratification by a hitherto reluctant American Congress. On September 27th the administration sent a bill to Congress after a majority of the House Ways and Means Committee and the Senate Finance Committee indicated they would back it. Though upsets are still possible, supporters reckon the bill will be approved within weeks. But for free-traders, that is cause for only the faintest cheer.

The benefits to Peru seem clear. Mr García, who when a candidate was sceptical of the deal, now says that it could add an additional percentage point to economic growth (which reached 8% last year). That is mainly because it provides investors with greater security. Peru's industrialists' association reckons that it could prompt an extra $9 billion in industrial investment in 2008 and 2009 alone.

Opponents worry that farmers, especially of maize, cotton and wheat, will struggle to compete with their subsidised counterparts in the United States. They also fret that American companies will try to take out patents on Amazonian plants.


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