Eugene has asked me if I might occasionally run a cross-post from MarginalRevolution.com, if I thought the topic would be of interest to VC readers. We each believe that the two blogs do not have massive overlap of readership. So here goes…
Here is one lengthy criticism of the treaty. Look there for the details, but here are my views:
1. The Bush Administration has not negotiated the treay on a bipartisan basis. In part this is Bush’s core style, in part the Democrats have not offered much useful assistance. If the treaty passes, the "pork cost" to swing Republicans will be high.
2. The worst parts of the treaty limit anti-AIDS drugs by extending intellectual property rights to Central America too strictly. Yes drug companies will try to price discriminate, but the Brazilian solution may be better. What will happen to generic medicines in Costa Rica? Of course patent-breaking is a bad international precedent, but is Central America the relevant international tipping point for the destruction of intellectual property rights? The net effect is difficult to estimate, read more here.
3. On the other hand, sooner or later these stronger patent protections might be imposed anyway, as Central American nations develop and join the global mainstream. The question is how many people will die in the meantime.
4. More generally, the U.S. is setting bad precedent by using free trade treaties as leverage to negotiate other non-trade deals.
5. The treaty remains hostage to the interests of Big Sugar, as the sugar quota is barely weakened. Nonetheless the sugar lobby still opposes the treaty, fearing a slippery slope of further erosion of privilege. This is a good sign for the treaty.
6. Don’t worry that the agreement does little for labor rights or environmental protection in Central America. Imposing such policies, before the recipient countries are wealthy enough to support them, is usually counterproductive.
7. The net move toward free trade is relatively small.
8. The biggest benefit of the treaty may be symbolic, by encouraging the Central American nations to embrace democracy more strongly and also to develop closer trade relations with each other.
9. Failure of the treaty would be a disaster, again for symbolic reasons. Trade negotiations would slow down significantly, and the age of trade agreements might be over.
The bottom line: This is probably a treaty we should pass, but it is not a treaty we should be proud of.
By the way, Heritage is now running a CAFTA blog. Russ Roberts has a more positive take on the treaty. Matt Yglesias says thumbs down.
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