October 6, 2008 12:43PM

Punish Goverments, Not People

The Washington Post implicitly calls today in an editorial for the U.S. to “punish” those Latin American governments that have been dismantling democratic institutions and attacking U.S. interests in the region. According to the newspaper, the weapon the White House and Congress could use is removal of unilateral trade preferences that Washington currently grants to countries such as Ecuador and Bolivia. The Post even mentions the benefits Nicaragua and Honduras get under CAFTA, as if these countries could be expelled from the regional agreement if their governments continue their anti-U.S. rhetoric.

The Post gets it wrong. By granting trade preferences to Latin American countries (whether through unilateral programs or trade agreements) Washington is not “subsidizing governments” as the newspaper puts it, but dismantling barriers so that Latin Americans and American companies trade products and services freely. People, not governments, trade.

If the U.S. government were to remove trade preferences to unfriendly countries in the region, it would be punishing the people whose jobs depend on exports to the U.S. market, rather than punishing their governments. The effect would be just the opposite of what the Post intents: it would leave unemployed tens of thousands of Latin Americans who would then depend more on government to subsist. It would empower the region’s populist governments by extending their popular base. And, it would arm the populists with ammunition as they will point at yet another example of American “aggression” toward their countries.

This is similar to the case of the U.S. embargo towards Cuba. Even though the Post’s editorial doesn’t go as far as proposing to cut off all trade between the U.S. and these countries, the suggestion is analogous.

With respect to CAFTA, it would be quite damaging for the U.S. reputation if it were to denounce that trade agreement in order to “punish” two of its signatories. Such a move would also harm friendly countries like Costa Rica, Dominican Republic, Guatemala and El Salvador and taint the U.S. as a serious and reliable commercial partner. FTAs with the U.S. would cease to be predictable and permanent tools to liberalize trade. It’d be an ominous precedent.

Interestingly, the Post doesn’t mention suspending foreign aid to these countries as a more effective way to punish their governments. Bolivia, Honduras, and Nicaragua are or have been in the payroll of USAID and the Millennium Challenge Corporation in recent years. Ironically, the MCC was conceived as an effective aid mechanism that would reward countries that show a “commitment to policies that promote political and economic freedom.” Just the opposite happened. What a surprise.