November 25, 2014

Free(ze) Trade

David Poppe | 12/1/1995
One year ago, the Summit of the Americas commemorated and cemented a new regional order in which free trade, democracy and closer hemispheric ties ruled the day. A primary beneficiary of this new order was supposed to be Florida, gateway to Latin America and burgeoning trade hub.

How quickly things change. In the year since the summit, most Central and South American countries pursued economic liberalization and freetrade policies more vigorously than ever, but the U.S. government has backtracked on its commitment to free trade.

To be sure, the volume of trade passing through Florida ports continues to boom. More importantly for the state's economy, the volume of goods produced in Florida for export grew by 19.4% during the first half of the year, rising to $11.8 billion. That's nearly $2 billion per month in Florida-produced goods being shipped overseas.

Miami International Airport is bursting at the seams. It's already apparent that the $2.7 billion expansion program will not be enough to accommodate long-term growth at the airport. Some Dade County officials are advocating that the airport buy 500 acres or more west of the airport for future expansion.

Miami International Airport accounted for nearly 30% of Florida's trade during the first half of the year, with $7.7 billion worth of goods moving through the airport. The Port of Miami handled another $6.1 billion worth of trade goods.

But trade flows are growing elsewhere, too. While trade flow in the Miami U.S. Customs District, which includes all ports and international airports from West Palm Beach south, grew by 21.4% in the first half of the year, trade in the Tampa U.S. Customs District, which encompasses the rest of the state's ports, grew an almost identical 21.3%

About one-fifth of Florida's total trade flows through the Port of Jacksonville, which handled $5.1 billion in goods through June, including $3.5 billion in imports. Port Everglades in Broward accounts for $3.5 billion in trade, while the Port of Tampa handled $1.5 billion, or 5.8% of the state total.

This surge isn't likely to recede anytime soon. But experts say the explosive growth of the past five years is threatened by political currents that have turned against free trade.

A year ago, for example, it appeared Chile shortly would be included in the North American Free Trade Agreement (NAFTA). Yet President Clinton remains unable to get fast-track negotiating authority from Congress to add Chile to the pact. Without such authority, Chile's inclusion must be ratified by Congress, which can attach conditions as it sees fit.

Failure to include Chile in NAFTA would be a setback for plans to achieve a Free Trade Agreement of the Americas by 2005, which was one of the commitments made by all 34 countries at the Summit.

Now, however, Republican presidential candidate Patrick Buchanan advocates an isolationist economic policy, while U.S. Rep. Richard Gephardt pushes for weightier environmental and labor standards to be attached to future trade pacts. Many Democrats with ties to labor disapprove of free trade entirely.

In November 1993, when NAFTA was passed by Congress, President Clinton said the pact would create 170,000 new American jobs in one year. That never happened, although neither did the "giant sucking sound" of U.S. jobs flowing to Mexico predicted by Ross Perot. But when Mexico devalued its peso late last year, the resulting recession virtually shut off the flow of U.S. goods into the country. That has hurt. Moreover, the short-term mediocre returns from NAFTA leave many Americans unconvinced of the benefits of extending free-trade deals to other Latin nations.

All this has sent a message to Latin nations that the U.S. has turned ambivalent about free trade. "Florida could have a very good year in 1996. But long-term, we have the issue of U.S. leadership," warns J. Antonio Villamil, a Miami economist and former undersecretary of Commerce in the Bush administration.

Luis Lauredo, who served as executive director and coordinator of the Summit of the Americas, worries about more backsliding in 1996. "We have tremendous inactivity during an election year because everyone uses these elections as an opportunity to beat up on foreign aid," he frets.

Latin countries aren't waiting for the U.S. to come around. Mexico and the four countries involved in the Mercosur trade pact - Argentina, Brazil, Paraguay and Uruguay - already are talking to the European Union about trade agreements. There will be a trade summit in Madrid on Dec. 15 involving heads of state of the Mercosur and European Union countries. Similarly, several South American countries are reaching out to Asian nations to secure trade pacts with them. The U.S. risks being left out of these agreements.

"U.S. protectionist ramblings and isolationism have not caused a retreat in the hemisphere for free trade," says Jerry Haar, senior research associate at the University of Miami's North-South Center. "U.S. isolationism and protectionism among people like Ross Perot and certain members of Congress has done more to bond Latin American countries together."

According to a top aide, U.S. Sen. Bob Graham, who supports Chile's inclusion in NAFTA, similarly worries that Americans are sending wrong signals. "We've dug in our heels on Chile. We still don't have fast-track authority, and it doesn't look like it's going to happen until after the next election," says Graham's legislative assistant Russ Sullivan. "Clearly, we are not moving at the pace expected."

One important message will be sent shortly. Countries in the Caribbean Basin Initiative (CBI) were promised parity with NAFTA by the Clinton administration last year. These countries have been hurt by the movement of textile factories to Mexico since passage of NAFTA.

Now, however, Congress is hesitating to grant CBI parity. Some in the U.S. textile industry argue NAFTA is hurting U.S. manufacturers and shouldn't be expanded to include Caribbean nations. But free traders argue that keeping low-skill, labor-intensive textile plants out of the Caribbean won't save U.S. jobs but will cause factories to move to Asia. Sullivan says Sen. Graham worries that the U.S. will lose credibility with Caribbean and Latin nations if it reneges on the promise of CBI parity.

Lauredo says Latin nations are watching American moves closely in the aftermath of the Summit and NAFTA negotiations: "They are worried about the U.S., caught in this election year, rescinding a lot of the promises" of the Summit.

If that happens, the spirit of the Miami summit may turn into a ghost.

International Briefs

Searching for a way to boost tourism, Mexico may authorize casinos in vacation spots like Cancun and Acapulco and border towns like Tijuana. The Miami Herald reports that the number of U.S. tourists who spend more than a day in Mexico has remained flat at about 5.3 million annually for five years. Mexico thinks casinos might double the number of U.S. visitors.

The U.S. Department of Housing and Urban Development (HUD) has approved a $5.5 million low-interest loan for the development of 155,000 square feet of warehouse space at the Wynwood Foreign Trade Zone project in Miami. The trade zone will recruit freight forwarders and brokers, manufacturers, cruise ship suppliers and container customers.

Tags: Florida Small Business, Politics & Law, Business Florida

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