U.S.-Chile Trade Stopper

House Minority Leader Richard Gephardt (D-Mo.) and his allies in the AFL-CIO owe American workers an explanation of why the United States is losing business in Chile. The answer is no mystery: tariffs and other trade barriers. And the solution is readily available: Congress needs to give President Clinton fast-track authority to negotiate free-trade agreements.

Free trade is the name of the game in today’s global economy, and those who still don’t get it, like the congressman from Missouri, could learn a thing or two from those who do, say Canadian Prime Minister Jean Chretien and hundreds of Canadian business people who will be making a trade trip to Santiago next month.

U.S. exports to Chile increased 43% in 1995, then fell to almost zero growth this year in the face of competition. Under free-trade agreements with Santiago, Canadian and Mexican telecommunications equipment and motor vehicles are helping to fill the void in Chile’s imports created by the American retreat.

Consider the case of VTR Telecommunications, a Chilean cable and telephone provider. When it decided to modernize, one Canadian and two American companies were invited to submit bids. Canada’s Northern Telecom Inc. won the $180-million contract. It was not that the Chilean company had any special desire for the Canadian product but rather the beneficial product of the Canada-Chile free-trade agree- ment. That deal went into effect last July. Canada moved in when it realized Clinton would fail to convince Gephardt and his labor allies that he needed fast-track authority to negotiate a free-trade agreement promised to the Chileans back in 1994.

Gephardt insists he wants to help American workers with “fair trade,” not free trade. The bottom line is the determination of the minority leader and his union and congressional supporters not to allow American wages to be undercut by cheap foreign imports. But ultimately free trade works to the benefit of both sides. The American consumer makes choices based on both price and quality.

An example involving Chrysler illustrates the dynamic. Until this past summer, the U.S. auto maker had been selling vans assembled in its St. Louis plant to the Chileans. After the Canadians signed their free-trade agreement with Chile, the corporation was faced with a choice: export vans from its Ontario, Canada, plant only and gain the benefits of lower tariffs in Chile or hang on to its production in St. Louis and risk losing business. Chrysler chose Ontario.

Import barriers in most Latin American countries hover around 15%; the average U.S. import tariff is only about 3%. Washington needs to strike deals for lower foreign tariffs negotiated through free-trade agreements. That’s what it takes, and that’s what Congress should deliver.