Commentary : Enhance a Win-Win Trade Pact : Caribbean basin: The U.S. has benefited as much as the other 24 signatories to this agreement, but updates are needed.

The presidents of the nations of Central America are in Washington this week to impress upon the Clinton administration and Congress the importance of passing pending legislation to enhance benefits under the Caribbean Basin Initiative.

American outpouring of support for Central American and Caribbean countries in the aftermath of hurricanes Georges and Mitch reflects the spirit of solidarity and the strong political and economic ties characteristic of the relationship between the United States and many of its neighbors to the south. Recognition of these ties, and of the influence the United States exerts on Central America and the Caribbean, led the U.S. Congress and President Ronald Reagan, with strong bipartisan support, to enact the Caribbean Basin Initiative in 1983. The preferential terms of trade granted to CBI beneficiaries were designed to create jobs and reverse the commodity-dependent policies that had made the region’s economies vulnerable and unstable. The resulting stability would, in the eyes of policymakers, also encourage the growth of democracy. Impressed by CBI’s political, social and economic achievements, Congress in 1990 expanded and permanently extended the program.

For my country, with a rich democratic tradition extending back over 100 years, CBI has been particularly relevant in the area of economic development. But the benefits have not flowed in one direction only. The United States, too, has benefited from this program. Central America and the Caribbean--prior to the natural disasters of 1998 that severely crippled some of our key sectors--represented one of the fastest-growing export markets for U.S products. Some statistics will put this in perspective: Last year, U.S. exports to the region exceeded $19 billion, almost $6 billion more then U.S. exports to China. In 1997, U.S. exports to CBI countries were higher than U.S. exports to Argentina, Eastern Europe or Switzerland. From 1983 to 1997 period, U.S. exports to the region increased by 218%. During that same period, U.S. imports from CBI countries rose by 162%, an impressive figure, but one that pales in comparison to the increase in U.S. exports. In 1998, U.S. imports from CBI countries were only $17 billion, creating a U.S. trade surplus of $2 billion.

Perhaps the most telling figure for Americans is that trade under CBI has generated some 400,000 American jobs. In addition, the preferences accorded to Central American and Caribbean goods have increased opportunities for American investors in the region. This trade relationship has contributed to American job growth, American competitiveness, and an important U.S. trade surplus.

For this relationship to continue to thrive, the CBI program must be enhanced. Since its original enactment and its renewal, world trade has changed significantly. The margins of preference that CBI beneficiaries once enjoyed have steadily eroded. In particular, Mexico, which already enjoys the natural advantage of sharing a border with the United States, now faces fewer trade barriers than its Central American and Caribbean neighbors when exporting to the U.S. market. Unlike Mexico, we are not beneficiaries of the North American Free Trade Agreement, and we cannot afford to wait for implementation of the Free Trade Area of the Americas. We are extremely concerned about the trend toward increased imports from Mexico, because it will dwindle incentives to import textile and apparel goods from CBI countries.

Continued trade diversion of this kind will result in a loss of jobs in Central America and the Caribbean, and in a diversion of investments. One of the factors multinational firms take into account when opening new facilities is whether the country in question will provide them with access to preferential trading arrangements. With its exceptional access to the U.S. market, Mexico now provides a logical export platform to the United States. It would be difficult for us to stem the tide of trade and investment diversion unless the CBI program is enhanced to level the playing field.

Make no mistake. This is not a zero-sum game in which restrictions on imports from CBI beneficiaries will translate into more American jobs. On the contrary, CBI enhancement will benefit American workers. Without it, prosperity in Central America and the Caribbean will decline, as will the earning power that enables CBI residents to purchase nearly $20 billion worth of American goods each year. CBI enhancement is good not just for CBI beneficiaries: It is also good for Americans.