Seemingly, President George W. Bush had multiple reasons for his recent four-day trip to Latin America. On the surface it was to remind the region the United States hasn’t forgotten about it and to recognize the success of democracy in countries such as El Salvador by proposing trade agreements.
Behind the scenes, Democrats accused Bush of pandering to the Hispanic vote, and the president shot back by complaining the Democrats were holding up important trade deals. Yet below all the hubbub lies a great idea – rewarding positive political growth with economic incentives. In this case those incentives are reduced trade restrictions.
Bush knows as well as any president that tough economic times can result in political hardships and even turmoil. After all, his father, former President George H.W. Bush, is widely said to have lost his re-election bid due to a countrywide recession in 1992. In Latin America, the consequences are often much more severe. Recently, Argentina went through three presidents in one week due to economic problems. These unstable events can lead to bloodshed, unfavorable governments and political leaders, and long-term security risks for other countries – remember the Lusitania and the World Trade Center. So for humanitarian and self-interest reasons, it is beneficial for the United States to encourage economic stability. And one way to do that is through free trade.
Lesser trade restrictions increase economic growth. For instance, by lowering the costs of goods, free trade allows consumers to purchase more goods, which increases demand. When demand increases, producers react by increasing supply, which in effect is raising the gross domestic product. To increase the supply of goods, producers must hire more laborers. And with an increase in people working, there is again an increase in demand for goods. This increase in disposable income for the country means that foreign firms will become interested in what they see as an increasingly lucrative market. To capture this market, some firms will establish branches of their business in the growing country. This will further stabilize the economy and provide yet more jobs. With the economy growing and unemployment falling, established young democracies will strengthen.
Bush’s proposal of free trade to El Salvador President Francisco Flores is a key example of how and where this type of policy could work. Only 10 years ago, El Salvador was suffering through a civil war. Inflation increased several thousand percent and the economy was in shambles. Today, though, the Salvadoran people have established a democracy and are working hard to improve their welfare. Creating a free trade pact with El Salvador will help them realize the fruits of this toil for many more years to come. It’s within the U.S. power to help establish the blossoming democracies of the world, and it’s in everyone’s best interest if it does.