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Trade deal would put foreign firms on equal footing with U.S. companies


WASHINGTON - The Central America Free Trade Agreement debate is heating up, and one part of the proposed pact has not received the attention it deserves - an overlooked section that offers further evidence why Congress should emphatically reject CAFTA.

Chapter 9 of the agreement covers government procurement and establishes a rule of "national treatment" in government purchasing. This means that under CAFTA, each participating nation must treat goods, services and suppliers from the other CAFTA nations in a manner that is "no less favorable" than it treats domestic firms when awarding contracts. And so the U.S. government would not be allowed to treat its own citizens better than foreigners, or use "Buy American" policies to support the domestic economies.

The CAFTA nations include Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic.

Governments have long used procurement to support domestic industry, particularly public infrastructure and national defense. If the Army needs new uniforms, for example, or the State Department needs new vehicles, it simply makes sense that money taken out of the economy through taxes should be plowed back into the economy via the procurement of goods manufactured in the United States. Otherwise, the economy is weakened.

Such government spending is a vital stabilizer during the business cycle and has been an effective tool for stimulating the economy.

There already have been protests against federal, state and local governments that outsource U.S. work to other countries. Much of this has involved security concerns over sending sensitive personal records to overseas data processing centers.

But there also has been a disturbing trend at all levels of the U.S. government in allowing foreign firms to bid against U.S. firms for projects paid for with taxpayer dollars. With the United States having run a $617 billion trade deficit last year (heading toward $700 billion this year), U.S. officials should not be adding to the nation's economic woes by sending more taxpayer money - and the jobs and productive capacity it supports - out of the country.

The lure of saving money on imports is a penny-wise, pound-foolish notion when it slows the economy and shrinks the tax base. The only way to balance budgets without excessive taxation is to grow the domestic economy. That is why a majority of states have refused to come under CAFTA rules.

Unfortunately, the U.S. trade representative who negotiated CAFTA, Robert B. Zoellick, has been hostile to all "Buy America" preferences. When the House Armed Services Committee tried to strengthen the domestic production of critical weapons technology for the U.S. armed forces in its 2004 authorization bill, Mr. Zoellick objected.

Yet the World Trade Organization Government Procurement Agreement allows "the protection of essential security interests relating to the procurement of arms, ammunition or war materials, or to procurement indispensable for national security or for national defense purposes." It's odd when the WTO shows more concern for national interests than does the U.S. trade representative.

CAFTA may appear to be a minor agreement with small countries of no economic importance. But it contains controversial provisions that pose major threats to the U.S. economy should they establish precedents for future agreements. The only way to change a failed trade policy and embark on fresh strategic thinking is to lay CAFTA aside.

William Hawkins, a trade expert and former staff member of the House Armed Services Committee, is senior fellow for national security studies at the U.S. Business and Industry Council.

Columnist Trudy Rubin is traveling on assignment.

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