"For Everything the North Gives It Exacts a Price In Return"*

I have never been to a Central American country. I stayed three weeks in the Philippines, but I willingly admit that I do not know poverty. (It is sad that US poverty experts grew up in Greenwich, CT. I do not think that time served in the Peace Corps qualifies you as a poverty expert.) Therefore, I do not understand the opinions or the situations of the poor in Central America. I am an arrogant US citizen, and I support any steps that make trade freer.

My question is how can CAFTA hurt the average person? It might do nothing for the average person in Central America, but it cannot make them worse off than they are currently. Trade must be mutually beneficial to occur. Central Americans will not sell anything to the US without getting something more valuable in return and vice versa.

Before Central American farmers are driven off their farms by US farmers, Central America has to give something in return for US food. There are no free lunches. What Central America sends to the US must be less valuable to Central America than the imported US food. There must be a net benefit to Central America, and the average Central American is better off after trade. There is a bigger pie to split amongst the same number of people.

But, Nicolasas's argument is that the median Central American might be worse off than he or she was before CAFTA. Positive economists whom are always looking for work will say this question is empirical. There have been studies on the issue, but I doubt if they prove anything.

My opinion is that that everyone will be better off or at least not worse off with CAFTA. Again my US arrogance comes through because I do not think that distributional asymmetries matter. Wealth breeds opportunity for both those with low and high initial endowments. Of course, there are potential political problems, but greater wealth makes correcting political problems both feasible and profitable. A country without money cannot build schools. Wealth must come first.

The continuous value theorem roughly states that to get to point C from A you have to go through B (all values between A and C). CAFTA is not perfect. It is a political instrument with political problems, but it is a step in the right direction for Central America.


* Bruce Springsteen