U.S. Economist Mixes Romance, Market Theory

February 18, 2005

LOVE was in the air as visiting U.S.economist and author Russell Roberts presentedtwo lectures on trade and economicsin San José Monday.The university professor gave hismaterial a Valentine’s Day twist: he criticizedfree-trade opponents for creating a“dishonest romance” to build support forprotectionism, and promoted his mostrecent book, “The Invisible Heart: AnEconomic Romance.”Roberts, a professor at George MasonUniversity in Washington, D.C., a NationalPublic Radio (NPR) commentator and acontributor to myriad publications, spoketo business executives gathered at a morningevent sponsored by the Costa Rican-American Chamber of Commerce(AmCham) and at an afternoon seminar forjournalists.“THE Invisible Heart,” like Roberts’previous book, “The Choice: A Fable ofFree Trade and Protectionism,” is a mix ofeconomic theory and fiction.Between romantic entanglements,Roberts’ protagonists debate corporateethics and market theories. He pairs characterswith opposing views: a high-schooleconomics teacher with a liberal literatureteacher, and a CEO outsourcing his laborto Mexico to maximize profits with an idealisticlawyer intent on suing the company.Roberts, like the economics teacher inthe novel, advocates a hands-off governmentapproach that prioritizes individualfreedom and allows market forces to takeeffect.“The more open a nation is to theworld, the more it benefits,” he said.ROBERTS applied this argument tothe proposed Central American Free-TradeAgreement with the United States(CAFTA). In his opinion, the agreementdoesn’t go far enough to liberalize the markets.“CAFTA is not free trade. Look at thesize of it,” he said, holding his thumb andindex finger inches apart in reference tothe document signed last year by theUnited States, five Central American countriesand the Dominican Republic. (Askedthis week, the U.S. Embassy said the finalCAFTA document contains 2,530 pages.)He added that if he were in charge, theUnited States would eliminate tariffs andrestrictions on imports altogether.While he expressed whole-heartedsupport for the easing of trade restrictionsrepresented by CAFTA, he advised hisCosta Rican audiences, business leadersand journalists alike, to be straightforwardabout the agreement’s drawbacks.“NEVER lie,” he said. “Never say,‘CAFTA is going to be great for everybody.’It’s not. It’ll be great for most CostaRicans… and certainly for most in a fewgenerations.”El Salvador became the first country toratify the agreement in December (TT,Dec. 24).Costa Rica’s legislators have not yetbegun to review CAFTA.AmCham members and other privatesectorleaders in Costa Rica have been discussingways to disseminate informationabout the benefits of CAFTA for months(TT, Nov. 12, 2004).ROBERTS also argued that CAFTA’sopponents, both in Costa Rica and theUnited States, appeal to the heart withemotional arguments he finds illogical,building up nostalgia for lifestyles that freetrade often eliminates, such as farming.People often want to preserve their oldway of life for their children, he said, evenif that way of life has significant disadvantages.“Your Costa Rica will be a very differentCosta Rica than your grandparents’,”he said, explaining competition from theUnited States will eliminate some industriesor businesses and make room for others.“If you have a dream to be a corn orsugar farmer in Costa Rica under CAFTA,forget it.”He added that some factories and smallbusinesses would certainly close downbecause of increased competition underCAFTA. However, he said, “by allowing(those factories) to die, we open up newopportunities for (the next generation).”THE economist said the idea that freetradeagreements create or destroy a significantnumber of jobs in the long term issimply wrong. The agreements “changethe kind of jobs that a nation has,” he said.According to Roberts, certain elementsof CAFTA, such as the lifting of monopolieson Costa Rican telecommunicationsand health insurance, will certain cause joblosses, as did the end of AT&T’s monopolyin the United States in 1984.“That will happen here. It is inevitable.(Costa Rica) will have to decide how muchto help (the people who lose their jobs),and for how long,” he said.WHITNEY J. Witteman, EconomicSection Head of the U.S. Embassy in SanJosé, present at one of the lectures, saidthat because many tourism businesses useimported products, tariffs on whichCAFTA will lessen or eliminate altogether,the agreement will allow those businessesto offer cheaper services to visitors. Thiscould be enough to attract them to CostaRica instead of the Caribbean or otherpotential competitors, according toWitteman.FOR more information on Roberts andhis work, visit www.invisibleheart.com

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