Costa Rica's CAFTA Referendum

Dani Rodrik writes:

Dani Rodrik's weblog: How will Costa Rica vote on trade?: Costa Rican voters are deciding in a referendum today whether to participate in a U.S.-led regional trade agreement, CAFTA. Proponents tout the benefits on enhanced market access in the U.S., while opponents fret about provisions that will require changes in domestic regulations (in telecomms and insurance in particular), increase rights of U.S. investors, tighten intellectual property rules, and open up domestic agricultural markets. Here is a detailed summary of the agreement.

I have been a critic of these regional agreements in the past because their benefits tend to be greatly oversold. The additional market access you get is generally not worth the restrictions on your policy space that you have to accept. Developing countries have tended to sign on to these more for their signaling value ("we are a nice country and open for business") than for the direct economic gains. If NAFTA has proved such a disappointment for Mexico, it is hard to imagine that CAFTA will do a great deal for the development prospects of these countries.

Costa Rica is a long-standing democracy that rightly prides itself in its social arrangements and the quality of its polity. I do not know enough to have a strong view as to whether CAFTA is good or bad for this country. But I am happy that there is a referendum on the subject. Let the people decide.

I think that this is not something that Dani would ever have written had he been smart enough to accept our offer to come to Berkeley. Here in California we have referendums. LOTS of referendums. It is not an inspiring sight. It is much better for voters to elect representatives who share their values, and for the representative to then study and think and so develop informed opinions on the issues.

This idea--"the representation of the people in the legislature by deputies of their own election"--is, as Alexander Hamilton wrote 220 years ago, a great innovation in the

science of politics... [which] like most other sciences, has received great improvement. The efficacy of various principles is now well understood, which were either not known at all, or imperfectly known to the ancients.... [W]holly new discoveries... [and ideas that] have made their principal progress towards perfection in modern times... are means, and powerful means, by which the excellences of republican government may be retained and its imperfections lessened or avoided..."

Referendums have advantages as symbolic actions raising the issue decided to a higher place as far as the consent of the governed is concerned. But for making good decisions? Very doubtful.

I am also puzzled by Dani Rodrik's lack of a view. If an economics professor specializing in global development and political economy doesn't have an informed view, who does?

I do have a view. Some of the provisions of CAFTA on intellectual property, et cetera, are bad for Costa Rica. Guaranteed tariff-free access to the largest consumer market in the world is very good. And almost all of the "restrictions on the policy space" imposed by CAFTA keep governments from going places where they should not go in the first place. On balance, CAFTA is a plus--although not a huge plus--for Costa Rica.

---

UPDATE: And it looks like I agree with a majority of the voters of Costa Rica:

AFP: Costa Rica votes yes to US free trade deal: partial results: Voters in Costa Rica narrowly backed a free trade deal with the United States, according to partial official referendum results released by electoral authorities on Sunday. Out of 73 percent of votes counted, just over 50 percent of voters said yes to the agreement against 47.5 percent who voted no, the Supreme Electoral Tribunal said. Turnout was around 60 percent.

If the small, relatively rich nation accepts it, the Central American Free Trade Agreement will open local markets to US products but also boost Costa Rican exports to the United States. It has been accepted by several other countries in the region, but faced left-wing opposition in Costa Rica, where President Oscar Arias was forced to call a referendum on it after more than three years of domestic debate...

Comments

[meno]

'And almost all of the "restrictions on the policy space" imposed by CAFTA keep governments from going places where they should not go in the first place'

Really? I also think it's probably a plus. But I think you underrate the restrictions on the policy space.

Have you looked at how the US govt interprets as barriers to free trade such things as govt-dominated buying of pharmaceuticals? NAFTA doesn't push that issue because the Canadians wouldn't wear it, but other countries get pushed towards a more privatised health approach. Big pharma are a big driving force behind the USA's bilateral approach to trade treaties.

Meanwhile bilateral treaties undermine attempts at global agreements: and global agreements seem the only way to kill off that despicable cockroach, the agricultural subsidy.

[I agree with you that the US shouldn't be in the business of negotiating bilateral treaties. But the question here is: should Costa Rica accept this one?]

[derrida derider]

You underestimate how harmful the "intellectual property" provisions are to developing countries. Imposing the egregiously protectionist patent and copyright laws of the US onto other countries means these are "managed trade", not "free trade" agreements.

Why do the elites in such countries then appear so keen on them? for the familiar reasons protectionism always appears popular - costs are diffuse and invisible while benefits are concentrated.

The irony, of course, is that the US got a substantial boost to its own development by ignoring the (much more liberal) intellectual property laws until they themselves reached the technological frontier. If these developing countries had any sense they'd do the same.

[Tomas]

I do not know anything about costa rican politics, but as to the question of referendum on foreign and trade policy I have some experiance from the danish EU/EC referendums.

In Denmark, in my analysis at least, the political class was very much at odds with a good chunk of the danish electorate. The fear was that EU/EC resistance could lead to anti-EU parties getting a boost as some people would regard the policy towards EU as a important political question.

To defuse this, referendums were a useful tool. Since there was traditionally a small majority for further EU expansion, partly based on the classic dansih argument about protecting danish agricultural exports, this could provide political cover for the mainline political parties. Thus EU-politics would not become a factor in the normal danish electoral politics, since any major reform would result in a referendum. Voters lost any incentive to vote according to this issue in general election.

In 1992 however disaster for this policy struck when voters actually voted "no" to the marstrict treaty. This was promtly solved by making "a special deal" with other EU countries so that swing voters could be wedged out of the "no" camp. Since then there has been a increasing reluctance to use referendums, but they have now become regarded as a stable of danish EU-politics and it is regarded as undemocratic to not have them.

I do not know if this dynamic of political cover for established parties have anything to do with the referendum in Costa Rica, but as always I am sure that someone much wiser on the subject than me can tell me if there is any similarity.

[walkingtheline]

Hopefully the guaranteed access Costa Rica gets will be more guaranteed than the guaranteed access Canada got.

[Joe Ray]

Yes, in the ideal world we would "elect representatives who share (our) values, and for the representative to then study and think and so develop informed opinions on the issues."

But in the real world we elect representatives who'll proclaim whatever "values" they think stand the best chance of getting them elected then take whatever position on the issues is most benificial to their largest campaign donors.

And derrida derider is right. It's not "free" trade. How could it be "free" with the intellectual property restrictions? It's managed trade.

[Slocum]

"It is much better for voters to elect representatives who share their values, and for the representative to then study and think and so develop informed opinions on the issues."

Things must really be very different if you have a state legislature made of philosopher kings who make decisions by carefully "studying, thinking, and developing informed opinions". It's funny though -- the reports of the CA state government we get out here don't quite conform to that lofty description.

In Michigan, we have just about as many ballot proposals as CA (many of the same ones, in fact -- CA had 'prop 13', MI had the 'Headlee amendment', CA had 'prop 209' MI had 'prop 2'). Are some of these initiatives examples of poor decision making? Well, I disagree with them in many cases. But at least they have the advantage of reflecting the will of the people -- unlike many of the dumb decisions the legislature makes.

In general, I would say that the advantage of ballot initiatives is that the will of the voters can be reflected on a particular issue, without their having to become single issue voters, which strikes me as an important form of democratic flexibility.

[Ponzi Q. Globalization]

"It is much better for voters to elect representatives who share their values, and for the representative to then study and think and so develop informed opinions on the issues."

Most of the American voters do not understand the long-term problems caused by global labor arbitrage and the gutting of American productive capabilities (two of the fundamentals of neoliberal 'free-trade'). Nor do most of their representatives. Nor, it seems, do most economists.

Well, maybe the latter two do understand but don't care because (1) an ideology that promotes the interests of existing power and wealth has been beaten into their heads and (2) the short-term benefits to those-who-matter (and themselves) are so wonderful.

[hari]

Brad-

It's a misnomer to call CAFTA a "free trade"
agreement.

It's what I call, managed bilateral [US dictated] and restrictive intellectual property ...trade policy agreement.

Why? Subterfuge for WTO multilaterals!

US will NOT allow its NTBs to be touched because of Congressional stakes -eg. sugar.

If you've dealt with GATT Rounds, for about thirty years, you know for sure that OECD countries have always tried to "protect" their co-called competitive advantage - until they lost it, first, to SKorea and, now, with globalization, to international division of labour (ie. China and India).

Central America will hardly make a dent into US trade flow simply because of its size and product-mix.

In a less egregious policy framework, US would declare (unilaterally!) free trade access to ALL CentralAmerican products in order to facilitate (their) domestic trade and development - so they don't come over the boarder as illegals, etc.

[Denis Drew]

California (and San Francisco) referendums at least have the advantage of allowing private citizen initiated petition drives to put before the public issue that either would never get before the legislature or would never make it through -- I am thinking a higher (if still inadequate) minimum wage in particular -- and the outcomes are beyond the power of the Terminator to veto.

[anne]

Repeatedly in the last days, the press reported that American trade representatives had "threatened" Costa Rica to pass the free trade agreement. This "threatening" was reported even on public radio. Now I assume we were not about to add Costa Rica to the evil empire no matter the vote, but I suggest that there is something dreadfully wrong, dreadfully harmful about American bullying verbally or otherwise. But, I found no self-consciousness of what we are about in threatening Costa Rica in reading or listening to reports.

[me]

"It is much better for voters to elect representatives who share their values, and for the representative to then study and think and so develop informed opinions on the issues."

So are you saying that even though 75% of the people think this country is on the wrong track, rejecting health care for children while funding an additional $193 Billion for Iraq is what they REALLY want?

We have a president and congress with their government health care telling children to go to the emergency room.

[Robert Waldmann]

Oscar Arias is back ? Wow. Well I certainly agree with the Costa Ricans who voted in the last presidential election.

Now what about Nicaragua ? Does President Ortega support CAFTA ?

I mean all of these blasts from the past are fun, but I don't want to start reading about contras in Nicaragua and death squads in El Salvador or ... anything from Guatamala (50 dead in the last electoral campaign was quite bad enough thank you).

[Slocum]

With respect to getting rid of poor decisions by ill-informed voters and their pesky ballot initiatives, I ran across this today as well:

http://www.reason.com/news/show/122839.html

Indicting petition organizers on trumped up charges? That could do the trick.

[Hans Suter]

Update: 60% of Costa Ricans think Brad DeLong of whom they've never heard is wrong.

[andres]

Brad: "Referendums have advantages as symbolic actions raising the issue decided to a higher place as far as the consent of the governed is concerned. But for making good decisions? Very doubtful."

No preconceptions please. I am in full agreement that California's ballot referendums have turned into a Frankenstein, but that does not mean that referendums are always necessarily bad at making good decisions.

If you look clearly at California, not to mention the US as a whole, you see (1) a political process that is still strongly dominated by the campaign financing process which gives a preponderant edge in political power to business interests, not just in the legislatures but also in the matter of putting together ballot initiatives and (2) a corporate-controlled news media whose hierarchically-driven duty is to mislead the public on key issues.

Under such conditions, it is no surprise that referendums will yield really bad outcomes. But that need not necessarily be the case everywhere in the world. If people perceive that their government has been co-opted by external players but still retain enough independent media and other political forums to engage in rational and informed debate, then referendums can be and will be a force for democracy. That is also why I am adamant in urging an Iraq-wide referendum on the presence of US and other foreign occupation troops.

So I am glad that Costa Rica held such a referendum, and I hope that they made the right decision.

[andres]

Brad: "And it looks like I agree with a majority of the voters of Costa Rica."

As Hans Suter pointed out, you do not. Nearly 60% of voters in Costa Rica thought that the issue was important enough that they, and not their government, should decide on the matter. If they had agreed that a referendum was not a good way to make a decision on foreign trade, a majority would have abstained.

And if you meant that the majority of Costa Ricans agree with you on the benefits of CAFTA, that ain't necessarily so: do the math. 50.** percent out of an estimated turnout of 60% of eligible voters does not make for a majority. In fact the plurality of Costa Ricans either don't care about CAFTA enough to vote for it or they believe that it is a matter to be decided not by them but by their representatives.

[andres]

Brad: "[I agree with you that the US shouldn't be in the business of negotiating bilateral treaties. But the question here is: should Costa Rica accept this one?]"

Interesting point. The question is, who decides? If Costa Ricans agree about the bad global effects of bilateral US trade treaties, shouldn't they vote it down? Or should Costa Ricans care only about their own net gain from the treaty and ignore external effects, beggar-thy-neighbor or otherwise?

[wood turtle]

Does this mean I will be able to walk into a store and see Christmas decorations with a label other than "Made in China?"

[andres]

Brad: "I am also puzzled by Dani Rodrik's lack of a view. If an economics professor specializing in global development and political economy doesn't have an informed view, who does?"

Oh come off it. An economics professor specializing in global development and political economy will start off with a general outlook and approach, but he is a fool if he believes that his outlook/approach will not be modified by individual circumstances. So I suggest that you:

(1) Read the text of CAFTA, available at

www.ustr.gov/Trade_Agreements/Bilateral/CAFTA/CAFTA-DR_Final_Texts/Section_Index.html

(at least the main texts, and preferably also the annexes since this is a legal document after all)

(2) Read academic papers on the Costa Rican economy and the likely effects of CAFTA.

If you do both, then you can have an _informed_ opinion on CAFTA. If you do not, a Ph.D. in international political economy and development can only give you an uninformed outlook.

Dani Rodrik is simply being humble in admitting the above. You are not.

[mds]

"Hopefully the guaranteed access Costa Rica gets will be more guaranteed than the guaranteed access Canada got."

Indeed. The worst, yet likely, outcome for Costa Rica is to be Canada when it attempts to compete with politically powerful US interests, and to be Mexico when Archer Daniels Midland arrives to rape its domestic agricultural production to death.

[shah8]

One really should keep in mind that the US has a tendency to threaten Central American populaces to vote its way. The Salvadore election of 1990 was a pretty classic example.

[ralph]

Oh, come on. CA referendums are great in the sense that democracy is a great system -- but NOT efficient and NOT designed to be a good decision maker. These things are great because they are designed to be an avenue of correction for the failures of political decisions. I'm strongly in favor of referendums in CA because it is merely another mechanism of moving the politics around when the other mechanisms -- regular parliamentary democracy -- goes awry.

Do I like 28 refs on the ballot, three of which look identical? No. Am I aware that they are mostly all bought and paid for? Yes. But the alternative is to accept that malformed status quos in the legislature are OK. Brad, the question I have is: Which one leads to WORSE decisions? If neither, then the point is moot.

[shah8]

Nicuaragua, I mean, not Salvador...

[c.l. ball]

[It is much better for voters to elect representatives who share their values, and for the representative to then study and think and so develop informed opinions on the issues.]

Yes, if they can find representatives who:

a) share their values
b) study the issues
c) think about them

But if politicos don't meet any of those conditions, then referenda are the way to go.

Better yet, what if legislatures were filled by lot, such that citizens had the time to study and think about issues.