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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...

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