American President Bush and Peruvian President Alan Garcia have signed the free-trade agreement that Peru and the U.S. started negotiating back in 2003. The initial agreement was concluded in 2005, but the new, protectionist Congress delayed approval and forced Garcia to renegotiate its terms. Essentially, the Democrats demanded that the agreement be made more palatable to organized labor and environmentalist groups.
The effect of this pact will not be earth-shaking, because Peru is not a huge economy. Still, the U.S. International Trade Commission estimates that it will raise trade between Peru and the U.S. by nearly 200/0. For several reasons, it is amazing that this modest agreement survived to get finalized.
First, it is surprising that Bush, with a 30% approval rating and only a year left in office, still had the juice to get the agreement through a hostile, anti-free-trade Congress, completely controlled by the opposing party.
Second, President Garcia had himself attacked the agreement during his election campaign in 2006. But once in office, he worked to get it implemented, and is now urging American fishing, manufacturing, and mining companies to invest in his country, promising “long-term security.”
Third, even though the modified agreement stiffened environmental and labor rules on businesses starting operations in Peru, organized labor still opposed it. This Congress has rolled over for every demand made by Big Labor, no matter how outrageous, so this treaty was not a slam dunk.
Finally, there is a swelling antiglobalist sentiment in this country. A recent Wall Street Journal article pointed out that Americans oppose global free trade by 58% to 280/0. In the face of this backlash, even Republicans are retreating from free trade – so getting enough Democrats and Republicans to vote this deal through was again no slam dunk.