Dear Concerned Citizen,

Recently the House of Representatives narrowly passed a free trade agreement that allows a relatively unregulated movement of goods and services between the United States, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua. This week, President Bush signed the bill into law. This so-called Central American Free Trade Agreement continues in the trajectory of the North American Free Trade Agreement (NAFTA) signed into law by President Clinton.

The slight margin of the House vote, 217-215, shows that free trade remains highly controversial. It has also become increasingly partisan. When President Clinton signed NAFTA into law, a sizable number of Democratic legislators voted for it. But CAFTA seems to have split the Congress along largely partisan lines. The vast majority of Republicans voted for CAFTA and the vast majority of Democrats voted against it. The Democrats raised one of their favorite bugaboos, "outsourcing." After the vote, House Democratic leader Nancy Pelosi called CAFTA "a step backward for workers in Central America and a job killer at home."

This gets it exactly half-right. Let's begin by acknowledging an element of truth in what Pelosi says. CAFTA will cause some Americans to lose their jobs. The reason is simple: free markets tend to direct economic activity in the direction of maximum efficiency. That means that if Salvadoran or Dominican workers can make shirts or shoes at a fraction of the price that it costs American workers to make those same products, then companies that make shirts and shoes are going to save a lot of money by establishing plants in El Salvador and the Dominican Republic.

This is by no means a complete loss for the United States. Some American workers--the ones who are no longer competitive--suffer. But American consumers--those who buy shirts and shoes--gain, because they are now able to purchase those items for a lower price. Ideologues like Pelosi pretend that it is always in the American interest to protect the interests of the displaced American worker, but they rarely explain why this interest is always presumed to outweigh that of the American consumer.

But this failure to weigh competing American interests is hardly the biggest problem for Pelosi and other opponents of free trade. The biggest problem is that these so-called champions of compassion find themselves opposing the best anti-poverty program ever devised. The party of the poor finds itself directly arrayed against the interests of the world's poor. In order to protect American jobs that pay $15 an hour, Pelosi and company seek to deprive poor people in the Third World from earning the few dollars a day that they need to climb out of desperate poverty.

An unlikely figure who has figured this out, apparently without an economics degree or attending any congressional hearings, is the lead singer for the rock group U-2, Bono. "International trade needs to give everybody a chance," he recently said. "The poorest countries deserve a chance to earn their way out of poverty." Bono's point is a simple one. The problem faced by poor people and poor countries is not capitalism or globalization. Their biggest problem is being left out of the global capitalist economy. Global capitalism represents their best prospect for the future.

For the first few decades after World War II, America sought to reduce world poverty mainly through foreign aid. This "handout" strategy proved effective in alleviating famines and fighting short-term disasters, but it offered Third World countries no sustainable path to development. After all, the beggar who receives a few dollars for a meal is back on the street again the next day. Countries like my home country of India continued to receive foreign aid year after year, and they remained poor as ever.

So America and the West tried another solution: loans. Generous loans were provided to poor countries through agencies such as the World Bank and the International Monetary Fund. The problem is that these loans were typically given to countries that did not produce anything of value. Consequently the IMF found itself being asked to provide new loans so that countries could pay back the old loans. Even paying interest on the loans proved to be a millstone around the neck of poor countries. Eventually the poor countries began to see indebtedness not as an achievement, but a curse.

Now, without any government effort, and even without the philanthropic exertions of Bill Gates or the Hollywood crowd, a new global anti-poverty solution has emerged. Yes, it's called free trade and sometimes goes by other names, such as "tariff reduction" and "outsourcing." These measures have turned out to be the greatest poverty-reduction program of all. They don't just give out money or make loans that cannot be repaid. They succeed by taking advantage of a resource that all poor people possess: cheap labor. They liberate poor people from poverty by employing them to make things that other people actually want to buy. Free trade has already lifted tens of millions of Chinese, Mexicans, Indians, and South East Asians out of hardship and destitution. Now it promises to improve the lot of millions in Central and South America.

It's possible to say that protecting high-paying American jobs should take priority over the interests of Nicaraguans and Hondurans, however indigent and needy they might be. This is in fact the Pat Buchanan position. It's a bit crude, but at least it's honest.

Nancy Pelosi wants to side with Buchanan, but she also wants compassion on her side. Thus Pelosi asserts that free trade is a "step backward for workers in Central America." In reality, if you want to be compassionate and to help poor people all around the world, there's no better way to do it than to support free trade.