OPINION:
Echoes of the earliest days of our nation and its founding precepts are resonating on a tropical island in Central America. The power of trade agreements is being tested by an emerging situation in Honduras.
U,S, citizens have invested in economic development and employment zones (ZEDEs) created under the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR). CAFTA-DR is now under threat, creating a test case for the enforceability of all trade agreements and whether the federal government will act decisively to protect the property rights of U.S. citizens that rely upon them.
The premier ZEDE in Honduras is the Próspera ZEDE on the idyllic island of Roatán, which granted investors a fifty-year guarantee of legal protection in the Honduran Constitution. Próspera is by far the largest and most well-developed ZEDE, bearing the fruits of significant private investments from the U.S. by Silicon Valley financial heavyweights and tech innovators. The zone recently made bitcoin legal tender and passed legislation facilitating the issuance of Bitcoin bonds.
In January, Xiomara Castro of the hard-left LIBRE Party won the presidency and immediately made hostile statements about the ZEDEs, whilst entertaining overtures from the PRC. Rejection of CAFTA-DR appears imminent. President Castro’s hostility to private enterprise, capitalism and even private property ownership is nascent but alarming. Early alarms, amplified by her September 2022 fiery anti-American speech before the U.N. General Assembly, indicate she may steer Honduras to the Venezuelan pathway.
Despite creating jobs and extraordinary economic growth, the new Honduran government has shown great hostility to the Próspera ZEDE’s idea of economic impact zones extolling the sanctity of private property ownership and individual liberty. Actions against the Próspera ZEDE amounting to the seizure of U.S. citizens’ property would be in violation of Honduras’ trade agreement with the United States as well as a further declaration of Honduras as another beachhead of communism in the Americas.
Strong measures in response to the seizing of property owned by U.S. citizens by a foreign nation have a long history in the U.S. The seizure of private homes and properties to quarter and support British troops was the final straw that no American colonialist could endure, thereby provoking the American Revolution.
One of our nation’s earliest military conflicts was the Barbary Wars under President Thomas Jefferson in 1801 through 1805, and again under Madison in 1815. The Barbary Wars were fought to protect the private property rights and commercial interests of U.S. citizens against lawless sovereigns. As an aside, Jefferson’s conduct of the Barbary War is often cited in support of presidential wars in defiance of Congress and Article I, Section 8, Clause 11 of the U.S. Constitution. The argument is nonsense because Congress explicitly authorized Presidents Jefferson and James Madison to conduct the Barbary Wars.
No one is advocating military reprisals against Honduras. It is irrefutable, however, that the U.S. government has significant authority and historical precedent to respond with strong measures should Honduran President Castro move against Próspera in violation of CAFTA-DR.
The Próspera ZEDE crisis in Honduras has not gone completely unnoticed. A bipartisan coalition, a 21st-century American political unicorn, is coalescing in the Senate. Sens. Bill Hagerty, Tennessee Republican, and Ben Cardin, Maryland Democrat, recently wrote a letter to Secretary of State Antony Blinken making the case that “any direct or indirect expropriation of U.S. investments in Honduran Economic Development and Employment Zones would be regarded as a direct assault on the guarantees of CAFTA-DR and surely trigger a devastating loss of private sector confidence.”
Hostile action by President Castro would “dramatically undermine the strong U.S. interest in encouraging significant new private sector investment in Honduras and the region.” Discouraging investment in the region would be catastrophic for Honduras and, if allowed, would destroy confidence in the CAFTA-DR agreement and similarly drafted trade agreements.
The response of the Biden administration to Honduras bears watching. Recently Vice President Kamala Harris pursued a “Call to Action” policy soliciting Próspera ZEDE-style private investment “to sustainably address the root causes of migration by promoting economic opportunity” in the region resulting in over $1 billion of pledged financial support from U.S. industry and investors. Should Ms. Harris have informed these investors that while the government solicits these investments as a policy matter, nothing will be done to protect them from the lawless actions of recipient nations?
The Castro administration’s threatened violation of the intentionally strong investor protections in CAFTA-DR renders the “Call to Action” a siren’s song luring U.S. investors to financial destruction on the rocks of a sovereign swindle.
The concept of strong measures against foreign governments lawlessly seizing American citizens’ property remains central to our concept of liberty and sovereignty. Withholding the hundreds of millions of dollars of taxpayer-funded U.S. aid to Honduras is an appropriate response. If trade agreements are unenforced they are worthless, or a sham.
- W. Bruce DelValle is a constitutional law, technology law and international law litigator. He is a native Texan who grew up on the Gulf Coast of Florida, graduated from Penn State University and worked as a nuclear power engineer prior to graduating cum laude from Washington and Lee University School of Law.
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