Roller Coaster Year for Trade Pact

December 24, 2004

BOTH proponents and critics of theCentral American Free-Trade Agreementwith the United States (CAFTA) held theirbreath for much of 2004, awaiting theresults of the U.S. presidential electionsthat could determine the fate of the tradepact.However, the year began and endedwith frenzied debate, protests and lobbiesfor and against CAFTA.Analysts say U.S. President George W.Bush’s reelection in November all butguarantees the treaty will be sent to theU.S. Congress early in 2005.COSTA Rican negotiators, who inDecember 2003 requested additional negotiationswith the United States, completedtwo extra rounds of talks in January.Primary topics of discussion included theopening of the Costa Rican ElectricityInstitute (ICE) monopoly on telecommunicationsand the National Insurance Institute(INS) monopoly on insurance, clauses forprotection of small and medium businesses,and trade conditions for sensitive agriculturalproducts.Foreign Trade Minister Alberto Trejosannounced the successful conclusion of thetalks in January, and the agreement wassigned in Washington, D.C. in May.EVEN the agreement’s most ardentsupporters admitted there were potentialproblems ahead for the trade pact, whichmust be ratified by each country’s legislaturebefore taking effect – although if it isratified by the U.S. Congress, it will takeeffect immediately between that nation andEl Salvador, which became the first countryto ratify the agreement in December.While a poll in March showed 64% ofCosta Ricans supported CAFTA, a 7%increase since September 2003, thousandstook to the streets in two massive marchesin May to protest the agreement.Environmentalists criticized clauses thatallegedly freeze environmental legislation,small business owners and farmersexpressed fear about the effect U.S. competitionwill have on their markets, andmany claimed the agreement’s fierce protectionsfor intellectual property rights willdrive up the costs of medicines here.STILL, the largest obstacle in the pathto CAFTA’s ratification in Costa Rica maybe the government itself.Debate continues in the LegislativeAssembly as to whether a simple majority(29 of 57 legislatures) or a two-thirds vote(39 legislators) is required to approveCAFTA, a question that will ultimately bedecided by the assembly’s president,Gerardo González, or the ConstitutionalChamber of the Supreme Court (Sala IV) ifhis decision is contested.Meanwhile, President Abel Pachecoadded a major hurdle for CAFTA’s passagein July when he announced he would sendthe pact to the assembly only if the controversialPermanent Fiscal Reform Packageis passed (see separate story). This had nothappened at year’s end.In August, CAFTA was re-signed, thistime including the Dominican Republic,and the U.S. November elections servedas the starting gun in a race for the agreement’sapproval, since analysts predictthe U.S. House and Senate, led byRepublican majorities, will ratify it earlynext year.MEANWHILE, at year’s endNicaragua seemed poised to ratifyCAFTA in early 2005, and Honduras andthe Dominican Republic may not be farbehind, increasing the pressure on CostaRica.

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