San José, Costa Rica, since 1956

U.S. Begins Discussing Trade Pact

The much-anticipated, polemic debate on theCentral American Free-Trade Agreement withthe United States (CAFTA) unofficially beganthis week in the U.S. Congress.In anticipation, national and international lobbyists,including Costa Rican political leader OttónSolís, descended on Washington, D.C., in efforts tosway the most important decision in the tradepact’s future, and participate in what analysts arecalling one of the most important discussions in thefuture of U.S. trade policy.Although the discussions are only in committee –the official U.S. congressional debate will not beginuntil U.S. President George W. Bush submits the documentto Congress – they put the region one step closerto the reality of a free-trade agreement. They also putCosta Rica one step closer to the reality of being leftout.ONCE Bush officially submits CAFTA toCongress, lawmakers will have 60 legislative days tomake a decision. If it is approved, and signed by Bush, it will immediately go into effect with ElSalvador, Guatemala and Honduras, whichhave already ratified the treaty.Costa Rica would then have two yearsto ratify the agreement or be excluded, and– as it was reminded last month in a controversialand direct statement by a official – lose the trade privileges itcurrently enjoys.Still, as this week has made increasinglyclear, the trade pact’s future also remainsuncertain in the U.S. Congress.“I have been in a lot of meetings herewith congressmen and their assistants andno one is predicting a result,” Solís toldThe Tico Times via e-mail.“The opposing forces are very equal,”continued the Citizen Action Party (PAC)pre-candidate for Costa Rican president,who opposes the treaty and is asking for itsrenegotiation.PROPONENTS – who dominatedWednesday’s Senate Finance Committeehearings – maintain the trade pact wouldlevel the playing field for U.S. producersand exporters in Central America and theDominican Republic, also included inCAFTA.“Today, over 99% of the food and agricultureproducts we import from the regioncome in duty-free. Meanwhile, our foodand agriculture exports are hit with anaverage 11% tariff, with some tariffs rangingas high as 150%,” Republican Sen.Chuck Grassley testified at the committee.He added that the trade pact wouldopen up the Central American market, cuttingtariffs and therefore consumer pricesfor U.S. tractors, microchips, DVDs andother manufactured goods.THESE sentiments have been echoedby rice and wheat producers, processed foodmanufacturers and many other manufacturers.Mark Berlind, executive vice-presidentat Kraft Foods, Inc., told the Senate committeethe six CAFTAcountries represent agrowing young market that is increasinglyshowing a demand for U.S. processedfoods. Kraft products like processedcheese and cream cheese are currently limitedby tariffs as high as 66%, he said.The American Farm Bureau Federationmaintains the trade pact would yield nearly$1.5 billion in agricultural exports to theCAFTA region.“These countries make up the second largestU.S. export market in LatinAmerica, with more than $15.7 billion inU.S. exports in 2004,” added AmbassadorPeter F. Allgeier, Acting United StatesTrade Representative.CAFTA opponents in the UnitedStates, including some agricultural organizations,argue the Central American countriesand Dominican Republic do not offera substantial new market for the UnitedStates.All six countries combined had a grossdomestic product of $85 billion in 2002,the most recent year for which figures areavailable. That figure barely matches theeconomic outputs of some U.S. cities,opponents say.Furthermore, the combined populationis “approximately 31 million with limitedincomes,” according to the NationalFarmers Union.Instead, opponents say the agreementwould promote outsourcing to CentralAmerican countries.Giving CAFTA opposition in Congressa further push, notably among someRepublicans, are U.S. sugar producers.Sugar producers are considered to have astrong lobby in the U.S. Congress, andhave been the recipients of favorable U.S.policy – keeping sugar prices high bysharply restricting imports and providingdirect subsidies, according to a recentreport by the Center for GlobalDevelopment.Jack Roney, of the American SugarAlliance, told the Senate Committee bilateraland regional free-trade agreements areunfair, and trade should be debated in theWorld Trade Organization (WTO), whereall countries are at the table.CAFTA alone should hardly be a fearof U.S. sugar producers, explained DanielGriswold, director for the Center for TradePolicy Studies at the Cato Institute, aWashington, D.C. think-tank.“The sugar quota increases by 109metric tons; this is a drop in the bucket ofthe U.S. sugar market. It is one day’s worthof production, the amount spilled on thefloor of Starbucks every day,” he said. “Itwill have an imperceptible affect on theU.S. market.”Instead, sugar producers are worriedabout the greater implications of comingtrade agreements the United States hasnegotiated (see sidebar).“This is the first agreement sinceNAFTA (the North American Free-TradeAgreement) involving substantial tradewith poor countries,” Griswold continued.“Therefore you have not only (amongopponents) the special interests of the textileand sugar industries, you also have theanxiety about labor and environment.”One such ideological group, theAmerican Friends Service Committee, saidin a statement the treaty will put workersout of jobs, jeopardize rural farmers,reduce access to life-saving medicines andstifle democracy – a statement reminiscentof the refrain sung by anti-CAFTA groupsin Costa Rica.SO far in Costa Rica, such argumentshave only been made on the streets and ininformal debates.President Abel Pacheco has yet to sendthe trade pact to the Legislative Assembly,instead waiting for the assembly to vote ona controversial and long-anticipated planfor fiscal reform, which is mired in its owncontroversy (see separate article).For a short time, CAFTA proponentsand opponents here came to a rare consensusthat the trade pact’s future should bedecided by voters in a referendum (TT,March 11).Such hopes have likely been killed byPacheco, who, to make a referendum feasible,is running out of time to initiate theprocess, according to Otto Guevara, 2006presidential candidate for the LibertarianMovement Party, whose leaders authoredthe referendum idea.Doubt also has risen as to whetherPacheco will send CAFTA to the legislature at all, Guevara told The Tico Times.“There are two groups: optimists, whothink Pacheco will send CAFTA, and pessimists,who don’t think he will ever sendit,” he said. “I am in the second group.”He said the 2006 elections would likelybecome a kind of CAFTA referendumall their own, with opposition to, or supportof, the agreement becoming one of themake-or-break differences between candidateswhen people go to the polls.If the agreement is not approved herewithin two years of implementation, CostaRica will be left out, and may lose the tradeprivileges it currently enjoys under theCaribbean Basin Initiative (CBI),Christopher Padilla, the assistant representative for public affairs,warned Costa Rican reporters last month.Padilla’s statement about CBI hasproved to be controversial, as some –including members of the U.S. Congress –view this threat as false.(Tico Times reporter Katherine Stanleycontributed to this report.)

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