San José, Costa Rica, since 1956

U.S. House Approves Trade Pact, CAFTA Squeaks Through in Close Vote

Whether it was persuasive textile modificationsor intense lobbying by U.S. PresidentGeorge W. Bush, last-minute efforts by theBush administration paid off in just enoughvotes to pass the Central American Free-Trade Agreement with the United States(CAFTA) in the U.S. House of RepresentativesWednesday night, 217-215.The approval of one of the most polemic tradeagreements in recent history answers one questionfor Costa Rica and leaves many more pending –specifically, whether Costa Rica, where CAFTAhas not yet been submitted to the LegislativeAssembly, will be a part of the pact.BECAUSE the U.S. Senate has already approvedCAFTA (TT, July 1), only Bush’s signature is requiredfor the agreement to take effect Jan. 1, 2006 betweenthe United States and Honduras, Guatemala and ElSalvador, the three other signatory countries that haveratified the agreement. Costa Rica, Nicaragua and theDominican Republic, which signed on to the agreement in August 2004, have not yet ratifiedCAFTA.U.S. passage increases the pressure onthe pact’s supporters and opponents here.Critics of the agreement said yesterdaythey would continue their struggle againstit and will hold an “unprecedented generalstrike” if President Abel Pacheco sendsCAFTAto the assembly, according to wireservice EFE.Proponents said the clock is now tickingfor Costa Rica.“This is extremely positive for us, and itputs a lot of pressure on us as a country tobegin discussion of this treaty in our congress,”Sergio Navas, vice-president of theChamber of Exporters, told The Tico Times.“The effects of being left out… would bedisastrous for agro-exporters, and the industrialsector in textile factories.”On the day of the debate, Bush made arare trip to Capitol Hill to meet personallywith key Republican holdouts in an attemptto gain support for the agreement.Lawmakers with ties to the sugar and textileindustry expressed reserves about theeffect of the agreement on their constituents,even after Bush sealed a deal withthe Central American countries to modify aclause dealing with pockets and linings forpants exported to the United States.The change, designed to appease U.S.textile manufacturers by providingincreased protection against textile giantssuch as China, prohibits signatory countriesfrom exporting pants to the UnitedStates tax-free if the pockets and liningsare not made with fabric from the UnitedStates or Central America.ALTHOUGH Foreign Trade MinisterManuel González said Tuesday that CostaRica had agreed only to discuss the possibilityof the making changes to the agreement,both the U.S. Trade Representative’s Officeand the Costa Rican Vice-Minister ofForeign Trade, Amparo Pacheco, confirmedthat Costa Rica had agreed to the textilemodification. Pacheco said that it was on thecondition that the United States would grantan equivalent concession to Costa Rica,negotiated after the treaty takes effect.For Ottón Solís, presidential candidatefor the Citizen Action Party (PAC), thisconstitutes a renegotiation of CAFTA,something he and other CAFTA opponentshave been pushing for, but proponentsclaimed could not be done.“I have always been told a renegotiationis impossible, but last week we saw animportant renegotiation of textiles,” hesaid. “(CAFTA supporters) were lyingbefore when they said renegotiation isimpossible, and they are lying now.”Vice-Minister Pacheco insists it is not anegotiation because the treaty establishesprovisions for changes to rules regarding theorigin of certain products.“THE (U.S.) approval is a very importantstep,” she added. “The negotiation andapproval of a free-trade agreement with theUnited States is an aspiration that CostaRica has had for more than 10 years. Withthis, it has become a reality.”She emphasized, however, that the ratificationof the agreement is not the government’sonly priority; also crucial are theimplementation and complementary agendasfor the trade agreement, and a tax reformbill President Pacheco says is necessaryto ensure CAFTA’s benefits reachall Costa Ricans.The implementation agenda consists oflaws the Legislative Assembly must pass ifCosta Rica is to be in compliance withCAFTA, including laws to open the state-runtelecommunciations, electricity and insurancemonopolies to private competition.The complementary agenda is a numberof measures the President feels the countryshould take to prepare itself for the broadercompetition it will face under CAFTA.Though Costa Rica finished negotiationsof the treaty in January 2004 andsigned the agreement in May of that year,President Pacheco maintains he will notsend CAFTA to the assembly until the taxplan is passed, he receives the recommendationsof a “council of notables” henamed (TT, July 22) and he is sure theagreement will benefit all Costa Ricans.MANY CAFTA supporters say thisdelay could cost Costa Rica investmentopportunities to other countries.“I believe if we don’t move, the consequenceswill be harsh,” said AlbertoTrejos, former Minister of Foreign Tradeunder whose watch CAFTA was negotiatedand signed. “It is very disappointingthat the person in charge of the trade policyin this country, when confronted with ahistorical vote in the U.S. capitol… all hehas to say is ‘we are in no hurry.’“I am afraid it will be a difficult roadbecause the government is certainly notpreparing itself, but rather wasting time untilthey can pass it on (to the next administration),”Trejos told The Tico Times.Some analysts have predicted thatPresident Pacheco will let the nextPresident, who takes office in May 2006,deal with CAFTA. Once CAFTA takeseffect on Jan. 1, 2006, Costa Rica has a windowof two years to approve it, or be leftout. Some say the effects of not being partof the treaty could be felt much sooner.“It could be a couple of months – asshort as that,” said Lynda Solar, executivedirector of the Costa Rican-North AmericanChamber of Commerce (AmCham).“I hope not, but there are companies fromall over the world that are always evaluatingthe environment in certain countriesthat are on the radar screen. The fact is,they will look at a country differently if ithas a free-trade agreement with the UnitedStates or it doesn’t.”CRITICS of the agreement say CostaRica will be just fine on its own.“(CAFTA) is going into effect, yes,but only for the countries that have ratifiedit,” Solís said. “Those countries have theirown conditions and aspirations. We haveothers. We are going to go ahead, pressingfor renegotiation, and only then will wesend (the agreement) to the assembly. If(CAFTA is) sent now, we (PAC) are goingto vote negative. We are only eight votes,but we will vote negative.“I continue believing the treaty is notgood for us. It will increase poverty; many(U.S.) congressmen said as much lastnight during debate,” Solís told The TicoTimes yesterday.Albino Vargas, secretary general of theNational Association of Public and PrivateEmployees (ANEP), said the vote revealeddivisions in the United States.“It should catch one’s attention howthin Bush’s margin of victory was,” Vargassaid. “This tells us that the trade policy ofPresident Bush is not necessarily the tradepolicy of the United States.“In Costa Rica, for the social movements,we were not expecting that it wouldbe rejected,” he added. “We have our ownstruggle in this country, and on this basiswe will work for a street referendum. Wecontinue to be convinced that CAFTAmust be defeated with citizen mobilizationbecause CAFTA does not work for us.”

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