Daily Edition: San José, Costa Rica, December 9,  2003

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Final Round of CAFTA Began Yesterday
By Fabián Borges
fborges@ticotimes.net

The ninth and final round of free-trade negotiations between the United States and Central America began yesterday in Washington D.C.

The round is divided into two parts - a regular technical negotiating round that will last until Friday, and a three-day meeting between Central American and U.S. trade officials aimed at politically resolving remaining issues, set to end Dec. 15.

Foreign Trade Minister Alberto Trejos said on Thursday that although he is "satisfied with what we have accomplished so far, several key issues still need to be resolved."

After eight rounds and almost 12 months of negotiations, about 80% of the treaty's content has been defined and agreed upon. However, "nothing is agreed until everything is agreed," Trejos said.

Going into Washington, seven of the 21 chapters of the Central America Free-Trade Agreement (CAFTA) have been concluded (plant and animal safety standards, technical barriers to trade, general safeguards, trade facilitation and customs modernization, investment, electronic commerce, and government procurement of goods and services).

Important advances have also been made in guaranteeing national and non-discriminatory treatment for investors, financial services, environmental and labor standards, trade-dispute settlement, rules of origin and in the six chapters on institutional requirements.

"We have a hard week of work ahead of us, during which we will discuss all the issues that have yet to be resolved," explained head Costa Rican negotiator Anabel González last week. "We're on the home stretch and very close to obtaining the objectives we have been striving for since the beginning of the negotiations. We are prepared."

At the top of the agenda for Central America is the need to define the rules through which sensitive agricultural imports (rice, basic grains, dairy products, beef, chicken, and pork) will be able to enter the region.

A previous agreement states that these products will be allowed to enter through special yearly access quotas -- imports received before the quota is met will pay a low tariff, imports received after the quota is met will pay a high tariff. The United States is asking for the tariffs on these quotas to be reduced gradually during the next 10 to 15 years.

Central American has argued that, as long as the U.S. continues to provide multi-million dollar subsidies to its farmers, its sensitive products won't be able to compete on a level playing field and, therefore, should be subject to special treatment and possible exclusions within CAFTA.

Given the sensitive nature of these products, the size of the quotas (which will be defined based on each country's historic average imports), the tariffs they will pay in and out of the quota and the rate at which they will be liberalized will likely be defined during bilateral meetings between the ministers of each country during the second part of the round.

"Sensitive issues will be addressed on a case-by-case, country-by-country basis," Trejos said. "We must carefully define the size of the quotas and the situations under which safeguard mechanisms can be used."

Central America also continues to push for improved access to the U.S. market for its textile exports.

The Costa Rican textile production and clothing manufacturing industries employ 20,000 workers and produce approximately 10% of the country's total exports. However, rising labor costs have gradually reduced the sector's role in the economy. Still, textiles remain a key issue for Nicaragua, Honduras, El Salvador and Guatemala, where the industries employ millions and produce roughly 80% of total exports.

Central American negotiators are expected to continue to argue in favor of more flexible rules of origin -- the criteria used to define where a product was made and the main stumbling block in most textile trade negotiations.

During the last two rounds, significant advances were made in defining a list of in-shortage fabrics and a mechanism through which additional fabrics can be added to the list. The U.S. is also very close to extending CAFTA privileges to Central American textile exports made using fabrics imported from the Andean Pact countries and countries with which the U.S. has signed free-trade agreements.

In the area of services, Costa Rica plans to present the U.S. with its proposal to partially open certain telecommunications services (broadband Internet, cellular telephones and private data networks).

According to Trejos, the U.S. has maintained an ambiguous position in regard to its desire to be allowed to enter the Costa Rican insurance market. Costa Rican negotiators announced they have a preliminary negotiating position in case the U.S. brings up insurance. However, they will attempt to avoid discussing the issue.

In the area of intellectual property rights, negotiators will discuss the length of time during which test results for drugs and agrochemical products will be protected. Labor and environment discussions will continue to center around the dispute-settlement mechanism and defining how financial sanctions will be handled.

"These are complex issues," Trejos said. "We feel prepared. The final outcome will be the result of a year of hard work on the part of the negotiating team, the Foreign Trade Ministry (COMEX), other public institutions and the private sector. This process involves everyone.

"We are optimistic going into Washington," he said before he left. "We are urging all Costa Ricans to be optimistic."