Central American Free Trade Agreement

CAFTA, the Central American Free Trade Agreement, has been the subject of major controversy between Central American countries and the United States. The new trade negotiation incorporates the extending of the North American Free Trade Agreement (NAFTA) into the Central American countries and aims to create a trade-free zone throughout the western hemisphere by January 2005. Several Central American nations are willing to take on CAFTA, while many others cite its disadvantages and drawbacks. Congress alludes to all the benefits of CAFTA and disputes all the arguments that debase the new trade agreement.

The result of a year of negotiations among officials, CAFTA seeks to fulfill the opening of markets with free trade partners, at the same time pushing trade liberalization through the Free Trade Area of the Americas (FTAA). Although many Central American countries enjoy duty free access to the U.S. market for their trade exports, they often have very high tariff and non-tariff barriers for U.S. exports. CAFTA would not only reduce these trade barriers, but also would play a part in the reformation of domestic, legal, and business environments in order to encourage development and investment (Exec. Office of the President). These reforms would include greater precision in the undertaking of governmental action and rule making, greater enforcement of the law and intellectual property rights, and improvement of protection.

Final negotiations were made in December between the United States and several Central American countries, with the conclusion that CAFTA is on the wrong track, and, if allowed on its present course of action, would harmfully impact the weaker Central American countries (Kyer). The concession that took place in Washington showed that the developing countries are not as easily oppressed as they have been in the past. The upcoming fight to repeal the agreement will prove the rivals of corporate globalization stronger than ever.

Government is emphasizing the potential decline in tariffs on both consumer and industrial merchandise that the agreement would institute. Both North and Central America exempted their most susceptible goods from the surfacing competition. The U.S. maintained protection on their sugar and textile industries in exchange for twenty years of tariffs on corn, dairy, and other farm products from Central America.

For some people, other parts of CAFTA would provide greater cause for concern than the argued trade conflict, as the removal of investment barriers would further the enterprising countries in Central America. The deal is similar to NAFTA in that it allows companies to sue the government for regulations that supposedly infringe upon their rights. Many disagree with the CAFTA pact because it will drive up the cost of life-saving drugs such as for the treatment of AIDS and other STD's. CAFTA is also predicted to reduce pro-worker safeguards from the Caribbean Basin Trade Partnership Act, which includes unprecedented protection for labor. Because of all these reasons, CAFTA would deal a significant blow to the poor and the working people in the U.S., although the outcome of the whole deal is all but certain. Setbacks such as the World Trade Center attack, the dilution in Miami of plans for the FTAA and the delay of trade negotiations with Australia and Morocco are holding back the forward momentum of the Bush Administration's plans.

Countries are withdrawing their economies during the last moments to defy U.S. demands and ease pressure in the homes. Costa Rica, for example, has strengthened its resolve not to walk back in on trade negotiations involved with CAFTA. Healthcare privatization issues in El Salvador have put the left-wing party in strong favor to overcome the presidential elections in March. This development would shake the countries' commitment to CAFTA even further, and even if Bush was able to sooth relations with Central American countries, CAFTA will still remain a daunting challenge in Congress. The president is supposedly demanding a fair amount of discipline from those that support his plan, several Republicans that are members closely related to the trade-affected businesses. As stated earlier, both the sugar and textile industries are complaining bitterly about the opening of any new U.S. markets, despite the reassurances that CAFTA would soften the blow to their commerce.

Though the Bush Administration expresses confidence in its ability to carry out CAFTA on a single vote, it may not be willing to pay the exorbitant price necessary to undertake such an endeavor.  "This agreement is more of a burden than a political asset for the Bush Administration," says Larry Birns, director of the Council on Hemispheric Affairs. Analysts are predicting that the President's advisors will not bring CAFTA to the voting poll until after the election. CAFTA is recognized as being an important milestone for trade policies in America, and while it may well be, with protest against neoliberal economics growing, free trade enthusiasts will hopefully discover that CAFTA will not in fact advance down the path of corporate globalization.

If CAFTA went into effect, labor and human rights throughout Central America would be rolled back, further pushing underprivileged citizens into poverty while increasing the wealth of others (Burke). The incorporation of neoliberalism would give the market control over people and free trade agreements. The Central American working population, farmers, students, activists, and those who oppose the FTAA oppose CAFTA because it will advance the passage of the FTAA and promote the rich while downsizing the impoverished (Burke). The U.S. corporations will benefit from the transferring of wealth from the poor nations to their own businesses.

El Salvador, Guatemala, the Honduras, and Nicaragua are involved in the deal with U.S. partners, with plans to include the Dominican Republic in 2004. Costa Rica withdrew from the agreement, causing a significant setback in the trade communications. The trade department's office illustrates CAFTA as a step toward 'trade liberalization hemispherically through the FTAA and globally in the Doha talks in the WTO' (Zoellick qtd. by Mekay). A free trade area is being set up in the western hemisphere to include all the Central American countries except Cuba, but the agreement was put on hold briefly when FTAA advances were not completely successful. The U.S. continues to open free trade markets around the world; CAFTA is predicted to regulate and improve trade.

Although CAFTA is modeled after NAFTA (North American Free Trade Agreement), the fact that NAFTA created exorbitant job loss and did nothing to improve the lives of Mexicans isn't helping the promotion of CAFTA, which many activists argue will create social problems and loss (Engler). Many groups such as the Washington Office of Latin America, World Visions, Health GAP and many church groups pledged to fight CAFTA to the end. Part of their conflict comes from the government's practices of watching over farmers no matter the cost to other agricultural sectors throughout U.S. history. These combatants also protest the failure to protect the environment, public health, and labor rights. NAFTA caused well over a million job losses and hurt small-time farmers; many people live on less than two dollars a day in the Central American countries (Mekay).

CAFTA would allow exports of consumer and industrial goods to become duty-free in Central America and phase out tariffs over the next ten years, while the U.S. benefactors would profit from information technology goods, construction and agricultural tools, paper, chemical, medical, and scientific advancements. In spite of the rewards U.S. companies would reap, advocates are still hoping to beat CAFTA out of Congress. Several members have already expressed concern over the labor and job transfer issues from the U.S. to Central America. Democrats are concerned with worker and environment protection while Republicans show apprehension at the vulnerability of textiles, sugar, and dairy industries. CAFTA will not easily pass the U.S. Congress, due in part to Costa Rica's failure to follow through with negotiations and also to the numerous drawbacks the plan would undeniably produce.

On the conflicting side, however, President Bush announced in 2002 that the trade agreement with Central America would purpose to strengthen the economic ties with the Central American nations and reform their economic, political, and social progress while moving toward the completion of the FTAA (Burke). He says that the next step will be to expand trade between countries and create more jobs to replace those lost by NAFTA. Bush's Administration is also willing to consider the possibility of negotiating CAFTA with the Central American nations' leaders; the U.S. is committed to advancing trade initiatives around the world and in individual nations to strengthen our home economy. Free trade will benefit farmers, businesses, workers, and consumers in the United States while economic development and democratic governing grows among the partners in CAFTA.

CAFTA is predicted to improve America's leadership role in trade and improve the quality of citizens' lives both at home and overseas. Progress has already advanced toward the expanding of trade in Central America. The proposed agreement would promote exports from the U.S., support democracy and economic reform, secure human rights and labor laws, and advance the development of the FTAA. CAFTA would commit the Central American countries to openness, thus deepening the roots of democracy and the rule of law, simultaneously reinforcing market trade. These reforms, put together with trade and investment flow increase, would expand growth and achieve better working conditions. The trade negotiations would generate the need for close cooperation among the Central American people, thereby improving their integration and creating more peace, economic cooperation, and stability.

President Bush has made it understood that the promotion of trade and open markets is essential to America's leadership. The failure of NAFTA provided valuable lessons on what to avoid with CAFTA, so that the Central American countries would benefit, rather than be harmed by, the completion of CAFTA. The extensive assessment of the affects trade policies and expenditures from the U.S. would have on the Central American countries has been studied and proposed so that the nations would not be damaged. CAFTA will require institutional reform, dispute settlement problems, and create suitable property, labor, and environmental standards. Lastly, it would highlight appropriate policies to help Central America maximize the benefits created by CAFTA and in turn minimize the costs of the trade agreement, which would benefit the poverty-stricken population in Central America.

The potential of the trade benefits could easily provide economic growth and poverty reduction, although this is only possible if the trade market has a solid foundation. Trade barriers have been lowered and state subsidies eliminated, while increases in trade and exporting remains out of reach. There is no equitable distribution of income in Central America anymore and poverty has not been reduced in the least; on the contrary, unemployment and underemployment have increased along with social and political violence. Because such a great number of Central Americans are dissatisfied with their economic situation and lack of democracy, there is little wonder why so many are promoting the passing of CAFTA. The impact the proposed trade agreement would have on the poverty-stricken, lacking countries is unknown at present, and very little can be predicted about the affects CAFTA will create if passed.

The United States is attempting to create fair trade between North and Central America while continuing to reduce poverty. Technology, education, health, and credit transfer advancement is hoped for with the completion of CAFTA, but serious concerns have risen over the time period CAFTA has to be completed; this schedule may not allow time for all the hoped-for improvements (Vincent McElhinny).  The agreement would effectively lower trade tariffs, open markets for trade, and establish rules for the governing of commercial transactions. CAFTA would support jobs in the U.S. and in Central America and provide both commercial and economic gain. Free trade is expected to play an important role in bolstering democracy and the rule of law in the Central American region. Agricultural issues are being addressed as well as service, labor, and environmental challenges. Evidently labor laws would not turn into non-tariff barriers but instead would be used to yield higher standards across the nations. CAFTA 'seeks an agreement that advances everyone's interest' (Regina Vargo qtd. by Green).

Adolfo Franco, the assistant administrator for USAID, stated that CAFTA will help overcome a series of natural disasters, economic degradation, and military conflict that has built up in Central America over the last few decades. He also articulates that this trade agreement would be a 'win-win' situation for both the U.S. and Central America because of the increased mutual trade. The U.S. national interest stands to benefit from growing economies, stability, rising income, and the higher quality of life assured to Central America. The Bush Administration is committed to reconstructing hurricane-damaged areas of Central America and provide relief aid to those in need. The enactment of CAFTA will give Central America the ability to open new trade markets in the U.S. and in other countries around the world; it will strengthen the prospect of the sanction of the FTAA.

Initiative has been taken to include aid for information technology assistance and civil society outreach. As soon as CAFTA is put into effect it will provide Central America with a 'platform', so to speak, on which to build stronger economies. The five Central American countries involved in CAFTA will be elevated to the status of full trading partners with the U.S. and receive duty-free benefits from exporting to the U.S. CAFTA will make these nations a more attractive place for investment as well as leading to faster economic growth (Green).

Although benefits of CAFTA are cited to help the Central American countries, overall the trade agreement seems to be more detrimental to them while creating more income and advantages in the United States. The agreement makes no promises to create more jobs or fashion an equitable distribution of revenue among the poverty-stricken individuals in Central America. CAFTA's partner, NAFTA, generated the loss of many thousands of jobs (Kyer). CAFTA does not promise to make up for that loss and could even cause more Central Americans to lose their jobs from the loss of existing trade laws. Trade negotiations for CAFTA could profit individuals to some degree, but the inconveniences seem to far outweigh the expediencies.