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Foes in Central America Stall CAFTA

The pact was to take effect Jan. 1, but it has been blocked by election politics and anti-trade sentiment. U.S. officials say it's not in jeopardy.

January 09, 2006|Evelyn Iritani | Times Staff Writer

Growing anti-trade sentiment in several Central American countries has held up a trade agreement with the United States that had been slated to launch Jan. 1.

Under the Central American Free Trade Agreement, the U.S. agreed to open its markets further to key Central American products, such as sugar and apparel and textiles, while those countries promised to lower barriers to U.S. farm goods, high-tech products and services. Central American governments also said they would strengthen their labor and environmental laws.

Some experts said a delay could pose problems for the Central America deal, given the rising skepticism about free trade across Latin America.

CAFTA has become a hot issue in the campaign for next month's presidential election in Costa Rica, the only country that hasn't ratified the agreement, and anti-trade sentiment is running high in several countries that have yet to complete the legal changes necessary to put the trade pact in place.

Some countries are balking at the requirement that they put more teeth in their intellectual property laws.

Health activists say these changes, pushed by U.S. high-tech and pharmaceutical firms, will make it harder to get low-cost generic medicines needed to treat AIDS.

U.S. officials downplayed the delay, saying such agreements often take longer than expected to complete.

The agreement, which includes Guatemala, Honduras, Nicaragua, El Salvador, Costa Rica and the Dominican Republic, is one of the most complex trade pacts the U.S. has ever tackled because of the number of countries and issues involved.

Given that the United States already has one of the world's most open markets, the biggest adjustments are being made south of the border.

"We're basically working with the governments to make sure that everything is lined up for the agreement to be ready to go into effect," said Neena Moorjani, a spokeswoman for the office of the U.S. trade representative. "Other agreements have taken this long and longer to take the next steps, and what's going on with CAFTA is nothing unusual."

Trade experts are confident that the deal isn't in serious danger. Central America is the U.S.' second-largest export market in Latin America after Mexico. In addition, governments there are anxious for a deal to help them compete against cheap Chinese products.

"CAFTA is going to become a reality; it's just going to happen a little bit more incrementally than originally planned," said Daniel Griswold, a trade expert at the free-market-oriented Cato Institute in Washington.

CAFTA sparked a bitter partisan battle in the U.S., where the White House and the Republican leadership in Congress were forced to lobby hard for the votes to approve the agreement last summer. The chief opponents were sugar growers and textile producers fearful of opening up their markets to cheap imports and labor unions and Democrats pushing for tougher protections for workers and the environment.

Like President Bush, pro-trade leaders in Central America face fierce criticism from organized labor and some industries, such as farming and small business, that fear they will be crushed by powerful U.S. competition, explained Daniel Erikson, a Caribbean expert at Inter-American Dialogue, a Latin American think tank in Washington.

In addition, Erikson said, Central American leaders are suffering from "CAFTA fatigue" brought on by the lengthy negotiations, which began in 2002 and were delayed by the U.S. presidential election.

"A lot of leaders in Central America feel like they have spent a lot of political capital on this and now they're being asked to continue to do so," he said. "There's a certain exhaustion setting in."

Some of the Bush administration's allies are not happy with last month's announcement that the U.S. would implement the trade agreement on a "rolling basis" when countries had made "sufficient progress" to complete the deal. The U.S. trade representative's office said several countries, including El Salvador, could be ready as early as February.

Guatemalan Vice President Eduardo Stein complained recently that U.S. pharmaceutical firms were holding up his country's CAFTA entry in an effort to force his government to make further changes to its laws.

During an interview last month with Associated Press, he said Washington seemed "only interested in our money and commodities."

He also said his government had decided to strengthen its ties with Mercosur, a regional trading bloc formed by Argentina, Brazil, Paraguay and Uruguay.

In Costa Rica, CAFTA has become a flash point in the presidential election campaign. Former President Oscar Arias, the front-runner, is a strong supporter of the agreement and is expected to push the deal through the legislature quickly if elected. But opposition candidate Otton Solis is running on an anti-CAFTA platform and has gained the support of public-sector unions and others opposed to the pact.

"I think the months ahead will tell the story of what the price was domestically in other countries to get CAFTA passed," said Todd Tucker, research director at Public Citizen's Global Trade Watch, an activist group in Washington critical of CAFTA. "So far, it seems pretty high."

U.S. sugar growers are happy to see any delay in the agreement. Under terms of the deal, the U.S. has agreed to more than double the amount of Central American sugar that can come into the country in the first year, said Jack Roney, economic director for the American Sugar Alliance, a trade group.

However, CAFTA's effect was diminished by the devastation wreaked by last year's hurricanes, which destroyed a large portion of the U.S. crop. Thanks to emergency market-opening measures, Central American sugar growers have seen a big boost in sales to the U.S.

"This year," Roney said, "we need the extra sugar."

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