CAFTA signed with little fanfare; FTAA next?

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June 2004

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CAFTA signed with little fanfare; FTAA next?
The United States and five Central American countries signed a free trade agreement on May 28 that the Bush administration hopes will lead to an even bigger hemisphere-wide free trade deal by next year.

Despite the successful conclusion of complex trade negotiations, the Central American Free Trade Agreement (CAFTA) still faces stiff opposition in Congress. Many Democrats contend that CAFTA fails to do enough to protect American workers from unfair competition from low-wage countries.

The agreement is likely to become an issue in this year's presidential campaign. The presumptive Democratic nominee, John Kerry, said that he opposed the deal as negotiated by the Bush administration because it did not have enforceable rules on labor rights and environmental protection. According to the Associated Press, Kerry pledged to reopen CAFTA negotiations to include such protections if he were elected president.

The United States trade representative, Robert B. Zoellick, used the signing ceremoney to comment on differences between Kerry and President Bush over trade issues. According to AP, Zoellick asserted that "opportunism and economic isolationism'' were being used to attack efforts to promote democracy in Latin America.

Not everyone was cheering the new trade agreement. In a statement released just before its signing, Oxfam America, a hunger relief and economic development agency, noted: "While officials from Central America and the U.S. toast the fruits of negotiations, more than 15 million Central Americans who live on less than $2 per day have nothing to celebrate."

"Trade has an important role to play in helping developing countries achieve economic growth and poverty reduction. But CAFTA will only hinder, not help the poor benefit from trade," said Stephanie Weinberg, Trade Policy Advisor at Oxfam. "Under CAFTA, millions of small farmers in Central America will be unable to compete with U.S. subsidized rice, corn, and beans, all of which are staple crops in Central America."

Oxfam used the negative consequences of 1994's North American Free Trade Agreement to illustrate its concerns regarding the likely impact of CAFTA. Since NAFTA went into effect, 15 million Mexican corn farmers have faced enormous hardship due to a 70 percent drop in corn prices, which Oxfam says is largely due to the dumping of subsidized corn on the Mexican market by large U.S. agribusinesses. "NAFTA was supposed to benefit Mexico, but today, half of the rural Mexican population lives in extreme poverty."

Oxfam also charges that CAFTA will also have significant negative consequences for public health in Central America. The agreement will require Central American governments to impose stringent patent protection on the production of pharmaceuticals, putting at risk the ability to manufacture affordable generic medicines. New rules under CAFTA will strengthen the rights of patent holders, yet limit competition by generics producers, giving pharmaceutical companies a stranglehold on the drugs market.

"The result is almost certain," said Weinberg, "drug prices will rise. In Central American countries with little or no health insurance and limited public health-care coverage, this will simply mean that poor people will go without medicines . . . that could save their lives.”

Oxfam charged that while CAFTA sets out strict rules for investors' rights, it does little to outline their responsibilities. Nor does CAFTA protect governments' right to pass laws to protect the environment, health, safety, and welfare of their citizens. In contrast, investors who believe their profits have been harmed by such government actions can sue under international tribunals, bypassing national judicial systems entirely.

The five Central American countries that participated in the May 28 signing were Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. When CAFTA is presented to Congress, it will also include the Dominican Republic, which joined the pact in March, too late under congressional rules to participate in the signing ceremony. It was uncertain, however, when the administration and Republican leaders would bring CAFTA before Congress, given the strong opposition from Democrats and even some Republicans.

According to an AP report, the Bush administration hopes that momentum generated by CAFTA will spur stalled negotiations on a Free Trade Agreement of the Americas (FTAA), which would create a free trade zone linking 34 nations in the Western hemisphere; Cuba would be excluded. The agreement is scheduled to be concluded by next January if wide differences over such issues as agriculture can be bridged by then. Like CAFTA, the proposed FTAA has generated strong opposition from a battery of economic justice, corporate governance, and environmental advocacy organizations.

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