U.S. Passes CAFTA but Faces Continued Trade Challenges
in the Americas
The Central
America Free Trade Agreement (CAFTA) became U.S. trade law on August 2, signed
by U.S. President Bush after passing by close votes in both the House of
Representatives and the Senate.
CAFTA is a free
trade agreement between the U.S.
and the Central American countries of Guatemala,
Nicaragua, Costa Rica, Honduras,
El Salvador as well as the
Caribbean country, the Dominican
Republic. Modeled after the North American
Free Trade Agreement between Canada,
the U.S. and Mexico, the deal makes it easier for U.S. companies to extract raw materials at low
prices from the member countries, while guaranteeing U.S. manufactured and agricultural
goods more access in the region.This is
especially critical to the U.S.
given the increasing inability of some of its agri-businesses to compete with
low-cost production of staples such as sugar, soybeans, corn and cotton in
South American countries such as Argentina
and Brazil.CAFTA will assist these businesses by
guaranteeing them access to markets that might otherwise go to Brazil or Argentina,
decreasing the ability of smaller, indigenous farmers in CAFTA countries to
subsist on these crops and leaving the vast subsidies paid to U.S. agribusiness
producers untouched.
Under the deal,
the U.S.
is expected to increase its share of the telecommunications industry in each of
the member countries, while some of the American pharmaceutical companies are
reportedly quite interested in patenting some of the vegetation in the region
for use in the development of extremely profitable drugs.The deal will also make it easier for U.S. companies
to operate in the Central American countries without having to pay taxes or
penalties for breaking labour and environmental regulations.
Some free trade
proponents in the U.S. have
tried to portray CAFTA as an important victory on the road to the U.S. goal of establishing a free-trade zone
throughout the Americas (FTAA), with the exception of Cuba.However, negotiating CAFTA only became a
priority for the Bush Administration after it became very clear that several
countries in the Americas
were not prepared to accept the U.S.
dictate on the FTAA.Most recently, the
FTAA agenda suffered another severe blow with the signature of a trade
agreement between Cuba and Venezuela,
which Venezuelan President Hugo Chavez has offered up as an alternative model
for the hemisphere.
Even more
troubling for the Bush administration is that negotiating CAFTA, in essence a
trade deal between the world’s biggest superpower and a handful of its client states, was a difficult process, with Costa Rica
twice walking away from the talks.Massive popular opposition to the agreement within the countries, El Salvador and Nicaragua in particular, is
expected to play a key role in upcoming national elections,
while the Honduran government backed off a planned referendum on the agreement
for fear the Honduran people would overwhelmingly reject it.