The Office of the U.S. Trade
Representative completed negotiations on a free-trade agreement between
the United States and four Central American countries on Dec. 17.
El Salvador, Guatemala, Honduras and Nicaragua are all included in
the agreement.
Negotiations between the United States and the Central American countries
on the Central American Free-Trade Agreement (CAFTA) began Jan. 27,
but Costa Rica withdrew from the joint negotiations Dec. 16 due to
disagreements over telecommunications and insurance concerns.
According to a press release from the Office of the United States
Trade Representative, the combined total goods trade between the United
States and the four CAFTA countries is $15.4 billion. However, many
of the countries already enjoyed duty-free access to the U.S. marketplace
through trade preference programs, which are granted to developing
countries to promote economic development.
Under CAFTA, more than half of current U.S. farm exports would become
duty-free upon the adoption of the agreement (see sidebar). Among
those are frozen potato fries, sweet corn, apples, grapes, cherries,
peaches, cranberries and raisins. And though not all fruit and vegetable
products would have the tariffs immediately removed, CAFTA would grant
tariff phase-outs.
“We got protected status for asparagus,” Alan Schreiber,
Washington Asparagus Committee said.
Fresh and frozen asparagus coming into the United States from CAFTA
countries are already duty-free under the preference programs, but
for asparagus leaving the United States, the tariffs for both fresh
and frozen are at 15 percent.
“Currently no fresh asparagus has been shipped there (CAFTA
countries),” said Matt Lantz, a trade policy specialist for
Bryant Christie Inc. in Seattle. “We negotiated a C basket phase-out
– the tariff will be phased out over 10 years; it will fall
1.5 percent per year. For our processors, we did a little better.
Again there is a 15 percent tariff in Central America. El Salvador
agreed to immediate elimination of the tariff. Honduras and Guatemala
put on five-year phase-out. Nicaragua has it in the C basket.”
John Keeling, National Potato Commission, said that for potato growers,
CAFTA is mostly a good news situation.
“We think the U.S. negotiators did a real good job getting reductions
in french fry tariffs, which was our primary focus point of the negotiation,”
Keeling said. “We were disappointed that Costa Rica walked away
from the negotiations; it’s really important to have them in
this deal.”
According to the Office of the U.S. Trade Representative, Costa Rica
is expected to return to negotiations after further research and discussion.
Not all commodity and grower groups were pleased with the outcome
of the CAFTA negotiations, and even Schreiber said that there is more
to the story.
“I don’t think free trade is all it’s cracked up
to be for agriculture,” Schreiber said.
Ray Gilmer, director of the Florida Fruit and Vegetable Association,
said that free trade agreements like this one hurt growers in the
end.
“The Central American agreement is really seen as an extension
of NAFTA, and NAFTA was generally viewed as not a good thing for Florida
producers because it generated a big surge of imports from Mexico,”
Gilmer said. “The immediate effects of CAFTA will not be nearly
as significant as what happened after NAFTA because the potential
for products that compete with Florida is not there.”
Where Gilmer is really concerned is with the Free Trade Area of the
Americas (FTAA), which he sees as the next step after CAFTA.
“We’re seeing combination of CAFTA and FTAA will result
in making every country in western hemisphere a competitor with Florida,”
he said. “It’s (CAFTA) one of the steps in the chain that’s
leading the Bush Administration toward its goal of expanding trade
in this hemisphere. We’re watching what the administration is
watching with cautious skepticism. Their objectives are to open markets;
opening them with developing nations usually means increased competition
with other markets.”
Representatives at the National Farmers Union also expressed concern
over CAFTA.
“We are opposed to CAFTA for a couple of reasons,” said
Tom Buis, vice president of government relations for the National
Farmers Union. “One is it kind of continues very similar to
previous trade agreements that were recently ratified. It doesn’t
contain anything to address the differences in currency. The U.S.
dollar is usually significantly stronger. As long as that occurs,
that makes our products more expensive in the international markets.”
Buis said NFU is also opposed to CAFTA because it does not address
labor and environmental concerns.
Buis said that CAFTA creates an uneven playing field where U.S. growers
are at a disadvantage.
“All you have to look at is what’s happened in us over
last 10 years,” he said. “We’ve seen imports soar,
and exports haven’t kept pace. At some point you have to look
at why that’s happening. As long as you have this uneven playing
field, it will continue.”
Buis said that country-of-origin labeling would be one step in the
direction of making free trade fair trade.
“Even when the product gets here, it’s tough because we
don’t have mandatory country-of-origin labeling so people can
differentiate between our product and other countries,” he said.
As NFU and other groups prepare to lobby Congress to vote against
CAFTA, still others prepare to fight for the agreement. And according
to industry sources, the vote in Congress will be a tight one.
“The CAFTA still has to be approved in those countries and also
in the U.S.,” Lantz said. “It looks like there will be
a very tight vote in Congress. There’s still some political
hurdles to get over. The earliest (date for adoption of CAFTA) is
January of next year (2005) – that’s if things go well
and it is approved.”
What’s
Next
The United States and CAFTA are working to complete the legal review
of the text of the agreement and the agreed-upon tariff schedules.
The purpose of the review is to ensure that the texts accurately reflect
the agreement the negotiators reached.
Once submitted to Congress, a vote on the package can take place 90
days later.
Within 60 days after the agreement, the president will send Congress
a list of changes to existing laws that are necessary to comply with
the agreement.
Within 90 days after the president signs the agreement, the U.S. International
Trade Commission will submit a report to the president and Congress
assessing the likely impact of the free trade agreement on the U.S.
economy and on specific industry sectors of interests to consumers.
The president will then submit to Congress a copy of the final legal
text of the agreement, a draft implementing the bill, a statement
of any administrative action necessary to implement the agreement
and various other documents required for the implementing legislation
to be considered under the Trade Promotion Authority procedures.
The United States will begin work to integrate the Dominican Republic
into CAFTA.
Agriculture’s
Benefits
More than one-half of U.S. farm goods exported to the four CAFTA countries
will receive immediate duty-free treatment.
The remaining tariffs will be phased out over 5, 10, 12 or 15 years.
For certain sensitive product, the agreement provides for the application
of a volume-based safeguard designed to provide for market growth
while helping to protect against possible import surges during the
agreement’s transition period.
Immediate duty-free treatment for U.S. apples, pears, grapes, raisins,
cherries, peaches, cranberries and related products, frozen potato
fries, concentrated orange juice, sweet corn, almonds, pistachios,
walnuts, wine and whiskey.
Rules of origin will ensure that only U.S. and Central American goods
benefit from CAFTA.
