A tide of enthusiastic public opinion regarding free trade practices is receding. The sea change will make quick approval of the latest no-to-low tariff trade agreement, the Central American Free Trade/Dominican Republic Agreement (CAFTA-DR) difficult at best. The US and at least one other participating country (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic) must approve CAFTA for it to take effect. Concerns about sugar production, labor standards, and textile manufacturing are all possible stumbling blocks to ratification in these countries and the US.

A Spoonful of Sugar Won’t Ease CAFTA Ratification
US sugar producers are opposed to CAFTA because the agreement would increase the amount of foreign sugar allowed into the US, threatening the industry’s domestic monopoly and lowering sugar prices. CAFTA proponents argue that the agreement would increase the foreign share of the US sugar market by a meager 1.7 percent and reduce the amount domestic producers earn per pound by a mere 72 cents.

These numbers do not sway the sugar lobby. The industry believes CAFTA spells the beginning of the end for US sugar. The Florida congressional delegation, in particular, has been under intense industry pressure to refuse support for CAFTA ratification. Competing political interests place Florida’s elected officials in a difficult position considering Florida’s governor is President Bush’s brother. The Bush administration has launched an intense lobbying campaign to push for CAFTA ratification.

Undoing decades of US government price supports for the sugar industry will require lawmakers to employ extremely delicate negotiating skills – Big Sugar donated $2.4 million to various 2004 congressional campaigns. That’s more than any of the 46 agricultural donors contributed, per information from the political contribution tracking service, Political Money Line.

Labor Standards Ignite Public Debate
Ill-defined labor standards in the CAFTA agreement have some lawmakers up in arms. Last year, US Congressman Rep. Sander Levin (D-Michigan) filed a Freedom of Information Act request to view a US Labor Department commissioned report that undermined the Bush administration’s CAFTA position. Labor Department officials only recently released the results of the report after Rep. Levin threatened to launch a congressional investigation.

Undoing decades of US government price supports for the sugar industry will require lawmakers to employ extremely delicate negotiating skills.

The report details provisions in signatory countries’ labor codes that fall short of international standards. Specifically, Guatemalan law interferes with labor’s right to strike and El Salvador’s laws hinder union formation. The CAFTA agreement obligates countries to enforce their own labor laws, which if inadequate, could create an uneven playing field for signatory countries with higher labor standards.

Although the legislatures of Guatemala, El Salvador, Honduras, and Nicaragua have already ratified CAFTA, Costa Rica is still in heated debate about the consequences of ratifying the agreement. While Costa Rican business leaders generally support CAFTA, opponents in the academic, intellectual, and public employee sectors say the agreement will benefit few at the expense of many.

Can a Regional Trade Consortium Counter China’s Red Hot Textile Boom?
US CAFTA proponents argue that a trade alliance with Latin American neighbors is key to countering the flood of cheap Chinese textile exports and keeping the US textile industry afloat. China employs 19 million textile workers and runs a $160 billion trade surplus with goods it exports to the United States. The size of the trade gap and importance of maintaining domestic jobs in a still anemic global economy has pushed the two countries to the verge of an apparent trade war.

US textile industry executives believe that Central America is an incredibly important market for US apparel and textile manufacturers because its proximity lowers production costs. This makes it easier for the US to compete against China. The lower production costs, in addition to the proposed duty-free status of goods passing through CAFTA countries, would create even more of a competitive advantage for American made goods.

Regional Economic Integration Already a Reality
Independent of the US, Latin American countries have explored the benefits of regional economic integration. The Central American Common Market (CACM), established in 1961 by agreement between Guatemala, Honduras, Nicaragua, El Salvador, and Costa Rica, is in talks to create a customs union by January 2006. CACM does a brisk trade with its neighboring Andean Community partners (Bolivia, Colombia, Ecuador, Peru, and Venezuela) but regional political instability has hindered growth.

The climate in the US is decidedly wary of new international trade agreements. Discussions of a US withdrawal from the World Trade Organization are already occurring in Congress. Though talk of severing WTO ties is probably more smoke than fire, CAFTA trade negotiators may have to go back to the table and address congressional concerns before a final vote is reached.






Contributed by Amanda Howe, an attorney specializing in Comparative Intellecutal Property and Banking Law.

To read another Global Envision article about global sugar production and its effects on poor countries, see Bittersweet: How an Addiction To Sugar Subsidies Hurts Development.