Central American Leaders Bang CAFTA Drum In Washington

by Leroy Baker, Tax-News.com, New York

12 May 2005

Leaders of Central American signatories of the Central American Free Trade Agreement (CAFTA) agreement arrived in Washington yesterday in an attempt to lobby the Bush administration and members of Congress on the merits of getting the United States on board the free trade agreement.

According to US Trade Representative Rob Portman, the six leaders, representing Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic have been invited to Washington so that US lawmakers can hear first hand the economic benefits the CAFTA deal will bring to the Central American economies.

There is heavy opposition to the Central American Free Trade Agreement from US labor unions and farmers, not to mention from groups concerned about America's soaring trade deficits.

Under the CAFTA agreement, 80% of US exports of consumer and industrial goods will become duty-free in Central American and the Dominican Republic immediately, with remaining tariffs phased out over 10 years.

Key US export sectors will benefit from immediate duty elimination, such as information technology products, agricultural and construction equipment, paper products, pharmaceuticals, and medical and scientific equipment. Tariffs on US autos and auto parts will be phased out within 5 years. Countries not presently in the WTO Information Technology Agreement will join.

Central America and the Dominican Republic will also accord substantial market access across the entire services regime, offering new access in sectors such as telecommunications, express delivery, computer and related services, tourism, energy, transport, construction and engineering, financial services, insurance, audio/visual and entertainment, professional, environmental, and other sectors.

However, support for the CAFTA in Central America is not universal, especially in Costa Rica, where President Abel Pacheco has recently called for the establishment of a "council of notables" who will reassess the merits of the free trade deal for the Costa Rican economy.

Costa Rica has also witnessed public demonstrations against the CAFTA, with unions protesting about the commitment it will place on the government to break up state-run monopolies and open up the utilities and telecommunications sectors to competition from foreign firms.

The President has also angered supporters of the free trade pact by insisting that his long-delayed tax reform bill - still languishing in the Congress - is approved first.

Growing ever more impatient with the government, businesses (along with the Libertarian Movement Party, which is opposing the tax package) have countered that Pacheco's stance on the issue will scare away foreign investors, and have warned that the ongoing delay in CAFTA’s approval will threaten the country’s economic prospects.

Recommended