Last May the United States and the five countries of Central America – Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica – signed the U.S.-Central America Free Trade Agreement known as CAFTA. Several months later, the Dominican Republic joined the agreement, which would eliminate almost all trade barriers among the participating countries. In order for the trade pact to take effect, the U.S. Congress must approve it. Both supporters and opponents of CAFTA are predicting a tough fight.
According to Dan Griswold, director of the Center for Trade Policy Studies at the Cato Institute, a research organization in Washington, the trade agreement has some flaws. But overall, he says CAFTA is a winner for the United States and the other six countries, not only in economic terms but political terms as well.
"This is a region that is in our backyard," he says. "It has a tortured past. It was only in the 1980’s that Central America was one of the biggest headaches for U.S. foreign policy. Today the region is at peace. All six CAFTA countries are multi-party democracies. They’re making progress on social trends, on political rights and CAFTA would encourage that."
Opponents counter that CAFTA will impede social progress. Carol Pier is labor rights and trade researcher for Human Rights Watch. She says as drafted, CAFTA freezes substandard labor laws in place and does not give these countries any real incentive to improve them. For example, workers’ rights to organize are not sufficiently protected in many Central American countries. Ms. Pier says she would like to see CAFTA not only require countries to enforce their labor laws but have them meet a minimum international standard.
Carol Pier also faults CAFTA for not protecting workers from discrimination. "You’re dealing with countries in which the work force in the free trade zones is majority female. And yet you’re not requiring the countries to effectively enforce their laws on sex discrimination? To me that’s ludicrous," she says.
Opponents of CAFTA also fear it will damage the rural sector. According to Jeff Vogt at the Washington Office on Latin America, a democracy and human rights monitor in Washington, one-point-five million Mexican farmers were forced off their land after NAFTA was implemented in 1994. Central American farmers – who in some countries represent more than half the economically active population – could be harmed even more.
"There is a real concern that there is going to be increased unemployment in the rural sector," he says, "because Central Americans are not going to be able to compete with very highly subsidized agriculture, which will come in eventually to the Central American marketplace."
American farmers receive one-fifth of their income from government farm subsidies, which enables them to sell their crops below market cost. While importing cheaper grains into the Central American market will benefit those who live in urban areas, it will hurt rural farm workers and their families who stand to lose their livelihoods.
And as Jeff Vogt points out, one crop that Central Americans grow competitively isn’t included in the free trade agreement. "If you look at the Central American market, one of the major crops that it produces is sugar," he notes. "And that’s one product on which the U.S. is continuing to keep trade barriers. So in the one product where they could be competitive there’s a barrier to entry in the U.S. market."
Even free-trade supporters like the Cato Institute’s Dan Griswold concede that the sugar exclusion is one of CAFTA’s glaring failures. But he argues that even flawed, CAFTA is a good recipe for economic growth across the region.
"You look around the world and there seems to be a connection between trade liberalization, development and democracy taking root," he says. "We’ve seen it in South Korea, Taiwan, Chile, Mexico, and it’s happening in Central America. As these countries turn toward the global market, as they liberalize their economies, we’re seeing democracy and human rights take root."
It remains unclear when CAFTA will be sent to the U.S. Congress, although some speculate it could be as early as November, after the election but before the next president and congress are sworn into office in January.