Those who promote the Dominican Republic-Central America Free Trade Agreement,
or "DR-CAFTA," say it's a vital tool for enabling participating nations to expand their trade and investment opportunities and as a result, improve their economies. But critics charge that DR-CAFTA is largely one-sided, enabling big U.S. corporations to effectively overwhelm the local markets of other nations while maintaining barriers against their exports to the United States.
Along with the Dominican Republic, the Central American countries involved in DR-CAFTA are Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. The U.S. Chamber of Commerce says trade between those nations as a group and the United States was more than $33 billion in 2004, with $15.7 billion of that representing U.S. exports to the region. Such trade is small by comparison to total U.S. exports last year, which amounted to about $900 billion, while imports came to roughly $1.3 trillion.
Danielle Markheim, Senior Trade Analyst at Washington - based The Heritage Foundation, says it provides a way for participating countries to move forward governmentally and socially. "DR-CAFTA goes beyond the economics," she says. "DR-CAFTA is something these countries can use to help stabilize, you know, their fledgling democracies. They have the opportunity to take the advances and reforms that they've made and go even further."
The countries involved in DR-CAFTA already get preferential trade treatment with the United States under a measure called the Caribbean Basin Initiative, or "CBI", which came into being a little over 20 years ago. But while those countries enjoyed greatly reduced duties on the goods they sent to the United States, the CBI allowed them to maintain protectionist tariffs on incoming U.S. goods.
U.S. Trade Representative Robert Zoellick says DR-CAFTA "levels the playing field" between both sides by removing those tariffs. DR-CAFTA also allows U.S. corporations access to sectors of the other economies traditionally closed to them, such as banking, insurance, and telecommunications.
William LeoGrande, Dean of the School of Public Affairs at The American University in Washington, disputes Robert Zoellick's description of DR-CAFTA as a level playing field. "There are serious limitations to the agreement from the Central Americans' point of view. Their markets get opened up to U.S. goods in some critical sectors, particularly agriculture. Whereas, the United States is maintaining some important strictures and tariffs on Central American exports to the United States," he says.
DR-CAFTA regulates the importation of Central American sugar, ethanol, dairy products, peanuts and some other products. On the other side, Central American countries will be able to protect their local corn growers. And the agreement allows Costa Rica to protect its potato and onion producers.
U.S. corporations pushed hard for the trade pact to compel DR-CAFTA countries to privatize sectors under national control, such as telecommunications, and to open other sectors where foreign owners are kept out. Gary Hufbauer, with the Institute for International Economics in Washington says that possible outside takeovers of these sensitive areas are not against the best interests of the affected countries.
"I don't think that foreign control [of these sectors] is at all hostile to a country's economic ambitions because that will bring better technology and more efficient use of resources. And it will open up the markets of the country."
But analyst Fiji Rangaswami at the Washington-based Carnegie Endowment for
International Peace raises questions about privatization of nationalized sectors and foreign control of others. "I think there needs to be room for further government regulation in the telephone system," she says "if you want to ensure that there is broad access in rural communities. The question is, in return for opening up some of its public sectors, primarily telecom and insurance, did [countries such as] Costa Rica get additional market access to the U.S.? Was there a quid pro quo? And, I don't feel they got anything in return for that."
Another issue debated between DR-CAFTA supporters and critics is labor conditions in the member countries. Danielle Markheim of The Heritage Foundation cites a list of benefits she says the pact would bring to those workers. "Before, because the labor provisions [in signatory countries] aren't enforced, there was really no way for the average worker to take a complaint and have it addressed in a timely or effective manner," she says, adding "Under DR-CAFTA, ideally, the resources and the expertise will be provided to help those countries put those mechanisms in place."
The U.S. Trade Representative's Office says that DR-CAFTA compels member countries to strictly enforce their labor laws or face heavy fines. Furthermore, the office says, the pact enables the United States to impose trade sanctions against countries that do not comply.
But Larry Burns, Director of The Council on Hemispheric Affairs in Washington, says DR-CAFTA's supporters are overly optimistic that this pact will protect workers. He says its labor provisions represent a significant retreat from standards contained in NAFTA, an earlier trade agreement between the United States, Mexico and Canada.
"In NAFTA, the North American Free Trade Agreement," he says "you have to abide by the labor standards set up by the International Labor Organization of the U.N. Under the terms of DR-CAFTA, you simply have to comply with the local labor laws. But that doesn't mean anything, because those labor regulations are eak and entirely unsatisfactory."
In Washington, both supporters and opponents of DR-CAFTA say it's unclear whether their side has the votes to either pass or reject the trade measure. Political observers say it now depends on what happens as House lawmakers work behind the scenes to line up support for the pact.
This report was first broadcast on the VOA News Now "Focus" program. For other Focus reports, click here