WorldCity Business Magazine

CAFTA gets top priority

by Jeffrey Sparshott

The Central American Free Trade Agreement has become the definitive trade deal and the top trade priority for the Bush administration.

While a lot is going on in the world of trade policy especially escalating trade tension with China and negotiations at the World Trade Organization energy is now focused on the deal with the Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua.

“Our first trade priority is to pass the Central American and Dominican Republic Free Trade Agreement, known as CAFTA, or DRCAFTA. That is an important priority of this administration, and it should be an important priority of the United States Congress,” President Bush at the May 17 swearing-in ceremony for his trade envoy, Rob Portman.

Battle lines are mostly drawn. The administration is expected to send implementing legislation to Capitol Hill in June, and the final showdown is expected in July, when the Senate is likely to vote before the House on CAFTA. (The administration had hoped for a May vote but could not muster sufficient support.)

The fight over CAFTA is akin to the NAFTA debate an argument over how the U.S. competes and engages other countries in the world, and how to measure the costs and benefits of globalization. NAFTA, negotiated largely by the first President Bush then ushered into law by President Clinton, won congressional approval in 1993 by a fair margin, 234-200 in the House and 61-38 in the Senate. The United States, Canada and Mexico created the world’s biggest free trade zone and the sides that battled in 1993 still don’t agree whether it has helped or hurt North America.

More than a decade later, the Bush administration would love to have a 30-vote cushion. Instead, pro-trade forces are hoping they do well enough to match the vote count from the Trade Act of 2002, which slipped into law by a single ballot. That law granted Bush the authority to negotiate deals with Singapore, Chile, Morocco and Australia, all approved by Congress. It also started the wheels on CAFTA, also known as DR-CAFTA.

As with NAFTA and the 2002 bill, forces for and against free trade are pulling out all the stops.

In an unprecedented road show, presidents from the six Latin American nations toured the United States in May to gin up support for the deal. The business community, led by the Business Roundtable, the U.S. Chamber of Commerce and other business groups, in late May launched a nationwide push to support the agreement. And President Bush’s cabinet is working to convince doubters that the United States needs CAFTA.

Commerce Secretary Carlos Gutierrez, Agriculture Secretary Mike Johanns and Portman, the U.S. trade representative, are taking the lead on the economic front. Taking a page from Clinton’s NAFTA playbook, the president also opened a second front, selling CAFTA as vital to U.S. national security.

Bush himself is making the foreign policy case, while Defense Secretary Donald Rumsfeld, Secretary of State Condoleezza Rice and other high-level officials are telling Congress and the American public that CAFTA represents a strategic choice about the U.S. role in the region, Latin America and the world.

“For Central America and the Dominican Republic, CAFTA is a chance to strengthen democracy, expand economies, reduce poverty and corruption, and widen the circle of economic opportunity. It is also a challenge to the United States to complete the work of democracy and peace that we began two decades ago,” said Robert Zoellick, who negotiated CAFTA as U.S. trade representative before moving to his current post as Rice’s top deputy.

Mr. Zoellick said the United States must decide whether to promote America’s strategic interests or its special interests.

The “special interests,” though, are a fairly diverse group. Organized labor, which opposed every free-trade agreement listed in this column, objects to CAFTA’s provisions on worker rights. When it comes time for Congress to vote, unions bring a lot of Democrats into the “no” column.

The textile industry is split, but many domestic companies that weave fabrics are opposed to CAFTA because of loopholes that allow non-U.S. product to be sewn into Central American apparel and exported duty-free to the United States. These companies bring more Democrats and some Republicans to the no column.

And the tipping point comes from sugar, a relatively small industry that carries a lot of political weight and more than a teaspoonful of Republicans into CAFTA opposition.

Other lawmakers are simply concerned that U.S. policy is feeding an outsized trade deficit.

There are 231 Republicans, 202 Democrats and one independent in the House, plus the seat vacated by Mr. Portman when he took the U.S. trade post.

In part because of political polarization Democrats are not inclined to support any Bush initiative the administration is unlikely to get many votes from across the aisle. As of mid-May there were only three Democrats who definitely supported the deal down from more than 100 who supported NAFTA and as many as 25 who supported the 2002 trade bill. There are not now 218 Republicans who support CAFTA, though, so deals will have to be struck and arms twisted.

Congress has never voted down a free-trade trade agreement. The Bush administration doesn’t want CAFTA to be the first.