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CAFTA Closer?

posted on April 1, 2005


How the eventual 2005 crop impacts commodity prices depends, in large part, on demand. At first blush, the numbers may NOT support the fundamentals. But in corn anyway, it will take a healthy yield to meet world demand.

To that end, the Bush administration is pushing an aggressive trade agenda. The president wants a two-year extension of fast-track trade promotion authority, as well as Congressional approval of the Central American Free Trade Agreement, or CAFTA.

But CAFTA rhymes with NAFTA, and that's given the jitters to some farm interests, like the sugar industry. U.S. vegetable and fruit growers say NAFTA, which liberalized trade with Canada and Mexico, devastated their industries. And critics of CAFTA see history out to repeat itself.

CAFTA Closer? In addition to the U.S., Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic make up the countries of the proposed Central American Free Trade Agreement. Currently, goods from these countries come into the US duty-free but US goods are subject to high tariffs upon arrival at CAFTA ports.

The agreement is being promoted by the Bush administration as a chance to prove it can cut deals to liberalize trade with developing nations. It also is being pushed as a method of reducing the current trade deficit of 617 billion dollars by 4.5 billion dollars. Of the 4.5 billion dollars in exports, 1.5 billion is expected to be agricultural goods.

The U.S. sugar industry is concerned what effect a tariff-free marketplace could have on its product. To allay these fears, the Bush administration is touting a three-part plan to protect the U.S. share of the market. This includes language to prevent sugar from being sent through a CAFTA country to the US from places like Brazil.

Another group that will feel the effects of CAFTA is the cattle industry. The National Cattlemen's Beef Association is calling the plan a good idea. The NCBA sees a potential three-fold increase in beef exports to CAFTA partners by 2015.

On the opposite end of the spectrum is the Ranchers Cattlemen Action Legal Fund. R-CALF officials are concerned that not all tariffs will be removed and that cheap beef moving north will pressure US prices.

Politically, Democratic legislators are among those not totally on-board with the agreement. There is some concern that the open door could mean the outflow of American jobs. Democrats are worried that lower wages and lax enforcement of labor and environmental laws might be attractive to some US companies.


Tags: agriculture Latin America news trade