- The Washington Times - Tuesday, April 12, 2005

Congress today formally begins debate on the Central American Free Trade Agreement, likely the toughest fight yet for the Bush administration’s trade agenda.

The outcome will affect the administration’s international economic policy. Passage would add momentum to ambitious plans for bilateral, regional and global trade deals, while defeat would signal potential trade partners that prospects for any new projects are at best uncertain.

“If the United States is afraid to enter into a trade agreement with six little countries … what does that tell you about the willingness of the United States to enter into any trade agreement?” said Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers, a trade group that favors CAFTA.

“It’s not about Central America, it’s about trade,” Mr. Vargo said.

The Senate Finance Committee and a House International Relations subcommittee today are scheduled to hold hearings on an agreement, also known as DR-CAFTA, to lower tariffs and codify investor rights in the Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua.

Under special legislation governing trade deals, lawmakers can vote yes or no on the agreement, but cannot amend it.

President Bush’s trade team, with solid support from the business community, easily won congressional approval for four free-trade pacts during the administration’s first term. Business associations and some of the country’s biggest farm groups are ramping up their efforts to get CAFTA through Congress.

But opposition is coalescing around organized labor, domestic textile manufacturers and sugar producers — a potent mix that defies party affiliations and leaves final approval uncertain.

“It’s a diverse group. Certainly we are all on the same team to defeat CAFTA,” said Phillip Hayes, spokesman for the American Sugar Alliance, a group representing sugar cane and sugar beet farmers, as well as refiners.

The sugar industry objects to CAFTA provisions that will allow Central American competitors to sell more sweetener to the U.S. market, textile companies are worried that Asian competitors would displace their sales to the region, and unions say the pact will leave workers vulnerable.

“While [CAFTA] may be a good thing for certain multinational corporations, it’s not a good thing for workers. Particularly in the CAFTA countries, the labor laws are very bad,” said Mark Levinson, chief economist for Unite Here, a union that represents workers in textile, services and other industries.

Unions opposed the four pacts approved during the first term, which were easily passed in Congress.

In the textile industry, the administration hopes to convince enough companies that closer trade ties to Central America will help them fight their most menacing competitor — China.

“Textiles is probably the most fragmented bloc of opposition and the most easy to deal with,” said a U.S. trade official who asked not to be named.

Already the Commerce Department has taken steps to protect the industry from Chinese imports through new quotas, a step the administration says is not directly related to CAFTA, but one that might help ease opposition.

It is still not clear whether the sugar industry, which operates under a system of quotas that limits supply and supports prices, would makes a deal to mitigate losses from new openings for Central America. Neither side now appears conciliatory.

“The idea that the entire trade agenda is going to be held hostage by an industry that is not affected by the agreement. … It creates a lot of ill will in the administration and among members of Congress,” the trade official said.

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