- The Washington Times - Monday, June 13, 2005

Congress tomorrow is set to begin debate on the Central American Free Trade Agreement.

President Bush wants it ratified. Former President Jimmy Carter is pushing for passage, too. Meanwhile, labor unions and sugar growers have lined up against the trade pact, and House Democrats remain skeptical.

Forces for and against the deal likely will debate CAFTA in make-or-break terms for particular industries, for Latin American democracy and for U.S. leadership on global trade issues.

But for most Americans, CAFTA hardly would be noticed.

The pact is “likely to have a minimal impact on production, employment or prices” in the United States, the U.S. International Trade Commission (ITC) said in an analysis released last year.

CAFTA is a binding set of trade and investment rules for the United States, the Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. U.S. lawmakers, who can vote yes or no but cannot amend the deal, are expected to adopt or reject it by next month.

Particular industries would notice CAFTA. If approved, the agreement is expected to have the greatest impact on U.S. sugar, textile and apparel producers, while opening up export opportunities, especially for farmers, ranchers and some heavy manufacturers.

Overall U.S. exports to CAFTA countries are likely to increase by $2.7 billion a year, and U.S. imports are likely to increase by $2.8 billion after the agreement’s full 20-year implementation, the ITC said. That is a tiny fraction of last year’s $1.1 trillion in exports and $1.8 trillion in imports.

“It is a significant agreement, but let’s put it in perspective. [The CAFTA bloc] is a major trading partner, but compared to the U.S. economy as a whole, it is not that big,” said Erik Autor, vice president at the National Retail Federation, an industry group that supports CAFTA.

Mr. Autor said CAFTA should help lower clothing and footwear prices, for example. But it would be difficult to separate the impact of CAFTA from influences in the broader world economy, such as competition from China and the end of a global quota system.

On one important commodity, sugar, the ITC estimated prices would fall 1 percent, though an industry analysis predicted an eventual drop of 4.6 percent to 15 percent — bad for cane and sugar-beet farmers but good for candy manufacturers.

The ITC study estimated that when CAFTA is implemented fully, the lower prices and new export-oriented production would provide additional benefits to the U.S. economy worth $166 million each year.

That is less than 0.01 percent of U.S. economic output, or roughly 56 cents per person in the United States, based on an estimate by The Washington Times.

CAFTA also sets up rules that likely will benefit the United States but are hard to quantify, such as regulations for investment, customs, agricultural safety, patent protection and government procurement.

On the jobs front, the sugar industry would be hit hardest, losing more than 2 percent of its labor force, the ITC projected. All other industry-specific job gains and losses directly related to CAFTA affect less than 1 percent of the labor force.

But labor-union opposition to CAFTA has been steadfast.

“The Bush administration has negotiated an agreement that will utterly fail to create good jobs at home or promote equitable and sustainable development in Central America,” said John J. Sweeney, president of the AFL-CIO.

CAFTA’s political impact also will be significant in the United States and Latin America. Any economic impact would be relatively much greater in the Central American countries than in the United States, because their economies and populations are smaller. What is only a blip on the U.S. economic radar could be a major event in the poorer nations.

“If the U.S. Congress were to turn its back on CAFTA, it would undercut these fragile democracies, compel them to retreat to protectionism and make it harder for them to cooperate with the U.S.,” Mr. Carter wrote in a June 8 letter to U.S. lawmakers.

House Democrats, though, are skeptical that a “no” vote would do more damage than a “yes.”

“In fact, in each of the countries in the region, the CAFTA as negotiated is creating unrest and potential instability, not strengthening democracies,” said Rep. Charles B. Rangel, New York Democrat.

A “no” vote probably would chill the Bush administration’s drive to include Panama, Colombia, Peru and Ecuador in free-trade agreements, while further damaging already difficult talks to create a 34-nation Free Trade Area of the Americas.

The Bush administration has argued that the impact could extend as far as World Trade Organization talks, now at a critical stage.

“The rest of the world is watching,” U.S. Trade Representative Rob Portman said Thursday of the pending CAFTA vote.

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