WASHINGTON – The Bush administration reached an agreement Wednesday on expanding free trade in Latin America, giving four Central American countries duty-free access to the vast U.S. market and holding out the promise of cheaper prices for U.S. consumers.
The agreement, which must be approved by Congress, would represent America's sixth free trade agreement — deals to eliminate all barriers to trade — and was modeled along the lines of the decade-old North American Free Trade Agreement (search) linking the United States, Mexico and Canada.
The Central American Free Trade Agreement (search) or CAFTA, will cover Guatemala, Honduras, El Salvador and Nicaragua.
A fifth nation, Costa Rica, abruptly left the negotiations on Tuesday, complaining that the United States was demanding too much in the way of removing barriers that prevent foreign competition in the telecommunications and insurance industries. But the administration said it hoped to include that country within the next few weeks before CAFTA is sent to Congress.
The trade ministers of the other four nations, appearing at a joint news conference with U.S. Trade Representative Robert Zoellick (search), said they believed the agreement represented the best deal they could get even though the United States insisted on special protections for the beleaguered U.S. textile industry and sugar and various other agricultural products.
Zoellick called CAFTA a milestone along the way to the administration's big prize of a 34-nation Free Trade Agreement of the Americas, covering all countries in the Western Hemisphere except Cuba.
But opponents blasted the deal as a continuation of failed trade policies exhibited by NAFTA, which they contend have cost the country thousands of manufacturing jobs and contributed to a string of record-breaking trade deficits.
Rep. Dick Gephardt, who is campaigning for the Democratic presidential nomination, called CAFTA "yet another example of the Bush administration selling out American workers with a bad trade deal. ... As a result of CAFTA, thousands of textile and apparel jobs will be lost in South Carolina and across the country. Thousands more jobs will be lost in the agricultural industry."
Trade is expected to be a major issue in next year's presidential race with Bush's Democratic opponents charging that the administration has failed to provide help to a U.S. manufacturing sector that has suffered 40 consecutive months of job losses that have wiped out 2.8 million jobs.
U.S. unions were particularly upset with what they saw as weak protections for labor rights in the Central American pact. AFL-CIO President John Sweeney (search) vowed that organized labor "will do everything in our power to defeat this deeply flawed agreement."
The administration did negotiate special provisions to protect domestic textile manufacturers and sugar beet and sugar cane farmers, but officials in both industries said they were concerned that the deals still went too far in opening their sectors to foreign competition.
For sugar, the four Central American countries will see their current quota of 111,000 tons of sugar that they can ship to the United States rise by 85,000 tons next year and then increase by 2 percent per year for the next 15 years. The amount of the U.S. market supplied by the Central American countries would total about 1 percent in the first year of the deal and rise to 1.4 percent at the end of 15 years.
Lawmakers from sugar states said they viewed the CAFTA increase as a dangerous precedent for future free trade deals being negotiated with such countries as Australia and Brazil.
The administration, however, hailed CAFTA as a victory that will provide American consumers with access to cheaper prices on imports of such items as clothing and agricultural products such as coffee and spices while boosting the fortunes of U.S. exporters by tearing down foreign barriers.
An administration fact sheet said that once the agreement takes effect, 80 percent of U.S. exports of manufactured goods and more than 50 percent of U.S. agricultural products will be able to enter the four nations duty free with other tariffs on more sensitive items phased out more gradually.
The longest phaseout for the United States will cover dairy products at 20 years, and tariffs protecting poultry and rice will not disappear for 18 years.
The Central American nations were able to win lengthy protections for white corn among other products.
In addition to the NAFTA creating a free trade zone with Mexico and Canada, the United States has individual free trade agreements with Israel, Jordan and, just completed this year, Singapore and Chile.
The administration hopes to complete deals next month with Australia and Morocco and has announced a string of other negotiations, all part of an effort to push a global free trade agenda both through multination negotiations and individual deals.
The success in reaching the Central American deal gave the Bush administration a badly needed victory after a series of setbacks in trade including the collapse of global trade talks in Cancun, Mexico, a forced compromise with Brazil over the areas that will be covered by an FTAA and Bush's about-face earlier this month in deciding to withdraw protective tariffs on steel in the face of threatened European and Asian retaliation.