Businesses Look to Benefit From CAFTA

Raul Delgado sees an opportunity on the horizon for his freight business to start distributing foreign goods: CAFTA.

The Central American Free Trade Agreement (search) would eliminate most trade barriers between the United States and five Central American countries and the Dominican Republic. If it passes, Delgado said it will open the door for him to do business with his native El Salvador and bring more of that country's specialty foods, furniture and art works here.

"If the trade agreement goes through, it's definitely a plus for our side," said Delgado, president and chief executive officer of Cosmos Transport (search), a freight company that moves construction materials along the East Coast.

But while business groups have been generally supportive, labor groups worry that CAFTA will encourage U.S. businesses to move jobs overseas to take advantage of cheap labor.

CAFTA-DR would immediately eliminate duties on 80 percent of U.S. exports to El Salvador, Honduras, Nicaragua, Guatemala, Costa Rica and the Dominican Republic, and phase out other tariffs in 10 years.

The agreement was finalized by U.S. trade officials in December 2003, but has yet to be approved by Congress. Senate and House committees held hearings in recent weeks, but a spokeswoman for Senate Finance Committee Chairman Chuck Grassley, R-Iowa, said last week no firm date for committee action has been set.

At a House Ways and Means Committee hearing Thursday, Chairman Bill Thomas, R-Calif., said CAFTA would level the playing field for U.S. exports, which are slapped with tariffs upon entering the Central American markets.

But Ernie Grecco, president of the Baltimore Metropolitan AFL-CIO, said CAFTA would bring what NAFTA, the North American Free Trade Agreement (search), had brought several years ago: loss of jobs to workers overseas.

"All the manufacturing jobs are going," Grecco said. "Bring them back here to Baltimore."

But CAFTA will not have the impact here that NAFTA did, simply because trade with the CAFTA countries is relatively small, said I.M. "Mac" Destler, a trade expert at the University of Maryland's School of Public Policy.

Destler said CAFTA would benefit U.S. fabric producers, by giving them access to Central American apparel manufacturers, who would get privileged access to U.S. markets in return.

"If you stop having this privileged access to U.S. markets, you take away the incentive for them (Central American apparel companies) to import American fabric," Destler said.

CAFTA is good news for one company that supplies embroidered labels and brands -- such as Nike's swoosh -- for clothing companies.

"It will benefit our business because of the ability to be able to serve apparel brands and factories in Central America, "said Susan Ganz, chief executive officer of Lion Brothers (search), which has a small, but emerging customer base in Central America.

Michael Galiazzo, executive director of the Regional Manufacturing Institute (search), said the outsourcing of jobs is an unfortunate reality, but that moving operations abroad may help U.S. companies retain a competitive edge.

"Manufacturers in our nation are clearly burdened with extra costs . . . because of regulations we are required to follow," Galiazzo said, referring to additional costs for health care, litigation and workers' compensation.