On Dec. 17th, 2003, the U.S. completed negotiations for a Central American Free Trade Agreement (CAFTA) with Nicaragua, Honduras, El Salvador, and Guatemala. Costa Rica was also included in the Washington, DC session that began on Dec. 8th, but withdrew from the bargaining because of U.S. demands that it open up various service sectors, including insurance and telecommunications, to foreign competition.
Based on the NAFTA model, CAFTA would push ahead the corporate globalization agenda that has caused a "race to the bottom" in labor and environmental standards in the U.S. and Central America.
CAFTA includes services provisions promoting the privatization and deregulation of fundamental public services. In addition, CAFTA would remove all tariff barriers in the Central American countries on imported agricultural products. This would allow cheaply grown and heavily subsidized U.S. corn and other basic grains to flood local markets (subsidies that almost exclusively benefit giant agribusiness in the U.S.). Small farmers in Central America, already devastated by the importation of cheaply grown agribusiness U.S. grains, years of drought, and the massive fall of coffee prices on the world market, would face the extinction of their livelihoods. CAFTA would likely force a massive migration of erstwhile farmers to large urban areas to work in the informal sector or maquilas (sweatshops), or to risk a dangerous journey to seek work in the U.S.
In the US, "CAFTA would result in the loss of thousands of U.S. apparel and textile jobs," according to Mark Levinson, chief economist for the Union of Needletrades, Industrial and Textile Employees. "CAFTA is good for the big retailers, not for apparel and textile workers."
American growers of sugar cane and sugar beets expect competition to increase if sugar imports from the CAFTA countries are allowed into the United States without the steep tariffs imposed on sugar imports from other countries. The five Central American countries currently produce 2 million tons of sugar annually, more than the United States imports.
CAFTA as a stepping stone The Bush administration has been frustrated with negotiations this fall for a Free Trade Agreement of the Americas (FTAA) .In talks in Miami last month, the administration was forced to accept a watered-down outline for the FTAA that will allow each nation to determine the extent it is willing to lower trade barriers on various politically sensitive industries. That compromise covered over deep disagreements between the United States and Brazil concerning the scope of the negotiations that were threatening to derail the entire enterprise, which is supposed to conclude by January 2005.
Therefore, CAFTA is seen as a stepping stone to the FTAA, covering all 34 democracies in the Western Hemisphere. The Bush administration is pushing negotiations for smaller free trade deals such as CAFTA and individual agreements with other Latin American countries, to put more pressure on Brazil and its allies to acquiesce to a broad free trade deal. Holdouts, such as Brazil, would face the prospect of losing access to the world's largest market, the United States, to competitors who face lower trade barriers.
Congressional action early 2004: The US Congress is expected to receive the CAFTA agreement for consideration early in 2004. The Bush administration still hopes to include Costa Rica and the Dominican Republic in the pact before it goes to Congress.
Mexico, Canada, Israel and Jordan currently have free trade agreements with the U.S., but in 2003 Congress approved free trade deals with Chile and Singapore. This year (2004) the administration hopes to complete negotiations with Australia and Morocco, and with five African countries in the Southern Africa Customs Union. The administration also wants to launch free trade talks next year with Thailand, Panama, Bahrain, Colombia and possibly Ecuador and Bolivia.