USTR - Why Fear CAFTA?
Office of the United States Trade Representative

 

Why Fear CAFTA?
Op-ed by USTR Rob Portman in the Wall Street Journal 05/10/2005


Five Central American presidents and the president of the Dominican Republic arrive in Washington today after finishing a tour of U.S. cities where they met with the American people about a historic opportunity -- the U.S.-Central America-Dominican Republic Free Trade Agreement, or "Cafta." Their tour culminates at the White House, where they will join President Bush on Thursday.

Twenty years ago, civil war was a part of everyday life in Central America. Building democratic societies and improving the economies in these countries often took a back seat to simply staying alive. But the U.S. knew that just as our trade policy after World War II helped secure democracy and hope in Western Europe and Japan, open trade policies today could play a crucial role in transforming our neighborhood.

That is why, in 1983, President Reagan introduced the Caribbean Basin Initiative (CBI) to grant one-way access for the products of Central America and the Dominican Republic into the U.S. economy. This initiative functioned as critical economic aid, and it worked. Exports to the U.S. from this region have quadrupled since 1985. President Clinton was right to expand CBI benefits in the '90s and, as a congressman from Ohio, I joined colleagues in providing strong bipartisan support for that effort.

In the space of a generation, Central America and the Dominican Republic replaced chaos with commerce. It is time, now, to take our relationship to the next level. The economic benefits of Cafta to the U.S. could not be clearer. Because of CBI and the other trade preferences we have granted these countries, 80% of their goods and services and 99% of their agricultural goods already enter the U.S. duty-free. But U.S.-made products exported to Cafta countries (worth $15 billion) still pay hefty tariffs. On day one of the agreement, Cafta would eliminate the vast majority of those tariffs, saving nearly $1 billion per year in foreign taxes on U.S. manufactured goods and farm products. Those who supported legislation to open America's market on a one-way basis now have the chance to give our workers and farmers a level playing field.

In addition to the immediate savings for Americans, Cafta expands markets for American producers of everything from apples to zinc products. America's leading farm and manufacturing groups estimate sales gains to Central America of $1.5 billion in farm products and $1 billion in manufactured goods. This is good for American workers.

Lately many of my former colleagues on Capitol Hill have focused on our trade deficit with China. I share that concern, but Cafta helps address it by allowing us to compete more effectively with China. In the clothing business, Cafta provides specific incentives to use U.S. yarn, fabric, thread and elastics in making clothes in our hemisphere. After Cafta, more than 90% of all apparel made in Central America or the Dominican Republic will be sewn from fabric and yarn produced by American workers. If we don't solidify our trade relationship with this region through Cafta, these factories are likely to move to Asia, where U.S. inputs account for less than 1% of the clothes made there.

Some say that we should not enter into a trade agreement with Central America and the Dominican Republic because labor conditions there are not good enough. I find this argument hard to follow, because Cafta will compel these countries to improve their labor conditions. There is no doubt that the region has more work to do in passing better laws and enforcing them, but this is precisely why we should pass Cafta. This agreement gives the U.S. new leverage to raise standards and ensure effective enforcement of labor protections.

By the efforts of many brave reformers, Central America and the Dominican Republic have risen from the depths of despair and now stand poised to solidify their gains through a deeper trade and economic relationship with the U.S. It would be a mistake to take for granted the recent success stories of Central America and the Dominican Republic. Democracy is still fragile in many parts of Latin America: This is the chance of a lifetime to shore it up with our neighbors to the south, while simultaneously creating new markets for U.S. workers and farmers.

(Copyright (c) 2005, Dow Jones & Company, Inc.)

 
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