Will the Central American Free Trade Agreement drive another wedge in the agricultural alliance? While some have thrown their full weight behind CAFTA, other farm and industry groups are fighting its ratification.
CAFTA, signed by President Bush in May, would create a free-trade zone between the United States, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. The Dominican Republic could also sign the agreement.
Organizations such as the USA Rice Federation favor CAFTA because it includes market access for rough and milled rice. The milled rice issue caused some friction with the U.S. Rice Producers Association early on, but those problems appear to have been smoothed over.
USA Rice Chairman Gary Sebree says CAFTA preserves an existing market for U.S. rice and “offers new opportunities for expansion in Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua.”
The National Farmers Union, meanwhile, criticized the CAFTA signing, saying it would have a negative impact on sugar, fruit, vegetable and ethanol producers among others.
NFU President Dave Frederickson said a Minnesota-based grain company had already announced plans to invest in an ethanol plant in Central America to “avoid the 54-cent per gallon tariff on ethanol exports to the United States.”
Some of the harshest attacks on CAFTA have come from the American Manufacturing Trade Action Coalition, an umbrella group for manufacturing associations that includes much of the U.S. textile industry.
The day the president signed CAFTA, AMTAC sent out a six-page summary, detailing its perceived faults. “It is regrettable that the U.S. government continues to insist on trade deals that will exacerbate the trade deficit,” said Auggie Tantillo, AMTAC's executive director. “This deal is riddled with loopholes that will destroy tens of thousands of U.S. textile and apparel manufacturing jobs.
“To make matters worse, most of the loopholes will benefit China.”
The biggest shortcomings lie in CAFTA's rule-of-origin provision, Tantillo says, including an exception that allows non-U.S. or non-Caribbean made components to be assembled into an unlimited amount of products in CAFTA countries and exported to the United States duty-free.
AMTAC and cotton industry leaders also complain about cumulation, a provision allowing countries with free trade agreements with the United States and Central America to provide components for products that can be assembled in Central America and shipped duty free to the United States. Read that to mean transshipments from China.
Democratic presidential nominee John Kerry opposes CAFTA along with Senate candidates like former Clinton administration chief of staff Erskine Bowles, who is seeking John Edwards' seat in North Carolina.
CAFTA is one of several trade agreements that have been put on a fast-track after the collapse of the Doha Round of WTO negotiations in Cancun last September.
U.S. Trade Representative Robert Zoellick has said the administration is unlikely to ask Congress to ratify CAFTA until after the November elections. Maybe farm and industry organizations can smooth over their differences by then.