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American Shipper

CAFTA passage draws fierce mixed reaction

CAFTA passage draws fierce mixed reaction

   The U.S. House of Representatives, by a vote of 217 to 215, had no sooner passed the U.S.-Dominican Republic-Central America Free Trade Agreement (CAFTA) early Thursday morning than a storm of comments — both exultant and bitter — broke from every trade corner of Washington, D.C.

   CAFTA's allies relished their close victory. The trade pact's foes bemoaned its passage, and promised political retribution for 15 Democrats who voted with Republicans.

   The House vote came nearly a month after the Senate approved the bill 54-45. President Bush is expected to sign CAFTA into law. The White House had lobbied intensely for its passage, which did not come easily. Bush himself traveled to Capitol Hill the day before to make a pitch for CAFTA. The actual voting was prolonged as Republicans pressured about 10 wavering members of the House. After 30 minutes, the voting actually stopped with a count of 214 in favor and 211 against. For the next half an hour, Republicans from textile states debated who should vote against the bill, thereby saving face among their constituents at home. The final tally occurred shortly after midnight Thursday.

   The turnaround in CAFTA's fortunes came when the administration and the Republican leadership in the House won support from half of their party's Representatives from such textile-producing states as North Carolina, South Carolina, Georgia and Alabama.

   U.S. domestic textile and apparel manufacturers were 'blazing mad,' according to one trade source, and vowed to punish lawmakers who had changed their positions on the bill during the administration's final push.

   Calling CAFTA's passage 'a sad day for the U.S. manufacturing workforce,' Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition (AMTAC), a lobbying group for U.S. domestic textile and apparel producers, went on to say, 'we regret the outcome of the vote. We would like to express deep gratitude to the members of Congress who courageously opposed CAFTA. The defeat of CAFTA would have been the first step to rectifying America's devastatingly flawed trade policy that has cost the country nearly three million manufacturing jobs over the last five years.'

   'CAFTA turns a unilateral program into an improved and reciprocal relationship, to the mutual benefit of businesses and workers in both the U.S. and Central America,' said Laura E. Jones, executive director of the U.S. Association of Importers of Textiles and Apparel (USA-ITA). Jones added that 'CAFTA is not a perfect agreement,' since a number of last-minute deals, many pertaining to textiles and apparel, rewrote some of the rules agreed upon more than a year ago. Those changes will make it harder to shift the production of goods to Central America.

   Two government ministers in the CAFTA region said before the bill's passage that they had only vaguely agreed to negotiate modifications of the textile portion. 'It is not certain that we have agreed to those consultations,' said Manuel Gonzalez, Costa Rica's minister of commerce. 'It is not only that proposal, but we have to sit down to see what is going to be required of the U.S. in exchange for this — so what we get is proportional to what they are asking for.'

   In particular, the Bush administration's pledge to seek a modification to require that pocketing and linings fabrics be supplied by the United States or CAFTA's six signatory countries in order to be exported duty-free worried Marcio Cuevas Quezada, Guatemala's minister of economics. 'The problem is we have the treaty ratified and for us, it will be very tough if there are some changes made. If they open it for negotiation, Guatemala will of course have something to negotiate also,' Quezada said in a statement.

   Once CAFTA takes effect, importers may be able to take advantage of certain textile and apparel provisions that are retroactive to Jan. 1, 2004. However, those provisions will only be valid with respect to goods from countries that provide reciprocal benefits to U.S. exporters. It is not clear yet which countries will be eligible for the retroactive provisions.

   U.S. domestic sugar and sugar beet growers opposed CAFTA's passage to the very end, despite a substantial lollipop proffered by the Bush administration. If CAFTA causes sugar imports to top the farm bill's total import limits of 1.5 million tons, the U.S. government will either buy such excess sugar from U.S. importers or prohibit the excess amount from being imported, in which case the exporting CAFTA countries will be compensated with shipments of U.S. agricultural commodities. Any excess sugar purchased will be used for a pilot energy program that would turn sugar into ethanol.

   That deal won over some lawmakers who voted for CAFTA, but was turned down by domestic sugar and sugar beet growers, who still want assurances that sugar will never be part of any future trade agreements — a line the White House won't cross.

   CAFTA eliminates either immediately or over a period of time nearly all tariffs and other trade barriers to U.S. beef and pork products sold in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic.

   'Faced with high duties on beef and pork, U.S. producers have had encumbered access to this market for years. These duties are going to be ratcheted down over the next 15 years to zero,' said Philip M. Seng, president and chief executive officer of the U.S. Meat Export Federation (USMEF).

   'USMEF has identified major importers, retailers and distributors in these markets and is very excited about the increased access CAFTA allows to this region,' Seng explained.

   CAFTA will also immediately eliminate tariffs on all soybean and soybean products, with the exception of refined soybean oil, where the tariff will be phased out over 15 years in equal annual cuts. CAFTA's passage 'will solidify our position as the preferred supplier of soybean and soybean products to these Central American nations,' the American Soybean Association said in a statement.

   The Port of New Orleans, expected to benefit from a surge in north/south trade, said, 'this agreement will create new markets for Louisiana exports,' as well as 2,769 new local jobs. The port noted that most of its facilities were in the district of Rep. William Jefferson, a Democrat who crossed party lines to vote for CAFTA.

   'CAFTA has become a symbol of something much larger than a trade agreement, however important it may be. It is also a symbol of U.S. resolve and commitment to move forward on trade and investment liberalization, particularly with the developing world,' said Harold McGraw III, chairman and CEO of The McGraw-Hill Cos. Inc., and chairman of the Emergency Committee for American Trade (ECAT).

   The passage of CAFTA means 'the United States will not be able to use trade sanctions, or the threat of them, to press other countries to improve their labor laws and enforcement practices, as we have done successfully in the past. CAFTA puts in place only the requirement that Central American countries enforce their own labor laws, however weak they may be,' said Rep. Benjamin Cardin, D-Md., ranking Democrat on the Trade Subcommittee of the House Ways and Means Committee.

   It remains unclear when CAFTA will come into force. After signing the bill into law, President Bush must negotiate a date for CAFTA to become effective with his counterparts in the signatory countries. Thus far, only Guatemala, El Salvador and Honduras have passed implementing legislation. Costa Rica, the Dominican Republic, and Nicaragua have yet to do so.

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