[Ecommerce] Wall Street Journal: Costa Rica Balks at Free-Trade Pact

[Jeff Williams]

Thiru and all,

  This is how the multilateral game is sometimes played.  It's flawed at le=
ast,

and IMHO fundamentally wrong as far more people are hurt as a result of
the resulting final multilateral trade agreement than will ever benifit.  I
call
it protectionism in the name of free trade. It's bad for business, open
markets, and fiacal managment.  Others mileage may vary...

Thiru Balasubramaniam wrote:

> <SNIP>
>
> The reluctance of Central America's oldest democracy has surprised the
> White House and undermines one of its chief arguments for the pact: that
> Cafta represents an urgently sought benefit for the impoverished region.
> Costa Rica's ambivalence and the long delay before it votes may
> influence undecided votes in Congress. The ambivalence already has
> allowed the opposition to the trade pact in Costa Rica to gain momentum.
>
> <SNIP>
>
> Washington has negotiated smaller trade pacts with more than a dozen
> nations in Latin America, the Middle East and Asia, as a way to pressure
> big developing nations like Brazil and India to sign onto the
> multilateral accords. The implicit threat: If they don't sign, the U.S.
> will cut sweetheart deals with their neighbors. A Cafta defeat in
> Congress, which is expected to vote by next month, would undermine the
> U.S. strategy.
>
> <SNIP>
>
> U.S. exports to countries in the Cafta region were around $16 billion
> last year, nearly double from a decade ago. U.S. investment in Cafta
> countries was $4.3 billion in 2003, up 2% from the previous year.
>
> <SNIP>
>
> Some Costa Ricans worry that Cafta may lead to the privatization of the
> country's free universal health-care system, which puts the poor country
> on par with industrialized nations in many important health indexes.
> Just 38% of Costa Ricans polled in February who had heard of the deal
> thought it would benefit the country, compared with 56% in January of
> last year, according to a study by the CID/Gallup polling firm.
>
> -------------------------
>
> May 3, 2005
>
> Costa Rica Balks
> At Free-Trade Pact
>
> Misgivings Could Weaken
> Support in U.S. Congress
> For Central America Deal
>
> By *JOHN LYONS*
> *Staff Reporter of THE WALL STREET JOURNAL*
> May 3, 2005; Page A2
>
> SAN JOSE, Costa Rica =96 With President Bush's plan to bind Central
> America and the U.S. in a free-trade pact already facing tough
> opposition in Congress, an obstacle has surfaced that further threatens
> the pact's chances of passage.
>
> Costa Rica, the most-developed of the six nations that have signed the
> Central American Free Trade Agreement with the U.S., is balking at
> ratifying the accord. The country's parliament may not even vote on the
> pact until after the presidential election next February. The other
> Cafta nations are Nicaragua, Guatemala, El Salvador, Honduras and the
> Dominican Republic.
>
> The reluctance of Central America's oldest democracy has surprised the
> White House and undermines one of its chief arguments for the pact: that
> Cafta represents an urgently sought benefit for the impoverished region.
> Costa Rica's ambivalence and the long delay before it votes may
> influence undecided votes in Congress. The ambivalence already has
> allowed the opposition to the trade pact in Costa Rica to gain momentum.
>
> "If Cafta comes down to two or three votes [in the U.S. House of
> Representatives], which it very well might, people looking for an excuse
> not to vote for it might seize on the fact that Costa Rica is
> reluctant," says Rep. James Moran, a Virginia Democrat who supports the
> pact and flew to San Jose last week to lobby the government for Cafta.
>
> Cafta carries a lot of political freight for the White House, which has
> been unable to complete either a world trade pact or one encompassing
> all of Latin America. A free-trade agreement of the Americas was a key
> part of the president's foreign-policy agenda when he first took office.
>
> Washington has negotiated smaller trade pacts with more than a dozen
> nations in Latin America, the Middle East and Asia, as a way to pressure
> big developing nations like Brazil and India to sign onto the
> multilateral accords. The implicit threat: If they don't sign, the U.S.
> will cut sweetheart deals with their neighbors. A Cafta defeat in
> Congress, which is expected to vote by next month, would undermine the
> U.S. strategy.
>
> Economically, the administration contends that Cafta will open new
> markets for U.S. manufacturers and service providers, and boost
> investment in the impoverished region. At a televised news conference
> last week, President Bush underscored Cafta's geopolitical significance,
> saying the accord would "help strengthen the neighborhood" by
> demonstrating U.S. interest. Next week he plans to meet in Washington
> with the leaders of the six Cafta nations, to give a boost to the
> administration's lobbying efforts in Congress.
>
> U.S. exports to countries in the Cafta region were around $16 billion
> last year, nearly double from a decade ago. U.S. investment in Cafta
> countries was $4.3 billion in 2003, up 2% from the previous year.
>
> But Cafta's U.S. critics contend that the accord would accelerate the
> shift overseas of apparel jobs and threaten the heavily protected U.S.
> sugar industry -- even though the pact allows for only a modest increase
> in sugar imports. A Cafta defeat would reinforce the doubts of Brazil,
> Ecuador, Argentina and other nations skeptical of U.S. motives in
> negotiating trade pacts. It would also strengthen free-trade opposition
> forces in Congress, who have battled every trade deal since the North
> American Free Trade Agreement with Mexico and Canada in 1994.
>
> Many businesses in Central America are lobbying for the accord, figuring
> it would promote foreign investment in the region, as Nafta has helped
> Mexican business. The six Cafta nations signed the accord last year. El
> Salvador, Honduras and Guatemala were the first to ratify the pact,
> anxious to win protections that might buttress their apparel makers and
> other manufacturers against Chinese and Indian rivals.
>
> But the accord has also spawned deep reservations, even in countries
> where Cafta has been approved. Sugar exporters haven't won much access
> to the U.S. market, largely eliminating an area that Central American
> producers had hoped to exploit. Central American clothing makers also
> made costly concessions under rules designed to compel them to buy
> U.S.-made fabrics rather than cheaper Asian-made ones. In Guatemala,
> anti-Cafta protests have included thousands of demonstrators; at least
> two of the protesters have been killed. May Day marches in Guatemala,
> Costa Rica, Honduras and El Salvador featured anti-Cafta signs and slogan=
s.
>
> Nicaragua and the Dominican Republic haven't yet signed the accord, but
> they are expected to do so shortly. Costa Rica, though, is holding out
> because of mounting opposition by trade unions, some farm groups and
> even some business leaders who say Cafta's intellectual-property clauses
> are too invasive.
>
> The country's popular president, Abel Pacheco, is widely seen as trying
> to avoid ending his four-year presidency amid the strikes and protests
> that debating the accord might provoke. Although his government signed
> the pact last year, he now says he won't submit Cafta to Costa Rica's
> Congress until he is convinced that it doesn't threaten the poor; last
> week he said he would appoint a committee of leading Costa Ricans to
> review the accord.
>
> Mr. Pacheco's backsliding on Cafta prompted senior members of the
> economic team that negotiated the deal to resign last year. "It was
> clear to me he was disengaging, and wasn't going to be pushing with the
> kind of leadership necessary, so I got fed up," said former trade
> minister Alberto Trejos.
>
> Opponents of the pact have recently focused on provisions requiring the
> government to allow foreign investment in Costa Rica's state-owned
> telephone and insurance industries. Although telephone customers can
> wait a year to get a cellphone, privatization has become equated with
> corruption throughout Latin America.
>
> Some Costa Ricans worry that Cafta may lead to the privatization of the
> country's free universal health-care system, which puts the poor country
> on par with industrialized nations in many important health indexes.
> Just 38% of Costa Ricans polled in February who had heard of the deal
> thought it would benefit the country, compared with 56% in January of
> last year, according to a study by the CID/Gallup polling firm.
>
> Defenders of the deal say it will ensure longer-term stability by
> tethering the economy permanently to the U.S. Failure to ratify, they
> say, could leave the country on the sidelines of an important export-led
> transformation of the region's economies. Costa Rica's former president,
> Oscar Arias, a Nobel Prize winner who is leading polls to win next
> year's presidential election, has vowed to push for Cafta passage next
> year, if he wins. "If we don't have the agreement, no one is going to
> invest a penny here," he says.
>
> Traditionally, the U.S. Congress waits until its trading partners ratify
> a pact because it wants to make sure it gets the last word, and that
> foreign governments don't try to change provisions. Although Congress
> votes up or down on a trade pact, it can effectively modify a deal by
> voting aid to affected industries or mandating how provisions be carried
> out. For instance, Congress approved an earlier world trade pact only
> after it legislated a procedure for the U.S. to exit the accord.
>
> Rep. Moran, Republican Rep. Dan Burton of Indiana and other lawmakers
> last week tried to pressure Costa Rica by warning that Congress would
> eventually cut off existing trade preferences if Costa Rica's
> legislature didn't approve the Cafta. But senior U.S. trade official
> Peter Allgeier is eschewing threats. "I have no doubts about Costa Rica
> being there, in time," he says.
>
> As long as the country holds out, however, it weakens the hand of Cafta
> backers in Congress. If Costa Rica decides "that it's not coming to the
> party, then Congress might start asking themselves: Why have a party at
> all?" says Gary Hufbauer, a trade expert at the Institute for
> International Economics, a Washington think tank that supports free trade=
.
>
> ---- Greg Hitt in Washington contributed to this article.
>
> *Write to* John Lyons at john.lyons@wsj.com <mailto:john.lyons@wsj.com>^1
>
>         URL for this article:
> http://online.wsj.com/article/0,,SB111507115514722563,00.html
>
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Regards,

--
Jeffrey A. Williams
Spokesman for INEGroup LLA. - (Over 134k members/stakeholders strong!)
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