[Ip-health] WP-Accord Reached on Free Trade; Hill Fight Pssible Over US Pact with Central Americans

[Rachel COHEN]

Washington Post

Accord Reached on Free Trade
Hill Fight Possible Over U.S. Pact With Central Americans

By Jonathan Weisman
Washington Post Staff Writer
Thursday, December 18, 2003; Page A01


The Bush administration reached a free-trade agreement with four Central
American countries yesterday, setting up a tough trade fight in Congress in
an election year.

The trade accord -- reached just weeks before the 10th anniversary of the
North American Free Trade Agreement -- would allow more than 80 percent of
U.S. consumer and industrial products into Guatemala, Nicaragua, El
Salvador and Honduras duty-free as soon as it went into force. That figure
would rise to 85 percent within five years and 100 percent in a decade.

U.S. agricultural products would take considerably longer to reach
duty-free status, as long as 18 years, in large part because U.S. trade
negotiators insisted on protecting the American sugar market from Central
American exports.

U.S. negotiators failed to reach agreement with Costa Rica, the region's
most developed economy. But U.S. Trade Representative Robert B. Zoellick
expressed hope that Costa Rica would agree early next year, in time for
congressional consideration of the pact. Negotiators would also like to
include the Dominican Republic in the agreement that reaches Capitol Hill.

"This agreement provides hope," said Miguel E. Lacayo Arguello, El
Salvador's economy minister. "This is hope for a prosperous new era in our
societies."

Few economists believe that the Central American Free Trade Agreement would
significantly affect the U.S. economy. Between them, the four Central
American signatories produced $108.4 billion in goods and services last
year, compared with Mexico's $900 billion. But the CAFTA has already become
an important political symbol, as President Bush pushes forward with
efforts to create a hemisphere-wide free-trade agreement and opponents of
globalization try to stop trade liberalization.

"It's a very big issue for us," said Thea M. Lee, chief international
economist for the AFL-CIO. "This represents the cutting edge of the flawed
Bush trade policy."

If, as promised, the administration pushes for passage early next year, the
White House will present congressional Republicans with a difficult trade
vote just as a wave of protectionist sentiment crests in Washington.

"This will be a major challenge," Zoellick said. "There's no doubt about
it. But we're committed."

Republican congressional leaders looked at that challenge with chagrin
yesterday. One senior leadership aide said Bush could lose as many as 30
Republican votes in the House, especially from textile states that have
been losing jobs. The Republican seats in North and South Carolina will be
open in the 2004 election, the aide noted, and two of the retiring members,
Rep. Jim DeMint (R-S.C.) and Richard Burr (R-N.C.), will seek open Senate
seats against Democratic rivals likely to capitalize on the Bush
administration's trade policies.

"What you don't want to have in an election year is a vote that is going to
hurt a lot of your guys," the aide said. "Zoellick doesn't have a political
bone in his body. He's a technocrat, and his interests and our interests
are running very counter to each other right now."

Zoellick said the agreement includes unprecedented protections for labor
and the environment. It should open new markets for U.S. yarn and fabric
makers selling to Central American apparel manufacturers, while providing
new customers to U.S. livestock producers, insurance companies, express
shippers and computer firms. It also extends special protections to what he
termed the United States' "most sensitive" commodity, a reference to
long-protected sugar growers.

But the accord was attacked by labor organizations, which contend that it
would weaken existing labor protections. Health care groups decried U.S.
intellectual-property provisions that would protect U.S. pharmaceutical
companies from low-cost Central American generic drug makers.

"If CAFTA makes intellectual property protection of pharmaceuticals even
more stringent, lives will be lost," Manuel Munoz, who runs Doctors Without
Borders' AIDS treatment program in Honduras.

Perhaps more important to its political fate was the reaction from U.S.
textile makers and sugar growers -- and their congressional allies. The
American Manufacturing Trade Action Council, which represents textile
firms, and the American Sugar Alliance swiftly came out against the deal.

Under the agreement, clothing made in Central America would come into the
United States duty-free if the fabric and yarn was made in the United
States or one of the Central American partners. But at the insistence of
Central American negotiators, the agreement also extends duty-free access
to apparel made in part with Mexican and Canadian materials. And for some
clothing, like boxer shorts, bras and pajamas, additional loopholes were
opened for Chinese material, said Alfredo Milian, a consultant to the
negotiations from the Salvadoran Apparel Manufacturers Association.

U.S. textile firms charged that the administration was putting undue faith
on the ability of Mexican customs officials to ensure that only Mexican --
and not Chinese -- fabrics would be shipped to Central America for
assembly.

"Once again, the administration has delivered a lump of coal to South
Carolina textile workers," said Sen. Ernest F. Hollings (D-S.C.). "We've
already lost 62,400 jobs to Mexico, China and other countries, and this
will get rid of the rest."

Sugar-state lawmakers were also concerned. Sen. Byron L. Dorgan (D-N.D.)
said the agreement's limits on sugar imports would protect growers for now.

Under the agreement, the existing quota on duty-free sugar shipments into
the United States would rise immediately from 111,000 metric tons a year to
nearly 200,000 tons, then rise slowly to about 236,000 tons over 15 years.
But that is considerably less than the level the Central Americans sought,
and the tariff levied on sugar above those quota levels -- about 100
percent of the value -- would remain indefinitely.

But, Dorgan said, by including quota adjustments in the agreement, Zoellick
would ensure that further modifications would be made in free-trade
agreements under negotiation with Australia, Brazil, the Dominican Republic
and elsewhere.

"We will see the dismantling of the U.S. sugar industry," Dorgan said.

The stiff headwind facing the accord could convince Bush to postpone
sending it to Congress for consideration next year, a GOP leadership aide
said. But if the economy continues to improve, some of the opposition could
evaporate, DeMint said.

For now, with a Senate campaign already underway, DeMint was not about to
pledge his support.

"If we continue to have job losses, I think Congress will be very slow to
take any free-trade agreement," he said. "Right now, everybody's a little
gun-shy about trade."



=A9 2003 The Washington Post Company
___________________________________________________

Rachel M. Cohen
U.S. Director, Campaign for Access to Essential Medicines
Doctors Without Borders/M=E9decins Sans Fronti=E8res (MSF)
333 Seventh Avenue, 2nd Floor * New York, NY * 10001-5004 * USA
Tel: +1-212-655-3762
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E-mail: rachel.cohen@newyork.msf.org

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