Senate Okays CAFTA

Published August 1, 2005

The U.S. Senate on June 30 approved the Central America Free Trade Agreement (CAFTA), but final approval depends on action in the House, where opponents have vowed to defeat it.

The Senate vote was 54-45. Political analysts say the vote in the House may be too close to call. That vote was expected in July or early August, after this issue of Budget & Tax News went to press.

U.S. trade officials signed the agreement last year to create a free trade zone with Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua, as well as the Dominican Republic in the Caribbean, but it needs approval of both houses of Congress before going into effect.

In a statement released by the White House after the Senate vote, President George W. Bush said the agreement is “a strong boost for young democracies in our own hemisphere, whose success is important for American’s national security and for reducing illegal immigration.”

Tariff Cuts Praised

“NCFB praises Senators Dole and Burr for backing CAFTA-DR,” said North Carolina Farm Bureau President Larry Wooten shortly after the vote.

While the new Democratic senator from Illinois, Barack Obama, spoke favorably about CAFTA, in the end his vote was a no, as was the vote of Illinois’ senior senator, Dick Durbin (D).

“It’s evident that Senator Obama spent some time thinking about his position. And while Illinois Farm Bureau is pleased the Senator publicly recognized CAFTA’s benefits for Illinois agriculture, we wish he would have chosen to vote for the treaty,” said Illinois Farm Bureau President Philip Nelson.

Nelson continued, “For the past several months, Illinois Farm Bureau has been committed to making the strongest case possible for CAFTA. The Senate’s vote sends a clear message to the rest of the world that the United States is committed to fair trade, open markets, and economic growth. With the kinds of food Illinois farmers produce in abundance–our corn, soybeans, pork, and beef–any trade agreement that ultimately eliminates high tariffs and creates new markets for our products will always be a good deal for Illinois agriculture.”

Sugar Industry Key Opponent

U.S. Trade Representative Rob Portman told reporters after a June 20 speech to the U.S.-Korea Business Council, “The administration is still talking to members who have concerns about the sugar and textile portions of the bill, as well as broader trade concerns about issues such as China.

“There has been strong opposition from the U.S. sugar industry,” Portman said. “The impact from this agreement on sugar is minimal and there are protections in this agreement for the U.S. sugar sector that no other agriculture sector receives.”

As a result of past government protections for the sugar industry, the price of sugar in the United States is four times higher than it is on the world market.

On the morning of the Senate vote, the Chicago Tribune carried “Why I oppose CAFTA,” an opinion column by Obama.

Obama said the agreement “does less to protect labor than previous trade agreements, and does little to address enforcement of basic environmental standards in the central American countries and the Dominican Republic. Moreover, there has been talk that, in order to get votes from legislators from sugar-producing states, the Bush administration may be preserving indefensible sugar subsidies that benefit a handful of wealthy growers and cripple Illinois candy manufacturers.”

Chicago has long been a major candy producer but in recent years has lost hundreds of candy-making jobs.

Bush Stumps for Support

On June 24, Bush renewed his support for CAFTA in a speech to a group of Central American ambassadors in Washington, DC.

“CAFTA is good for our workers, it is good for our farmers, it is good for our small business people. It is equally good for the folks in Central America,” Bush told the ambassadors.

CAFTA would bring to those nations the stability and security that can only come from freedom, Bush said.

Rural Support Needed

Support for CAFTA appears to be running high in many rural areas. According to the South Dakota Farm Bureau, trade with Central America will help the state.

“Exports of farm products help boost South Dakota’s farm prices and income,” noted the South Dakota Farm Bureau Web site. “Such exports help support about 13,678 jobs, both on and off the farm, in food processing, storage, and transportation. In 2003, South Dakota’s farm cash receipts were $4 billion, and agricultural exports were estimated at $894 million, putting its reliance on agricultural exports at 22 percent.

“Implementation of the Dominican Republic-Central America Free Trade Agreement will increase South Dakota’s exports of agricultural products,” the statement continued.

Florida Farmers Doubtful

The Florida Farm Bureau, however, has taken a “hands-off” approach toward CAFTA. “Florida Farm Bureau does not have specific written policy addressing CAFTA,” notes its Web site. “However, FFBF does have policy stating that import-sensitive crops should not be negotiated on a bilateral or regional basis.

“Florida Farm Bureau should continue withholding support for this agreement,” notes the Web site statement, “while urging affected segments of the agricultural industry and the Administration to seek mutually satisfactory agreements.”

Economic Benefits “Rock Solid”

Barry Bushue, president of the Oregon Farm Bureau, has called upon his state legislators to support CAFTA. “We think (CAFTA) is a good package; it’s a winning package for Oregon and U.S. agriculture,” Bushue told the Capital Press for a June 24 article.

American Farm Bureau President Bob Stallman said, “The economic benefits of this agreement for the whole of American agriculture are rock solid.”

Stallman continued, “The Senate’s passage Thursday [June 30] of the Central American-Dominican Republic Free Trade Agreement is a big win for U.S. agriculture. The American Farm Bureau Federation appreciates the many efforts taken by the administration and Senate leaders to secure Senate passage of CAFTA-DR. This is a priority for American agriculture and we will work to ensure the same successful outcome in the House.”

Other Deals at Risk

Portman warned rejection of CAFTA would be a blow for the overall U.S. trade agenda.

“If CAFTA fails, frankly I think our ability to push global trade talks and other trade initiatives, either regional or bilateral, would be damaged.”

John W. Skorburg ([email protected]) is a visiting lecturer in economics at the University of Illinois, Chicago and associate editor of Budget & Tax News.