CAFTA was negotiated for the purpose of improving the balance of American products with Central America, and the reasons given are to level the playing field, because Central America had negotiated free trade agreements with other countries, and the United States faced a competitive disadvantage. One must ask how the playing field should be leveled, when we look at the conditions set by this country, for example in clothing and textiles, and domestic support and subsidies in agriculture, rules of origin, etc. Where is the playing field to be leveled?

The United States has said that this region has enjoyed the Caribbean Basin Initiative and other preferential programmes which provide for low tariffs, with 74% of all regional exports to the US enjoying a zero tariff rating in 2002. However, it must be said that exports from countries which have used these unilateral preferential tariffs have not been optimally developed, because there have been and still are non tariff barriers to this development. Analysis must also be quantitative, not only in percentage terms.

The United States has also openly stated that CAFTA would be creating an opportune moment for other small economies in the western hemisphere to follow this example. How would the small countries on the continent feel?

Another objective of the United States in negotiating CAFTA was to promote greater convergence in the negotiating positions of countries involved in the Free Trade Agreement of the Americas - FTAA process. With the difficulties of the FTAA, it seems very logical to proceed with the bilateral agreements which facilitate the inclusion of countries and groups of countries in the hemispheric agreement.

There is no doubt that Central America has become an interesting market for the United States. This country now exports over nine billion dollars per year to this market. This represents 40% of the total imports of Central America. In other words, the US trade presence is very strong. If we add to this that the sixth country to join CAFTA is the Dominican Republic, this group of countries as a whole will become the second largest market in the world, after Mexico.

The United States has indicated that over 80% of this country's exports of industrial and consumer goods will be immediately zero rated in CAFTA. Then, 50% of agricultural products will also have immediate tariff-free access.

Similarly, there will be significant access opportunities for the market in services. Central America is offering new access in the area of telecommunications, immediate package delivery, information services, tourism, energy, transport, construction and engineering, financial services, insurance, audio visual and other services. There will also be an important trade presence in the digital industry and government procurement.

In conclusion, it is interesting to know this side of the coin, and to know that there is a purpose and a value to everything in life. A coin always has two sides, and this must not be forgotten.

Luis Noriega is the Trade Director of the Association of Caribbean States. The views expressed are not necessarily the official views of the ACS. Feedback can be sent to mail@acs-aec.org.

February 10 , 2004