US proposals for CAFTA negotiations

Schedule of meetings 2003 January 8: Ministerial meeting, USA January 27-21: 1st Round, Costa Rica February 24-28: 2nd Round, El Salvador March 31 - April 4: 3rd Round, USA May 12-16: 4th Round, Guatemala June 16-20: 5th Round, Honduras July 28 - August 1: 6th Round, USA September 8-12: 7th Round, Nicaragua October 20-24: 8th Round, Costa Rica December 8-12: 9th & Final Round, USA

Negotiating Groups Market Access Textiles and Garments Services and Investment Dispute Settlement and Institutional Aspects Other Matters Labour and the Environment Cooperation

 

One issue that has emerged is the treatment of agriculture in the negotiations. Central America's producers fear that heavily subsidised exports of food grains from the US will undercut domestic production of domestic staples such as corn, rice and beans; exacerbating rural poverty and undermining food security. They point to the fact that Mexico's agricultural trade deficit with the US grew to US$1,841 million in the first seven years of NAFTA (1994-2000) from US$455 million in the previous seven years. Agriculture's share of the GDP is 58 percent in Nicaragua, 41 percent in El Salvador, 47 percent in Guatemala, 40 percent in Honduras and 24 percent in Costa Rica. Several million peasant producers in the sub-region derive their livelihood from domestic agriculture.
Hence the Central American Federation of Agricultural Chambers (FECAGRO) lobbied hard for a separate negotiating group for agriculture, where the issue of subsidies would be discussed. The US resisted this, arguing that the issue of agricultural subsidies is best treated in the WTO, as part of related negotiations with the EU and Japan. At this writing it seems likely that the US position will prevail: agriculture will be treated as part of the Market Access group and subsidies will not be negotiated.

Central America also needs to complete a common regime for agriculture, services, investment and dispute settlement in its own common market (CACM) that will serve as a negotiating platform with the US and the WTO. A significant step was taken at the Central American Summit in Costa Rica December 14-15, 2002. The leaders adopted an Agricultural Action Plan that aims to unify agricultural policy in respect of sanitary and phytosanitary norms and customs regulations.

Another source of concern in Central America is the treatment of textiles and garments. Central American exporters of these products see CAFTA as a means of removing restrictions in the current Caribbean Basin Trade Partnership Act (CBTPA) arrangements that require them to source their raw materials-fabrics, yarn and thread-from the US itself.

Now US textile and garments producers are pressing for the existing CBTPA provisions to be maintained in CAFTA. This lies behind the US proposal for a separate negotiating group for this product group. The Central American and Caribbean Council for Textiles and Garments-CACTAC-argues that this would mean that the only benefit they derive from CAFTA would be to make permanent the current CBTPA, with its eligibility restrictions.

Intellectual property, services, investment, labour and the environment will also be key subjects of negotiation. Hence, Central America's negotiating capacity will be strongly tested over the coming year.

The Central American Integration Bank (BCIE) has announced a technical assistance programme of US$2.5 million to help with the negotiations. The US is expected to announce a capacity building assistance programme of its own in January.

But the major challenge will continue to be internal-how to achieve negotiating cohesion and solidarity, given the disparities in levels of development and economic structure within the sub-region. Similar challenges arise within the Association of Caribbean States region as a whole.

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