Canton Repository

May 8, 2005

Bush faces uphill battle on CAFTA

By FINLAY LEWIS
Copley News Service

WASHINGTON — Six years after pledging a closer bond with Latin America, President Bush will launch a campaign this week to save a regional trade deal from a congressional defeat that could have damaging repercussions on ties to the hemisphere and possibly even on the future of global commerce.

Facing strong opposition in Congress to the proposed Central American Free Trade Agreement (CAFTA), Bush will welcome leaders from the region to the White House on Thursday to showcase the pact. White House aides say he will use the meeting to rally support for an agreement to reduce or eliminate trade barriers among the United States, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. The Dominican Republic also has signed up.

Many trade experts say that they expect Bush eventually will prevail — but at the possible cost of expensive side deals to placate powerful domestic lobbies. It may even involve renegotiating a provision opposed by U.S. sugar growers upset at the prospect of growing competition from low-cost Central American competitors. Another important player in trade politics, the U.S. textile industry, is divided.

Congress could vote on CAFTA later this month under procedures that allow only an up or down vote with no opportunity to amend the agreement’s text.

Complicating its prospects is rising anger among lawmakers of both parties over a growing flood of cheap Chinese imports. The situation might inspire attempts to hold CAFTA hostage until Beijing changes its exchange-rate policy and abandons other tactics thought to contribute to the surging U.S. trade deficit.

A dozen years after more than 100 House Democrats voted for the hotly contested North American Free Trade Agreement (NAFTA), the administration faces the prospect of pushing CAFTA through the same body almost entirely on the strength of its Republican majority. Few vote counters expect more than 20 Democrats to support the deal.

Times have changed since Democratic President Bill Clinton teamed with the GOP to overcome warnings by Ross Perot, the maverick presidential candidate, that NAFTA would cause “a giant sucking sound” of American jobs heading south to Mexico.

With the GOP now in control of the White House and Congress, Democrats no longer feel obliged to defy allies in organized labor and other liberal interest groups who still detest NAFTA and see the latest regional deal as another potential job killer.

Layered on top of economic anxieties is what many political experts say is a deepening partisan divide within Congress.

“I think just the partisan competition seems to be even more rancid than in the past,” observed Daniel Griswold, a trade-policy expert at the Cato Institute. “That’s spilled over into the trade arena. You have a number of pro-trade Democrats in the House that may not vote for CAFTA this time around, just because it’s become a kind of us vs. them partisan issue.”

At the same time, the stakes are high both for U.S. interests in the region and for the fate of ongoing negotiations for a global free-trade agreement that could have a major impact on both the American and world economies.

Peter Hakim, head of Inter-American Dialogue, a think tank that studies hemispheric affairs, said a CAFTA defeat in Congress would have “devastating” consequences.

“It would create an awful lot of resentment in the region,” Hakim said. He added it would likely kill prospects for a Free Trade Area of the Americas, a centerpiece of Bush’s promise during the 2000 campaign to end chronic U.S. neglect of its southern neighbors.

“No one is going to want to negotiate without being sure that what they put on the table will be respected by the U.S.,” Hakim said.

A CAFTA defeat also could undercut the U.S. position in negotiations on a world free-trade agreement that will reach a critical stage later this year when trade ministers from around the world gather in Hong Kong.

Reflecting a view held by many other trade experts, Bill Frenzel, a former congressman now at the Brookings Institution, warned, “I believe that (global trade) negotiations would come to a swift and sudden end, because the developing nations would say, ‘See, I told you these guys were out to screw us — look at what they did to the Central American countries.’ That would be a disaster, which would bring the trade policy of this administration to a screeching halt.”

CAFTA supporters argue that the United States stands to benefit from the deal because most Central American products already enjoy duty-free access to the U.S. market under other deals designed to bolster the region’s economy and to discourage narcotics trafficking.

The U.S. Chamber of Commerce, which is campaigning for CAFTA, says U.S. exports to the region would grow by $3 billion in the agreement’s first year.

But that figure, miniscule in terms of the sheer size of the American economy, gets summarily brushed aside by well-heeled special interest groups feeling threatened by Central American competition.

That is particularly true of the domestic sugar industry, which embraces growers spread across 19 states and boasts one of the most potent lobbying operations in Washington.

Under CAFTA, Central American sugar producers would be able to increase their shipments to the United States over a 15-year period by 150,000 metric tons. CAFTA supporters note that figure amounts to about 1 percent of U.S. sugar consumption during 2003.

Nonetheless, Jack Roney, an analyst for the American Sugar Alliance, told Congress last month, “We regard this as a life or death issue for our industry.”

Meanwhile, some lawmakers from textile-producing states, blaming Chinese competition for an economically stressed industry, say they will not support CAFTA unless the administration wins important changes in China’s trade practices.

The administration is billing the agreement as a key part of a larger strategy to promote democracy in troubled regions by spurring development and encouraging open markets. But with the AFL-CIO planning the launch of a national anti-CAFTA campaign on Tuesday, political analysts say Bush has been tardy in joining the battle.

“The president has to make a stronger case — much stronger than he has,” said Steve Smith, director of an economic policy institute at St. Louis’ Washington University. “Administration insiders really have to ask the White House why aren’t they making this a higher priority if it has these long term consequences for the United States.”