U.S to Reach Free Trade Agreement With Four Central American Countries

The United States, which reached the North American Free Trade Agreement (NAFTA) with Canada and Mexico 10 years ago, completed negotiations on Wednesday with four Central American countries, Guatemala, El Salvador, Nicaragua and Honduras, to create a regional Free Trade Agreement (FTA). NAFTA will continue moving in a southern direction as the U.S. pursues similar agreements with Panama, Ecuador, Bolivia and Peru.

A fifth nation, Costa Rica, abruptly dropped out of the talks on Tuesday as it had been opposed to opening its insurance and communications markets. However, the U.S. reached an agreement with four other Central American countries to gradually lower duties for the next decade when they reached a consensus on a tough issue, an open textile market.

U.S. trade representative Robert B. Zoellick, said, however, that he hoped further negotiations in the next few weeks would persuade Costa Rica to join the agreement before it is sent to Congress. It is likely that the U.S. could include all five countries in the agreement that reaches Capitol Hill early next year.

The Central American Free Trade Agreement (CAFTA) is the United States’ sixth free trade agreement. After the U.S. agreed to launch the NAFTA in 1993, taking effect in 1994, it created free trade pacts with Israel, Jordan, Chile and Singapore on an individual basis.

The six Central American countries’ trade volume with the U.S. is just $30 billion. This includes Costa Rica and the Dominican Republic, which the U.S. is trying to persuade to join the agreement. However, the U.S. expects free trade with those countries to help foster democracy and weaken militants’ power in the region.

The Bush administration has had a series of setbacks in trade, including the collapse of global trade talks in Cancun, Mexico, failed efforts to reach a Free Trade of the Americas Agreement and Bush’s about-face in deciding to withdraw protective tariffs on steel in the face of threatened European and Asian retaliation.

In particular, the United States’ status of world superpower was severely damaged when the Free Trade of the Americas Agreement failed mainly due to Brazil, which called itself an advocate for developing countries while insisting on abolishing U.S. farm subsidies. According to reports from overseas, however, the U.S. can put pressure on Brazil as it successfully completes a series of agreements with Central American countries.

CAFTA has already been drawing strong opposition from sugar beet and cane growers and textile manufacturers in the U.S. since the Central American products are much cheaper. As the presidential race is being held next year, lawmakers who are concerned about their voters may be reluctant to ratify the pact.

The Wall Street Journal said that the Bush administration might use the free trade associations to explain possible advantages from free trade with Central American countries.

Similar tactics can be seen from the Bush Administration, which is trying to persuade the Dominican Republic to join the pact, as it makes every effort to win support from the Democrats in New York State where a great number of Dominican Republic immigrants live.

Rae-Jeong Park ecopark@donga.com