Central American Free Trade Agreement
By Congressman Geoff Davis
The Central American Free Trade Agreement (CAFTA) presents an opportunity to protect our country and grow our economy. CAFTA is the best opportunity to strengthen democracy in the Western Hemisphere, turn back the rising tide of anti-American movements and solidify our borders against criminal gangs and illegal immigrants.
Unlike the 1980's when we confronted communists in Central America, the threat today is an authoritarian populism movement emerging while Central American countries struggle to compete economically with China. CAFTA is critical for helping U.S. and Central American textile firms stave off Chinese manufacturers seeking to control the world textile market.
Failure to enact CAFTA will help China by strengthening its ability to displace textile workers and production in our hemisphere. China will deepen and expand its economic presence in the Central American region where it already has $40 billion in trade with Latin America and has pledged $100 billion in investments over the next decade in areas that include mining and oil production.
Free and fair trade helps create jobs here at home by opening foreign markets to U.S. goods and services. Currently, 80 percent of exports from the countries that will be included under CAFTA - Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic - enter the U.S. free of costly tariffs while the number is even higher - 99 percent - for agricultural goods. But there is no reciprocity for U.S. goods entering CAFTA countries. Our exports are still subject to expensive tariffs imposed by the governments of CAFTA countries. This trade agreement will level the playing field for American businesses.
Probably the worst aspect of CAFTA is that it sounds like NAFTA, the North American Free Trade Agreement enacted in 1993 that essentially gave away our store without us getting anything in return. NAFTA immediately opened our markets to foreign goods, but foreign markets were not to open to U.S. goods for 15 years. We have to wait another four years before those markets open to us; this is not how CAFTA will work.
According to the U.S. Department of Commerce, for Kentucky's agricultural producers, CAFTA will eliminate tariffs on 50 percent of U.S. exports immediately and most remaining duties will be phased out in the next 15 years. The agreement includes provisions to eliminate immediately tariffs on high-value cuts of meat, which will benefit Kentucky's beef and pork producers.
For Kentucky's distilled spirits producers, CAFTA will eliminate all tariffs on liquor, and it commits all six counties to recognize Bourbon as a distinctive product of the U.S. This will ensure that only Bourbon produced in the U.S. may be sold as Bourbon in the six countries. And for the Commonwealth's manufacturers, the trade agreement will immediately eliminate tariffs on 80 percent of U.S. exports and eliminates all tariffs within 10 years, including the current taxes of up to 15 percent on chemical and machinery products, of which Kentucky is a significant producer.
The Central American market has become increasingly important to the U.S. The region is the second largest export market for us in Latin America, behind only Mexico. From 2000 to 2004, export shipments to the CAFTA group of countries expanded by 16.4 percent, more than three times the 4.8 percent growth of overall U.S. exports.
We cannot separate ourselves from what happens in Central America. Criminal gangs, drug traffickers and smugglers of illegal immigrants create a highly volatile network right next door to us. Deputy Secretary of State Robert B. Zoellick, a former U.S. Trade Representative, stated recently that CAFTA will "promote equality of opportunity" in countries long dominated by powerful families. Dictators and corrupt politicians are being driven out of these countries and replaced by leaders seeking to establish emerging democracies.
The U.S. is working to bolster our democratic friends in this hemisphere while working to deter Venezuela and Cuba from meddling in the internal affairs of the region. There is growing evidence that Venezuela, in close coordination with Cuba, is using its oil wealth to back extremist, anti-democratic and anti-American groups. Cuban dictator Fidel Castro and Venezuelan President Hugo Chavez are attacking CAFTA, hoping to prevent its ratification to undermine the U.S. As Zoellick eloquently put it, "But at root, the debate on CAFTA is about America's role in the world. We must decide whether we will sacrifice the strategic interests of the United States and the future of Central America for a spoonful of sugar. We must decide whether to promote America's strategic interests or its special interests. The world is watching."
http://geoffdavis.house.gov/Read.aspx?ID=151