CAFTA In Limbo
Jamaica Gleaner
CAFTA In Limbo
17 January 2006
GUATEMALA CITY (AP): Jacobo Kattan was hoping to build an industrial park and create 8,000 new jobs after the expected implementation of a regional free-trade pact last month. Instead, he’s had to fire 2,000 workers and close three companies as the region’s clothing industry haemorrhages, putting factories in legal limbo while much of their business leaves for Asia.
The Central American Free Trade Agreement (CAFTA) was supposed to take effect on January 1. But none of the member-countries - Guatemala, El Salvador, Honduras, Nicaragua and the Dominican Republic - were ready to comply with what some complain is an ever-changing set of rules and regulations proposed by United States negotiators, including strengthening of intellectual property laws.
"The U.S. negotiation practices have been wretched," said Guatemala’s Vice-Minister of Foreign Trade, Enrique Lacs. The U.S. team still wants several more side agreements from Guatemala, he said, including lifting restrictions on the importation of antennae and other telecommunications equipment.
"If we had accepted the accord as is, CAFTA would already be in place," Lacs said. "But we are still debating."
Neena Moorjani, spokeswoman for U.S. Trade Representative Rob Portman, said the delay was normal - and necessary.
"We are working toward prompt ratification of CAFTA," she said. "At the same time, the implementation process should not be rushed, so that the benefits to farmers, workers, businesses, and consumers of the United States and its CAFTA partners are not jeopardised."
El Salvador expects to implement CAFTA on March 1. Guatemala and Nicaragua have set their sights for April or May, and Honduras has said it will take six months. The Dominican Republic says it won’t be able to formally join until the summer.
Things were grim even before CAFTA-DR was agreed upon. When the U.S. eliminated quotas on clothing imports from China last year, Central America’s factories immediately began to suffer. Guatemala alone lost 38,000 jobs and 51 textile factories in 2005. The U.S. increased imports of Chinese produced textiles by 95 per cent over the same period.
Kattan, whose factories make mostly dress shirts for U.S. buyers, has watched as his business has gone East.
"My clients tell me: ’If I have to wait 45 days to bring the cloth from Asia and pay higher Honduran wages, I might as well just send the orders" to Asia, he said.
Under the existing Caribbean Basin Trade Partnership Act, Central American clothing manufacturers can avoid paying U.S. tariffs when exporting garments made with U.S. thread. But U.S. thread is so expensive that it makes more sense economically to import Asian fabric and pay the extra taxes.
