In the trade zone: Georgians assess effects of CAFTA deal

In the trade zone
Georgians assess effects of CAFTA deal

By MARY LOU PICKEL
The Atlanta Journal-Constitution
Published on: 08/17/05

Georgia’s poultry industry is gearing up to ship more frozen chicken abroad under the Central American Free Trade Agreement, while parts of the state’s textile industry also stand to gain.

"It levels the playing field," said Abit Massey, president of the Georgia Poultry Federation. Tariffs on U.S. chicken headed to Central America will steadily decrease over the years, and Georgia’s family farms, processing plants and hatcheries stand to gain.

BY THE NUMBERS
After first year of CAFTA:
• $9.27 million: Projected increase in chemical exports from Georgia to Central America.
• $7.91 million: Projected increase in processed food, beverage and tobacco exports from Georgia to Central America.
• $262 million: Projected increase in output across all Georgia industries.
• 1,516: Estimated number of new jobs in Georgia.
Source: U.S. Chamber of Commerce

Around Atlanta and Georgia, businesses are taking stock of how the reduction in tariffs on goods traded between the United States and Central America will affect them - both positively and negatively.

Some Georgia industries hope CAFTA, which was signed by President Bush on Aug. 2, will streamline customs paperwork and help shipments go through more quickly. Others say the agreement continues the trend of shifting American jobs overseas and will do little to solve the U.S. trade deficit.

William Hawkins, a senior fellow with the U.S. Business and Industry Council, said CAFTA countries don’t have much money to buy U.S. products.

The trade agreement basically assured "another venue for cheap labor," he said.

The U.S. Department of Commerce has been publicizing CAFTA and will sponsor a forum Friday in Atlanta at the World Trade Center on how minority businesses can take advantage of the agreement.

Werner Bieri, president of Buhler Quality Yarns in Jefferson, says the 135 people he employs spinning cotton yarn have a better chance of keeping their jobs due to CAFTA.

"We are buying American-grown cotton, and we spin it here, and we export a large part to those Central American countries," he said.

The trade agreement buoys the demand for U.S. cotton yarn in Central America because it gives the apparel industries in those countries quota-free and duty-free access to the U.S. market for clothes they make with U.S. components, he said.

"Without CAFTA, there would have been a bleak future because we would have lost the main export market," Bieri said.

The trade agreement further opens markets in six countries: Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica and the Dominican Republic. In many respects the agreement continues and expands the 20-year-old Caribbean Basin Initiative, which opened the U.S. market to Central American goods.

Holly Frey is director of international operations support for Atlanta-based FOCUS Brands, parent company of Cinnabon, Carvel and Seattle’s Best Coffee International. She says her company must "jump through a lot of hoops" to get products into Central America.

"There are a lot of small details that countries can be real sticklers for, and they can hold up your container for weeks," she said.

Frey ships flour and sugar out of Miami to Central America, to franchises there that make the aromatic cinnamon buns.

She hopes the trade agreement will mean a set of uniform customs paperwork for each country.

Juan Vasquez, director of sales for government and export at Selecto Scientific in Suwanee, says he has just started exporting a water filtration system to Guatemala for restaurant soft-drink machines.

CAFTA is a good step, he says, because it follows the European model of integrating the economies of multiple countries.

"If we don’t build that network within our area, we are going to be weak," he said.

Gary Black, president of the Georgia Agribusiness Council, says it’s hard to calculate just how much revenue the trade agreement will generate for Georgia. He shies away from saying a certain number of cotton acres will be planted solely because of CAFTA.

Healthy business

The advantage is in opening up new markets for Georgia farmers, he said.

"Anytime you’re able to add a market, it makes the health of your business that much more solid," Black said.

The state’s poultry industry welcomes the further opening of the Central American market.

Under the deal, 26,000 metric tons of U.S. chicken leg quarters may enter Central America duty-free. Before, those chicken leg quarters had a tariff as high as 164 percent in some countries.

Chicken leg quarters are the largest segment of the U.S. poultry export market. Americans prefer white breast meat, therefore the industry sells those at a premium and exports the legs.

Georgia farmers ship about $10 million in chicken per year to Central America, said Bill Roenigk, vice president of the National Chicken Council. The state’s shipments of frozen chicken to the region could reach $20 million to $25 million in the next decade, he said.

"In the case of poultry, it’s very positive," Roenigk said. "Unless their companies are very, very efficient, it’ll be difficult to compete against U.S. industry."

That’s what worries Caroline Hofland, owner of CBH International in Suwanee. She exports curtains for chicken houses and other poultry equipment to Central America, which represents about 30 percent of her business.

Chickens live in buildings with air conditioning, and curtains control drafts for maximum growth.

She tries not to worry about what she sees as the potential demise of Central American chicken farming under the agreement. If the industry declines, she says, more people will lose their jobs and come north to the United States looking for work.

"I live one day at a time," she said. "When the problems come, we can only pray for the best."

source: AJC