Monitoring report: DR-CAFTA in Year One
Monitoring report: DR-CAFTA in Year One
A report by the Stop CAFTA Coalition
September 12, 2006
Click here to download the report (PDF, 210KB)
Introduction
Over the past four months members of the CAFTA Monitoring Working Group have coordinated the
drafting of this report with friends and allies in Central America. While it is far too early to detail
long-term trends in labor, textiles, agricultural practice and policy, investment patterns, services, and
environmental consequences of CAFTA, in this report we have looked primarily at the process of
implementing CAFTA since January 1, 2006 and some early trends and concerns that have emerged,
many of which we will continue to monitor.
Background
The US-Central America Free Trade Agreement (CAFTA) was initiated by the Bush administration in
January of 2002 as an effort to revitalize faltering talks for a Free Trade Area of the Americas. After a
year of preliminary discussions, “negotiations” began in February of 2003 and were completed in
December of that year between the United States, El Salvador, Guatemala, Nicaragua, and Honduras.
Costa Rica joined the accord in January of 2004, and all six countries formerly signed in May of 2004.
In August of 2004 the Dominican Republic was docked to the core agreement creating the U.S.-
Dominican Republic-Central America Free Trade Agreement (DR-CAFTA).
CAFTA was adopted first by El Salvador in December of 2004; Honduras and Guatemala in March of
2005; the United States in July of 2005; and Nicaragua and the Dominican Republic in September of
2005.
CAFTA was initially intended for implementation on January 1, 2006. Shortly before, in mid-
December 2005, the United States Trade Representative (USTR) announced that in its estimation,
countries in Central America had failed to fully enact laws necessary to bring their legal systems into
compliance with changes mandated by the CAFTA. At this point the USTR set in motion a process of
rolling implementation, whereby, the USTR would certify countries as ready to implement CAFTA on
a case-by-case basis. As a result of this policy CAFTA was implemented first by the United States and
El Salvador on March 1, 2006; Nicaragua and Honduras on April 1, 2006; and Guatemala on June 1,
2006.
The Dominican Republic has yet to fully comply with demands by the USTR and has not yet
implemented the agreement. Costa Rica remains the only country to have not ratified the agreement.
Findings of “CAFTA in Year One” Report
The process of rolling implementation has had negative consequences for the region and for the United
States by creating confusion governing rules of origin for textiles. The result has been lost jobs in the
United States and parts of Central America. Far from creating the promised regional textile complex
to offset competition from China, the ham-handed approach to implementing CAFTA has contributed
to a trend, already in place, of Central America losing market share to competitors from Asia.
The confusion surrounding implementation has been by and large the creation of the United States
Trade Representative and Congressional leadership. The USTR has insisted on new concessions from
Central American counterparts that go beyond items negotiated during CAFTA discussions. These
concessions include:
– Demands to re-interpret intellectual property rules to grant extended periods of protection for
U.S. based pharmaceutical companies.
– Requirements that governments in Central America adopt U.S. Department of Agriculture meat
inspections protocols, thereby foregoing their rights to inspect meat packers prior to issuing
export licenses in the United States and re-inspecting meat at the border.
– Forcing countries to accept USTR interpretations of a host of disagreements concerning tariff-
rate quotas and distribution of import licenses.
– Demands that all of these disputes be settled by changes in the civil codes of all of the countries
in order to cut off the potential for legal challenges later.
The USTR has been unwilling to compromise meaningfully with any of its partners, even when the
new demands were part of negotiations between the Bush administration and Congressional
Republicans that helped pass CAFTA by a slim 2-vote margin.
The delays in implementation have been especially long in Guatemala and the Dominican Republic,
and as mentioned in the reports on Guatemala, outstanding issues concerning pocket linings and taxes
on beer still have not been settled even after the implementing deadline has passed.
As chapter 9 on agriculture in El Salvador notes, there is already evidence of stress to the rural
economy of Central America that is being exacerbated by CAFTA. Imports of items such as fresh beef
and a variety of dairy products to Central America have increased dramatically. Guatemala has
already submitted a case before the World Trade Organization for dumping of chicken quarters by U.S.
poultry exporters. In El Salvador, inflation is increasing, including for food items, indicating that
despite promises to the contrary increased food exports from the United States are not leading to lower
food prices.
As chapters 1 on El Salvador and chapter 2 on Nicaragua note, another impact of CAFTA
implementation we are seeing is the cost to the government of initiating programs to prepare the rural
economy for the disruptions. The Nicaragua chapter documents a program that shows how support
funds are being absorbed by larger producers, not small farmers who desperately need them. Further
disruptions to the rural economy will lead to expanded migration, both within Central America and to
countries outside the region.
There has been no improvement of the human rights situation in Central America under CAFTA.
Indeed, there is evidence that CAFTA and other neo-liberal reforms are increasing social conflicts and
in El Salvador, Guatemala and Honduras the state is responding with increased violence, or failing to
protect social activists non-violently demanding their rights. This is another trend that we will
continue to monitor closely.
Finally, there was a great deal of concern about the situation of worker rights in Central America
expressed by members of Congress during the CAFTA fight. While too early to draw specific
conslusions, we simply note that few collective bargaining agreements exist with non-company unions
in the free trade zones of Central America, and the age old practice of firing union leadership in an effort to squash organizing efforts continues unabated. There will be longer reports on worker rights
enforcement in the months to come.
Also, we note that coalitions of legal scholars, lawyers, and civil society organizations in the countries
of Central America have presented legal challenges to domestic and regional courts calling into
question the constitutionality of the implementing laws. This is another area we hope to report on as
the cases progress.
The Monitoring Working Group
The task of monitoring CAFTA impacts is an ongoing one. The goal of the Working Group is to
continue to coordinate monitoring efforts and to do periodic reporting on the impact of policies enacted
to implement CAFTA. This first preliminary report on implementation is issued on September 12,
2006 in the hopes that concerns raised in this report will resonate with members of Congress as they
look to agreements with Peru and Colombia.
For more information and to download the report go to http://www.stopcafta.org
