1. Negotiations
2. US-DR-CAFTA

New year sees delay in CAFTA implementation

New Year Sees Delay in CAFTA Implementation

By Todd Tucker | January 5, 2006

Americas Program, International Relations Center (IRC)

A key argument used by U.S. transnationals and the Bush administration to pass the Central America Free Trade Agreement (CAFTA)-that Central American countries themselves needed and wanted the agreement-has broken down on the eve of implementation of the controversial pact.

Countries throughout the region are balking at added U.S. demands for domestic legislative reforms as prerequisites to implementation. The United States has also postponed the implementation deadline to give time to make its own adjustments and wrest even greater concessions from its future CAFTA partners.

Days before the January 1 deadline for CAFTA was to go into effect, news broke that several of the CAFTA countries’ parliaments have grave misgivings about the national legislation required to implement the deal. In Costa Rica’s case, the Congress is unwilling to ratify the controversial agreement at all.

The Bush administration has decided to put off the agreement’s planned Jan. 1, 2006 implementation until it can persuade the governments to accept anti-public interest changes to each Central American country’s domestic laws.

After weeks of speculation in the Central American press that CAFTA would not be implemented on January 1, 2006 as planned, on Dec. 19 the Bush administration reversed its previous stance that there would be no obstacle to the January implementation, and instead declared that the agreement may not go into effect with all or any of the CAFTA countries by that date. [1] Administration spokesperson Christin Baker noted that implementation would only occur “with those countries that the United States has determined to have taken sufficient steps to complete their commitments,” while a Dec. 30 press statement from the U.S. Trade Representative’s office noted that CAFTA implementation would be conducted by individual country “on a rolling basis.” [2]

Press reports have indicated that the United States is also not ready to implement the agreement, dogged by a whole set of problems such as U.S. failure to sort out new customs rules for CAFTA’s increased sugar imports. [3]

Meanwhile in Central American nations, months after signing the pact the promotional campaigns heralding the promises of CAFTA have been replaced by the reality of having to make the far-reaching, retrograde changes to their domestic laws governing public health, intellectual property, and other regulations required by the trade and investment agreement.

The following is a summary of the status of CAFTA implementation in each country.

Honduras and El Salvador

In a bid for Washington’s favor, the ruling parties of both Honduras and El Salvador passed sweeping legislation in mid-December that contains new policies that require the imposition of extensive monopoly protection benefiting U.S.-controlled industries such as digital media and pharmaceutical companies. A Salvadoran police department official gave some indication of the road ahead when he said that the new protections would be enforced, “As we enforce our drug laws: you’ll be prosecuted for possession” of “pirated” copyrighted materials. [4]

But some remorse has been in evidence in the weeks following passage of the new legislation, as a Salvadoran official indicated when he acknowledged that there could be thousands of people put out of work if CAFTA’s rules were to mandate an immediate crackdown on the vendors of pirated CDs and software. When he raised the possibility of allowing these vendors to continue selling their wares, he received a harsh rebuke from the U.S.-based Business Software Alliance (BSA), one of the main copyright-dependent industry associations pushing for CAFTA ratification. BSA spokesperson Mauricio Chacón told reporters that, “We’re very sorry that many people will be out of work, but it is not our problem.” [5] Days later, Chacón alleged in a separate interview that enhanced monopoly rights for copyright holders would bring El Salvador “enhanced economic growth like they have in Mexico and Costa Rica.” [6]

However, there is no historical precedence for the claim-Mexico has shown very low growth rates over the NAFTA period-and studies show that increased payments for use of patented and copyrighted material will cost developing countries millions of dollars far into the future. Even the World Bank has acknowledged that increased patent protection represents a drain on developing countries’ economies, as it involves using scarce national resources to pay royalties and other tribute to copyright- and patent-holders who are usually in developed countries. [7]

In Honduras, former President Ricardo Maduro experienced record low approval ratings following the signing of CAFTA, with less than a third of the population rating his performance as good or very good and a full 77% deeming his administration as more corrupt or as corrupt as previous governments. [8] Cardinal Óscar Rodríguez Maradiaga, the archbishop of Tegucigalpa, who figured as one of the candidates to become Pope last year, told reporters in November that he was worried that CAFTA would produce more poverty in the region. [9]

In El Salvador, where the recent CAFTA-related overhaul of the country’s laws passed by a small majority of 45 out of 84 votes, the leading opposition party (FMLN) walked out of Congress as the legislation was passed, pointing out that the overhaul of national law could harm the public interest and no attempt had been made to evaluate the impact on local communities. The opposition party also noted that the Bush administration was demanding changes, not only to trade law, but also to criminal law and laws affecting telecommunications, security transactions, and sanitary standards. [10]

Polls show record opposition to CAFTA in El Salvador, where 76% of the population believes the agreement will not improve the country’s situation or will worsen it. [11]

Despite the passage of these draconian changes to the Central American countries’ domestic laws, the United States, which must approve that countries have sufficient national legislation in place before implementing the agreement, has not yet notified the Organization of American States of its acceptance of the changes it demanded of El Salvador and Honduras, leaving open the possibility of renewed pressure for further changes to domestic laws in the coming weeks. Both countries’ governments have suggested a new deadline of Feb. 1, 2006 for implementation, but the Bush administration has not officially approved this date. [12]

Guatemala

In Guatemala, polls found that 65% of respondents believed that CAFTA would harm their country. [13] When the government ratified CAFTA in March 2005, tens of thousands of people filled the streets in protest of the agreement. The government responded by unleashing the military on protestors across the country in violation of the 1996 Peace Accords ending Guatemala’s civil war, which forbid the use of military forces in actions against civilians. Two indigenous campesino farmers participating in the protest were murdered. Bishop Álvaro Ramazzini of Guatemala, president of the Central American Conference of Catholic Bishops, summarized local sentiment when he said, “CAFTA did not come down from God. It is the flawed work of man,” and “may well make conditions here worse.” [14]

In recent days, Guatemala’s vice president Eduardo Stein pointed out that the Bush administration’s efforts to force changes in Central American law have taken a divide-and-conquer approach, targeting each country one by one outside the framework of the regional agreement. He added that it “makes one think that they are renewing pressure for the [Central American countries] to make more changes in their intellectual property laws.” [15] The Bush administration recently campaigned successfully to get Guatemala to repeal its public health law that allowed more generic competition in the pharmaceutical market, a reversal that “ensure[d] that thousands of Central Americans in need of such medications will have to go without,” according to columnist Harold Meyerson in the Washington Post. [16]

Inside U.S. Trade reported that administration officials are now targeting for elimination Guatemalan laws that allow exemptions from pharmaceutical industry’s data exclusivity rights “for the protection of plants, animals, and the environment.” Data exclusivity rules effectively extend the period of patent protection for pharmaceutical drugs from the 20 years mandated under World Trade Organization rules to 25 years-a clear case of corporate favoritism. Public health activists in Guatemala and beyond have been trying to press for exemptions from these extreme CAFTA rules for generic medicines.

The Bush administration is also upset that proposed Guatemalan law on copyright protection “does not clearly state that there are no limits on criminal sanctions in the case of intellectual property rights” [emphasis added]. [17] In other words, the administration has insisted on new domestic laws that could impose steep fines and throw consumers in jail for listening to recorded copies of their favorite music if that recording was made by someone else in violation of CAFTA copyright rules and the listener thus was an unknowing listener to “pirated” materials. [18]

The latest press reports indicate that Guatemala may be ready to implement CAFTA in February 2006. [19] The process has created deep resentments however. Vice President Stein publicly criticized the approached of the Bush administration during the CAFTA implementation process: “It’s an affront to Latin America when a government says it wants to be a ‘partner,’ but then is only interested in our money and commodities, while seeing our people as an epidemic ... They treat us as if we were a region of delinquents.” [20]

Costa Rica

CAFTA has still not been ratified by the legislature of Costa Rica, a country which the U.S. State Department describes as the oldest and strongest democracy in the Central American region. [21] Many experts believe that a vote is unlikely until May 2006, following national elections. [22]

In an attempt to curtail public participation and bulldoze changes through the legislature, the USTR announced recently that only countries that ratify and implement CAFTA by April 1, 2006 will be eligible for certain agricultural benefits. [23] Meanwhile, Representative Gregory Meeks (D-NY), one of the few Democrats who supported CAFTA, implied that Costa Rica should not expect to see continued benefits under an existing trade program called the Caribbean Basin Initiative. Representative Ruben Hinojosa (D-TX), another CAFTA supporter, took on a threatening tone when he said, “If Costa Rica does not join this pact, while the other five countries have approved it, the opportunity will pass you by.” [24] Hinojosa added that only the U.S. government will decide whether Costa Rican laws meet CAFTA requirements, which, he noted, are “not negotiable.” [25]

Fortunately, Meeks’ and Hinojosa’s threats, made on a recent delegation of U.S. congressional CAFTA supporters to Costa Rica, are only ill-informed bluster, since it would require an explicit act of Congress to eliminate the CBI program, which was made permanent some years ago. However, the claim parrots the line employed by the Bush administration throughout the CAFTA debate to bully Central American countries into accepting a CAFTA many in Central America deemed against their interests.

In March 2005, Ways and Means ranking Democrat Charles Rangel felt compelled to dispel the threat of elimination of the CBI openly promoted by the Bush administration by pointing out that CBI is a “ congressionally mandated program [whose] benefits are guaranteed on a permanent basis, unless the Congress amends current U.S. law.” Representative Rangel announced that he would oppose such an amendment of U.S. law, characterizing the administration’s remarks as “thinly veiled blackmail.” [26]

According to a September 2005 poll by the University of Costa Rica, 58% of that country’s population thinks CAFTA should be renegotiated or rejected outright. The vast majority of the population-69%-believes that the agreement should be put to a binding national referendum. [27] Former president Rodrigo Carazo Odio (1978-1982) told a Washington audience that, “ Costa Rica wants to maintain its friendship with the United States, but CAFTA, as it currently stands, is not in the best interest of Costa Rica, and should therefore not be approved.” [28]

Opposition to CAFTA is also evidenced by the continued strength of presidential candidate Ottón Solís, who is running on an anti-CAFTA platform, and won over a quarter of the votes when he ran for president in 2002-an extraordinary showing for a third-party candidate. [29] On the other hand, Abel Pacheco, the president who signed CAFTA, is set to leave office in February 2006 with record low approval numbers. [30]

Apparently concerned that the already heavy-handed tactics in Costa Rica were not being adequately understood by local officials, the Bush administration’s ambassador to Costa Rica, Mark Langdale, has launched a campaign in the local press to raise the volume of the already voluminous threats. Langdale, appointed in October 2005 after being one of the largest individual donors to the Bush re-election campaign and president of a hotel management company with extensive interests throughout Latin America, stated that if CAFTA is not ratified by May 2006 “the first thing that will suffer is [Costa Rica’s] reputation as a preferred investment location in Central America.” [31]

Ambassador Langdale also said that it would be “very unusual” for a country to continue to enjoy CBI benefits if it “rejects a treaty already approved by the [ U.S. ] Congress.” Finally, he implied that Costa Rica should subordinate its national democratic process to the Bush administration’s interests, saying that “Costa Rica has the right to carry on its democratic process, but always in reference to what is going on around it ” [emphasis added]. [32]

These statements have further inflamed Costa Rican public opinion, with the country’s largest labor union denouncing Langdale’s “intervention” in the country’s internal affairs, calling it “an unacceptable attempt to psychologically blackmail the country.” [33] The union has called CAFTA defeat its top priority in the new year, and promises a wave of strikes and other actions to make their point of view heard. [34]

Dominican Republic

Like Costa Rica, the Dominican Republic has also been threatened with loss of agricultural benefits if it does not implement the trade agreement by April 1, as U.S. pressure increases in the face of recent press reports indicating the Dominican government will delay CAFTA implementation until July 1, 2006. [35] Dominican government officials have stated that they have already sent “all the documentation” requested by the Bush administration, but have been told that the U.S. Trade Representative’s office is busy and that it has been “impossible” for them to read the papers that they themselves requested of the government. [36]

According to press reports, Dominican Republic officials have decided to implement a CAFTA-mandated regressive tax reform that will raise the price of basic consumer goods even though the agreement has not gone into effect. Opposition party legislators from the PRD have blasted the decision, characterizing the move as a “brutal ambush.”

Polls show that 60.8% of the population opposes the agreement, [37] while 65% think the country’s economy is headed in the wrong direction following CAFTA ratification. [38]

Nicaragua

In Nicaragua, the Bush administration threatened to decrease foreign aid and withdraw diplomatic relations to force realignment in Nicaragua’s domestic politics that it considered unhelpful to the CAFTA cause. In September, Representative Dan Burton (R-IN), a strong supporter of CAFTA and of the Bush administration, implied that Nicaragua would lose trade preferences if CAFTA were not ratified, saying that “a failure to sign CAFTA would put in jeopardy many jobs in the free trade zones,” [39] in reference to the exports that received preferential access to the U.S. market under CBI that would continue under CAFTA.

During the recent political crisis in Nicaragua, Deputy Secretary of State Robert Zoellick flew to the country to openly interfere by attacking a Nicaraguan political coalition comprised of the Liberals and the FSLN. Zoellick listed CAFTA among the threats against the new coalition: “I want to be frank,” he said. “That’s a path that will lead Nicaragua to lose the Millennium Challenge Account assistance, to lose the opportunity of CAFTA, to lose the opportunities of investment, to lose the opportunities of integration with your neighbors [...] Relations with the United States will depend on the commitment to democracy and constructive links with the United States along the development and democracy agenda that I ’ ve outlined.” He went on to praise a set of candidates for national office, whom he approvingly described as belonging to a “ Third Way movement.” [40] The Latin American Weekly Report characterized the move as “Washington’s most overt intervention in a Latin American electoral process since 1946.” [41]

Polls also indicate that Nicaraguans are most concerned about the stagnating economy, especially unemployment, [42] problems likely to be exacerbated by CAFTA. Most recently, a Nicaraguan official stated that the government hopes to have CAFTA implemented by February or March of 2006, but that the Bush administration has not given “feedback” on the qualification status of Nicaragua’s laws. The official added that “after April, it will be more difficult to put CAFTA into effect,” [43] echoing the Bush administration’s threat heard first in Costa Rica.

Bush Administration Arguments Crumble, Pressures Increase

After sitting on the signed agreement for over a year because they knew they didn’t have the support in the U.S. Congress for CAFTA, the Bush administration was able to pass the deal by a one-vote margin only after twisting Republican arms and cutting shady deals that cost U.S. taxpayers millions of dollars. [44]

The administration has come face-to-face with the reality that the agreement it defended on the basis of its benefits to economic performance and democracy in Central America is largely unpopular there. Central American opponents of CAFTA protest that it forces their nations to implement an anti-development model that would cause serious economic and social trauma.

The Bush administration’s bullying tactics, which involve a de facto USTR veto over the adequacy of Central American national law, are clearly fueling opposition to the agreement. Even in the U.S. Congress, the asymmetry of what the Bush administration is demanding has not gone unnoticed by CAFTA opponents.

A letter from leading House Ways and Means Committee members-including Reps. Rangel, Benjamin Cardin (D-MD), Sander Levin (D-MI) and Xavier Becerra (D-CA)-pointed out the contradiction that the Bush administration appears to be forcing changes to CAFTA country law in regard to intellectual property and agricultural market access, while failing to do the same to bring the countries’ labor laws into compliance with international standards. “The administration once again appears to be applying a double standard when it comes to the question of including basic international standards of decency and fairness for working people in U.S. FTAs [free trade agreements],” the four members of Congress wrote in a letter to U.S. Trade Representative Rob Portman. [45]

Ironically, the president’s argument before Congress that CAFTA was essential to U.S. foreign policy objectives in Central America, is belied by the growing unpopularity of the United States in the region, in large part as a result of CAFTA and similar trade agreements. A recent poll shows that 61% of Latin Americans now have little or no confidence in the United States, with President Bush receiving only a 4.8 approval rating on a scale of 10-among the lowest for leaders in the Western Hemisphere. [46]

Indeed, if CAFTA is finally implemented in Central America, U.S. foreign policymakers will be living with the consequences of having forced a discredited policy on a population that widely opposes the trade agreement’s provisions. It will be up to the people of Central America and the Dominican Republic, along with allies abroad, to track CAFTA’s damage and demand a more democratic and just alternative that places the needs of human populations above the narrow interests of U.S. corporations such as the pharmaceutical firms.