Honduras and Nicaragua enter trade pact with US

Sat Apr 1, 2006

TEGUCIGALPA, Honduras (Reuters) - A controversial trade pact between the United States and Central American nations took effect in Honduras and Nicaragua on Saturday as supporters said it would help bring prosperity to the poor region.

The U.S.-Central American Free Trade Agreement, known as CAFTA, will give smaller businesses access to international markets, Honduran President Manuel Zelaya told a news conference where he was joined by U.S. Ambassador Charles Ford.

"We will strengthen our urban areas and rural sectors that are deeply impoverished," he said.

Investors in Brazil, Japan, China, Taiwan and Europe hope to negotiate deals for biofuels, textiles, health and education services in the region under the pact, he said.

Three countries including El Salvador, have now entered into the agreement, despite fierce protests against the pact across the region. Small farmers, unions and civic groups feared free trade would drive competition that would erode incomes and reduce living standards.

CAFTA was approved in the United States last year after one of the bitterest trade debates in the House of Representatives in years. The pact covers the United States, El Salvador, Costa Rica, Guatemala, Honduras, Nicaragua and the Dominican Republic.

The United States refused to implement the pact by the original target date of January 1 because it said none of the other CAFTA countries had made the necessary changes to bring rules and legislation in line with the accord.

A key issue was the reluctance of the CAFTA trading partners to recognize the U.S. meat inspection system as equivalent to their own, thereby removing a technical barrier to U.S. meat exports.

El Salvador, Nicaragua and Honduras have made regulatory changes to make way for the pact, while the other countries have yet to do so. Costa Rica alone has not ratified the trade deal, although President-elect Oscar Arias supports it.