NCPA - National Center for Policy Analysis


May 26, 2005

A spoonful of sugar may be the poison that kills the economic opportunity of free trade between the United States and six nations in Central America and undermines the fundamental concept of international trade, says Pete du Pont, a former governor of Delaware and chairman of the National Center for Policy Analysis.

The Central American Free Trade Agreement (Cafta) would free up trade between the United States and Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic. And for the American economy, it would be a good step forward, says du Pont:

  • Three quarters of the tariffs U.S. firms now pay would be eliminated immediately and the rest phased out.
  • It would immediately save U.S. manufacturers $1 billion each year in foreign taxes.
  • U.S. Trade Representative Rob Portman notes that American farm and manufacturing groups estimate American sales to Central America will annually increase by "$1.5 billion in farm products and $1 billion in manufactured goods" once it is fully in force.

Cafta would expand foreign markets for U.S. products and services and substantially increase job opportunities in America, says du Pont:

  • Unfortunately, the American sugar industry is so strongly advantaged by quotas, tariffs and subsidies that total sugar imports have declined by about a third since the 1990s.
  • Cafta would allow additional sugar imports from the Central American nations totaling 107,000 metric tons in the first year.

Annual U.S. sugar production is about 7.8 million metric tons, so the effect of Cafta is to raise sugar imports into America by about one day's sugar production, or as Portman puts it, "approximately one teaspoon of sugar per week per adult American."

That threat -- a teaspoon of sugar a week -- has caused the U.S. sugar lobby to focus its efforts on killing Cafta. And it may succeed, says du Pont.

Source: Pete du Pont, "Sugar Socialism: The American consumer takes his lumps -- and pays too much for them,", May 25, 2005.

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