NCPA - National Center for Policy Analysis

The Case for CAFTA

January 5, 2004

U.S. trade officials concluded negotiations last month with Nicaragua, Guatemala, El Salvador and Honduras for a Central American free trade agreement. A vote in Congress to ratify Cafta, as it is known, is expected to come before Congress later this year.

Cafta promises to engage a heretofore isolated region. According to the U.S. Chamber of Commerce, the agreement "should pave the way for a substantial expansion of business ties between the United States and Central America."

  • According to the Office of the U.S. Trade Representative, 80 percent of U.S. exports of consumer and industrial products to Central America will be duty-free "immediately" and over 15 years all tariffs on these goods will be eliminated.
  • The list includes such key exports as "information technology products, agriculture and construction equipment, paper products, chemicals and medical and scientific equipment."
  • Better than half of U.S. farm exports to the region will become duty-free immediately and tariffs on most U.S. farm products will be phased out within 15 years.
  • There are also gains for the Central American consumer in access to U.S. service providers and, as important, the dismantling of distribution barriers.

These commercial possibilities ought to be enough. But Cafta may also translate into a big win for U.S. foreign policy. As one Central American trade negotiator has already noted, increased competition would mean greater stability in both economics and government.

Source: Editorial, "The Case For Cafta," Wall Street Journal, January 5, 2004.

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