Friday December 19, 2003
Trade pact a gamble for Bush
The US government risks alienating crucial voters by agreeing to the new Cafta deal.
The Bush administration this week pressed ahead with its commitment to open up borders for free trade when it agreed a deal with four Central American countries. In doing so the US government plunged itself into further controversy at home with an issue that could become crucial in next year's presidential elections.
The agreement with El Salvador, Honduras, Nicaragua and Guatemala will strip away all tariffs on industrial goods over the next ten years and phase out protection of agricultural products over the next 20 years.
The US government hopes that Costa Rica and the Dominican Republic will join at a later date. The ultimate aim is to have free trade across the Americas.
Trade officials announced the deal, the the Central American Free Trade Agreement (Cafta), with a certain amount of relief. It is 10 years since the North American Free Trade Agreement, on which it is modelled, was signed, sweeping away trade barriers between the US, Canada and Mexico.
Free trade pacts begun in the Clinton administration were signed with Chile and Singapore earlier this year, but, other than that, the current administration's record on trade has been abysmal.
It received a black eye over the imposition of steel tariffs last year. They were ruled illegal by the World Trade Organisation, criticised by domestic steel users and eventually lifted ahead of schedule when Europe and Japan threatened retaliation.
More ambitious trade talks have also stalled.
When it came to power, the Bush administration vowed to pick up the pace of the free trade policy sponsored by the previous government.
But global trade talks collapsed in Cancun, Mexico in September and bilateral talks with Australia, and Morocco have been delayed. Plans for a free trade agreement in the western hemisphere were drastically watered down. Other existing free trade pacts are in place with only Israel and Jordan.
The administration is also under increasing pressure to protect jobs from India and particularly China, where trade relations are becoming increasingly strained. America's trade deficit with China reached $103bn last year.
For opponents of free trade there is little to celebrate with this latest deal. Concerns are deepening about the effects that trade agreements are having on the US.
Since George Bush became president, almost 3m American manufacturing jobs have been cut as factories lose business to cheaper imports or are forced to relocate their own plants to the developing world to compete.
Although there have been signs of a long-awaited improvement in industrial output in the US, most of those jobs are gone for good.
Detractors complain that there are too few provisions on labour and environmental laws in Cafta, which means the Central American companies can manufacture at far lower costs.
Democrats are seizing on the issue for their own election campaign and the agreement could have trouble passing through Congress.
Representatives from the sugar and textiles industries in the US are particularly worried about the latest deal.
Richard Gephardt, a presidential hopeful, has long fought trade liberalisation and warned that Cafta would cost thousands of American jobs. The agreement, he said, was "selling out American workers".
Currently the trade between the US and the four Cafta countries is valued at $15.4bn.
The states that rely on manufacturing have seen little evidence of the resurgent American economy. The establishment of Cafta, whether it will be directly responsible for job losses or not, will only further heighten fears. For the Bush administration that is not good news. Many of the regions affected are crucial swing states.