Competition worries U.S. sugar growers
Total U.S. exports to the CAFTA nations will rise by $2.7 billion.
WASHINGTON (AP) -- U.S. shoppers should get a price break on shirts and pants made in Central America. American farmers and manufacturers are hoping to gain new sales in the region.
U.S. sugar growers, however, are fretting about increased competition now that Congress has passed and sent to the president a trade deal that eliminates barriers between the United States and Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua.
Most analysts predict that the political fallout from the Central American Free Trade Agreement, which President Bush plans to sign Tuesday, will outweigh the economic impact. They note that the six CAFTA countries have economies that are very small in comparison with the U.S. economy.
The debate over the pact was the most contentious free-trade fight in Congress in more than a decade.
The U.S. International Trade Commission, which did the most extensive study of the agreement, found that it will have a tiny but positive impact on the U.S. economy -- a gain of 0.01 percent in output in an $11 trillion economy.
Overall price breaks for U.S. consumers will be small because 80 percent of goods from the six nations already come into the U.S. duty-free under federal programs to help poor nations.
Yet the effect on some industries will be significant.
The commission estimated that after full phase-in of the agreement, U.S. exports of textiles and clothing to the six countries will increase by $802.8 million. Machinery exports will rise by $400.6 million. Auto shipments will go up by $180.4 million. Sales of wheat and other grains will climb by $157.3 million.
Total U.S. exports to the CAFTA nations will rise by $2.7 billion, or 14.8 percent, according to the study.
The value of goods sent from those countries to the U.S. will jump by $3.1 billion for textile and clothing shipments, while shipments of processed sugar will increase by $113.2 million.
The total increase in imports will come to $2.8 billion at the time of full phase-in. The study estimated that imports in some categories will decline in future years.
"The biggest winners from the passage of CAFTA will be the people of Central America. This will solidify the tremendous gains they have made in economic and political reforms," said Dan Griswold, head of trade studies at the Cato Institute, a libertarian think tank in Washington.
In addition to promoting the pact on foreign policy grounds, the Bush administration and Republican leaders participated in a frenzy of deal-making to win votes.
One deal meant passage of House legislation to make it easier to impose penalty tariffs on China in trade disputes.
Also, there were agreements sought by textile state lawmakers to ensure that U.S. plants now shipping yarn and fabric to Latin America, where it is made into finished clothing, will not lose out to competition from China and other low-cost suppliers.
Despite all the horse-trading, the legislation passed by only two votes, 217-215, on Thursday night after House leaders held the normal 15-minute vote open for an hour to allow more arm-twisting.
"Passing CAFTA required last-minute procedural stunts even after weeks of the president's personal attention ... months of GOP leadership threats and goodies and an army of corporate lobbyists," said Lori Wallach, head of Public Citizen's Global Trade Watch, a CAFTA opponent.