Source: Carnegie
For Immediate Release: July 7, 2003
Contact: Cara Santos Pianesi, 202-939-2211, csantos@ceip.org
Current
U.S. Proposals for Central America Trade Pact Risk Economic Shock for Region
New
Carnegie Paper Outlines Steps for Stable, Prosperous Trade Zone
The U.S. must take unprecedented steps in trade talks with Central American countries if the resulting free trade zone is to be development success and not a disaster, argues Carnegie Endowment for International Peace senior associate Sandra Polaski in a new issue brief.
The United States is currently negotiating with Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua to create the U.S.-Central American Free Trade Agreement (CAFTA) -- a free trade area that will combine the world's largest economy with some of its poorest. However, while Central America desperately needs a boost to its growth and development, the risks of such an unequal combination are formidable. In her paper "How to Build a Better Trade Pact with Central America," Polaski highlights several obstacles that must be addressed in order to make this combination of strong and weak economies work for the benefit of all six.
The United States should break new ground in four key areas: agricultural trade; adjustment assistance to help those who lose from trade to adapt; labor law reform; and monitoring for the agreement's start-up phase. Polaski discusses each of these topics and offers concrete solutions that negotiators can use to achieve positive outcomes. For example, she points out that, as most of the Central American economies are primarily agricultural (with subsistence farming the largest single occupation in four of them), U.S. food imports could wipe out poor farmers, while jobs in other sectors grow too slowly to offer alternatives. To address this problem, Polaski suggests that the U.S. proposal provide long transitions, of twelve years or more, for trade liberalization of staple food crops produced by subsistence farmers in Central America. On the import side, U.S. liberalization of access for Central American export crops should occur early in the agreement, to allow for absorption of labor from subsistence agriculture.
Polaski argues that the United States has important interests in creating a stable, prosperous trade zone with Central America that go beyond the profits of U.S.-based firms. Potential negative consequences of a badly constructed CAFTA could provide fertile ground for the further encroachment of the drug trade in the region, increased illegal immigration, and economic and political instability at the United States' back door.
Sandra Polaski was the U.S. Secretary of State's special representative for international labor affairs. She was responsible for labor provisions of pathbreaking trade agreements with Jordan and Cambodia.
This issue brief-in English and Spanish-is only available online at www.ceip.org/trade.
###