CAFTA Moves Closer to Approval

Despite deep divisions in Congress, the Central American Free Trade Agreement is coming closer to reality.

The Senate Finance Committee approved the trade pact on a voice vote on June 29. The agreement was then sent to the full Senate floor.

On June 30, the House Ways and Means Committee approved CAFTA on a 24–11 vote, sending the trade agreement to the full House floor, where there is stiffer opposition. The full House is expected to start debating CAFTA after July 11.

Congress has 90 working days to approve the accord.

The Bush administration has been waging an uphill battle to get Congress to approve CAFTA, which would eliminate tariffs on qualifying goods traded between the United States and Costa Rica, Guatemala, Honduras, Nicaragua, El Salvador and the Dominican Republic.

CAFTA is backed by many apparel manufacturers who see the region as another source for producing clothing. Central America is relatively close to the United States, with goods taking only two days to be shipped to Miami or Houston. Wages are low compared with those in the United States. The average apparel worker in El Salvador makes a little more than $150 a month.

“The sooner this gets passed, the better,” said Steve Lamar, senior vice president of the American Apparel & Footwear Association, a trade group of apparel and footwear manufacturers. “This can’t come soon enough because we’re seeing quite a bit of erosion in the apparel business in Central America.”

More than 63 factories, accounting for 34,000 jobs, have closed in the region since the beginning of the year, Lamar said.

But many in the U.S. textile industry oppose the agreement because fabric from Mexico and Canada can be used in Central American apparel factories and still come back duty-free. Nicaragua, being one of the poorest countries in the region, was given the ability to use 100 million square meters of fabric from outside the region and still have duty-free status on garments. Last year, U.S. textile factories exported $5 billion in yarns, fabric and components to Central America.

The American Manufacturing Trade Action Coalition, an umbrella group of 18 textile associations, opposes the free-trade pact. But the National Council of Textile Organizations, which had opposed CAFTA, now backs the agreement. The organization reversed course after the new U.S. Trade Representative, Rob Portman, committed to amending CAFTA to assure that $100 million in existing U.S. pocketing and lining exports to the region are not lost. —Deborah Belgum