Costa Rica to Be 5th Country in New Trade Pact With U.S.
By ELIZABETH BECKER
WASHINGTON, Jan. 25 — After a one-month delay, Costa Rica agreed on Sunday to join the United States and four other Central American nations in a new regional free trade pact.
The administration sees the pact as an important building block in its plans to extend the North American Free Trade Agreement throughout the Western Hemisphere.
Costa Rica, the wealthiest of the five Central American nations, held
back its approval last month pending intensive negotiations with the United
States over its
demand that Costa Rica open up its telecommunications and insurance industries.
Bringing Costa Rica into the agreement marks a welcome success for the administration after a series of disappointments in trade negotiations over the past year.
Robert B. Zoellick, the United States trade representative, praised
the agreement, known as the Central American Free Trade Agreement, or Cafta,
saying it would
create the second-largest market in Latin America for exports from the United States, after Mexico. The other nations involved are El Salvador, Guatemala,
Honduras and Nicaragua.
"With each Central American nation, we worked to tailor market access
provisions to reflect individual circumstances," Mr. Zoellick said in a
statement, "and that
work is now complete with Costa Rica."
Administration officials said Cafta would open the region for agricultural
exports and other goods and services from the United States. It will also
help prepare the
domestic textile industry for stiff international competition next year, they said, when the global textile quota system is eliminated under an international trading
agreement. China and other Asian nations, with their lower labor costs, are especially feared.
The creation of something like a textile free-trade area would make
the United States cotton and textile industries part of a tariff-free supply
chain with the garment
factories of the Central American region.
"We believe this will be extremely helpful when competition over textiles
heats up globally with the removal of quotas next year," a senior trade
official said during a
telephone press conference on Sunday.
The administration will have trouble convincing Congress that this agreement
will help stanch the bleeding in the American textile industry, which has
lost hundreds of
thousands of jobs in the past three years. Senator Ernest F. Hollings, a Democrat of South Carolina and an avowed protectionist, has already asserted that Cafta will
get rid of the rest of the jobs.
At least 80 percent of United States exports to the five countries will
become duty free immediately if the pact is approved. The United States'
trade with these five
Central American countries is significant. They import $9 billion worth of products from the United States every year, the rough equivalent of American exports to
Russia, India and Indonesia combined. And the United States imports $11 billion worth of goods from the five countries, with nearly three-fourths of the products
entering duty free under special-preference programs.
The compromise announced on Sunday with Costa Rica would require a gradual
opening of nearly every aspect of its insurance industry and three main
areas of its
Supporters of the trade pact, which was negotiated in one year, view
it as a long overdue helping hand to a region that has been ravaged for
decades by war and
economic deterioration. Mr. Zoellick said that the new trade agreement could also lead to stronger democracy in the region.
But critics say the pact asks too much from the smaller countries, especially
in demands for protection of United States intellectual property rights,
which could limit
the availability of inexpensive medicines.
And while the United States won its demand for opening the countries
for its agricultural exports, with gradual competition for essentials like
onions, potatoes, corn
and rice, it largely left the American sugar industry protected.
The administration's $19 billion in annual farm subsidies were not part of the negotiations.
The Dominican Republic is also negotiating with the United States to
join Cafta. Mr. Zoellick began those discussions earlier this month.