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Pact will aid both US and regional interests, Senate Committee told

WASHINGTON, DC - 04/14/05 - The proposed free-trade agreement between the US, the nations of Central America and the Dominican Republic "will be a partnership that spurs economic growth while strengthening regional democracy," according to Acting US Trade Representative Peter Allgeier.

Testifying yesterday before the US Senate Finance Committee, Allgeier outlined the Bush Administration's support for the trade pact telling legislators that the so-called CAFTA-DR or CAFTA pact "would help consolidate democratic and free-market gains throughout Central America and the Dominican Republic, thereby reinforcing the region's "progress toward economic, political and social reform."

From the US perspective, he said, the CAFTA is attractive because Central America and the Dominican Republic are large export markets for the US, Allgeier said.

Many US sectors that would stand to benefit from CAFTA, the USTR official explained.

"The region is a voracious consumer of US products and services. In some areas, textile yarn and fabric for example, the region is second only to Mexico as a worldwide consumer of US exports," he said. "The American Farm Bureau Federation estimates CAFTA could expand US farm exports by $1.5 billion a year, which would represent nearly a doubling of our current agricultural exports to the region."

Moreover, CAFTA is expected to play a decisive role in the textiles sector, according to Allgeier. "Textiles and apparel is an important component of our trade with the region and deserves special mention," he said. 

Algeier added that garment factories in Central America and the Dominican Republic are large consumers of US-made textile fabric and yarn. "CAFTA will help keep it that way," he said, "by delivering tariff preference benefits for clothing made in the region that uses US yarn and fabric."

Citing increased global competition, particularly from Asia, Allgeier warned lawmakers that "without CAFTA, our domestic yarn and textile industry would likely lose one of its biggest customers."  Obviously, "without the tariff preference benefits of CAFTA, apparel companies may well move production to China," he said. 

"In China, there are no special trade incentives for apparel producers to buy US yarn and fabric," which is the reason why "a T-shirt that is made in Honduras is likely to contain well over 50 percent US [yarn] content, while a T-shirt made in China is likely to contain very little US content at all."

Answering a question about the impact of the CAFTA on the US sugar industry, Allgeier said, "The amount of sugar allowed into the United States under CAFTA is miniscule," he told senators. "Claims that the CAFTA will harm the US sugar industry are simply wrong."

According to the USTR, "The chief effect of CAFTA is not to further open our market, but rather to tear down barriers to our products and services in Central America and the Dominican Republic."

In response to skeptics who claim that CAFTA's benefits are likely to be one-sided, Allgeier pointed out that the agreement "will create new opportunities for US workers and manufacturers," since under CAFTA, "more than 80 percent of US exports of consumer and industrial goods will become duty-free immediately, with remaining tariffs phased out over 10 years."

Among the California-based supporters of the CAFTA is the San Francisco-headquartered California Council for International Trade (CCIT), which is urging the members of the California Congressional delegation to support the trade agreement.

In a letter to each member of the delegation, CCIT Chairman David Zuercher, executive vice president of Wells Fargo HSBC Trade Bank in Los Angeles, stated that the trade promotion organization is urging passage of the agreement for several reasons.

"We believe that the agreement would expand export opportunities for California exporters, particularly producers of agricultural crops like cotton and wheat and manufacturers of computers and electronic products," said Zuercher.

"CAFTA-DR," he said, "reduces and eventually eliminates the current high tariffs on U.S. products, which will significantly improve market access. The agreement is also expected to improve economic development in the region, which will lead to greater demand for our products."

In addition, he stated, "Exports of California products to the region increased by close to 70% between 2000 and 2004, according to the US Department of Commerce, making California the sixth largest exporter to the region. We believe that CAFTA-DR will continue this positive growth in demand."

In short, he said, "CAFTA-DR will help strengthen economic development in the region and support the democratic process there. Economic growth will provide more jobs for the local population and reduce the pressure to leave home in order to seek employment. Our national interests are served by having healthy, stable neighbors to our south."

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