to action by the start of discussions for a US-Central American Free Trade Area
(FTA), Central American businessmen, like their CARICOM counterparts, have been
mobilizing to ensure they make an input into trade negotiations.
Central American Business Council was launched in El Salvador on February 26,
grouping the national private sector organizations of the five Central American
countries, Panama and the Dominican Republic. The business leaders also adopted
a declaration on principles for the US-Central American FTA. The American
Chambers of Commerce (AMCHAM) of Central America have also met with several
Presidents to offer their help in the negotiations.
recent weeks Central American Presidents and Trade and Economy Ministers have
held several meetings in preparation for the March 24 U.S.-Central American
summit, when the proposed FTA will be discussed.
actual negotiations to begin, the U.S. Senate must follow the House in approving
legislation to grant the Administration Trade Promotion Authority. However, the
conditions so far attached to TPA could significantly reduce Central America’s
benefits from exports of textiles and garments to the U.S.
will be a factor in the negotiations and also has implications for the Free
Trade Area of the Americas (FTAA).
question is how far Central America will negotiate en bloc. The sub-region’s
own customs union is not due to come into effect until 2005; and some
negotiators are suggesting that each country should draw up its “negative”
list of sensitive products to be excluded from free trade.
suggest a broad framework U.S.-Central American agreement complemented with
country-level agreements that are bilaterally negotiated. At the moment, this
approach does not find favour with the U.S.
third issue is the degree of asymmetry that the agreement will provide. Central
American businessmen have declared that this principle should be integral to the
FTA with the U.S., because of the tremendous difficulties they will have in
competing with duty-free imports from the U.S., especially agricultural goods,
which benefit from heavy U.S. subsidies.
Trade and Foreign Ministers have gone on record insisting that elimination of
such subsidies should be a condition of the FTA.
question of asymmetry (non-reciprocity) is central to the principle of Special
and Differential Treatment that is now being re-examined by the WTO.
is linked to a fourth issue: the fiscal impact of an FTA. Central American
governments earn an average of 20 percent of their revenue from trade taxes and
an average of 50 percent of imports come from the U.S. The potential revenue
losses are significant.
Besides special tariff
provisions, Governments will need help in reforming their taxation systems to
recuperate such revenue losses. Other Caribbean countries, particularly those of
the OECS, face similar problems.
fifth issue in the negotiations is the role of financial assistance. U.S.
negotiators are insisting that the agreement will be limited to trade. Central
American sources, however, point to the existence of the Alliance for
Sustainable Development in Central America, to which the U.S. is a party.
would want to see expanded U.S. funding for the Alliance included as part of a
comprehensive trade-and-aid package for the sub-region. Precedents exist in the
EU-ACP accords and to some extent in the Plan-Puebla-Panama between Mexico and
and other small countries in the Greater Caribbean region will be watching
closely, as a U.S.-Central America agreement will establish precedents for the
treatment of smaller economies in the FTAA.
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Norman Girvan is Secretary General of the Association of Caribbean States.
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