CAFTA Tilted Against the Poor: New Benefits for US, New Burdens for Central America

Posted: 12 December 2003

International aid agency Oxfam today criticized final negotiations for a Central America Free Trade Area (CAFTA), arguing that the agreement will not produce new trade benefits for developing countries.

"The US negotiating strategy is to demand concessions from developing countries in return for benefits they already receive under US law," said Gawain Kripke, Senior Policy Advisor for Oxfam America. "Trade should offer opportunities for growth and reducing poverty, not create new burdens and risks for developing countries."

Over the last three decades, Congress has enacted several trade preference programs to grant increased access to US markets for poor and developing countries. In 1984, President Ronald Reagan signed the first in a series of legislative acts known as the Caribbean Basin Initiative (CBI) to assist countries in Central America and the Caribbean by stimulating the development of the region's exports through lower US tariffs.

Oxfam points out that under the CAFTA, Central American countries may see no improvement to their current benefits, but will be forced to open their markets and take on costly new commitments. According to sources close to the negotiations, the US has offered Central Americans little or no increase in access to export sugar to the US. At the same time, the US insists that Central American countries open their markets to US exports in dairy products and basic crops, such as rice and corn. Opening their markets to US exports in these sensitive areas could create ruinous competition for millions of small farmers in Guatemala, Honduras, Nicaragua, El Salvador, and Costa Rica.

Overall, more than one-third of the labor force in Central America is employed in agriculture, and many more citizens depend indirectly on income earned by agricultural workers for their livelihoods. Agriculture accounts for a significant part of these countries' GDP—as much as 30% in Nicaragua. CAFTA negotiations could remove trade preferences granted to Central American countries over the last 20 years, while leaving Central American farmers exposed to export dumping of subsidized US farm products.

"Making poor countries negotiate for benefits they currently enjoy betrays the spirit and intent of helping our poorer neighbors. Congress enacted the CBI and other trade preference programs to help developing countries, not as a political tool to force bad trade agreements on them," said Kripke.

Oxfam believes that reducing poverty and promoting economic development for poor countries should be a central goal for trade agreements. Read more information on how CAFTA could risk the livelihoods and health of millions of poor people.