Bridges Trade BioRes • Volume 3 • Number 19 • 31st October 2003

ENVIRONMENT PROVISIONS IN THE US-CENTRAL AMERICA FREE TRADE AGREEMENT?

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ENVIRONMENT PROVISIONS IN THE US-CENTRAL AMERICA FREE TRADE AGREEMENT?

After five days of trade talks, negotiators from the United States and five Central American nations (Guatemala, Costa Rica, Honduras, El Salvador and Nicaragua) finished their latest meeting on 24 October in Houston, expressing optimism about reaching an agreement on the Central American Free Trade Agreement (CAFTA) by the end of this year. Some critics argue that the environment and labour provisions of the agreement should be strengthened, while others have raised concerns about the impact of the CAFTA on the agriculture sector in Central America.

US Senator proposes inclusion of environmental provisions

Before finalising the agreement in December, the trade negotiators have to address several issues of concern put forward by, amongst others, the Democrat Senator Max Baucus. The Senator has urged trade negotiators to include environment and labour chapters in the free trade agreement. He suggests a tightening of environmental standards, including improving the text of the agreement and providing support for trade capacity building and environmental cooperation. In particular, Baucus would like to see the inclusion of a petition process for citizens and non-governmental groups that could lead to a factual investigation by an environmental commission of whether a country is effectively enforcing its environmental laws. Baucus argues that such a provision would be a tool of empowerment for citizens and NGOs. A similar provision is included in the North American Free Trade Agreement (NAFTA), where an investigation can be initiated if ministers agree to it by two-thirds majority vote.

Furthermore, Baucus proposes to include a dispute settlement process, which gives parties to the agreement the right to penalties, and ultimately trade sanctions, if another party is not "effectively enforcing its environmental laws, through a sustained or recurring course of action or inaction, in a manner affecting trade between the Parties, after the date of entry into force of this Agreement". Similar articles have been included in the NAFTA, in the Singapore-US and in the Chile-US agreement. However, so far no party has ever made use of the Part V dispute settlement process, which has been criticised as non-substantive and non-enforceable due to weak language. Baucus however argues that it is necessary to include such a provision due to the "realities" in Central America where "environmental standards and enforcement capacity are lower, democratic institutions are fragile, and sustainable development concerns more critical".

Democrat politicians have also called for the inclusion of provisions to mandate strong labour standards referring to "the serious problem of the region’s lower labour standards and enforcement capacity."

Agricultural impacts

At the meeting negotiators also discussed concerns regarding sensitive agricultural products, which they said were likely to be addressed using a 15-year phase-out clause. Observers of the free trade agreement negotiations have raised concerns regarding the impact of the CAFTA on the agricultural sector in the Central American countries. In particular small farmers are concerned that they would be unable to compete against subsidised US products and loose out on their domestic markets. For example, Guatemala’s production of staple crops such as maize, beans and rice could come under pressure compared with US products in terms of price and quality.

Central American countries hope, however, that access to the US sugar markets would boost their economies, as the region’s sugar industry employs over 500,000 people and has several million tons of potential exports. For their part, US sugar producers are concerned that the agreement could undermine their domestic market, where sugar sells for about three times the world market prices. Randy Rolando, president and chief executive officer of the Rio Grande Valley Sugar Growers, mentioned that CAFTA would raise the current 1.5 million tons of imported sugar to 3.5 million tons, resulting in a depression of sugar prices that would put many Valley sugarcane growers out of business.

The CAFTA negotiations began in January 2003. The chief negotiators will meet again on 12 November 2003, and the countries’ ministers will meet again on the 18 November 2003. The ninth and final round of talks is scheduled to take place from 9-12 December 2003 in Washington, D.C.

"Talks bring hemispheric agreement closer to reality," HOUSTON CHRONICLE, 25 October 2003; "Trade accord moves ahead," WASHINGTON TIMES, 25 October 2003; "US, 5 Central American Nations Conclude Trade Talks in Houston," VOA NEWS, 25 October 2003; "Central American trade talks see progress," AP BIZWIRE, 24 October 2003; "Farmers, workers react to CAFTA Official: Free trade deal would put many Valley growers out of business," VALLEY MORNING STAR, 24 October 2003; Central American pact pushed: Trade negotiations resuming this week, SEATTLE TIMES, 23 October 2003; CAFTA Thumbscrews, The Nuts and Bolts of "Free Trade" Extortion, COUNTERPUNCH, 14 October 2003; "Ag called key to Central American trade talks," HIGH PLAINS JOURNAL, 28 October 2003.