CAFTA Signed

Ag industry stands behind agreement with support. Compiled by staff

Published on: May 28, 2004

After a year of intense negotiations, the Central America Free Trade Agreement (CAFTA) was signed today. The agreement with the Central American countries of Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua aims to reduce high tariff and non-tariff barriers for U.S. exports.

The signing sets in motion a 60-day timetable for the President to send the bill to Congress, which would then have 90 legislative days to consider the bill. The U.S. forged a separate trade agreement with the Dominican Republic, which it plans to sign separately as early as the end of June. That agreement will be integrated into CAFTA and sent to Congress as one trade package, under Bush administration plans. With an election year and opposition from the textile and sugar sectors, Congress has an uphill battle before passing the deal.

"When the trade agreement is fully implemented, tariffs on U.S. agriculture products imported by CAFTA nations will decrease from between 15 and 43% to zero percent," says American Farm Bureau Federation President Bob Stallman. "Farm Bureau estimates CAFTA will result in nearly $900 million in increased U.S. agricultural exports."

According to the American Soybean Association (ASA), the deal will immediately eliminate tariffs imposed on the export of U.S. soybeans, soybean meal and soybean flour. Tariffs on U.S. exports of soybean oil bound for these countries will be reduced over a 12 to 15 year period. These actions are expected to improve and facilitate the exportation of U.S. soybeans and soybean products to CAFTA countries, which may assist in keeping out competitive soybean products.

Duty-free quotas on all pork and pork products will increase each year, and tariffs also will be eliminated. Although it will take 15 years, U.S. pork exports to CAFTA nations will become completely duty-free in 2019.

"Pork was an extremely contentious issue in these negotiations, but U.S. pork producers ended up with a great result, in large part because the U.S. negotiating team insisted on including all agricultural products in this agreement," says National Pork Producers Council (NPPC) President Keith Berry. He notes that some further work needs to be done to ensure that all of these countries recognize the U.S. meat inspection system and implement transparent import procedures before NPPC fully supports the agreement in Congress.

The U.S. Rice Federation says Central American has always been one of their biggest customers. "We now have guaranteed market access for rough and milled rice, which is something we did not have before," a statement says.

"The agreement will offer immediate duty free access for more than 1 million metric tons of U.S. corn, with tariffs dropping to zero in all four countries within 15 years. The market potential for U.S. feed grains is extremely high and demand will grow due to this historic agreement," reports the U.S. Grains Council.

After implementation, the agreement will grant immediate new access to U.S. dairy exporters for more than 2,600 metric tons of cheese, approximately 4,800 tons of milk powder, 820 tons of butter, 760 tons of ice cream, and 980 tons of other dairy products. Tariffs for these sensitive products will be phased-out to zero, and tariff-rate quotas will grow, over 20 years. In addition, the United States gets unrestricted access (zero duty) for whey, lactose and certain cheeses, among other products.

"U.S. dairy exports to the CAFTA countries average $35 million per year, despite restrictive tariffs and quotas," says Jerry Kozak, CEO of National Milk Producers Federation. "CAFTA should enable us to grow that number considerably. By opening up trade opportunities within the region without weakening U.S. programs in return, the U.S. Trade Representative delivered a winning agreement to U.S. dairy producers, processors and exporters."