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August 21, 2005

CAFTA: The future looks bright in Brevard

Experts doubt plan will affect region's industries


Exporter. Advanced Technologies Worldwide, a Cocoa-based manufacturer of steel extruder screws, expects the new trade agreement will help business. Advanced Technologies makes and ships parts around the world. James Montgomery welds a facing on a screw. Michael R. Brown, FLORIDA TODAY
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What is CAFTA?
The Central American Free Trade Agreement is a trade agreement between Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua and the United States.
It is designed to reduce barriers to trade among the countries, promote economic growth in Central America and the Dominican Republic, and reduce tariffs on American goods in those countries.

What's next?
The trade agreement has not taken effect. It must be passed by all parties involved before a starting date can be set.
It was approved by Congress in July and signed into law by President Bush on Aug. 2. It has been approved by legislatures in El Salvador, Guatemala and Honduras. It faces heavy opposition in Costa Rica, Nicaragua and the Dominican Republic.
SOURCE: U.S. Department of Commerce, U.S. Department of Agriculture

The downside
Many fear the consequences of the agreement could mirror the job losses and corporate pressures created by the North American Free Trade Agreement.

# No protection for public health, workplace safety and environmental standards.
# Promotes sweatshop labor by ignoring international labor standards. Opponents say Central American labor law is unfair to unions and workers.
# Expands corporate power by allowing companies to sue governments over laws that may stand in the way of their ability to make a profit. Under NAFTA, the rules have been used 27 times to challenge workplace safety and environmental laws.
SOURCE: Global Exchange,Citizens Trade Campaign,Public Citizen

Good outcome. William Arredondo, a machinist at Advanced Technologies Worldwide who lives in Melbourne, agrees that the Central American Free Trade Agreement will have a positive effect on business. "It opens up the door for their products and our products. It's not as negative as people think it is." Michael R. Brown, FLORIDA TODAY
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Shipping oversease.Mike Briggs of Cocoa loads twin extruder screws and barrels for shipment to Costa Rica, one of the partner countries in the recently approved free trade act. Michael R. Brown, FLORIDA TODAY
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William Arredondo, a machinist in Cocoa, isn't worried about losing his job or suffering from the other negative effects critics of the Central American Free Trade Agreement have warned about.

The Melbourne resident works for Advanced Technologies Worldwide, which makes and ships steel parts to Central America, among other places. The company's owners expect the agreement will help their business.

Arredondo agrees.

"It opens up the door for their products and our products," he said about CAFTA. "It's not as negative as people think it is."

Others disagree, including members of Congress. President Bush signed the CAFTA Implementation Act into law this month after the House of Representatives approved the agreement by a narrow, late-night 217-215 vote. The vote also was close in the Senate, where it passed, 54-45.

The stated goal of the agreement is to end tariffs and other trade barriers between the U.S. and the Dominican Republic and the Central American countries of Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua.

In Arredondo's case, CAFTA should work to improve his job security. However, opponents of the agreement point to textile workers and others in North Carolina, South Carolina and elsewhere who lost their jobs after the North American Free Trade Agreement was signed more than a decade ago.

Critics -- from Ralph Nader's liberal think tank Public Citizen to the conservative John Birch Society -- say such trade agreements foster corporate globalization, causing a "race to the bottom" in labor and environmental standards. They claim NAFTA has hurt independent farmers in Canada, Mexico and the United States, shifting more farmland into the hands of large agribusiness firms.

"Over the past decade, we have seen the results of the economic formula embedded in those agreements," the Salvadoran American National Network, the largest national alliance of Central American community-based organizations, said in a statement opposing CAFTA.

"At the same time, we have seen poverty increase and real job opportunities all but disappear," the group said. "We have seen workers' rights eroded and we have seen our natural resources devastated as foreign corporations set up shop without regard to labor and environmental laws. We have seen farmers leave the land in record numbers, unable to compete with subsidized agriculture from developed countries."

The benefits

CAFTA supporters -- including U.S. and foreign trade officials and corporate backers -- say the agreement will open new markets to American manufacturers; create more price competition among suppliers of consumer goods, which should benefit U.S. consumers; and help modernize Central American economies.

"U.S. wheat producers want to compete on a level playing field in the global marketplace," Sherman Reese, president of the National Association of Wheat Growers, said in a statement supporting CAFTA.

"These are natural markets for us," added Boyd Schwieder, the association's chairman. "We want them to prosper."

Once the agreement is ratified by each nation, foreign tariffs on wheat imports will be immediately locked at zero for all six CAFTA countries. Wheat flour tariffs in the six countries, which range from 6 percent to 14 percent, will be phased out in the next 15 years.

Mike Slotkin, an economics professor at Florida Tech in Melbourne, sides with the CAFTA supporters. He says Brevard County stands to gain more from the agreement than it would lose. Some U.S. jobs might be lost, he said, but consider the potential benefits for consumers.

"I tend to be a free-trader," Slotkin said. "With any trade agreement, there will be protests. Some industries will downsize and others will upsize because we're getting goods from our trading partners cheaper. . . . The trick is to get people educated enough so they can make the transition" into other jobs.

President Bush has said CAFTA is a top priority of his administration.

The agreement creates a free trade zone similar to NAFTA, which went into effect in 1994 during the Clinton administration and involves the U.S., Canada and Mexico. CAFTA also is seen as a step toward the Free Trade Area of the Americas, a more ambitious proposal involving South American and Caribbean nations, except Cuba.

Citrus and sugar

Florida's citrus industry decided not to oppose CAFTA after determining it would have a minimal effect, if any, on citrus growers. But citrus officials have concerns about Free Trade Area of the Americas because it could involve Brazil, the world's largest citrus producer.

"We're going to have a problem with that because of Brazil," said Doug Bournique, executive director of the Vero Beach-based Indian River Citrus League. "We'll have to see what's being offered."

The U.S. sugar industry, which has a large presence in Florida, opposed CAFTA and also opposes Free Trade Area of the Americas.

"Every pound of sugar we import is a pound of sugar that an efficient U.S. farmer doesn't get to sell," said Phillip Hayes, spokesman for the American Sugar Alliance. "The U.S. government is negotiating trade agreements with 21 other sugar-producing nations. We want to make sure CAFTA is not a model for future agreements."

Avenues for growth

Known primarily for producing bananas, coffee and sugar, some Central American nations are starting to attract new industries.

In Costa Rica, tourism generates more for its economy than bananas and coffee combined. Also, Costa Rica has landed big investments by companies such as Intel Corp., which employs nearly 2,000 people at its $300 million microprocessor plant; Procter & Gamble, which is establishing an administrative center; and Abbott Laboratories and Baxter Healthcare from the health care industry.

However, CAFTA faces opposition because of provisions for "test data exclusivity" for pharmaceuticals. That's when a drug company provides test data to government regulators to prove its medicines are safe and effective. The provision would ban smaller companies from reusing the data to produce lower-cost generic versions of drugs.

Critics say the provision would prevent poor people from receiving medicines.

"In order to delay competition from generic manufacturers, multinational companies have been pushing hard to obtain exclusive rights over their test data," according to the Campaign for Access to Essential Medicines.

Local exports

Slotkin, the Florida Tech economist, said CAFTA should have a relatively small effect on business in Brevard and in Florida, with the exception of some agricultural niches. The Central American and Caribbean countries involved in the agreement also have relatively small economies and impoverished populations with comparatively little purchasing power.

One local company that stands to benefit from CAFTA is Advanced Technologies Worldwide. The small company of 20 employees makes and repairs steel extruder screws and injection screws used to make a variety of plastic products, from PVC pipe to plastic bottles.

The company makes the screws at a machine shop in Cocoa and ships them from Port Canaveral to Mexico and countries in Central America and South America.

Advanced Technologies Vice President Debra Ortiz said NAFTA boosted the company's business from Mexico, and she expects CAFTA to do the same in other countries, although she couldn't say by how much.

The company's services are "more attractive for them in Central America because they don't have to pay a tariff," Ortiz said.

Mike Briggs, who works at the Advanced Technologies machine shop, said he favors free trade agreements in general, although he doesn't know much about CAFTA.

"I haven't seen it hurt us yet," Briggs said, referring to NAFTA.

When cell phone maker Nokia Corp. announced in 2003 that it was closing its Melbourne repair plant, some of the 400 people who worked there said many of the company's American jobs were being moved elsewhere, including to Nokia's plant in Reynosa, Mexico.

Nokia spokeswoman Chantal Boeckman said none of the Melbourne jobs were moved to Mexico. Nokia opened the plant in Reynosa in 1995. About 1,300 people work there, and Nokia plans to expand the plant later this year.

Another company, Arvato, has since opened a similar but smaller operation at Nokia's former Melbourne building, where Arvato plans to grow.

Contact Blake at 242-3644 or