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Web-Posted Jun 18, 2005
Critics: CAFTA-DR could add to trade deficit

By Robert Pore
robert.pore@theindependent.com

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The announcement by the Commerce Department Friday that the U.S. trade deficit was at an all-time high of $195.1 billion from January through March of this year has fueled continued criticism of a free trade agreement with Central American countries.

The deficit in the current account increased by 3.6 percent from the previous quarterly record, an imbalance of $188.4 billion in the final three months of 2004.

The current account deficit has risen to record heights in recent years as America's demand for foreign goods and services has soared, raising worries about the country's ability to continue financing a trade deficit at such heights.

With a number of free trade agreements already on the books, the current account deficit for all of 2004 hit a record $668.1 billion, up a sharp 28.6 percent from the previous record of $519.7 billion in 2003, according to the Commerce Department.

Earlier this week, the Senate Finance Committee held a "mock mark-up" of the United States-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR).

In a nonbinding vote, the committee voted 11-9 in favor of passage of the agreement and considered numerous amendments.

"R-CALF was disappointed in this vote, and the fact that the CAFTA-DR is inching forward," said Dennis McDonald, co-chairman of R-CALF USA's Trade Committee.

Some senators, including Sen. Kent Conrad, D-N.D., are saying that CAFTA-DR will only add to the nation's mounting trade deficit.

"When I look at CAFTA, I see an agreement that adds to our trade deficit with the region," Conrad said.

R-CALF USA President and Co-Founder Leo McDonnell said that CAFTA-DR supporters claim that U.S. beef exports to the CAFTA-DR countries will increase $40 million in 10 to 15 years.

But McDonnell said for the individual cattle producer that would only represent a 10-cent increase in value per head.

"In exchange for this increase of almost 10 cents, we give up the safeguards on cattle and beef, lose special provisions that address surging imports, provide South American countries with the access to ship live cattle into Central American countries that will be slaughtered and shipped to the United States as a product of the CAFTA countries," he said. "Worst of all, we give these countries complete market access, and the slim export opportunity the U.S. has in Costa Rica and Nicaragua is limited by a safeguard on our beef."

But Michelle Reinke, associate director of legislative affairs for the National Cattlemen's Beef Association, said the free trade agreement will be good for U.S. cattle producers. She also was critical of tying the passage of CAFTA-DR to the reopening of foreign markets to U.S. beef exports.

"Cattle producers will not support amendments that could alter the effectiveness of CAFTA," Reinke said.

"How could anyone want to deny U.S. cattle producers the opportunity to export U.S. beef into these Central American regions until after Japan and Korea are reopened? It just doesn't make sense. This would not help leverage our closed export markets and would only deny us the opportunity to export into CAFTA nations on day one of the agreement."

Sen. Chuck Hagel, R-Neb., said CAFTA will be the most important trade agreement considered by this Congress and it has direct consequences for Nebraska.

He said passage of CAFTA means increased markets for Nebraska's agricultural products and manufactured goods to the nations of Central America (the Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua).

"Passing CAFTA will further open new markets for Nebraska beef, corn, soybeans and other Nebraska products by lowering and eliminating tariffs on U.S. goods in CAFTA countries," Hagel said.

He said currently, U.S. goods exported to CAFTA countries face significant tariffs.

But despite these tariffs, Hagel said, Nebraska exported more than $19.5 million worth of goods to CAFTA countries in 2004, according to the Commerce Department.

"With these tariffs eliminated, this region provides significant potential for states like Nebraska, which depend on our ability to export our products," Hagel said.

He said the office of the United States Trade Representative views Central America as a larger market for U.S. products than India, Indonesia, and Russia combined.

Hagel said CAFTA is supported by more than 50 agricultural industry and farm groups, including the Nebraska Farm Bureau and the Nebraska Corn Growers.

"Few issues considered by this Congress will have a more direct impact on Nebraskans than CAFTA," he said. "Ultimately, the argument for CAFTA is not about numbers on a page or statistics; it is about Nebraska families and communities that need the opportunities provided by these markets to grow and remain competitive. CAFTA is good for Nebraska."

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