Thread: Arkansans give CAFTA mixed reviews

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Arkansans give CAFTA mixed reviews
Sunday, Aug 28, 2005

By Alison Vekshin
Stephens Washington Bureau
WASHINGTON -- Pinched by low prices and a shrinking domestic market, Marianna farmer Stanley Reed is looking overseas to sell the 7,000 bales of cotton his 3,500-acre farm produces annually.

Reed, 54, is hopeful the newly approved Central American Free Trade Agreement (CAFTA) will broaden his sales.

"I think CAFTA will open up more markets for our agricultural products to move to those Central American markets," Reed said. "I hope it would improve our prices enough and give us market opportunities."

The agreement, signed into law by President Bush earlier this month, aims to expand trade between the United States and Honduras, El Salvador, Nicaragua, Costa Rica, Guatemala and the Dominican Republic.

Eighty percent of imports from Central America and the Dominican Republic already enter the United States duty-free.

Under the agreement, more than 80 percent of U.S. exports of consumer and industrial goods will become duty-free to those nations immediately, with remaining tariffs phased out over 10 years.

Arkansas business and agriculture leaders support the pact as a business tool. But labor leaders see it as a threat to workers, escalating the slide of jobs that left the state after the North American Free Trade Agreement was approved a decade ago.

The Arkansas Farm Bureau lobbied in favor of the agreement, said Andy Miller, associate director of governmental affairs.

"The CAFTA countries currently can impose tariffs as high as 160 percent to 164 percent on our poultry products going down there," he said. "Under previous agreements, they can send their products into our country duty-free. This CAFTA agreement basically levels the playing field."

Ron Russell, president of the Arkansas State Chamber of Commerce and Associated Industries, maintained the agreement would boost Arkansas companies by allowing smaller firms to export with greater ease.

"This is going to open up a lot of opportunities for a lot of businesses," Russell said. "This is really going to help us expand the economy within the state of Arkansas."

On the other hand, Arkansas AFL-CIO president Alan Hughes pointed to the state's job losses under NAFTA, the trade pact signed by the United States, Canada and Mexico that went into effect in 1994.

"We've lost over 40,000 good-paying jobs in Arkansas due to plant closings," Hughes said. "Most of those jobs went overseas through NAFTA."

Don Davies, international staff representative for the United Steelworkers of America in Benton, called CAFTA "nothing but an expansion of NAFTA."

Davies said the agreement would offer large corporations incentive to exploit the cheap labor available in Central America.

Further, the agreement will not help sell more U.S. products in Central America because its citizens cannot afford them, he said.

Russell dismissed criticism that the trade agreement could export U.S. jobs.

"Those jobs that are moving out of the United States will go with or without CAFTA," he said. "Those jobs are going because of cheap labor in foreign countries."

In 2004, trade between the United States and the CAFTA nations totaled more than $33 billion, according to the Commerce Department.

Of the CAFTA nations, El Salvador was Arkansas' leading market in 2004, accounting for $14 million in exports, according to the Arkansas Department of Economic Development.

Costa Rica followed with $6.7 million, the Dominican Republic with $6.6 million, Guatemala with $5.2 million, Nicaragua with $2.4 million and Honduras with $2.2 million.

All are relatively tiny customers for Arkansas companies, which exported $37 million in goods in 2004.

Paper products, fabrics and motor-vehicle parts were among the largest exports from Arkansas to the CAFTA countries, according the Commerce Department.

In 2004, Arkansas exported $9.7 million in paper, $3.9 million in fabrics, and $3.2 million in motor-vehicle parts to the region.

For Springdale-based meat and poultry processor Tyson Foods, Inc., the agreement will mean "continued access to a growing market," spokesman Gary Mickelson said in a statement.

"The agreement means we'll be able to continue the export of such items as chicken leg quarters and beef variety meats as well as some certified Angus beef cuts," Mickelson said. "CAFTA also opens the door for mechanically deboned meat, often used as an ingredient in hot dogs."

For Bentonville-based Wal-Mart Stores, Inc., the agreement will offer greater access to Central America's textile, apparel and footwear products, said Angela Marshall Hofmann, director of international trade for federal government relations in Wal-Mart's Washington, D.C., office.

"It's a very thriving source of business for us in those categories," said Hofmann, who lobbied Congress to support the CAFTA bill.

She said CAFTA would protect U.S. jobs by creating an incentive to use U.S. cotton, yarn and other goods to produce textiles and apparel.

The agreement has the added benefit of harmonizing the six CAFTA countries under one system, she said.

"It helps us move U.S. exports there if and when we ever build stores there," Hofmann said.

But one economist said the expectations for CAFTA are overblown.

Compared with U.S. trade giants like China and Canada, the economies of the CAFTA nations "are drops in the bucket," said Jeff Collins, director of the Center for Business and Economic Research at the University of Arkansas.

Arkansas' exports to the CAFTA countries accounted for 1.1 percent of the state's total overseas exports in 2004, according to the Commerce Department.

"Ten years after, if we would try to ferret out the impact, it would be fairly tough to measure and would be fairly minimal," Collins said.

Among the six-member Arkansas congressional delegation, four members voted for the CAFTA legislation in July. Reps. Vic Snyder, D-Little Rock, and Mike Ross, D-Prescott, voted against it.

Sen. Blanche Lincoln, D-Ark., supported the measure, saying it would create more jobs in Arkansas.

"I firmly believe that opening markets for American goods and services is a good thing for our workers and our economy," she said in a statement.

"We produce far more than we consume in this country and the reduction or elimination of trade barriers benefits workers, farmers and manufacturers," Lincoln said.

Rep. John Boozman, R-Rogers, said he supported the agreement because it would equalize tariffs between the CAFTA nations and the United States.

Rep. Mike Ross, D-Prescott, said he opposed the agreement because it would have a detrimental effect on the state's workers.

Touring his congressional district this month, "I won't go through a county that doesn't have a shuttered building that was once a factory and was putting local people to work," Ross said.

"This is about exporting our jobs, not exporting our products," he said.

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