White House struggles for Cafta votes
By William L. Watts, MarketWatch
Last Update: 6:37 PM ET July 25, 2005

WASHINGTON (MarketWatch) -- The Central American Free Trade Agreement is unlikely to make or break the U.S. economy, but the House vote later this week on the controversial trade pact could have important ramifications for other trade negotiations.

"It's become a proxy war in a sense for a number of issues that are much larger than the Cafta agreement," said Mark Smith, managing director of Western Hemisphere affairs at the U.S. Chamber of Commerce, which has been lobbying for passage of the agreement.

The trade pact carries symbolic weight as a referendum on the more than decade-old North American Free Trade Agreement, and is also colored by worries about the loss of manufacturing jobs, China's rising economic power, and the desire by Democrats to hand President Bush a rare legislative defeat, Smith said. Watch the interview.

The pact's backers contend it will help put the U.S. on a level playing field. While around 80% of goods from Cafta nations - Honduras, Nicaragua, Guatemala, Costa Rica, El Salvador and the Dominican Republic -- enter the United States duty-free, many U.S. products face tariffs and other barriers.

Opponents charge the pact will continue trade policies that have undermined U.S.-based manufacturers and workers.

"What the supporters of Cafta don't realize or don't want to admit is that it takes much more than cutting tariffs to equalize a trade playing field. And what they have been missing, in particular, is that if they don't do something about the ferocious cut-throat price competition that Central America faces from China [in the apparel market], then the Central Americans will not be able to earn enough to buy U.S. imports no matter how deeply their tariffs are actually cut," said Alan Tonelson, research fellow with the United States Business and Industry Council. Watch the interview.

The pact faces near-unanimous opposition by Democrats, who charge it fails to offer adequate labor protections. It also faces opposition or misgivings by Republicans from districts with large numbers of sugar producers, textile makers and other manufacturers.

Republican leaders and business allies acknowledge they remain short of the votes needed for passage, but note that last-minute arm-twisting was often required to secure passage of other pieces of trade legislation, including the 2002 renewal of Bush's fast-track trading authority. See archived story.

Such deal-making has allowed Cafta backers to pick off some previously-wavering lawmakers in recent weeks. Four textile-state Republicans - Bob Inglis of North Carolina, Phil Gingrey of Georgia, and Spencer Bachus and Michael Rogers of Alabama - scheduled a news conference for late Monday afternoon in which they were expected to announce they would back the pact.

The move came after House Ways and Means Committee Chairman Bill Thomas, R-Calif., last week released a letter assuring Inglis he would work with textile-state lawmakers on future legislation that would modify textile-related elements of the agreement.

Earlier this month, Rep. Phil English of Pennsylvania, the only Republican to vote against the pact in the Ways and Means Committee, announced he would be vote for Cafta after Thomas agreed to back legislation that would increase scrutiny of China's trading practices.

The administration has also promised to help insulate U.S. sugar growers from any increase in sugar imports from Cafta countries, but the deal is still vehemently opposed by the sugar industry.

Bush, meanwhile, has all but cleared his calendar in order to be free to personally lobby members of Congress on Cafta.

"This is an important initiative. The president is continuing to reach out to members of the House and urge passage of this agreement," said White House spokesman Scott McClellan.

William L. Watts is a reporter for MarketWatch.