The Central American Free Trade Agreement (CAFTA) passed one hurdle when the Senate Finance Committee, on a vote of 11-9, and the House Ways and Means Committee, by a vote of 25-16, both positively recommended approving the agreement. The committees' non-binding recommendations now go to the White House, which is preparing final CAFTA legislation to send to Congress. Once it does so, Congress has 90 days to ratify or reject the bill, but may not amend it. However, uneasy about trade deficits, the rising economic clout of China and opposition from domestic sugar producers and unions, lawmakers are beginning to balk at approving the pact to open markets between the US and Central America. Congressional Democratic leaders say they do not think most Democrats will support the CAFTA if there is a vote in coming weeks. Republicans who normally back trade deals are also expressing reluctance to approve the agreement. At issue is an agreement to gradually eliminate tariffs and create duty-free trade between the US and El Salvador, Guatemala, Honduras, Nicaragua, Costa Rica, and the Dominican Republic. The White House calls the deal a win for US businesses, noting that 80% of imports from the areas already enter the US duty-free under previous deals, while US exports can face tariffs of 40% or more. CAFTA would immediately eliminate duties on more than half the value of US farm exports to the region, and would gradually phase in other tariff reductions. But the debate about the trade pact is reviving arguments about the merits of free trade, similar to the controversy about the much larger 1994 North American Free Trade Agreement (NAFTA) that eliminated barriers between the US, Mexico and Canada. The outcome could be an important signal of whether protectionist pressures are building in Congress - and of the prospects for a successful conclusion to a broad round of World Trade Organization (WTO) talks. The CAFTA deal is relatively small in market terms. It is expected to expand US exports by just $1.9 billion a year when fully implemented in coming decades and add just 0.01% to the overall US economy, according to an International Trade Commission study. But it is one of the most prominent trade votes since Congress, in a 2002 squeaker, gave President Bush trade promotion authority to negotiate trade deals. Since that 2002 vote, the US trade deficit has ballooned from $421.7 billion to $617 billion, and manufacturers have shed millions of jobs. On top of everything else is partisan politics. Many Democrats, whose votes are essential to passing CAFTA, are leery of the White House after bitter fights about everything from Social Security to the confirmation of federal judges. Additionally, business lobbyists calculate that as many as 50 House Republicans - out of 231 - now appear inclined to oppose the treaty. Roughly 20 Democrats are needed for passage because of this significant number of Republicans who have indicated their firm opposition to the CAFTA. Unfortunately some reliably pro-trade Democrats, such as New Democrat Coalition Chairwoman Ellen Tauscher (CA) and Rep. Joe Crowley (NY), a business ally on some issues who aspires a party leadership slot, have said they will oppose CAFTA. On a positive note for supporters, Reps. Solomon Ortiz (D-TX) and Silvestre Reyes (D-TX) are leaning toward voting for the CAFTA. This would bring the number of firm Democratic votes to six. Reps. Henry Cuellar (TX), Norm Dicks (WA), William Jefferson (LA), and Jim Moran (VA) have already publicly committed to supporting the trade deal. Because the CAFTA is in trouble, a prominent business leader recently laid it on the line: Business groups are prepared to cut off campaign contributions to House members who oppose the pact. "If you are going to vote against it, it's going to cost you," Thomas J. Donohue, president and CEO of the US Chamber of Commerce, warned during a meeting on Capitol Hill. Both sides agree that without a major push from the White House and the GOP leadership, CAFTA is likely to become the first major trade deal to be defeated in more than 40 years and a major embarrassment for the Administration.
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