June 2, 2005--The Central American Free Trade Agreement (CAFTA) can expect to face much contention in Congress but is seeing a great deal of support from small businesses that export to the six countries involved in the agreement.
Initially signed into law last May, CAFTA has still not reached Congress more than a year later. In a news conference Tuesday, President Bush urged for a speedy passage, reiterating the positive effects the agreement would have on U.S exports to the region.
Under terms of the Agreement, more than 80% of U.S. exports to the six CAFTA countries -- Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua -- will become duty-free immediately, with the rest of the existing tariffs eased off over the next 10 years.
Supporters of CAFTA contend that this would level the playing field for U.S. exporters in the Central American market. Nearly 80% of U.S. imports from the CAFTA countries are duty-free.
According to the National Association of Manufacturers (NAM), 15,625 American firms export their goods to the CAFTA-DR countries. Of them, 87% are small and medium-size firms.
"Given that the bulk of U.S. exporting manufacturers are smaller-sized companies, they stand to significantly expand exports -- exports that have heretofore been limited," said Christopher Wenk, spokesperson for the NAM.
Furthermore, U.S. exporters face an eager market in Central America, said James Morrison, president of the Small Business Exporters Association (SBEA).
"There's a solid opportunity for U.S. exporters to expand business once tariff restrictions are relaxed, especially in sectors like telecom, construction, distance learning and medical equipment," Morrison said. The CAFTA nations currently buy over half of their imports from the U.S.
The tariff-eliminating provisions of CAFTA are only part of the benefits small exporters will reap, Morrison said. "What's just as important is that the agreement gets rid of non-tariff barriers," Morrison said. "These are often the biggest hang-ups for smaller firms because they eat directly into profit margins."
Opponents of CAFTA criticize the agreement for failing to address need for decent labor laws in Central America.
In addition to approval from Congress, the agreement will need ratification by the Central American countries before being taken into effect.