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House Passes CAFTA

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July 28, 2005--In highly contested voting that continued into the early morning Thursday, the House of Representatives narrowly approved the Central American Free Trade Agreement (CAFTA), a pact that small manufacturers say will further accelerate outsourcing of jobs overseas but that small exporters say will open up a significant market.

The trade agreement -- which eliminates most tariffs between the United States, the Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua -- passed by a margin of 217 to 215, but only after voting was kept open for an hour to accommodate last minute wrangling among textile state Republicans weary of supporting any trade agreement. The vote, which came a month after the Senate approved CAFTA 54-45, cleared the way for the approval of President Bush, who, in a statement released Thursday, said that it would "help American workers, farmers, and small businesses."

While many of CAFTA's supporters and detractors had conceded that its impact on business would be relatively minor, it aroused ire among manufacturing, textile, and sugar industry groups, who complained that lawmakers should concentrate on enforcing current trade restrictions rather than easing others. "As our manufacturing base erodes, as our industrial base erodes, we have a President who is contributing to the further erosion of that base," said House minority leader and California Democrat Nancy Pelosi, in a press conference before the vote.

While these concerns were enough to keep all but a handful of Democrats from supporting the agreement, they led to a number of last-minute compromises that swayed several key Republicans. These included administration assurances to the textile industry that Chinese pocket materials would not be used in Central American products and a bill passed just ahead of the CAFTA vote that purports to curb Chinese subsidies on exports.

At the same time, some small exporters had pushed for its passage, arguing that the agreement will help lower transaction costs and allow small businesses to grab an even bigger market share. " [CAFTA countries] want what we've got," said James Morrison, president of the Small Business Exporters Association. "70% of what they buy comes from us and small business's share of exports going to that region is one of the highest in the world."

Last updated: Jul 28, 2005




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