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KERRY VOWS TO RENEGOTIATE CAFTA, COSTA RICA LEAVES OPTION OPEN
Inside U.S. Trade
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Date: June 4, 2004
Democratic presidential candidate John Kerry last week vowed to renegotiate a free trade agreement signed with Costa Rica, Honduras, El Salvador, Guatemala and Nicaragua if elected president in November, claiming the lack of "adequate and fully enforceable" labor and environmental provisions in the agreement had to be changed. The Dominican Republic is expected to join the deal this summer.
"I will bring us back to the negotiating table to develop an agreement that provides economic benefits, creates jobs and includes strong protections for labor and the environment," Kerry said in a written statement issued on May 28 after the Central American free trade agreement was signed.
An adviser to the presidential hopeful said Kerry has yet to decide whether he would renegotiate the entire deal, or draw up side accords on the environment and labor much like former president Bill Clinton did with the North American Free Trade Agreement after deciding it was inadequate as negotiated under the Administration of George H.W. Bush. However, the adviser said Kerry plans to review all FTAs within the first 120 days of being elected, and hopefully determine a plan on how to proceed with CAFTA by the end of that time period.
In response to Kerry's criticism, Costa Rica and Honduras stood by CAFTA's labor and environmental provisions, as well as their domestic laws.
"We feel proud of what we have done in [the labor and environmental] areas," Costa Rican Trade Minister Alberto Trejos told Inside U.S. Trade. However, Trejos did not rule out the possibility that CAFTA could be reopened. "If events evolve, of course, we'll react to them," he said.
Trejos said that in the meantime, his primary focus is on getting the deal approved legislatively in Costa Rica as it currently stands. Trejos said he hopes to begin the formal process of getting the Costa Rican government to approve the deal "by mid-July to late July" once the Dominican Republic FTA is docked onto the CAFTA. He further said that he expects to have a vote on CAFTA by the end of the year.
According to Trejos, he has not held "face to face talks with Kerry" about the deal, but he has been assured by members of Congress that are close to Kerry that his statement on renegotiating the CAFTA does not reflect a shift by Kerry or the Democratic Party away from supporting trade.
Honduras also defended the CAFTA labor provisions, with a diplomat telling Inside U.S. Trade that it does not prevent the parties to strive toward meeting international labor and environmental standards. She also said Honduras had been making great strides in getting its labor laws up to par with international standards, and plans to continue on that path.
Kerry pointed out that CAFTA implementation throws away what he considers a "strong tool" for persuading Central American countries to meet international labor standards and eliminate the worst forms of child labor.
The Kerry adviser said the candidate was referring to the Caribbean Basin Initiative, a unilateral trade preference program that allows the president to take away, suspend or limit trade benefits for countries of the Caribbean and Central American region if they do take steps toward internationally recognized labor standards. Costa Rica, Honduras, El Salvador, Guatemala and Nicaragua's benefits under CBI would be automatically eliminated once CAFTA is implemented, leaving no enforcement mechanism to take its place should these countries consistently neglect to enforce their labor laws or form new laws that fall short of international standards.
Both an AFL-CIO source and a March 19 report by the Labor Advisory Committee for Trade Negotiations and Trade Policy said the Generalized System of Preferences is responsible for nearly every labor law reform that has taken place in Central America over the past fifteen years. However, both GSP and CBI require the Central American countries to meet the same criteria for labor or face the withdrawal of trade benefits.
Kerry was quick to point out in his statement that he is not opposed to free trade, citing support for an FTA with Jordan that included "strong and enforceable labor and environmental provisions in the core of the agreement." According to the Jordan FTA's labor chapter, all labor laws must meet five international standards and this obligation can be enforced under the dispute settlement process. On the other hand, the only actionable offense is a failure by a country to enforce its own labor laws, regardless of whether those laws meet any international standards. CAFTA does not require labor laws to meet international labor standards, but simply sets that as a goal countries "shall strive" to meet.
International Labor Organization standards, which, as cited in the Jordan FTA's labor chapter, include "the right of association; the right to organize and bargain collectively; a prohibition on the use of any form of forced or compulsory labor; a minimum age for the employment of children; and acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health."
Separately, the governors of Maine and Oregon last month informed USTR that they were rescinding previous authorization to include their states in the government procurement chapters of a variety of bilateral FTAs.
Oregon Governor Theodore Kulongoski (D) informed U.S. Trade Representative Robert Zoellick in a May 27 letter, a day before the U.S. signed CAFTA, that Oregon will not take part in procurement chapters "in any new trade pacts."
Kulongoski told Zoellick that a previous trade commitment that bound Oregon to the World Trade Organization's Government Procurement Agreement could not be read as allowing Oregon to be subject to new procurement agreements.
His May 27 letter was a follow-up to a May 7 letter to Zoellick in which he said the outsourcing of U.S. jobs "has become a sensitive issue to Oregon citizens" and that he was alarmed that new bilateral FTAs could limit Oregon's ability to "curtail the outsourcing of state government jobs."
Maine Governor John Baldacci (D) informed Zoellick on May 18 that he was revoking a broad authorization to subject his state to procurement disciplines in various U.S. FTAs.
Balducci said he still supports including Maine in the U.S.-Australia FTA, but that he would need to conduct case-by-case reviews of whether to include Maine in CAFTA as well as an FTA the U.S. negotiated with Morocco and is currently negotiating with five Southern African countries (SACU), as well as the Free Trade Area of the Americas (FTAA).
Additionally, 21 California state senators and assembly members urged Governor Arnold Schwarzenegger (R) in a May 28 letter to withdraw California from the Australia FTA and to refuse to subject the state to the government procurement disciplines in the Australia FTA, CAFTA, SACU and the FTAA.
The moves by Maine and Oregon follow decisions made by Pennsylvania, Iowa and Missouri to drop out of CAFTA and other bilateral FTAs (Inside U.S. Trade, May 21, p. 13).
Copies of the May 28 Oregon letter, the May 18 Maine letter, the May 28 California letter Kerry's statement on CAFTA are available online to subscribers of Inside U.S. Trade's electronic news service World Trade Online at www.insidetrade.com
