Multinational Monitor


Not Kosher: The Ralph Reed-Jack Abramoff Connection.
by Andrew Wheat

The United States, Bolivia, and the Political Economy of Coca
by Gretchen Gordon

The CAFTA Chronicles: Strong-Arming Central America, Mocking Democracy
by Tom Ricker and Burke Stansbury

Thais Take to the Streets to Stop U.S. Trade Agenda
by Martin Khor

Drilling East Timor: Australia's Oil Grab inthe Timor Sea
by Charles Scheiner


Saving $60 Billion: Lawrence Korb's Common Sense Budget Defense Plan
An Interview with Lawrence Korb

The Market for Virtue: The Impact of Corporate Social Responsibility
An Interview with David Vogel


Behind the Lines

The Lobby Reform Fiasco

The Front
Philippines Gets Stomped - EPA Program Off Track

The Lawrence Summers Memorial Award

Names In the News

Book Notes


CAFTA Chronicles: Strong-Arming Central America, Mocking Democracy

January 1, 2006 marked the date that the Bush Administration had set for implementation of the US-Central America-Dominican Republic Free Trade Agreement (DR-CAFTA). However, progress has been frustrated in various countries where the United States insists on the need for dramatic changes in domestic laws, often requiring constitutional changes before CAFTA goes into effect. Like the negotiations and the ratification of CAFTA, the implementation process is undemocratic, lacks transparency, and demonstrates the subordination of the six countries involved to U.S. corporate interests.

The original date is now past, and the Bush administration is adopting a strategy of "rolling implementation." Only governments that the United State Trade Representative (USTR) certifies have made necessary changes to their laws will be permitted to enter CAFTA.

By early 2006, the only country to implement dr-cafta was El Salvador. Honduras had announced plans to implement in April. Nicaragua may follow quickly, and Guatemala and the Dominican Republic are speaking of early summer. Costa Rica has yet to ratify the agreement, and that is expected to be a huge fight.

"Negotiating" CAFTA

"Where there is no balance of power, negotiation means imposition," says Carlos Pacheco of the Centro de Estudios Internacionales in Managua, Nicaragua of the CAFTA negotiations. Talks for the agreement between the United States, Nicaragua, El Salvador, Honduras, Guatemala and Costa Rica began in January 2003 and were completed in December of that year (Costa Rica did not sign until January 2004 and the Dominican Republic was added in August 2004 following a separate negotiation process).

It would be difficult to find another multilateral negotiation process with less "balance of power."

The U.S. economy is a global behemoth, topping $11 trillion in 2003 and accounting for nearly 80 percent of the economic size of the entire Western Hemisphere. Meanwhile, the combined economic output of countries in Central America was $58 billion in 2000 - smaller than the total income of just two U.S.-based agribusiness companies that will benefit from the accord: Cargill and Archer Daniels Midland.

The elite of Central America are also historically dependent on the United States, with Costa Rica something of an exception. In Nicaragua, El Salvador and Guatemala, the ruling parties overseeing CAFTA negotiations were each rooted in U.S.-supported alliances that evolved during the wars of the 1980s.

Throughout the process, U.S. trade negotiators dictated rather than negotiated. From the first round where all participants were required to sign a pledge of secrecy, to the final round where then-U.S. Trade Representative Robert Zoellick told the Costa Rica team to either open up its service sector to privatization or be left out of the trade deal, the United States bullied and used a divide-and-conquer strategy to get the deal it wanted.

For example, when Central American negotiators asked to leave agriculture out of the talks until the United States was willing to discuss its own domestic agricultural subsidies, the United States simply refused. When the Central American negotiators came back with a request for a separate negotiating table for agriculture, the United States again simply refused, saying that all products had to be open for discussion.

Just before the first round of talks, the U.S. Drug Enforcement Agency stripped Guatemala of its certification in the "War against Drugs," saying that it had "failed in its efforts to stem the tide of drugs." The Guatemalan negotiating team recognized that decertification "weakens [our] position seriously," as it gave U.S. negotiators a club to hold over their heads. In a desperate attempt to regain his country's certification, Guatemalan President Alfonso Portillo offered to privatize his country's seaports and turn control over to the United States!

Guatemala entered the next round with its own proposed schedule for reducing tariffs - destroying Central American efforts at unity. Following CAFTA ratification in Guatemala, the Bush administration released long withheld military assistance, and is continuing to press the U.S. Congress to reinstate military training assistance to Guatemala, long banned for human rights reasons.

After Costa Rica joined with other countries in the developing country grouping known as the G-20 to challenge U.S. subsidies at the World Trade Organization talks in Cancun in 2003, Harkin Energy (a Houston-based company, on whose board President George W. Bush formerly served) announced a $57 billion lawsuit against the Costa Rican government for canceling a drilling contract. (This case was decided in the government's favor in a domestic court last year; under CAFTA rules, the case would have gone to an arbitration panel made up of trade specialists.)

The USTR also banned importation of wild shrimp from Costa Rica during the year, for the failure to use "turtle-safe" nets. The ban was lifted after Costa Rica acceded to U.S. demands on privatization of telecommunications and signed CAFTA in January of 2004.

Throughout the negotiations, the Bush administration threatened Central American countries with a total cut-off from Caribbean Basin Initiative preferences - a power that resides only with Congress - should they balk at signing CAFTA.

The negotiations ended on December 17, 2003. Costa Rican negotiators had walked out the previous day, and other negotiating teams were announcing to the press that an agreement was not going to be reached until January or February. However, following a morning session with Robert Zoellick, negotiators announced an agreement at 12:30 PM.

Ratification Farce I

CAFTA proved deeply unpopular in both Central America and the United States, making ratification possible only through processes that critics condemn as anti-democratic.

The United States set the tone by ensuring that CAFTA would not be debated in the United States during an election year, when politicians would be most accountable. The administration did everything it could to hide CAFTA until after the November 2004 election. For example, the formal signing ceremony for CAFTA took place at the Organization of American States on a Friday before Memorial Day weekend of 2004, while Congress was not in session. No heads of state took part. When the Dominican Republic was added later that summer, the signing ceremony was again on a Friday at the Executive Office Building (ironically in the Indian Treaty Room).

El Salvador's legislature was the first to ratify CAFTA. Given that CAFTA was an international treaty, opponents demanded a two-thirds vote as required by the Salvadoran constitution. The ruling ARENA party responded by blocking all debate on the constitutionality of CAFTA. Then, with the Assembly building surrounded by riot police protecting it from protesters - a group of whom had previously occupied the building to protest CAFTA - ARENA introduced CAFTA at 3:00 AM on December 17, 2004. Finally, it was rammed through over the vociferous opposition of the FMLN party on the last legislative day before the Christmas break. Legislators admitted to having not read the CAFTA implementation text, which was withheld until a few days before the vote.

Honduras's National Congress followed a similar process in March 2005. Faced with major popular opposition to the agreement, the President of the Congress agreed to hold a public session with sectors of civil society on March 8 before proceeding with a vote on CAFTA. In fact, the Congress approved the deal at a special session held at a downtown hotel on March 3.

"The ratification of [CAFTA] was done in a traitorous fashion, given that the President of the National Congress Porfirio Lobo Sosa had promised the different social organizations that before sending the treaty to Congress for a vote, they would have a meeting next Tuesday, March 8th so that the people of Honduras could present their reservations to Congress," thundered a statement issued by COPINH (The Council of Civic, Popular and Indigenous Organizations of Honduras). The following week, all the major roads into Tegucigalpa were blocked in protest of the Congress's action.

In Guatemala two weeks later, the scene was repeated: Tens of thousands of protesters crowded around the National Congress demanding that the question of CAFTA ratification be put to a national referendum. After two days, the military was called out to break up the protest. This was the first time the army had been mobilized to quell domestic protest since the peace accords of 1996 were signed - in violation of those accords, which banned the army from engaging in domestic security operations.

"CAFTA was negotiated behind peoples' backs," said Guatemalan Bishop Monsignor Álvaro Ramazzini, president of the Bishops' Secretariat of Central America and Panama, "and this is the reason that people today are now protesting. It is based on a logic that favors profit over human rights and sustainability. It is clearly intended to facilitate the accumulation of capital to complement and lock into place the neoliberal reforms carried out by governments of the region."

Despite the protests, the Congress voted to ratify CAFTA on March 10.

The following day, two people were shot to death by the police during an anti-CAFTA demonstration in Northern Guatemala.

The Guatemala government also passed a new intellectual property rights law [Decree 31-88], to come into compliance with CAFTA. The new law denies generic pharmaceutical manufacturers the right to rely on test data from brand-name companies for a period of five years after a brand-name product comes on market, delaying the introduction of price-reducing generic competition. The Bush administration had threatened to leave Guatemala out of CAFTA after the Congress had earlier voted to eliminate test data protection.

"Paying more money for the exact same medicines means treating fewer people and, in effect, sentencing the rest to death," says Dr. Karim Laouabdia of the international humanitarian organization Doctors Without Borders. "We are especially worried that Decree 31-88 and intellectual property provisions in DR-CAFTA could make newer medicines unaffordable - our [HIV/AIDS] patients will need these in order to stay alive once their first-line regimen fails."

Ratification Farce II

With three countries in Central America on board, the Bush administration launched its own domestic offensive in spring 2005. Bush and the Republican leadership promised a vote on CAFTA before the Memorial Day recess in 2005. But the U.S. Congress proved to be the most difficult obstacle to CAFTA ratification.

The Democrats were unusually united in their opposition. The central issue raised by the House Democratic leadership was the lack of enforceable worker rights protections in the agreement. Key Representatives Charles Rangel, D-New York, and Sander Levin, D-Michigan, had raised this issue during the negotiations on many occasions, only to be ignored by the Bush administration. Complicating matters further were concerns raised by Republicans in districts with textile and sugar interests, both constituencies that were opposed to the agreement.

Memorial Day came and went without CAFTA implementing legislation being introduced. The next deadline set by the Bush administration was the July 4th recess. It was clear that a vote in the House of Representatives was still too close to call, so in an unusual and possibly unconstitutional move (the Constitution requires that measures affecting revenue first be introduced in the House), the agreement was first acted on in the generally pro-free trade Senate.

The process began with a "mock mark-up." (Congressional committees typically amend proposed laws in what is known as the "mark-up" process.) According to the Trade Promotion Authority law ("fast-track") that Congress passed in 2002, neither the House nor Senate can formally amend a trade-implementing law. They can only make recommendations.

So, the first step in the process was a "debate" in the Senate Finance Committee, where it was clear that few of the members really understood what was going on. Senator Jeff Bingaman, D-New Mexico, for example, asked three times what his vote in the committee would mean given that the vote was a non-binding recommendation to send the current CAFTA draft to the floor of the Senate with non-binding amendments. It was not clear anyone really knew the answer.

The next step was a "mock mark up" in the House Ways and Means Committee. This mock mark-up began after the Senate had already started floor debate for the final CAFTA vote - at which point no changes could be made. Thus, whatever ability the mock mark-up in the House might theoretically have had to influence the legislation was eliminated. No worries, however - the House Ways and Means Committee voted the bill out of committee with no mock amendments.

The Senate passed CAFTA later that evening, June 30, in a 54-to-45 vote. That was the closest Senate vote on a trade-implementing bill ever, undermining the White House effort to gain momentum from Senate passage. (The Senate vote was apparently non-binding. In a little-noticed move, the Senate actually voted a second time on CAFTA on July 28. This time, the trade deal passed 55 to 45, with Senator Joe Lieberman, D-Connecticut, voting in favor of CAFTA after missing the first vote.)

The House vote was finally scheduled for July 27. The day of the vote, President Bush and Vice President Dick Cheney both made appearances on Capitol Hill to rally Members. Representative Jim Kolbe, R-Arizona, promised to "twist arms until they break into a thousand pieces" if necessary to get the vote.

In the limited House debate on the deal, Republican after Republican went to the microphone to talk about Hugo Chavez, Fidel Castro, Che Gueverra, Daniel Ortega and all the "leftists" in Latin America that were watching this vote to determine if the United States would "stand with its allies." (Yes, even Che, who could only witness the vote from the afterlife.)

The scheduled 15-minute vote actually lasted for more than an hour, as the House leadership bullied recalcitrant Republicans into switching votes and supporting the deal. Referring to the promises made to Republicans who cut deals in exchange for voting for CAFTA, House Minority Leader Nancy Pelosi, D-California, would later say that floor of the House had been turned into "Let's Make a Deal." After sufficient arm-twisting got Robin Hayes, R-North Carolina, to change his vote from "No" to "Yes," the vote was closed, passing 217 to 215.

President Bush signed the CAFTA legislation on August 2. "CAFTA is more than a trade bill," he said, "it is a commitment among freedom loving nations to advance freedom."

The United States Demands More

The U.S. vote did not mark the end of the CAFTA implementation adventure. Although the lopsided trade deal stipulates that it can be implemented once the United States and any one other signatory has ratified it, the Bush administration was eager to pressure the three remaining countries to ratify the deal - and to extract still more concessions from those countries which had.

The Dominican Republic ratified CAFTA in September, without much controversy.

Nicaragua ratified the agreement in October, but only under duress. Nicaragua's formal debate and vote on CAFTA took just four hours in the National Assembly - following a visit by now Under Secretary of State Robert Zoellick. Zoellick threatened a complete cut-off of U.S. aid if the right-wing did not unify behind CAFTA and against efforts by the Sandinistas to build a coalition with supporters of former President Arnoldo Aleman. Prior to this visit, the Sandinista leadership of the Assembly had vowed to block a vote on CAFTA until a set of compensatory measures were passed to protect those adversely affected by the agreement.

Costa Rica still has not voted on CAFTA. Opposition is very strong in Costa Rica. The country has already witnessed several general strikes in response to the government's efforts to negotiate and sign CAFTA.

Those countries that have ratified CAFTA have discovered that the U.S. government is looking for dramatic changes in their domestic laws before certifying that they are in compliance with the agreement. Simply signing the agreement was not enough, apparently.

The Bush administration has prepared a detailed list of CAFTA "implementation deficiencies" in Guatemala, especially regarding intellectual property rights issues. Although Guatemala revised its intellectual property laws to satisfy U.S. demands at the time it ratified CAFTA, USTR is insisting on the most aggressive interpretation of even the most picayune of provisions. For example, CAFTA permits an exemption from pharmaceutical test data rules "to protect the public." The U.S. government has objected that Guatemala's law also includes an exemption for protection of plants, animals and the environment.

When the lower house of the Dominican Republic's legislature recently passed new tax and tariff laws, the USTR cried foul - threatening to decertify the government, as out of CAFTA compliance. The government in the Dominican Republic then said that it will need until July to deal with a number of issues involved with implementing CAFTA.

In El Salvador, the pro-U.S. ARENA party acceded to Bush administration demands in December 2005 and adopted a package of changes to the Salvadoran legal code that the United States had insisted on as a condition of CAFTA implementation. Changes included tightening of intellectual property laws and penalties, assurances that licenses to fill tariff rate quotas for U.S. agricultural imports were granted to retail operations (not wholesalers likely to purchase from domestic producers first), and adoption of the usda meat inspection program - thereby foregoing El Salvador's right to inspect meat plants in the United States or re-inspect U.S. meat at the border. (These conditions are being placed on other countries in the region as well).

Opposition FMLN legislators walked out in mass in protest of ARENA's move. "The right is giving our national legislation a coup de grace by putting it completely at the service of transnational corporations' commercial interests, to the detriment of the common good," said Salvador Arias, a leading economist and deputy for the FMLN.

In Nicaragua, the National Workers' Front (FNT) has challenged CAFTA implementation before the Supreme Court. The labor federation has identified 15 specific requirements of CAFTA that contravene the country's constitution. One item, granting multinational corporations special legal rights to seek monetary damages in response to regulatory efforts, is also a source of concern in the United States.

The FNT's general secretary, Gustavo Porras, promised that the FNT will shut the country down with protest should CAFTA implementation move forward. The Supreme Court has yet to rule on the case.

As El Salvador became the first country to fully implement CAFTA, protests led by informal market street vendors have broken out in that country's capital city. Tightening the laws against piracy will criminalize an activity that many Central Americans depend on for survival, given the lack of formal employment. According to one market vendor, by signing CAFTA the Salvadoran government "wanted to please the gringos but not vendors, to whom they give no alternatives." Street vendors were joined by unions and students on the date of implementation, in a national mobilization against the accord.

In Costa Rica, the largest market in Central America, and the only country to not ratify cafta, the presidential election in February became a showdown over the future of cafta. It was assumed that former president, and cafta supporter, Oscar Arias would walk away with the election. But Oton Solis, who wanted to renegotiate cafta to strip out the telecommunication privatization and other provisions, nearly pulled an upset. The election was so close that a manual recount was required. Arias was eventually declared the winner, by less than 1 percent of the vote. Solis' campaign, however, reenergized cafta opponents. Arias may seek ratification of the accord over the next few months, but it will be a big fight in the assembly.

It's Still Called Imperialism

Defending CAFTA from its legion of critics, then-U.S. Trade Representative Robert Zoellick authored a remarkable passage in a Washington Post opinion piece in December 2003: "You'll pardon me if I have a little bit of an ironic smile when primarily people from the United States decide to tell democracies in Central America what's good for them. We used to call that imperialism."

For many in Central America, however, it is the Bush administration's approach to negotiating, ratifying and implementing the Central America Free Trade Agreement that illustrates that imperialism is indeed alive and well in the Western hemisphere.

Tom Ricker is the co-director of the Quixote Center, based in Hyattsville, Maryland. Burke Stansbury is executive director of the New York City-based Committee in Solidarity with the People of El Salvador (CISPES).


Editor's Blog

Archived Issues

Subscribe Online

Donate Online


Send Letter to the Editor

Writers' Guidelines