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CAFTA No. 371

Adopted 2005
Amended 2006
Amended 2007

The Central America Free Trade Agreement (CAFTA), an agreement between the U.S., Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic, was signed by the participatory countries in May of 2004. CAFTA was passed by the U.S. Congress in July of 2005; implemented by El Salvador March, 2006; Honduras and Nicaragua April, 2006; Guatemala July 2006; Dominican Republic March, 2007. At this writing, Costa Rica has yet to pass and implement CAFTA.

Crafted on the NAFTA model, CAFTA perpetuates the failed policies of NAFTA. CAFTA is resulting in further exploitation of workers in poor developing nations, and more loss and outsourcing of jobs in the U.S., primarily in manufacturing and agricultural states.

It is ADA's position that all trade agreements must include basic protections for the environment, and, internationally-recognized (ILO) standards for workers in the core texts of the agreements, not in unenforceable side agreements, as they are in NAFTA. These standards must be enforceable, with penalties equal to those applied to infringements against intellectual property rights.

CAFTA requires only that nations enforce their own laws. While the labor, human rights and environmental laws of the signatory Latin American countries often are substandard, CAFTA contains no meaningful, enforceable efforts to improve them.

Like NAFTA Chapter 11, CAFTA Chapter 10 gives a corporation the right to sue a foreign country in the event that some local, state or federal regulations of the area impinge on corporate profits, real or estimated. Thus, pollution standards or prevailing wage laws may be considered "barriers to trade" and challenged in a trade tribunal, closed to public, press and lawmakers of the areas involved, and where only the language of the trade agreement may be considered. WTO and NAFTA tribunals historically have decided in favor of the corporations bringing suits, assessing "offending" countries millions of dollars. NAFTA Chapter 11, designed to protect property and profits of corporate investors, has resulted in violations of state sovereignty, rights of citizens and laws established by their courts and governments.

CAFTA sets a dangerous precedent by including trade in services in the agreement. More investment facilitation than trade, this new component enables foreign corporate privatization and the deregulation of services, such as education, health care, transportation, libraries, postal delivery, formerly public construction projects, and delivery of natural resources, such as water and electricity. Privatization of these services would leave citizens without traditional recourse to government if service provisions were inadequate or prices became unaffordable.

CAFTA enables corporate monopolies of pharmaceuticals, reducing or eliminating public access to generic drugs, even as those used in treatment of life-threatening diseases like AIDS and leukemia. Patent rules also can increase use of genetically modified seeds.

CAFTA represents a threat to family farms in favor of corporate agribusiness by facilitating the dropping of prices below cost of small-scale farm production.

CAFTA is a stepping stone to the Free Trade Area of the Americas, which would involve the entire Western Hemisphere (except Cuba). Proponents of CAFTA argue that the agreement will open new markets for the U.S., but, at the time of passage, the six CAFTA partner nations had a combined gross domestic product (GDP) of only $85 billion- comparable to that of Columbus, OH. Without provisions to help Central American farmers or workers improve their purchasing power, CAFTA's potential for creating markets falls far short.

Global trade offers the opportunity of raising working and living standards of people in all participating nations. A new trade model is imperative. Trade agreements must be negotiated in the interests of the public good, rather than for the benefit of multi-national corporations.

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No. 371

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