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Corn+Soybean Digest

CAFTA Becomes Law

Corn, soybean and cotton producers, all heavily dependent on exports, should benefit from the new Central American-Dominican Republic Free Trade Agreement (CAFTA).

In what became a battle as big as the one generated by NAFTA legislation in the '90s, CAFTA received the signature of President George W. Bush on Aug. 2 after a partisan congressional vote that was as narrow as his victory over Sen. John Kerry.

Leaders in the National Corn Growers Association (NCGA) and American Soybean Association (ASA) feel their 11th hour telephone campaigns helped CAFTA's passage in a vote of 217-215 in the House of Representatives, after the U.S. Senate had approved it by a vote of 54-45.

CAFTA's purpose is to reduce or eliminate unfair duties applied to U.S. corn, soybean and other agricultural products exported to six countries that are customers of American farmers — El Salvador, Guatemala, Honduras, Nicaragua, Costa Rico and the Dominican Republic. Opponents of its passage argued that CAFTA would open the U.S. to more agricultural imports and cost many Americans their jobs.

The National Farmers Union (NFU) was one opponent. “CAFTA trades away American producers' ability to compete fairly in a global economy,” says NFU president Dave Frederickson, a grower from Murdock, MN. “It forces them to compete with producers from countries which have a cost-of-production advantage over the U.S. because they aren't required to meet the same labor and environmental standards.”

But NCGA, ASA and the National Cotton Council (NCC) were among more than 80 crop and livestock groups that supported CAFTA passage. NCGA noted that more than 99% of U.S. agricultural imports from those countries already enter the U.S, while many U.S. exports of agricultural products to those countries face stiff tariffs.

With CAFTA's passage, NCGA says 80% of U.S. products, which currently face high tariffs, will go into these countries duty free, and CAFTA could increase agricultural exports by $1.5 billion when fully implemented.

“Our grassroots should be applauded for coming out in force for this trade agreement,” says NCGA president Leon Corzine, Assumption, IL. “It is the right agreement for our industry and all of agriculture.”

The six countries included by CAFTA represent a growing region of 45 million people that imported $264 million in U.S. soy products in 2004. “We congratulate the House for joining the Senate in passage of CAFTA,” says ASA President Bob Metz of Browns Valley, MN. “This is great news for U.S. soybean farmers because CAFTA will solidify our position as the preferred supplier of soybeans and soybean products to these Central American nations.”

ASA says CAFTA would immediately eliminate tariffs on all soybeans and soybean products with the exception of refined soybean oil, where the tariff will be phased out over 15 years in equal annual cuts.

Cotton growers should also benefit from CAFTA. “Congress' approval of CAFTA is great news for the cotton and textile industry and agriculture in general,” says Woods Eastland, NCC chairman. “Preserving these markets will enhance the competitiveness of our cotton and textile industries, and preserves textile jobs in this country.”

The American Farm Bureau Federation (AFB) has called CAFTA “a solid win for U.S. agriculture.” Once fully implemented, AFB says the trade agreement will increase U.S. agricultural exports to the region by $1.3 billion.

Corzine adds that passage of CAFTA helps future agreements in addition to strengthening the U.S. negotiator's hand in the World Trade Organization and the Doha Rounds.

One of the staunchest opponents of CAFTA was Rep. Collin Peterson (D-MN), ranking minority member of the House Agriculture Committee. He pulled no punches in criticizing the House vote, calling it a “tragedy” for American agriculture and rural communities.

“CAFTA could not stand on its merits,” he says. “The administration recognized that the facts were not on the side of CAFTA and resorted to sleazy Washington deals. The checkbook was opened and deals were made right up until the last minute to force CAFTA through in the dark of night.”

Most sugar beet producing regions opposed CAFTA. Peterson, whose state is a significant beet-producing region, says “those who supported CAFTA did so on the backs of our rural communities in Minnesota and across the country — the communities most vulnerable to poorly negotiated trade agreements. I join our farmers and workers in supporting free and fair trade, but CAFTA, like NAFTA, represents neither.”

Meanwhile, House Ag Committee Chairman Bob Goodlatte (R-NC) praised CAFTA. “I am very pleased that the U.S. House of Representatives joined with our colleagues in the Senate to pass CAFTA, a trade agreement that will level the trade playing field with our Central American neighbors and provide U.S. producers with greater access to these markets,” he says. “The U.S. currently exports $1.7 billion in goods to the CAFTA countries, and yet we import $2.4 billion, most of which come into the U.S. duty-free. With the passage of CAFTA, U.S. producers will now have the same access to those markets that their producers have to our market.”

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