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US-CAFTA Talks to Start in January
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Nov 21, 2002

Negotiations on a free trade agreement between the United States and five countries of Central America are slated to begin in January - and all sides are optimistic they can finish by the end of the year, Costa Rican Minister of Foreign Trade Alberto Trejos said yesterday (WTD, 11/4/02).

Although that is a "fairly ambitious" schedule, Mr. Trejos said the countries want to have a deal by the end of 2003 to avoid election-year complications.

Formal talks are scheduled to begin on January 21 in San Jose, Costa Rica.  The five Central American countries - Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua - will be negotiating as a group.  They are members of the Central American Common Market - an entity that had been moribund for many years but which the countries are in the process of turning into a true economic union, the minister stated.

Both the strengthening of the common market and the FTA with the United States are important to Central America because it will help the region attract more foreign investment than the five small economies can command on their own, Mr. Trejos noted.  He spoke at a conference sponsored by the Organization of American States and NetAmericas.

Solidarity
Solidarity among the five countries - and the ability to agree on common negotiating positions - will be crucial to a successful conclusion of the FTA, according to Mr. Trejos.  The countries have negotiated together before - most recently with Canada. But there are economic and political differences between the five, he pointed out.  The Costa Rican official said he expects that tariff schedules will vary country to country in the final agreement due to different political sensitivities.

It also is important that the FTA go beyond the Caribbean Basin Initiative to be a "precedent setting" agreement that takes on the toughest issues of integrating small economies.  Mr. Trejos suggested that capacity building and technical cooperation will have to be a core component of the agreement.  As important as market access is the creation of a common set of rules that addresses issues like dispute settlement resolution, customs harmonization and sanitary and phytosanitary standards.

The five countries understand that important issues for the United States will include intellectual property rights protection and labor and environment.  On the controversial labor and environment issue, Mr. Trejos suggested the United States seems to be moving in the right direction - away from trade sanctions - in its proposed FTA with Chile.  The Central American-Canada FTA also provides a good model, with its emphasis on cooperation to help smaller economies comply with labor and environmental protections.

Services trade will be a difficult issue for Central America because the region "has a long way to go toward self-convergence," the minister noted.  The countries have never negotiated a common position on services and each country's service sector is at a different level of development and liberalization.

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