With President Bush signing the Dominican Republic–Central American Free Trade Agreement (DR-CAFTA) Aquesta setmana, the hard work now begins on implementation. As has been learned from regional trade agreements like NAFTA and the WTO agreement, implementation of an agreement requires a huge amount of effort to avoid ongoing conflicts with trading partners. Immediately outlining an implementation game plan and beginning work will pay dividends in the years ahead.
En 2004 the WTO estimated that 220 regional trade agreements were in existence and trade between agreement partners accounted for about 43 percent of world merchandize trade. Problems are simply part of the process. Countries like Brazil and Argentina have struggled with issues within the MERCOSUR agreement among South American countries just as the three NAFTA countries have struggled with trade issues.
The first task for implementation must be handled by the U.S. Representant de comerç (USTR) office and Administration political operatives. To secure votes for passage, the Administration made deals with some members of the Senate and House. This is not unique. What is needed is a complete list so that everyone involved in DR-CAFTA implementation knows how the deals will affect implementation. One of the frustrations in implementing NAFTA was that people argued over what was promised during passage of the legislation in Congress.
Two weeks ago the Administration reached an understanding with a group of Republican Representatives from textile and clothing regions of the country on the exports of yarn and certain types of fabric. Complete details of the terms of the understanding need to be made publicly available so there are no misunderstandings about their impact on implementing the agreement.
Closely related to this is a list of problem areas that opponents raised as DR-CAFTA was being debated in Congress. Sugar and labor issues were the two most talked about, but other issues raised included ethanol. Issues that are brought up in Congressional debates seldom die on their own. Legitimate concerns need to be addressed, and spurious ones need to be researched and explained for those who want to listen.
Next on the agenda should be a list of concerns raised by opponents of DR-CAFTA in the other six countries. The agreements have already been approved in Honduras, Nicaragua and Guatemala. The agreement has been much more contentious in Costa Rica but is expected to pass. The agreements are also expected to be approved in El Salvador and the Dominican Republic. As with issues raised in the U.S. debat, legitimate concerns need to be addressed now rather than allowed to fester for years.
DR-CAFTA also includes 30 letters that clarify portions of the agreement. Additional background on these letters would be helpful in understanding how each government will interpret the words in the letters. The NAFTA side letters on sugar continue to cause problems 12 years after the beginning of the agreement.
With these political issues addressed, the next concern has to be regulatory issues. As we have learned with NAFTA and the WTO, regulatory issues are often the most troublesome issues and the ones that opponents of trade can use to frustrate the movement of products. While hormones and antibiotics in meat and pesticide residues on fruits and vegetables are some of the most common issues, they also include labeling issues for processed food.
Achieving compatible regulatory systems will need to be accomplished while recognizing sovereignty issues for each county. The process is made more difficult because the other six DR-CAFTA countries do not have a common regulatory system. DR-CAFTA is actually six individual agreements with the U.S. Each country has its own regulatory system that must be considered. To the extent that acceptable international standards are available and are being followed by the U.S., the integration process could be eased by using those international standards.
The regulatory process has to be forward looking to anticipate problems rather than just reactive to existing problems. The BSE situation between the U.S. and Canada is an example of two trading partners addressing an issue separately, but not being prepared to respond to an actual case of the disease. Talking about potential problems is often hard to do because participants are reluctant to deal with “what ifs” that may never happen.
Some regulatory issues may become intractable for science-based or non science-based reasons. These issues need to immediately move to a high political level in each government so they can be resolved without the positions of both sides becoming so hardened that neither will accept a middle ground solution. After arguing issues in NAFTA for 12 years there are issues that both parties see in only a win-lose framework.
With these political and regulatory hurdles out of the way, parties in all seven countries can then focus on actually trading products. That will be the real test of the previous work on implementing DR-CAFTA. If the proper groundwork has been done, most of the differences that develop can be resolved as they would be in any trading relationship.
CAFTA implementation will be closely watched by both supporters and opponents in the seven countries and around the world. All countries involved need a commitment to working together to resolve problems as they develop.