CAFTA: “We’re Defining Whether We’ll Commit Suicide or Die a Natural Death”

The author, who is representing the National Federation of Cooperatives in the CAFTA negotiations’ “side room,”shares his experiences and analysis of the negotiations so far.

Sinforiano Cáceres

The Central American Free Trade Agreement (CAFTA) is testing our economic organizations’ capacity to make technical and political proposals that can defend us in the world’s new market-dominated logic. This test isn’t easy. The logic of CAFTA’s negotiation rules is both highly technical and highly political, and we have to learn to defend ourselves well in both camps. We have to be able to present a political argument—which we’re better at—as a way of reinforcing the technical proposals, because political arguments lose validity without technical underpinnings. This has subjected our organizations, which are used to a logic of class demands, to an rapid learning process. Accustomed as we are to working for the short term in a context of changing dynamics, it has been a huge challenge to learn to think and work for the medium term, the long haul, for the process itself. We’ve had to learn to watch for hazards in the road, switching our headlights from high to low beam to deal with the dynamics of the moment while always keeping one eye ahead. None of this is simple when the leaders of our organizations have such a low academic level and don’t always have a sufficient grasp of the abstract to formulate valid proposals. Personally, I’ve found it difficult to understand this thematic, but we’ve finally been getting enough of a grip to make concrete contributions.

The US Strategy: Dominate the agenda until the end

The US negotiating logic has been to skirt the agricultural issue, leaving it till last so our negotiators won’t have enough time to consult us properly about the proposal—should they choose to, because so far only Nicaragua has made any real effort in this respect—and our organizations won’t have the capacity to respond adequately. That’s its strategy. The United States has been presenting its sensitive issues—electronic commerce, patents, intellectual property and textiles—while pushing ours—agriculture, environment and labor—to the end.

The US strategy concerns us greatly. Our issues have still not been discussed after seven rounds—the latest one in September, in Managua—and will therefore be negotiated in the last two rounds, to be held in the United States (Houston in October and Washington in December). Will there be time to resolve the remaining issues in two rounds? This rush and the deadline they’ve decided on implies enormous economic, technical and human costs for us, which is why many groups have been left along the road for lack of economic resources, an inability to come up with proposals or because they feel frustrated and have decided to engage the fight by other means. It also explains the diversity of CAFTA-related positions and proposals among the non-official social and economic sectors in Central America. Somehow and at some point, all those ideas have to be rescued, because it’s one thing to sign the free trade agreement and quite another to implement it, when everything will be further complicated by our not knowing exactly what we’re fighting against and what the rules of the game are. We’ll only start getting a feel for that during implementation.

Half a year of posturing

The negotiations got underway in January 2003, and the first two rounds consisted of little more than presentations. Both the United States and Central America presented offers, but nothing was negotiated because that has to involve both offers and demands. Demands were finally presented in the third and fourth rounds, and negotiations only really got underway in the fifth round. Up to that point, it was only chatter, posturing, a waste of time, political tourism.

Thousands of products are at stake in these negotiations. Both the Central American and US sides have lists of “offensive” and “defensive” products. The offensive products are those with export potential while the defensive ones are those that need protection to avoid imbalances and thus increased poverty, unemployment or migration.

The main focus of the negotiating rounds has been to determine which products are sensitive, which must be made immediately duty free, which can endure two-way import and export activity and which should be kept out of the negotiations altogether. Those to be considered for tariff reduction or elimination have been grouped into five “baskets” according to different timeframes.

Defending our basic grain producers

The heart of the National Federation of Agricultural Cooperatives’ strategy is to exclude the basic Nicaraguan grassroots diet—tortillas (maize) and what we call gallo pinto (rice and beans)—from any basket, to pull them totally out of the CAFTA negotiation. And this isn’t out of caprice. The highly subsidized production of these three crops in the United States generates an enormous asymmetry, so regardless of our negotiating skills, we’re always going to lose and our production will be wiped out. We’ve used an obvious political argument to fight for exclusion of these three products and guarantee our food security: 250,000 families in Nicaragua will be ruined if rice, beans and maize are included in CAFTA, and that would create tremendous destabilization. It would end up making the region unapt for business, both for us and for the United States.
FENACOOP has gotten involved in this negotiation precisely to defend the production of those three basic grains. While we’ve sought to strengthen our position by making alliances to add other products and contributing on other issues , the heart of our strategy is to defend the basic food of the majority of Nicaraguans. This isn’t an easy fight. Right up to this most recent round in Managua, the United States has expressed willingness to exclude white maize from the negotiations, but not rice or beans.

Non-tariff barriers and development cooperation

Central America has to negotiate the issue of deadlines better. The general system of preferences conceded to us and the Caribbean Basin Initiative—the unilateral agreements that the United States made in the eighties that granted free access to the US market for some regional products—fundamentally textiles—expire in 2008. Central America should propose that the deadlines for phasing out duties on the different “baskets” start when this initiative concludes in 2008, rather than when CAFTA officially begins to be implemented in 2004.
Nonetheless, we believe that setting deadlines for dropping duties—already defined by basket—is useless unless we discuss non-duty barriers at the same time, especially sanitation and plant health measures. What good is it for our products to have immediate and duty-free access to the US market when non-tariff snags make that access as far away as ever? One of the clearest examples of the problem can be found in Mexico. With respect to chicken, the breast is the most attractive part in the United States, while legs and thighs are considered throwaways and sell at very low prices. In the US-Mexico free trade agreement, the United States agreed to the export of Mexican chicken breasts to the United States in exchange for the import of gringo chicken thighs into Mexico. Immediate access, zero duty, they said. So fine, the thighs have flooded into Mexico, but nearly ten years have passed and Mexico has been unable to export a single chicken breast to the US market because they always come up against some non-duty barrier. So what’s the use of agreeing on tariffs if there are no agreements about other barriers?
Another important issue that must be resolved is that of development aid. If we’re agreeing to eliminate tariff barriers in five, ten, twelve, fifteen years, it’s because we need protection before those deadlines, with the logic that by then we’ll be in a different and better situation with respect to competitiveness, productive diversification and stability. We clearly need cooperation to get us from our current situation to the position we need to be in when the deadlines agreed to in the baskets come into effect, because Central America’s economies aren’t currently capable of competing with these products at unprotected prices.
Cooperation is—or should be—complementary to CAFTA so that the agreement truly generates development. We’ve taken the official negotiators at their word and said to them: a free trade agreement can effectively be an instrument that promotes our development, as long as we also have financial, technical and material resources. If not, it will only serve to further disarticulate our weak economies.
The United States has claimed it is willing to provide such development cooperation. And in the Managua round, areas were discussed and some figures agreed upon. FENACOOP is focusing on three areas: 1) cooperation to support the most vulnerable sectors, those that will be most seriously affected by the agreement; 2) cooperation to promote diversification and productive conversion; and 3) cooperation to strengthen the currently low capacity of our human resources.

The United States says it is interested in strengthening human resources and the governments’ institutional capacity in line with CAFTA’s technical requisites. If, for example, the agreement establishes a plant health measure prohibiting the entry of certain genetically modified products into our countries, Central America’s customs departments don’t now have the technical capacity to analyze the products coming in to find out if they are genetically modified or determine what variety they belong to or what company they come from. The United States wants to focus its development aid on strengthening this type of capacity and it has been clear about why: it doesn’t want its products stuck at our borders due to our technical incapacity. It’s only thinking of its own interests, its products, its benefits, not ours. It’s natural: we have to be clear that in this kind of negotiation, what’s at stake is who eats whom, not who respects whom.

The US government questions why we are demanding development from CAFTA when it knows that our governments have no development strategy—and says so. We argue that while the government doesn’t have a development strategy, our organizations do, so we want them to negotiate bilaterally with us. In response to that, they opened a “window” of direct talks in the Managua round between Central America’s social, economic and business sectors and the institutions seated at the US cooperation table—the US Agency for International Development (AID), the Inter-American Development Bank, the World Bank, the Central American Bank for Economic Investment and various US NGOs.

Circulation of dangerous transgenics and pesticides

We’re exceedingly interested in discussing sanitation and phytosanitary measures for three reasons: 1) the importance of the introduction of genetically modified organisms into our countries; 2) the issue of pesticides; and, 3) the autonomy we must preserve in this area of CAFTA. All this concerns us most because of the lack of common regional laws or agricultural policies that prohibit the circulation of specific products—transgenics, pesticides—or even of the consensus or political desire to have them.

The issue of pesticides has us very worried. For some time the United States has been selling pesticides from what is called the “dirty dozen” in Central America, which are chemical products now prohibited in the developed world. Part of the problem is that if we use some of these chemicals in agricultural production, US phytosanitary measures will stop the resulting products accessing its market. It’s a vicious circle: they sell us their prohibited products then prohibit our production. Central America is extremely weak in this discussion because there’s no regional law prohibiting introduction of the “dirty dozen” into all of our countries. The laws differ from country to country and are incomplete: two products are prohibited in Nicaragua, three in Guatemala, two in El Salvador, etc., and they aren’t even always the same products.
If this isn’t regulated, the vacuum of legislation is going to lead to a massive triangulation of harmful products among our countries. They will enter where they’re permitted then circulate to where they are prohibited. And we run a tremendous risk of seeing a multiplication of cases like the banana workers in the northwest, who were poisoned by Nemagon.

The “innocuousness principle”
and the “precautionary principle”

We’re also very concerned about the “innocuousness principle” and the “precautionary principle.” The innocuousness principle tries to ensure that products coming into the market represent no risk to the consuming population’s health, while the precautionary principle relates to the possibility of our country retaining the autonomy to detain any product that could potentially damage public health, the environment or the national economy.
These are the most sensitive issues within the agreements on sanitation and plant health measures. And they are critical to the major US companies interested in massively selling their products down here, or those that are already selling us things we don’t need and that do us harm, such as Monsanto and other huge transnationals that sell transgenic foodstuffs and seeds as well as pesticides.
We have to be clear that we’ve been eating transgenic products for some time now, every time we eat Marusha or Maggi soups. What we’re aiming at now, through the free trade agreement, is to stop all these products from entering freely without our countries maintaining some autonomy to halt them.

Why should the powerful get subsidies
and the weak have to eliminate their duties?

Another very delicate issue in the negotiations is that of subsidies, the “domestic price supports” that the United States gives to its agricultural producers. The United States has argued that this will be decided in the multilateral World Trade Organization (WTO) forum and Costa Rica, Nicaragua and Honduras agree that this is indeed what should happen. Central American civil society agrees as well and takes it a step further: if the North’s subsidies correspond to the WTO, they shouldn’t be included in the CAFTA negotiations, and if that’s the case the US shouldn’t be asking us to drop our tariff barriers by certain deadlines until that issue has been resolved in the WTO. It’s only fair: they can’t ask us to leave Central America unprotected in the framework of a free trade agreement if the issue of US protection or lack of protection is being resolved elsewhere.
It would be fairest not to eliminate the duty on any product subsidized in the United States that the US wants to sell in Central America in competition with regional production. We have identified five products that combine these characteristics: peanuts, dairy products, sugar, rice and maize. The United States says it is willing to reduce the export subsidy it provides for these five products, but that subsidy represents barely 6% of the total subsidy received by their producers. The strongest subsidy is the 94% given for production, not the 6% given for exportation. The production subsidy is now disguised under the name of “domestic price supports” after an agreement between the United States and the European Union.
Another sensitive issue is the abysmal, unsalvageable asymmetry between the economies of Central America and the United States with respect to production, productivity, institutional capacity, etc., and not just in agriculture. If Central America can’t get the free trade negotiations to consider the principle of asymmetry, we’ll be signing our own economic death warrant. The United States is trying to tell us that its subsidies and this asymmetry aren’t necessarily disadvantageous for Central America. For example, its negotiators say that the United States produces a surplus of wheat and will sell it to us at very low prices, so Central America wins. Kidding on the square, we answer that maybe that’s true, but we want bread to sustain the living, not for the wake. What’s the use of cheap wheat in exchange for killing the rest of the economy?

Nicaragua’s disharmony makes it easy prey

The United States has very skillfully exploited Central America’s unresolved problems for its own ends. Despite being such a small region with such small countries, Central America has no negotiating strength because it hasn’t been able to negotiate as a single region with common interests. Central America failed to achieve its own integration in the lead-up to this negotiation; it couldn’t even agree on a customs union. And this creates two problems. The first is that we don’t have internally harmonized duties, which causes innumerable problems in the circulation of our merchandise throughout the region. The second is that we also have no common external duty, so we have problems generated by different duties in almost all categories that are key for Nicaragua.

Let’s look at rice. Guatemala and El Salvador only produce 10% of the rice they consume, while Nicaragua and Costa Rica produce 70% of their rice consumption. El Salvador thus set a low import duty because it wants the rice it doesn’t produce to come in at a low price. Costa Rica and Nicaragua want exactly the opposite, so they have a higher duty to protect their national growers by making imported rice more expensive.

When we Central Americans can’t reach an agreement, the United States proposes to negotiate each product bilaterally with the different countries, which would cause an intense triangulation of products; they would come in where they pay lower duty then circulate all over the region. This is one of the greatest dangers of this free trade agreement and its resolution depends on finding a way to respond to many different, and often condradictory, economic interests and regional political desires.

The last two rounds will be the most dangerous, because each country will decide whom to protect and whom to sacrifice, and at the end, there will surely be last minute maneuvers. It’s always politically easier, for example, to protect the “blue barons” of sugar and sacrifice the maize growers, even if the longer-term consequences of this sacrifice are catastrophic and augur immense regional instability.

In the negotiations, a genuine problem is attributed to Nicaragua: it has the lowest duties in the region. During the Alemán administration, duties were lowered or eliminated unilaterally, in exchange for nothing. For example, maize only has a 15% duty barrier, when 33% of the cost of US corn is subsidized. In Nicaragua, red beans had a 15% protection—only recently was it raised again to 30%—while Costa Rica, which doesn’t produce anything like the amount of beans we do, has a 30-45% protection. Beef production in Nicaragua has a 15% protection while pork, which is not produced in quantity or exported, has a 45% protection. These arbitrary duties, these irregularities, have a strong effect when it comes to regional discussions.
When the need for a common outside tariff for all of Central America comes up, our countries always say: let’s just adopt all the highest tariffs that already exist in the region. But the US proposes adopting not the 40% duty consolidated by our countries in the WTO but rather the applied duty, which is lower. In the case of maize, for example, we have a consolidated duty in the WTO that is higher than the 15% being applied, and of course the United States wants the lower duty, arguing that it will accept no discriminatory treatment, in line with the WTO’s own principles. This is just one index of how far out of our league we are.

Patents and intellectual property

On the issue of patents and intellectual property, which is critical to the United States, it proposes prolonging the life of its patents for pharmaceutical and agrochemical products for another five to ten years. Just one example of what this means is that glyphosate, a generic product that is the active component of brand name herbicides such as Gramoxone or Roundup is produced and used in Central America. Costa Rica can produce a gallon of glyphosate for US$25, while this same gallon costs US$113 to produce in the United States. So the US proposal is that for the next ten years the Central American agrochemical companies that produce glyphosate cheaply and generically pay use rights for this product to the Monsanto company, which patented glyphosate under the Roundup label. There is no logic to this, because this generic product has been produced in Central America competitively for years, and in fact the United States isn’t challenging this at all. It’s waging a larger fight for its brands; it wants to prolong the life of patents and buttress the intellectual property laws even more in their favor. We’re also very worried about the patents that the United States wants to have on living things—animal and plants. It is proposing the drafting of laws for these new patents where they don’t exist and the reform of laws that already do exist, always in favor of its own interests.

Labor and environmental issues

We’re particularly worried about labor and environmental issues. The United States has a problem with the first: our tragedy is disadvantageous for it. People in Central America work for any wage they can get in the free trade zones, or maquilas, and that tragedy is our relative advantage in the negotiations because there is serious tension in the United States today with the unions, which fear a massive exodus of companies to Central America and the triggering of even more unemployment there. Since the US labor force is massive and organized, it can pressure its congressional representatives not to approve CAFTA if it doesn’t include sufficient labor protection in the textile and agricultural fields.

As for the environment, we’ll have to see what technical standards investors will have to meet. For the most part, they are lower than established by national law, with potentially very damaging effects for Nicaragua’s still abundant water and forestry resources.

Do small and big producers have common concerns?

In the sixth round of the CAFTA negotiations, held in New Orleans, we met with the region’s big business executives. In private they’ve told us they are in total agreement with our proposals, but in public they can’t say that. There were no major differences between our proposals and those contained in the latest document issued by the agricultural companies. Like us, they are proposing the establishment of a special agricultural safeguard that is equivalent to the “domestic support” in the United States. They also propose establishing the asymmetry principle for the different agricultural products; lowering US duties until they reach our levels so we can continue dropping them together; and basing the quota of Central American rice imports on lack of supply rather than imposing progressive quotas with a 10% annual increase.
The region’s big business executives, who are just as aware of the potential risks as we have tried to be, confessed to us that they can’t say publicly what they think and say in private because they might end up having their “arm twisted” by their governments. They admitted that they’re happy to see us playing the role of the “bad guys” because we can say what they can’t. To understand this “double standard” you have to realize that no end of national political and economic games are being played out in this unilateral free trade negotiation.

What happened in Cancún
changed the nature of the game

What happened in Cancún during the WTO’s fifth ministerial meeting had a strong impact on the seventh round of CAFTA negotiations in Managua, which was held at the same time. The North had sold the Cancún meeting to the South as the great hope, but instead it was a bitter lesson in naiveté.

In the January 1995 Marrakech summit, the United States and the European Union had announced that they would reduce their subsidies by 30% and their duties by 36% and accepted that any country whose annual per-capita income was under US$1,000 would not have to lift the duties from its agricultural production. As a result, the Central Americans said: if that’s the multilateral agreement, why do we have to lower or eliminate our duties in the CAFTA negotiations with the United States since our per-capita income—with the exception of Costa Rica—doesn’t exceed US$1,000?
Then in the 2001 WTO summit in Doha, Qatar, the two fundamental agreements were the developed countries’ commitments: a) to work to convert international trade into an instrument for the poor countries’ development—mainly in agriculture—and b) to improve the poor countries’ income by facilitating the access of their agricultural products to the developed countries’ markets. Naturally, these two agreements, which were like “Christmas wish lists” for the poor countries, are hard, if not impossible, to fulfill, as was quickly demonstrated. Both commitments went up in smoke in Cancún when the United States and the European Union made it clear that neither side should think the other was going to cede anything without getting something in return. That’s what triggered the crisis in Cancún.

Why we need a moratorium
on the CAFTA negotiations

The influence on our regional free trade agreement of the derailing of the WTO is that now we can say to the United States: we’re not going to negotiate anything as long as you don’t reduce your domestic supports and your subsidies aren’t resolved in the WTO. This is one reason that it’s urgent to lobby in favor of a moratorium for the CAFTA negotiations. Others include the inconclusive Central American customs union process, the raft of incoherencies in the free trade agreements and the fact we need more time as a region to rethink what we’re doing.

Furthermore, in Nicaragua’s case, the National Development Program that the government presented in September is barely under discussion and there’s no way you can discuss a free trade agreement as a development instrument if you’re not clear about the development strategy into which it will be inserted. In this context, the greatest risk is that CAFTA itself will become Nicaragua’s development strategy rather than one instrument of it, and I think that’s where the Bolaños government is headed.

For all these and many other reasons, negotiating the free trade agreement is extremely complex, difficult and challenging for us. We have to recognize that our room for maneuver as a region is very limited and at times we feel that all we’re defining there is whether we’re committing suicide or will die a natural death. It’s that crude.

Nicaragua faces tremendous challenges

The challenges are immense for Nicaragua. The social movement, the peasant movement, has to be able to present a more carefully thought-out economic proposal, define new methods of struggle, rethink its demands and, above all, develop a vision so it can build a process. If it doesn’t, we’ll be restricted to a posture of resistance to CAFTA, which would be resisting something that most people see as a mere abstraction because it’s not yet decoded for them; they can’t envision all its problems.
We’ve lobbied gringo farmers and legislators, moving into areas where we’ve never gone before. In doing so, we’ve realized that the main fear in the United States is that the Central American region won’t fulfill the fundamental political task assigned it in the free trade agreement: to be a stable neighbor, ensuring the United States stability for regional trade more than a specific market. Because the fact is, Central America accounts for barely 1% of all US purchases and 1.2% of its sales. We’re nothing, really. Both Republican and Democratic Congressional representatives have told us that CAFTA is an issue in their campaign, which is yet another reason why the United States is imposing all these issues and all this rush on us.

The US is making a show of strength

We feel the US is using Central America to get the upper hand, showing us not only how it protects its agricultural products but also how it will defend them. Its negotiators are quite clearly presenting us very valid political arguments from their viewpoint. In the sixth round of negotiations, in New Orleans, we had the chance to participate in a discussion with the gringo negotiators and the Central American negotiators. We heard how the gringos defended the subsidies they give to their farmers and said they would go right on protecting them, because it has a multiplier effect on the economy, because the agro-food chain generates 10 million jobs and because the United States isn’t about to depend on any other country to ensure its population’s food supply.

And what political arguments could our negotiators have put forward to defend our agricultural producers? The very same ones: our food security, job generation, the multiplier effect on the economy… Plus our own arguments: the need to reduce poverty, hunger and migration; the need to improve consumption… We have all kinds of reasons to offer, but the Central American negotiators don’t give them. Maybe they’re ashamed to present themselves as representatives of poor countries.

Despite everything, kudos for the Nicas

That said, it has to be recognized that the Nicaraguan team has been the most open in providing information to nongovernmental sectors involved in the negotiations. We’ve had access to the texts, and this has improved our ability to identify the key points on which to pressure and present proposals. That’s why Nicaragua has taken the lead in agricultural and environmental issues within the Central American Initiative on Commerce, Integration and Sustainable Development (CID), which was created to coordinate the movements of those sectors of Central American civil society that share democratizing strategies and objectives in relation to trade policies.

The Nicaraguan team has also been the most consistent and compact—unquestionably the smallest, but also the best. But since Nicaragua only represents 4% of the volume of Central American exports to the United States, our specific weight is too small.

Furthermore, the Nicaragua team has also been the most stable over the course of the negotiations, with no changes in its composition. Honduras prepared its team, but a week before the first round it resigned en masse and they had to improvise. And Guatemala’s official negotiator resigned two rounds ago. The Nicaragua team also has the most diverse social representation, which has been very favorable for us. The strength of the Nicaragua team is also based on the fact that its members have no electoral aspirations, whereas those on the Salvadoran team can be heard in the corridors outside the negotiations already divvying up government posts. Something similar is going on among the Guatemalans. For various reasons I think that the Nicaragua team is the best. It’s just a shame that it represents a government so removed from the people.
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