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Congress Approves CAFTA

Approval of CAFTA in the summer of 2005 was seen as a significant political victory for the Administration and Republican congressional leadership.  CAFTA advanced USTR’s “competitive liberalization” strategy of using bilateral and regional trade agreement to builds momentum for U.S. positions during the Doha Round of WTO talks.  The Bush Administration asserted the importance of rewarding U.S. strategic partners on the War on Terror, and noted that a defeat of CAFTA would be disastrous for U.S. leadership in the global trade arena.

Prior to the vote, states registered their concerns about CAFTA’s procurement chapter, and about investment provisions modeled on NAFTA’s Chapter 11 that may impact state and local government authority.

What was the political backdrop for the close vote to adopt CAFTA?

a.    The Pros: Proponents argued that CAFTA would be a boon for US exports and that ratification would demonstrate the Administration’s continued political strength—in implementing its domestic agenda, and in providing leadership at global trade talks.

b.    The Cons: Opponents argued that CAFTA would accelerate a race to the bottom in labor, environmental, and human rights standards.  Fear of the effect on sugar and textile industries magnified opposition to CAFTA in Great Plains and southern states.

c.    The Vote on CAFTA was largely decided on a partisan basis, with many fewer Democrats supporting ratification than was true in the NAFTA vote a decade ago.

How did state and local government issues factor into the CAFTA debate?

a.    USTR talked up state/local exports.  The Trade Representative’s office noted sections of a report by the Intergovernmental Policy Advisory Committee stressing the importance of CAFTA to state/local export promotion efforts.  CAFTA would help U.S. exporters by lowering tariffs on exports on U.S. consumer and manufactured goods and by opening markets for U.S. services.  Exports of U.S. grain, beef, and poultry should also increase.

b.    Procurement requirements energized opposition.  Procedural questions about the governor’s role in binding the state to CAFTA’s procurement chapter, as well as USTR’s lack of consultation with state legislatures on procurement matters, created opposition to the agreement. 

c.    National Associations & Members of Congress focused on CAFTA’s investment chapter.  The National Conference of State Legislatures, the National League of Cities, the National Association of Towns and Townships, and the International Municipal Lawyers Association raised serious questions about CAFTA’s investment chapter.  “To date, sufficient assurances have not been offered to assuage our concerns that American federalism is not placed in jeopardy by the investment chapter of CAFTA,” they noted in a joint letter. Both congressional opponents and proponents of CAFTA expressed concern about the effect of CAFTA’s investment chapter on state and local government authority.  

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