CAFTA jeered, cheered in Md.

Split: Farm exports could rise, but the U.S. sugar industry may retrench.

July 29, 2005|By Laura Smitherman | Laura Smitherman,SUN STAFF

Maryland farmers struggling to make a living cheered when Congress narrowly approved a free trade agreement with Central America late Wednesday. Owners of the Domino Sugar refinery near Baltimore's Inner Harbor jeered.

The groups mounted intense lobbying campaigns on Capitol Hill in recent weeks and watched late Wednesday night as Republican leaders in the House of Representatives held open the vote for nearly an hour longer than planned to get more backers. President Bush had personally made the rounds to appeal to lawmakers on the accord his administration negotiated.

In the end, the Central America Free Trade Agreement, or CAFTA, was approved by a two-vote margin. Congress must vote trade deals up or down and cannot amend them, and the Senate passed the agreement last month.

The accord would eliminate most tariffs and import restrictions between the United States and Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic. Exports are expected to increase to the region where more than $15 billion goods are sold now, a market bigger than India, Indonesia, and Russia combined.

Nearly 80 percent of Central American products, including textiles, sugar and coffee, already enter the U.S. duty-free, and consumers here aren't likely to notice any price changes at the checkout counter, experts said.

Global trade gets to the heart of a local economy. In Maryland, the American Farm Bureau says CAFTA will enable farmers to double their exports of dairy products, cotton, grains and other products to nearly $30 million. In contrast, the American Sugar Refining Co., which owns Domino, says it might have to cut back production and jobs.

Valerie Connelly, director of government relations for the Maryland Farm Bureau, said CAFTA will allow soybean growers to sell more products into export markets and make up recent increases in their costs. They have been struggling to get their goods to market after the pier they used at the port of Baltimore was ripped apart by a storm three years ago. They're paying 25 to 40 cents a bushel to transport their crops to Norfolk, Va., she said.

Similarly, it could help dairy farmers who, in some cases, have felt pressured by poor profits to sell out to real estate developers. Dairy products as well as poultry, the No. 1 agricultural product in Maryland, and corn, some of which is used as chicken feed, also could be shipped south.

"Central America is a prime market, and it doesn't cost as much to ship there as some other overseas places," she said.

Van R. Boyette, a consultant and lobbyist for Domino, said CAFTA will allow an additional 110,000 tons of raw or refined sugar into the U.S. market duty-free, which will force the company to reduce its domestic production.

The majority owners of American Sugar are Alfonso and J. "Pepe" Fanjul, who also grow sugar cane in Florida that's transported by barge to Baltimore, where 395 people are employed, and other plants to be refined for consumers. The Fanjuls, Cuban expatriate brothers, are major political donors to both the Democratic and Republican parties.

`Had better days'

"We're going to have to look at all of our operations now and decide what facilities we're going to keep," Boyette said. "I don't think the Domino Baltimore operation is in jeopardy, and I'm hoping any cutbacks won't be made there, but I tell you if they do any more of these trade agreements, I wouldn't be so sure."

"We've had better days," Boyette said.

The cost of sugar in the United States is kept artificially high - roughly twice the price fetched on the world market - by price supports. Sugar producers say that's only fair because world prices are kept low by subsidized producers in Europe and Brazil who dump sugar on the global market.

The nail-biter of a vote reflects a split in Congress and public opinion on free trade, observers said. One decade after Congress passed the North American Free Trade Agreement with Mexico and Canada - a debate that struck a divisive chord nationally - the same debate rages on. NAFTA passed the House by 18 votes.

Bush, who argued that opening trade in Central America is a matter of national security, has trade agreements with Thailand, Morocco, and other Latin American nations next on his agenda. The administration, in pushing for the accords, links improving economies abroad to stronger democracies and notes that many of the would-be trading partners supported the U.S. war in Iraq.

But proponents of tearing down trade barriers say their argument - that doing so benefits the entire economy - has become harder to make in an increasingly partisan Washington. Their opponents, including labor unions, say that agreements like CAFTA enable companies to move jobs overseas and hurt industries such as textile and sugar.

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