- Dominican Republic Central American Free Trade Agreement -
This Spring semester, I am traveling throughout Costa Rica working on four independent studies through the New College program at the University of Alabama. One of these studies is to analyze the impacts that DR-CAFTA, Dominican Republic-Central American Free Trade Agreement, will have on Costa Rica.
Here in Costa Rica, the trade agreement is referred to as TLC – Tratado Liberacion Commercial. In this bog, the trade agreement may be referred to as TLC, DR-CAFTA, or CAFTA - which would refer to the time before the Dominican Republic signed on. Also, all five of the Central American countries included in the agreement are often referred to as CA-5.
Based on my readings of the policy changes written into the agreement, newspaper articles and scholarly papers written by both those who oppose and support the agreement, and by collecting a range of conversations and encounters here in country, I will attempt to observe a general impression of the peoples' views of DR-CAFTA’s impact on their lives.
Costa Rica is well known as Central America’s most stable democracy and since the end of World War II, this small country has developed a successful mixed economy. In the past 60 years, there as been a good public health plan of which has resulted in life expectancy figures equal to those of the United States, a literacy rate of 98%, a highly regarded national university, and an efficient electric power and telecommunications enterprises that exports electricity throughout Central America and provides the cheapest cell phone service in the western hemisphere. Costa Rica’s per capita gross domestic product of $12,500 is twice that of such neighboring states as Nicaragua and Panama, 400 percent greater than Honduras, and about the same as that of Chile—another energized social-democracy.
Source: Contentious CAFTA - A Turning Point for Costa Rica?
Dr. Stephen Bindman; COHA Senior Research Fellow
– Center of Hemispheric Affairs
With the signing of the DR-CAFTA, many changes are expected to occur in Costa Rica.
The key points of the agreement effective January 1, 2009 are:
• 80 percent of U.S. exports will be duty-free in Central America and the Dominican Republic.
• Tariffs on U.S. autos and auto parts will be phased out within five years.
• More than half of farm exports will be duty free.
• U.S. farm products will be phased out within 15 years, all tariffs eliminated in 20.
• Addresses sugar production imbalance.
• Apparel made in Central American and Dominican factories will be duty free if they use U.S. or regional fabric and yarn.
• New rules will loosen access to service, including telecommunications, technology and tourism.
• Private healthcare companies will have access to the CA-5
• The buying, selling and even manufacturing of arms may be allowed on Costa Rican soil.
There has been a widespread, grassroots dissent against CAFTA from the beginning, especially in Costa Rica. On February 6, 2007, tens of thousands of people took to the streets all over Costa Rica in a demonstration to block ratification of the free trade agreement and reject approval to implement legislation demanded by the United States. Their main point of contention was and still is that membership with CAFTA will alter the country's social development model, by introducing market bias in favor of foreign imports. There is a great fear that Costa Rica will turn away from socialism and towards capitalism.
Costa Rica signed onto CAFTA in 2004, but in October of 2007 the government passed a referendum to ratify its membership. In the country wide election, Costa Ricans voted 50.6% in favor for the agreement. The issue is still mired in controversy due to the narrow victory.
Reasons for opposition:
• No formal public input or oversight in the negotiations.
• CAFTA is likely to give corporations powers to object to barriers to free trade, including laws people enact for their own protection.
• A minority of rich companies and wealthy stockholders will benefit from reduced costs.
• Workers will get lower pay and lose their jobs.
• Reduced labor rights.
• Increased corporate domination of farms.
My curiosity about the TLC came about when I lived with a Costa Rican family for a summer in 2006. Our evenings were often spent sitting outside the house chatting and enjoying the cool, fresh air. During those conversations, I quickly learned that my host father Mario and his son Pablo were on opposing sides of the TLC. Mario, a retired school teacher, opposed the agreement with the vision that open markets and privatization of many social services make the rich richer and the poor poorer. Pablo, then in his mid-twenties, believed that Costa Rica needed a change; that if they continued to resist globalization and did not open their borders to foreign trade and investment, they would miss great opportunities to strenghen their economy.
I have now returned to their hometown Atenas and with my slightly improved Spanish skills, our conversations about the TLC have gotten much deeper and, as to be expected, more complex.
