WASHINGTON — The Senate was set to vote on the Central American Free Trade Agreement Thursday night after a contentious debate on a cornerstone of the Bush administration's trade agenda.
If the proposed accord passes, it would go to the House, where it would face a tough fight from opponents who have argued that it will boost imports and do further damage to domestic apparel and textile manufacturers as well as sugar producers. The House Ways and Means Committee approved CAFTA by a 25 to 16 vote.
The pact is intended to eliminate trade barriers with Costa Rica, El Salvador, Guatemala, Nicaragua, Honduras and the Dominican Republic. Proponents, including retailers and importers, say the Central American region gives them an alternative to sourcing in Asia. Some U.S. companies are prepared to increase their investment in Central America if CAFTA gets congressional approval.
"CAFTA is a good bill; it's a fair bill, an even-handed bill that members on both sides of the aisle should be able to support in that this legislation expands the market for America's goods and thereby grows jobs here at home," Senate Majority Leader Bill Frist, (R., Tenn.) said on the Senate floor.
But a fellow Republican, Sen. Lindsey Graham of South Carolina, suggested the agreement would cost even more jobs in his state, where textile and apparel industry employment fell to 46,500 from 78,500 from May 1993 to May 2005.
"The trade agreement we've negotiated with Central America — CAFTA — has many loopholes that China will exploit, just like they've exploited every other trade agreement we've ever done, and the cumulative effect ... has just been devastating to the textile industry and other industries," he said.
Top administration officials, from President Bush to Commerce Secretary Carlos Gutierrez, have lobbied publicly for the pact. The administration failed in a last-minute attempt to strike a deal with senators representing sugar-producing states, who fear increased imports.
The sugar issue would loom in the House, where a bloc of Democrats also oppose the trade bill on grounds that it doesn't adequately protect workers from exploitation.
The textile and apparel industry is split on CAFTA. Fabric producers generally oppose the deal because it allows the use of materials from any of the signatory countries, while fiber producers support the pact because of the potential export opportunities.Frist said businesses in Tennessee sold $271 million worth of goods and services to the CAFTA region last year and cited Levi Strauss & Co. as a company that would benefit from it. A Levi's plant in the state exported $34.8 million in apparel to the region last year, he said.
"CAFTA will open the door to 44 million consumers of American goods, and more sales to Central America means more jobs right here at home,'' Frist said.
But the opposition says the agreement will unlock the door to Chinese imports into Central America because it will make it easier for companies to turn to Asia for fabric and yarn and take business from U.S. companies.
"There is a small group within the textile industry who oppose this," said Sen. Jim DeMint (R., S.C.). "They say CAFTA will allow China to exploit loopholes in the agreement, but they fail to recognize that, without CAFTA, there will be no loopholes at all — just one giant hole that China will use to destroy our industry."
He echoed the administration's argument that U.S. retailers will pull out of the region and shift all of their business to China without CAFTA. Fabric mill product exports from South Carolina to the region were valued at $180 million —more than half the state's total exports to the region — in 2004, DeMint said.
But Graham said the administration's pledge to change a provision in the agreement for pocketing fabric to require it be made by one of the signatory countries — as opposed to any country in the world, which is the way it stands now — would never be fulfilled.
Officials made that pledge, among others, to the National Council of Textile Organizations and Sen. Elizabeth Dole (R., N.C.) in exchange for their endorsement.
"That would require all six CAFTA countries to ratify it and that's just not realistic,'' Graham said. "It's just not going to happen. So there will be people in my state who, unfortunately, if this gets passed, are going to be put out of a job because the Chinese are going to come into the CAFTA region and put American pocket fabric manufacturers out of business."
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