CAFTA Will Benefit U.S., Trejos Tells UA
Costa Ricans like chicken legs, while United States residents tend to eat more chicken breasts. The Central American Free Trade Agreement (CAFTA) or Tratado Libre de Comercio (TLC) as it is known locally, will make it easier for both countries to get the cuts of chicken meat they want.

That's according to Alberto Trejos, head of the private, nonprofit INCAE Business School in San José, who spoke Thursday at the Donald W. Reynolds Center for Enterprise Development at the University of Arkansas.

The Central American trade agreement involves Costa Rica, El Salvador, Nicaragua, Honduras, Guatemala, the Dominican Republic and the United States.

The agreement is already in effect in El Salvador and is expected to come into effect in Nicaragua and Honduras on April 1. The rest of the country are expected to follow soon.

Costa Rica is the only signatory country that has yet to ratify the agreement.

Trejos, a former minister of foreign trade for Costa Rica, led the negotiation of the trade agreement, which intends to make it easier to move goods among the U.S. and Central American countries.

For example, he said Arkansas produces a lot of chicken, but the state's residents eat more breasts than legs. There have been barriers to selling U.S.-produced chicken in Costa Rica and vice versa.

"With CAFTA, we are going to end up selling you all those breasts and you will sell us all those thighs," Trejos said.

The trade agreement  aims to remove tariffs, provide methods for dispute resolutions and require signatory countries to abide by and enforce their own laws.

Trejos said that will benefit countries who used to isolate themselves out of fear of foreigners, who then suffered because they couldn't develop technologies or catch up in global markets due to small economies.

"Now, not all of our eggs are riding in one or two baskets and that is because we trade," Trejos said. He noted Costa Rica now exports half its goods and services and imports half its goods and services.

Under the trade agreement, more than 80% of U.S. exports of consumer and industrial goods will become duty-free to American nations immediately, with remaining tariffs phased out over 10 years.

In 2004, trade between the United States and Central American nations totaled more than us$33 billion, according to the U.S. Commerce Department.

Despite its benefits, there were some potholes on the road to implementing the trade agreement. Trejos said the United States is a large country with economic power, viewed by some as bully. He said it's not easy to convince other countries to make a pact with a bully.

Trade agreement negotiation, including legal review, took about 17 months; passing it through seven countries' governments took 18 months; and the enactment is taking another six to eight months, Trejos said.

But, the trade agreement may help Costa Ricans know a way of life similar to U.S. standards of living. He said Arkansas is a relatively poor state, with per capita income of less than us$27,000 per year. However, Trejos said that's a fortune compared to Costa Rica's per capita income of us$3,750 per year.

"So we have a lot of catching up to do," Trejos said. "That catching up is going to require that our economy grows very quickly. There are not many ways to make a domestic economy grow faster than 3, 4, 5 percent a year," Trejos said.

Export markets can grow 9% to 15% per year, Trejos said, if trade barriers are removed.

Costa Rica hopes to quickly pass the trade agreement soon after Oscar Arias takes office on May 8, though he is facing opposition.

Arias is a supporter of the TLC, while his opponent, Ottón Solís, who lost to Arias by a very small margin in the February 5 elections, campaigned to renegotiate the trade agreement. Arias does not have a clear majority in the Legislative Assembly.