Costa Rica May Lose CBI
Benefits In Rejecting
CAFTA
by Mike Godfrey, Tax-News.com,
Washington
A rejection of the
Central American Free
Trade Agreement (CAFTA-DR)
by Costa Rican voters in
an upcoming referendum
casts an uncertain cloud
over the preferential
treatment of Costa Rican
goods entering the US
under the Caribbean
Basin Initiative (CBI),
part of which is due to
expire next year.
Costa Rica, which has
signed up to CAFTA-DR,
remains the only country
not to have ratified the
deal, and has remained
bitterly divided over
its participation since
the agreement was sealed
in 2004. On Sunday, more
than 100,000
demonstrators took to
the streets in San José
for an anti-CAFTA rally
- a huge protest in a
country of just 4
million people - which
highlighted the level of
feeling against the
proposed move to open up
the country to free
trade with the US, as
unions fear mass job
losses.
The issue will be
settled in a referendum
on October 7, but the
weight of opinion is
seemingly against
ratification. This
suggests that the
outcome will not be a
favourable one for the
government of President
Oscar Arias, which
supports CAFTA-DR, nor,
ironically, for Costa
Rican farmers who could
see high levels of
tariffs imposed on their
products entering the US
when CAFTA-DR is
supposed to replace
certain CBI provisions
in 2008. According to US
Deputy Trade
Representative John
Veroneau, this presents
a dilemma for the US
Congress, which would
have to decide whether
to retain these trade
benefits for Costa Rica
alone.
"There has been
considerable speculation
over how CBI benefits
could be affected by the
outcome of the
referendum," Veroneau
noted in a statement.
"Some have suggested
with certainty that
these benefits would not
be extended in the face
of a rejection of CAFTA.
Others have suggested
with equal certainty
that these benefits
would be extended. The
truth is that no one can
say for sure what the
impact would be since
Congress has never been
asked to extend
preferential benefits to
a country that has
rejected a bilateral
trade agreement.
Hopefully, the
referendum will be
decided on the merits of
the agreement itself,"
he observed.
Under the US Caribbean
Basin Initiative (CBI),
which has been in effect
since 1984, food and
agriculture products are
exported duty-free to
the US market. However,
when some provisions of
the CBI lapse in 2008,
certain goods exported
to the United States
could be subject to 35%
tariffs.
CAFTA would immediately
eliminate duties on more
than half the value of
US farm exports to the
region, expand
intellectual property
protections, and open
telecommunications and
other markets. It would
also eliminate tariffs
on 80% of US exports of
consumer and industrial
goods in signatory
countries, with the
remaining tariffs phased
out over 10 years.
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