White House Hopes Individual Deals Lead to Wider Agreements

By Nell Henderson
Washington Post Staff Writer

The Bush administration and the Dominican Republic agreed yesterday to remove almost all trade restrictions between them over the next decade, while keeping a lid on how much sugar the Caribbean island nation can export to the United States.

The agreement would allow the Dominicans to gradually boost their sugar exports to the U.S. market, but limits the amount of the increase and maintains stiff tariffs for exceeding those caps.

The pact would essentially add the Dominican Republic to the proposed Central American Free Trade Agreement, or CAFTA, which would reduce commercial barriers between the United States and Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua, "expanding the circle of friends and neighbors who have agreed to tear down the tariff walls that block trade," U.S. Trade Representative Robert B. Zoellick said in a written statement.

While the Dominican Republic's economy is small compared with the U.S. economy, the Bush administration has pursued such agreements with several individual countries in hopes of prodding others to continue negotiating a proposed Free Trade Area of the Americas that would include most of the nations in the Western Hemisphere, and to provide a push to the stalled World Trade Organization global trade talks.

Jack Roney, director of economics and policy analysis for the American Sugar Alliance, an industry trade group, called the change in Dominican sugar exports "a very, very modest increase indeed," adding, "We're pleased it's not greater."

Critics of sugar quotas say the trade limits prop up the prices paid by American businesses and consumers, while hurting poor sugar exporting countries trying to compete in global agriculture markets.

The increase the Dominican Republic's sugar cap is "not significant," said Dale Hathaway, a senior fellow at the National Center for Food and Agriculture Policy, and a former undersecretary of agriculture in the Carter administration. "It's fairly clear this administration is absolutely under the control of the sugar people and not going to upset them in an election year."

Zoellick's spokesman, Richard Mills, responded that "tough compromises were made in a few areas" in order to seize "the chance to open markets and expand opportunities for our workers, farmers and exporters."

The Dominican Republic became the eighth country to reach a free-trade pact with the United States since December -- joining the Central Americans, Australia and Morocco -- and the Bush administration has said it plans to continue negotiating more such agreements this year, even as trade heats up as an election year issue.

Democrats have blamed the Bush administration's economic policies for the loss of U.S. jobs to global competition. Republicans have responded by decrying proposed new trade restraints as "economic isolationism."

Some Democratic lawmakers have said CAFTA will not win congressional approval because it lacks sufficient protection for the rights of workers in the Central American countries. Zoellick responded to one such comment last week on Capitol Hill, saying, "The reason CAFTA can't pass is because we have a bunch of economic isolationists using labor as an excuse."

Zoellick said yesterday that the latest pact "will promote economic growth, opportunity and prosperity in the Dominican Republic and the region."

The administration is consulting with Congress on when it will send the agreements to Capitol Hill for approval, Zoellick said.

However, it's likely the matter will be put off until after the November election, given Congress's limited calendar, divisions on Capitol Hill over trade, and opposition from labor and the sugar industry, said Jeffrey J. Schott, a senior fellow at the Institute for International Economics.

The Sugar Alliance would have preferred that sugar exports not be included in any of the recent free trade agreements, Roney said, arguing that the issues of global oversupply and government subsidies should be addressed through the WTO global trade talks.

The Dominican Republic has a population of more than 8.6 million -- about the same as New Jersey -- and economic output of $21.3 billion last year.

The United States and Dominican Republic trade about $9 billion worth of goods and services each year. U.S. trade with the original five CAFTA countries is $23.2 billion.

The terms of the Dominican agreement are very similar to the CAFTA, making most U.S. merchandise exports duty-free and eliminating most tariffs on U.S. farm exports to the participating countries.

And like the other CAFTA countries, the Dominican Republic would continue to face restrictions on how much sugar it can export to the United States, but the caps would rise over time.

The United States produces about 8.1 million metric tons of sugar a year and limits imports by assigning specific quotas to individual nations.

The Dominican Republic has the largest U.S. sugar quota of any country, around 185,000 metric tons a year, a ceiling established through WTO negotiations. Under the new agreement, the country could export another 10,000 tons to the United States the first year the pact is in effect, an amount that would rise by 2 percent each year thereafter, without those shipments being hit by tariffs.

The five Central American countries combined have a quota of 125,600 metric tons a year. Under CAFTA, they would be able to export an additional 99,000 tons to the United States the first year, and that additional amount would rise to 140,000 tons over 15 years.

U.S. producers pay about 20 cents per pound for raw sugar, while the price on world markets is about 7 cents a pound, Roney said, terming the lower number a "dump price" below the cost of production.

© 2004