Costa Rican trade officials announced Jan. 25 that Costa Rica will join the Central American Free Trade Agreement with the United States, also known as CAFTA.

“We're very pleased Costa Rica has joined its Central American neighbors in this cutting-edge, modern agreement designed to expand trade between friends and neighbors,” says U.S. Trade Representative Robert B. Zoellick. “With each Central American nation, we worked to tailor market access provisions to reflect individual circumstances, and that work is now complete with Costa Rica.”

In late December the United States reached a trade agreement with the four Central American countries of El Salvador, Guatemala, Honduras and Nicaragua. However, Costa Rica was not included in the agreement at first, deciding that it needed additional time before signing off.

Disagreements over market access for agriculture, textiles and apparel, and professional services had delayed Costa Rica's entry into CAFTA, but Zoellick says those issues have been resolved.

Proponents of the trade agreement say it will phase out tariffs and other trade barriers, and will promote regional economic integration and growth. Costa Rica currently accounts for approximately one-third of U.S. trade with the five Central American countries included in the trade agreement.

According to the trade agreement, more than half of current U.S. farm exports to Central America will become duty-free immediately under the trade pact, including high-quality cuts of beef, cotton, wheat, soybeans, key fruits and vegetables, processed food products, and wine, among others.

Tariffs on most remaining U.S. farm products will be phased out within 15 years. U.S. farm products that Zoellick says will benefit from improved market access include pork, dry beans, vegetable oil, poultry, rice, corn, and dairy products. Textiles and apparel will be duty-free and quota-free immediately if they meet the agreement's rule of origin, he says.

Among those groups praising Costa Rica's entry into the Central American Free Trade Agreement is the USA Rice Federation.

“Costa Rica's participation in CAFTA finalizes a strong regional agreement that guarantees access for U.S. rough and milled rice,” said USA Rice chairman Gary Sebree. “The Central American market is critical to the economic future of rice producers and millers. With the addition of Costa Rica, CAFTA now includes a market that currently imports some 500,000 tons of U.S. rice.”

Sebree says Costa Rica has agreed to establish tariff rate quotas for both milled and rough rice, which will enter with no tariffs. The tariff rate quotas will grow over time and duties on all types of U.S. rice will phase out over a 20-year period.

Although the House and Senate must approve the Central American Free Trade Agreement before it can take affect, President Bush is expected to sign the trade pact when it reaches his desk.

“This is another important step toward fulfilling the vision of CAFTA. We look forward to negotiating with the Dominican Republic over the next few months to grow the ever-expanding circle of free trade in this hemisphere,” Zoellick says.


e-mail: dmuzzi@primediabusiness.com