Tai Suggests CAFTA Has Not Lived Up to Promise

With the administration's desire to address root causes for migration from Central American countries, U.S. Trade Representative Katherine Tai said the free trade agreement that covers that region, and the Dominican Republic, has been “very much on my mind recently.”

Tai, who was speaking at a virtual conference hosted by Council of the Americas May 4, said she knows that some trade agreements have fallen short of their promise. Even though nearly all Central American exports to the U.S. are now under zero tariff, “significant shortcomings in our trade infrastructure and policy implementation have prevented the agreements from generating the greatest benefit for the region,” she said.

She was told by an official from Cargill that bureaucracy and technical barriers to trade limit that agricultural company's ability to trade in Central America.

Tai said her office should examine how CAFTA has worked in practice, and if it could be designed better to spur integration of these small economies. Before passage, there was “a lot of expectation and hope that CAFTA-DR would stimulate development,” she said. She said that historically, Congress would cobble together just enough votes to get a trade agreement through, and then move on, neglecting implementation. She said she won't do that with the renewed NAFTA, now called USMCA.

Conference host Eric Farnsworth told Tai that businesses are concerned about how Mexico is implementing USMCA.

“Every trade agreement we have gotten across the line, it’s not happily ever after,” Tai said. She said that as you negotiate, you know where the irritants are, and where it's hardest to reach agreement. “You know that underneath the 'yes' is a lot of tension and political realities across the borders,” she said. So disappointment and progress after an FTA goes into force, “it’s all part of the territory, it happens.”

She said the fact that USMCA entered into force during the pandemic lockdown added another layer of difficulty, but she will keep at it in asking for Mexico and Canada to live up to their commitments, and she expects them to be equally honest about their disappointments.

“There are a lot of tools in this USMCA to allow for things to be fixed before they become irreparably broken,” she said.

Tai said that even though the USMCA is a stronger agreement in many aspects than NAFTA, it didn't go far enough to address climate change. As she did before, she said it's wrong to argue that environmental issues are not real trade issues.

“The sea level is rising, and the ocean is warming. Hurricanes that batter the United States, the Caribbean, and Central America are more severe and more frequent. The individuals who depend on tourism or fish for their livelihoods directly feel the increasing threat to our climate,” she said. “Tackling climate change, deforestation, protecting the environment -- they will all have a dramatic impact on our prosperity.”

Vice President Kamala Harris and Commerce Secretary Gina Raimondo, who both also spoke at the conference, were blunt about the role of corruption in retarding foreign direct investment in Central America.

“No matter how much effort we put in on curbing violence, on providing disaster relief, on relieving food insecurity, we will not make significant progress if corruption exists,” Harris said.

Raimondo said more transparency makes it easier to do business in Central America. “We have to focus on strengthening competitiveness in the region,” she said. She said the U.S. wants to increase trade with Central America and Mexico and assist American companies to do business in the region.

“We trade twice as much with the countries in North, South and Central America than we do with China,” she said. “And we export more to our neighbors in the western hemisphere than we do with all of Asia combined.”