The Central American Free Trade Agreement (CAFTA) is a treaty that would eliminate tariffs and other regulations on trade between the United States, El Salvador, Nicaragua, Guatemala, Honduras and Costa Rica. The Dominican Republic may also be added. It is modeled after the North American Free Trade Agreement (NAFTA).

NAFTA is a tariff-eliminating agreement between the US, Canada, and Mexico established in 1994.

Experts who have tracked the outcomes resulting from NAFTA’s policies have described it as a disaster for small farmers and working people in all three countries. US workers lost 879,280 jobs and real wages in Mexico have fallen as a result of NAFTA in the past 10 years, according to the nonpartisan Economic Policy Institute.

Mexico has lost as many as 1.3 million jobs.

One controversial provision of the treaty gives companies the right to sue member governments in secret arbitration tribunals if they believe a government policy “creates a barrier to trade.” This provision has been used about 30 times since 1994.

The most well known example of the use of this provision occurred in 2004 when an association of Canadian cattle ranchers sued the US government for imposing a ban on cattle from Canada due to mad cow disease. The Canadian ranchers claimed the ban was a barrier to free trade under NAFTA’s rules. The ranchers estimate their losses at $2-3 billion.

Arbitration has yet to begin, but the Bush administration, far from ensuring that diseased cows aren’t entering the US food supply, has made plans to lift the ban this year.

The USDA, the regulatory body with oversight over the beef industry, wanted to lift the ban in March, but a judge, at the urging of US cattle ranchers, blocked the move, saying that more work needs to be done to prevent the spread of the disease.

Under NAFTA’s provisions, the Canadian cattle industry not only could collect the $2-3 billion from US taxpayers (for an errant Bush administration policy), but could also force the US, if it is to abide by its treaty, to overturn regulations that may be protecting the US food supply from a dangerous disease.

Despite this dismal record, the Bush administration is seeking to expand NAFTA to Central America with CAFTA.

One El Salvadoran legislator estimated that Central American countries might lose as many as 500,000 jobs in the first few years of the CAFTA treaty alone. Central American critics of CAFTA also say that the deal would give US companies an unfair advantage over local companies by preventing Central American governments from protecting their local industries. Job losses and plant closures of local companies would be the result.

The effect would be the Wal-Martization of Central American industry: big multinational corporations move in; smaller, local companies close down.

CAFTA would also pressure Central American governments to privatize public services such as “water, health and education to the benefit of multinational corporations,” reads an AFL-CIO report on the trade deal.

The AFL-CIO has also criticized the trade deal for eliminating worker protections and environmental regulations as “impediments to trade.”

In a letter to US lawmakers who head the committee that oversees CAFTA’s Senate negotiations, AFL-CIO legislative director Bill Samuel stated, “CAFTA represents a failed model that will likely exacerbate poverty and inequality in Central America, while further eroding good jobs and wages at home. At the same time, its excessive protections for multinational corporations will undermine the ability of governments to protect public health, strong communities, and the environment.”

Meanwhile, Thomas J. Donohue, president and CEO of the US Chamber of Commerce threatened US lawmakers: “If you are going to vote against it, it’s going to cost you.”

Negotiations for CAFTA were completed in December 2003 and January 2004 and signed by the respective parties in May 2004.

Republicans are reported to be planning a vote on the controversial measure this summer. Earlier votes were delayed because the Republicans couldn’t muster enough support to pass the measure.

CAFTA must be approved by the national legislatures in each of the participating countries.

From the start of CAFTA negotiations, the Bush administration has seen CAFTA as a stepping-stone to the big prize: the Free Trade Area of the Americas (FTAA), a hemisphere-wide version of NAFTA. The passage of CAFTA is intended to pressure countries like Brazil, Venezuela and Argentina (all severe critics of the administration’s version of the FTAA) to get on board with FTAA or be left out.

Fierce opposition from workers in North and South America and their community allies in November 2003 stymied negotiations for the FTAA. Massive protests in Miami, Florida pressured various governments to rethink the FTAA’s more controversial polices.

If approved, FTAA would eliminate tariffs and other industry protections, worker and environmental protections from 34 countries with a population of more than 800 million. Opponents of current FTAA wording say that it would repeat NAFTA’s failings but on a much more massive scale.

Negotiations on FTAA were suspended for most of 2004 and trade ministers have not met this year to discuss it.