Thursday, July 28, 2005

Do you Know the Way to San Jose, or Tegucigalpa?

CAFTA is a done deal. Last night, the House passed it in a very close 217 to 215 vote. When the President signs it, and the U.S. makes some official notifications, the agreement will come into effect. To make life easy on everyone, this might be timed to happen January 1, 2006, but it could be sooner. Part it depends on whether the other parties have completed their legislative process and made their notifications.

CAFTA covers the U.S., Costa Rica, Honduras, El Salvador, Nicaragua, Guatemala, and the Dominican Republic. This will likely be an economic blip on the radar. Apparently, this region exports less to the U.S. than the exports of Virginia. But, the sugar and textile trades fought hard against it along with various labor groups and those who fear the steady march toward a one-world government.

For the Bush administration, it is a big win. It shows they can get trade deals done, it shows a commitment to rewarding democratic reform, and it might even help to open some markets to U.S. goods which is, after all, what trade deals used to be about before geopolitics became the foundation for many trade decision.

The text of the agreement is here and the implementing legislation is here.

The real question for companies is going to be how to integrate a compliance program into its existing system. Most big companies have set up NAFTA systems that treat U.S., Mexican,and Canadian content as originating. Now, here comes a new agreement and the originating country mix has to change. Plus, the certification and verification process is different. Don't forget that you might need a system that is capable of doing an analysis for Australian, Jordan, Singapore, or Chile as well. What about Bahrain and Morocco? This is getting to be a bit like playing four Monopoly games simultaneously with slightly different house rules for each game. Seems like it would be a good idea to have one over-arching trade regime that works to reduce duties in an orderly multilateral fashion.

Oh wait, there is a WTO meeting coming up.

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