Latinamerica Press / May 25, 1995
By Larry Luxner
WASHINGTON -- Two dozen Caribbean and Central American nations are worried that NAFTA -- aimed at making Mexico an attractive site for foreign investors -- may have exactly the opposite effect on their own smaller and more vulnerable economies.
From San Juan to San Salvador, governments are waking up to the NAFTA threat, a threat made even more worrisome since the Mexican peso crisis, which has made that country an even cheaper place to manufacture.
"An unfortunate result of NAFTA is that significant investment is being diverted away from the Caribbean region to Mexico," warns Rep. Philip Crane, an Illinois Republican and chairman of the House Trade Subcommittee.
Adds Peter Johnson, executive director of the Washington lobby Caribbean/Latin American Action: "Through NAFTA, Mexico's got all the benefits of CBI, and that diminishes CBI's advantages. In Guatemala alone, 70 companies have closed or moved to Mexico."
Regional leaders argue that NAFTA is diluting the Caribbean Basin Initiative, proposed in 1983 as a way to fight Communist influence in the Western Hemisphere. Just as NAFTA was intended to help Mexico, CBI sought to bolster the economies of 24 Central American and Caribbean nations by giving them duty-free access to the U.S. market in almost all products except for apparel, canned tuna, footwear, leather goods such as handbags and work gloves, watches and petroleum.
Later on, apparel and textiles became eligible under the so-called Item 807 program, and the region's garment industry began flourishing. Last year, U.S. garment imports from the Caribbean Basin rose by 12.7 percent to $4.57 billion.
But garment exports from Mexico during 1994, the first full year of NAFTA, soared by 38.3 percent to $1.89 billion. By 1996, Mexico could even eclipse the CBI countries in apparel exports -- and that has a lot of people genuinely worried.
"Prior to December, it was about the same," said Johnson. "Everything being equal, companies would prefer to stay in Central America because they find a better work ethic there, and workers there are more experienced. But now, Mexico is much cheaper."
Both Crane, a Republican, and Florida Sen. Bob Graham, a Democrat, want the United States to stop helping Mexico at the expense of the Caribbean. The two are sponsoring similar bills collectively known as the Caribbean Basin Trade Security Act. If passed, the Crane bill would extend NAFTA-like benefits to all 24 CBI signatories for 10 years and permit -- for the first time -- duty-free imports of previously dutiable items from the Caribbean Basin.
"This measure would help preserve our original commitment to help foster economic expansion and political stability in the Caribbean and Central America," said Crane in a recent statement. "By granting NAFTA equivalent tariff treatment to these countries ... we intend to put CBI countries on a clear path to assuming the reciprocal trade obligations of NAFTA."
Labor unions generally oppose extending trade preferences to the Caribbean for the same reasons they opposed NAFTA -- competition with American jobs. They also criticize the track records of Central American countries such as Honduras, which was recently investigated by the U.S. government for alleged violations of workers' rights. Mexico, surprisingly, has been silent on the CBI-NAFTA parity issue, probably because the government has more urgent matters on its agenda.
Nothing, however, is more urgent for the C/LAA, which has been lobbying hard to get the Crane bill approved in the House -- along with many Fortune 500 apparel, electronic and petroleum companies. Also pushing for NAFTA parity are the ambassadors of all six Spanish-speaking republics of Central America, as well as the Caribbean Community (Caricom), which consists of 13 English-speaking Caribbean nations and Dutch-speaking Suriname on the South American coast.
"This is clearly an improvement on all the previous efforts," said Byron Blake, Caricom's assistant secretary-general. "In its present form, this bill offers the CBI countries all that they want beyond the year 2000."
Antonio J. Colorado, Puerto Rico's former secretary of state and a proponent of Caribbean economic integration, says the legislation would put the region on a "level playing field" with Mexico.
"The Caribbean needs parity," he said. "The cost of parity to the United States is very small. At the same time, it will give them the advantages they had under CBI but are losing with NAFTA."
Clinton administration officials agree that Central American and Caribbean countries -- which together have less than half the population of Mexico -- should have an equal crack at the U.S. market.
"We think it's important to bring the Caribbean Basin into the program," says Deputy Assistant U.S. Trade Representative Jon E. Huenemann. "We're approaching this from the point of view of a constructive player. If this legislation helps forward that goal, the administration would support it."