Cafta Vote Clouds Prospects For Other Trade Deals; Bitter Fight Reveals Fears of Globalization, as Talks in Doha Round Languish

Congressional approval of a trade pact with six small Central American countries nudged forward the Bush administration's free-trade agenda. But the close vote and bitter fight underscored anxiety about the pace of globalization and clouded prospects for approval of future deals.

The 217-215 House approval of the Central American Free Trade Agreement early yesterday was a clear relief to proponents of continuing the post-World War II trend toward lower trade barriers.

'If we had not moved forward on Cafta, it would have undermined the U.S.position, which has been to lead the fight for globalization,' said Calman Cohen, president of the business-backed Emergency Committee for American Trade.

Cafta will lower trade barriers between the U.S. and six Central American countries for most goods and services, notably textiles and pharmaceuticals.

It will allow a small increase in sugar imports, but even that drew fire from U.S. sugar producers.

But the push to encourage globalization is faltering elsewhere. In Geneva this week, the global trade talks being held under the auspices of the World Trade Organization and known as the Doha Round have been languishing, stymied by the reluctance of the U.S., Europe and others to make concessions, especially in the key area of slashing agricultural subsidies.

And there is little visible movement toward the long-promised hemispheric Free Trade Area of the Americas. This effort to knock down trade barriers throughout North and South America began in late 1994 and missed its January2005 target date for sealing a deal.

With scant progress in those areas, the close call with Cafta raised doubts around the world about the willingness of the U.S. Congress to take the politically painful steps that are sure to be part of any future trade deals. It may also encourage the move in other countries, particularly in Asia, to form free-trade zones that exclude the U.S.

After all, the six Cafta countries -- Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic -- are economically insignificant in a global sense, exporting to the U.S. in a year what China exports to the U.S. in a month.

Of particular concern to those who see virtue in globalization is the erosion of support among Democrats. The House vote was much more partisan than the 1993 vote for the North American Free Trade Agreement, which lowered trade barriers for the U.S., Canada and Mexico. Republicans voted202 to 27 for Cafta. Democrats and the lone House independent voted 188 to15 against it.

The deep opposition among Democrats sprang in part from fears that Cafta would weaken labor rights and environmental rules in the region. But the trade fight has also become increasingly partisan for its own sake, with Democrats voting as much to gain approval from domestic interests and labor groups as out of principled objections to the details of an agreement.

That clouds prospects for future trade deals, especially if the Republican margin shrinks in the 2006 elections. The all-important fast-track authority-- which gives the U.S. president the power to negotiate trade deals that Congress either accepts or rejects without amendment -- is up for renewal in 2007.

Mr. Destler suggested that the partisanship may say more about the dynamics of Congress -- 'where the parties don't talk to each other anymore' -- than partisan divisions among the public. A recent poll of 821 adults by the University of Maryland's Program on International Policy Attitudes found 50% of self-described Republicans in favor of Cafta and 51% of Democrats.

While the poll found three-quarters 'support the growth of international trade in principle,' it picked up widespread dissatisfaction with 'the way the U.S. government is dealing with the effects of trade on American jobs, the poor in other countries and the environment.'

Organized labor, despite its defeat on the Cafta vote, intends to exploit that dissatisfaction. Cafta is 'another trade agreement that will cause more exportation of jobs and have no basis to raise standards in those countries so that the workers can share in the new trade arrangements,' said Andrew Stern, president of the Service Employees International Union, which split this week from the AFL-CIO.

U.S. business interests, though, vowed to press the free-trade fight. 'We can't let trade fatigue set in,' said Bill Lane, director for governmental affairs for Caterpillar Inc. 'The WTO Doha agenda is a once-in-a-generation chance to promote economic development around the world. Now is the time to ...damn the protectionist torpedoes, full speed ahead.'

The global Doha trade negotiations are aimed at further liberalizing world trade and slashing agricultural subsidies for all of the 148 members of the WTO, including developing countries that are now a big force in trade talks once dominated by large, industrialized countries.

At the WTO in Geneva, where negotiators from around the world are gathered for another round of frustrating talks, the Cafta approval offered one of the few rays of hope and helped allay fears that protectionist political forces in the U.S. were dominating Congress. 'It has provided a small shot in the arm to the cause of free trade,' said Peter Mandelson, the European Union's trade commissioner.

Diplomats said they hoped the U.S. would no longer be distracted by negotiations with Congress over Central America and could focus on the Doha Round of global trade talks, named after the city in Qatar where they were launched in 2001. U.S. officials deny that Cafta was a distraction.

A year ago, WTO members had hoped to have a rough blueprint of a Doha deal this week. But as the meetings wind down today, the talk is of missed opportunities. Not only did negotiators fail to hammer out a blueprint, but they have huge gaps to bridge before the WTO's member countries meet in Hong Kong in December to continue the Doha talks.

Fierce battles on agriculture issues have slowed progress. Negotiators have made big strides toward agreeing how to cut tariffs on manufactured goods, and to a lesser extent services -- both important to the U.S. and Europe.

But developing countries are unwilling to strike any agreements in those areas until divisions over agriculture close.

Globalization optimists questioned the parallels between Cafta and other free-trade pacts. The Central American deal drew concentrated fire from three well-organized constituencies -- textile producers, sugar companies and unions. But because the Cafta economies are so small, U.S. business didn't mount a campaign as muscular as it did in the Nafta vote. Business interests will have much more at stake if a Doha agreement is reached.

But the bruising the administration took on Cafta could put an end to the pursuit of bilateral and regional trade deals that formed part of the 'competitive liberalization' campaign launched by former Bush trade negotiator Robert Zoellick, now deputy secretary of state. During the past four years, Mr. Zoellick sealed free-trade deals with Chile, Singapore, Morocco and Australia, and launched talks with countries in the Middle East and Asia. The administration is now likely to spend less political capital on smaller, contentious deals like Cafta and concentrate on the global Doha Round.

In Asia, the perception that American political support for globalization is weak could accelerate moves to form regional free-trade pacts that exclude the U.S. China reached a deal in November 2004 with the 10-member Association of Southeast Asian Nations to create one of the world's biggest free-trade areas by 2010 and is pursuing separate pacts with countries as distant as Chile. India is pursuing bilateral deals, too.

For Latin American governments mulling their own free-trade pacts with the U.S., the Cafta cliffhanger raised an unsettling question: If the tiny, ardently pro-U.S. economies of Central America can barely get a deal, what can we expect? That may make Latin leaders less willing to expend political capital at home to win approval for trade deals that grant greater access for U.S. goods. While individual countries like Panama will continue to seek bilateral pacts with the U.S., the Bush administration's already troubled plan for a Free Trade Area of the Americas faces an increasingly uncertain future.

'If the formation of Cafta is so difficult, imagine the difficulties of the formation of [the FTAA],' said Gesner de Oliveira, a Brazilian economist.

'It's an inexorable process. But the velocity is going to be much slower than we thought five years ago.'

Brazil, South America's biggest economy, is unlikely to agree to the kind of lopsided concessions that were necessary to get Cafta through the Congress.

The Central American nations, for example, agreed to restrictions on their two most competitive industries, sugar and textiles. Under Cafta, Central American sugar exports to the U.S. are capped at about 1% of the annual U.S.market. By contrast, Brazil has called for an end to U.S. farm subsidies to jump-start talks for regional free trade.

--Matt Moffett in Rio de Janeiro, Kris Maher in Pittsburgh and Jason Dean in Beijing contributed to this article.