S1307JUL1

TheWeekInCongress.com

Week Ending July 1, 2005

S 1307 A bill to implement the Dominican Republic-Central America-United States Free Trade Agreement.

Click on flags for maps and country data

Costa Rica

Dominican Repub.

El Salvador

Guatemala

Honduras

Nicaragua

BRIEF

The bill text explains that the purpose of this Act is to develop economic relations between the US, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua for the benefit of all those countries. The economic relations would hinge on the reduction and elimination of barriers to trade in goods and services and investments and to lay the foundation for further cooperation to expand and enhance the benefits of the agreement. Currently it is US exports to the other countries that are taxed. The bill reduces or limits those tariffs.

Such bills determine basic rules of the game including the country of origin of the product and country of origin of the materials the product is made from. Certain products such as sugar get special attention. The bill was designed not to stop imports of sugar to the US but to absorb, in a way subsidize, the product by either paying the country not to send sugar to the US or to limit the export so not to disturb pricing on US sugar. Export to the US of sugar that exceeds guidelines would be purchased and converted to uses other than for human consumption such as conversion to motor vehicle fuel.

The ultimate outcome of any trade bill, this one included, is to increase trade thereby increasing manufacturing, therefore jobs and a stimulated economy. Trading with countries among which are a few of the poorest on earth would seek the same ends but with a few added steps in the beginning-The poor Central American countries in the deal would attract investments from around the world, including the US, to do manufacturing business in those poor countries where labor is inexpensive and products necessary for manufacturing exports are cheap and arrive without tariff charges. An influx of foreign investment would eventually raise the standard of living in those countries, make more money available and increase the potential for the purchase of higher end exports from the US.

This trade agreement increases the requirement that the participating countries make progress in labor rights and transparency of government.

Sponsor: Senator Charles Grassley (R-IA)

Vote: Passed Senate (RV 170) (June 30, 2005)

Cost to the taxpayers: No discernible cost. US trade agreements, however, tend to show loss of revenue to the US because tariffs are reduced on imports. In this case, most tariffs from the Central American countries are already zero. The potential for federal government pump priming to subsidize the cost of US exports is likely.