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Marketplace Morning Report

Costa Rica faces divisive trade-pact vote

Dan Grech Oct 5, 2007
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KAI RYSSDAL: There’s a vote scheduled Sunday in Costa Rica that drew comments from the Bush administration this week: Susan Schwab, the president’s trade representative, said the White House is in no mood to re-negotiate the Central American Free Trade Agreement.

Schwab’s comments were prompted by a protest ahead of Sunday’s referendum in Costa Rica. Voters there will have a chance to give the thumbs up, or down, on the regional trade deal.

We’ve got Marketplace’s Dan Grech on the line from the Americas Desk at WLRN in Miami — Hi, Dan… Do you think people in favor of free trade should be worried and paying special attention to what happens on Sunday?

DAN GRECH: I think that this is a kind of watershed referendum, for several reasons. One, it’s the first time that people are going to the polls to vote up or down on a free-trade agreement. Generally, those are done by presidents and congresses — and this is taking it to the people.

Costa Rica also has a really important symbolic value. It’s Central America’s most stable country, and if they basically turn their back on this trade deal, I think what it’s going to do for all the other countries that are in the process of negotiating trade deals with the U.S., is feel a little bit more squeamish about entering into a trade deal.

RYSSDAL: Obviously, if 100,000 people out of a country plus-or-minus four million come out and protest — as they did last week — they must have some pretty serious feelings behind it. What are the anti-CAFTA people saying in Costa Rica?

GRECH: One of their biggest concerns, and this is something that’s shared by their neighbors, is that CAFTA will put a lot of small farmers out of business. These markets are going to be flooded, they say, by cheap U.S. subsidized agricultural goods. And they simply can’t compete in the face of that kind of competition.

One of the things that Costa Ricans in particular are afraid of is they have free, universal health care. And one of the ways they’re able to pay for that is with cheap generic drugs. But the U.S. has forced some intellectual propterty provisions into CAFTA that would force Costa Rica to go with more expensive name-brand drugs, produced by U.S. pharmaceuticals.

RYSSDAL: President Oscar Arias has said, I think the exact quote is, CAFTA failing in this referendum on Sunday would be a “disaster” for the country. How is he going to get it passed?

GRECH: One of the main tactics that the pro-trade folks are using is fear — and here’s their argument: Free-trade agreements offer investors and businesses who are looking to park their money somewhere a very stable financial regime… one that doesn’t change with the political winds. So if an investor has an opportunity to put money in El Salvador, Nicaraugua or Guatemala — which have all passed this free-trade agreement — Costa Rica is going to lose out on a lot of those new opportunities.

RYSSDAL: It has been in effect — CAFTA has — in some of those neighboring countries. What do we know about what’s happening on the ground?

GRECH: Free trade in general has winners and losers. And some of the main losers are poor people — people who are farmers, who have relied on a certain amount of protectionism to make their goods competitive within Costa Rica. In its first year so far, the big winner has been the U.S. Eports to the five CAFTA countries have grown by more than 16 percent in CAFTA’s first year.

Despite that, trade deals have kind of fallen out of favor in Congress. And if on Sunday, everyday Costa Ricans thumb their nose at the U.S., that could sour Congress on some upcoming deals with Colombia, Panama and Peru.

RYSSDAL: Dan Grech at Marketplace’s Americas Desk at WLRN in Miami. Thanks, Dan.

GRECH: Thank you, Kai.

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