The Impacts of U.S. Agricultural and Trade Policy on Trade Liberalization and Integation via a U.S.-Central American Free Trade Agreement

This study looks at several major legislative actions in 2002 that will substantially affect trade negotiations with the United States, and examines the US import protection for agricultural products that will be critical in trade negotiations with Central American countries. The two important legislative actions were the passage of the 2002 Farm Bill and the passage of Trade Promotion Authority, which provides for "fast track" treatment of trade agreements. The 2002 farm bill was widely denounced as a major reversal of US farm policy, away from the earlier move toward reduced levels of support and toward decoupled supports for key commodities. In fact, however, the 2002 farm bill contained the same support mechanisms that were in the highly touted 1996 farm bill. The 2002 farm bill also reauthorizes the various export programs that the US government uses to support the increased exports of US farm products. The Trade Promotion Authority contains several new restrictions on US negotiators. It lays out a list of sensitive agricultural products and requires special procedures before any negotiations to liberalize access can occur. In addition to the list of sensitive products the US has some significant tariffs on a number of products that the Central American countries export to the US. Elimination of these tariffs can provide significant gains in market access for some products. In summary, the successful negotiation and approval of a US-CAFTA will require major political will on both sides to overcome the major hurdles that exist.