El Salvador: First in the Race to Implement DR-CAFTA, First to See Negative Effects of "Free" Tr


By Burke Stansbury, Committee in Solidarity with the People of El Salvador (CISPES)

go to www.stopcafta.org to download the full report

The country of El Salvador was the first to approve the US-DominicanRepublic-Central America Free Trade Agreement (DR-CAFTA) - in December of2004 - and the first to begin implementing the agreement with the UnitedStates in March of 2006. Publicly, the Salvadoran government hasboasted of its first-place status, claiming that the supposed benefitsof CAFTA will rain down on El Salvador like nowhere else in CentralAmerica.

Yet long before CAFTA officially went into effect, its flawed character was obvious to most Salvadorans. In fact, 76% of Salvadorans polled in late 2005 said that CAFTA would not improve the situation in El Salvador, or make matters worse . For years until it became law, CAFTA was widely promoted as the answer to all of El Salvadors economic woes. Ironically, since the March 1 start date, hardly an article has appeared in El Salvador about the positive repercussions of CAFTA. However, statistics from the U.S. International Trade Commission show that between March 2005 (a few months after El Salvador ratified CAFTA) and March 2006 (the month CAFTA implementation began) exports from El Salvador to the U.S. dropped by more than half, from $187 million to $88 million . Meanwhile, El Salvadors trade deficit with the US has also increased, creating an increasingly alarming situation for a country with an already huge national debt.

It was back in February of 2006 Salvadoran President Tony Saca met with President Bush and later announced that his country was the first to achieve the reforms necessary for CAFTA implementation. That El Salvador was first was no surprise given the countrys status as one of the Bush Administrations closest allies. Yet even for El Salvador, the implementation process proved difficult, with the US Trade Representative (USTR) piling on additional demands and requirements before giving the green light. Officials from the Salvadoran government resisted some of these changes, and like other Central American countries, privately argued that many of the changes were not agreed to in the initial negotiations. In the end, however, El Salvador was the first to concede to the USTRs demands, sacrificing the well-being of its people in order to become the "first" CAFTA country.

Controversial Legal Reforms

In order for CAFTA to go into effect in El Salvador, a series of legal reforms were insisted upon by the USTR. On December 14, 2005, the governing ARENA party and its ally the National Conciliation Party (PCN) rammed through a packet of changes to El Salvadors secondary laws in the National Assembly, and did so without any substantial debate over the measures. The Salvadoran executive had introduced the CAFTA reforms less than a week before the vote, prompting legislators from the largest opposition party (FMLN) to abstain from the vote and walk out of the Assembly session.
Changes were made to the law of public acquisitions and contracts, the insurance law, customs law, branding laws, intellectual property law, telecommunications law, animal and vegetable sanitary laws, and the penal code, among others.

Changes to the Intellectual Property law have been the most controversial, leading to the eruption of massive protests by informal sector market vendors. The reforms impose fines and even jail time for those who sell and purchase pirated goods, thereby destroying the livelihood of many poor Salvadorans who depend on the informal economy. As of the March 1 implementation date, the government and the Salvadoran police were claiming to have delayed mass arrests of vendors, though thousands of dollars in DVDs, clothes, shoes and other pirated products had already been seized. Following the March 12, 2006 municipal and legislative elections in El Salvador, it appears that the application of the changes to the Intellectual Property law are being applied more broadly, with drastic effects for those who depend on selling in the informal sector. In April, for example, police raided a public market in San Salvador, injuring many people and arresting twenty.

The USTR also demanded protections for textiles produced by U.S. companies. During negotiations El Salvador had won certain concessions permitting the use of fabric and other inputs from third countries for apparel exported to the United States. The country was later forced to concede because of Bush administration promises during the CAFTA vote in the U.S. Congress. Currently, El Salvador is prevented from using materials?namely pocketing and non-visible lining in pants?produced in other parts of the world in its production of certain textiles. This is an arrangement that benefits US textile companies that produce these materials.

Finally, the USTR succeeded in pushing the CAFTA countries to surrender their own food safety inspection requirements for meat imported from the United States. Instead they were forced to accept U.S. Department of Agriculture sanitary standards for both meat and agriculture products. Though El Salvador temporally resisted such changes, saying they were not originally agreed to, in the end the government succumbed. As a result they have ceded the right to devise standards for sanitation inspections on imports.

In essence, the changes to El Salvadors secondary laws will give extensive new protections to U.S. companies, particularly media, technology, and pharmaceutical companies. Such patent protections have even been criticized by the World Bank , and in a poor country like El Salvador represent a major attack on an entire sector of the economy?the informal sector?which is the only safety valve - along with emigration to the United States - for a huge percentage of poor Salvadorans.

Challenges in the Supreme Court: Ratification Procedure, Violation of Sovereignty called Unconstitutional

The 2004 ratification of CAFTA in El Salvador proved extremely turbulent, having occurred at 3:00 in the morning in a National Assembly surrounded by riot police. The governing ARENA party bypassed the 2/3 majority that is usually required to approve an international treaty. As a result CAFTA only needed to receive 49 votes, or a simple majority, rather than 63. With the FMLN in opposition, the CAFTA could only be approved by ignoring the Constitutional mandate for a super majority. But this is only one aspect of CAFTA that has been legally challenged by opposition parties and social movement organizations. In addition, the commission ordered to study the impacts of CAFTA was not given time to present its findings to the Assembly, and many legislative deputies admitted to having not read the text prior to the vote.

On March 1, 2006, the day CAFTA implementation began, the FMLN presented a case to the Supreme Court challenging the constitutionality of the trade agreement. The case cites multiple violations to eight articles of the Salvadoran constitution. These include the ratification procedure, infringement of territorial sovereignty, and the guarantee of "national treatment" for foreign companies. Social movement organizations also presented challenges to the constitutional legality of CAFTA

Services: the Threat of Water Privatization

According to Salvadoran social movement organizations, the biggest potential impact of CAFTA in El Salvador may come via a new wave of privatization in public services. The Ley de Aguas or Water Law will likely be presented to the Salvadoran Assembly this fall and would start the process of privatizing the public water utility. The law was crafted shortly after CAFTA was approved in the U.S., and thus was written with an eye to the principle of "national treatment" embedded in the investment chapter of the agreement.

In the past, the privatization of social services has been vigorously resisted by Salvadorans. In 2003, doctors and health care workers successfully blocked efforts to privatize health care, and one tool they used was the introduction of the "State Guarantee of Health and Social Security" law. With CAFTA now in place, and given that free trade agreements supersede national law, such a law against privatization?which seeks to protect the people's right to affordable social services?could be challenged by CAFTA's chapter on "Freedom of Investment." Indeed, the Salvadoran government must grant U.S. and multinational companies "non-discriminatory" or "national treatment" under CAFTA, thereby ensuring foreign access to service markets. This is the best indication that the change in policies brought on by CAFTA could ultimately enable such privatization to occur.

The investor rights provisions contained in CAFTA would also allow foreign corporations to sue national governments for laws or regulations that were shown to have caused a loss in profits. In the case of water privatization, laws that guarantee access to water for poor communities or create higher environmental and water quality standards than currently exist could be deemed "barriers to trade" by secret tribunals. Therefore, the recent push for a new Water Law in El Salvador has at its root the changes brought on by CAFTA that will pave the way for decentralization, and then privatization of water resources.

Resistance to CAFTA Continues in El Salvador

Changes to intellectual property laws that criminalize informal market vendors, and the government push for water privatization in El Salvador are perhaps the two most immediate results of CAFTA implementation that are being resisted by political forces and the popular movement in El Salvador. But as other facets of the deal play out, that resistance will continue. Indeed, everything from the rise in cost-of-living and transportation rates to increased street violence is often attributed, at least in part, to the failures of trade liberalization in El Salvador. Less than six months after implementation began in El Salvador, the battle over CAFTA has just begun.

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