The U.S.-Central America Free Trade Agreement may be in jeopardy because of the presidential election and the end of international quotas for all members of the World Trade Organization, said Jonathan M. Fee, a partner with the Washington office of the Atlanta-based law firm of Alston & Bird LLP.

During a presentation to the Independent Freight Forwarders and Customs House Broker Association of Atlanta on April 14, Mr. Fee discussed why CAFTA is in trouble with the U.S. Congress and the domestic textile industry that fears the import of cheap products from China beginning Jan. 1, 2005.

“Both parties in Congress are upset with jobs being exported overseas. It is anticipated that the president will delay legislation until after the election,” Mr. Fee said. “If it doesn’t pass before the election who knows if it will be approved.”

The agreement negotiated on Jan. 29 would foster trade between the United States and five countries in Central America including Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua.

Since then the Office of the U.S. Trade Representative has been negotiating an agreement with the Dominican Republic, which is to be added to the original agreement.

Mr. Fee also pointed to the lack of support from domestic textile associations, which are upset with key elements of the agreement, including the reduction in duties on products from Costa Rica and trade benefits given to Nicaragua.

CAFTA should have been passed 10 years ago, he said, when the domestic textile industry could have achieved enough momentum to compete with China and India before international quotas end on Jan. 1, 2005.

The WTO agreement on liberalization and elimination of quotas on textiles and apparel imported from WTO countries is being phased in over a 10-year period. Congress approved the agreement in December 1994 as part of the Uruguay Round Agreements Act and it went into effect on Jan 1, 1995.

“It is possible that we could see a tidal wave of cheap Chinese products flooding the U.S. beginning on Jan. 2,” he said, even though special safeguards were put in place to prevent disruption of the U.S. market when China joined the WTO in 2001.

For more information, contact Mr. Fee at (202) 756-3387 or by email at jfee@alston.com