The Foreign Service Journal, April 2006

A P R I L 2 0 0 6 / F O R E I G N S E R V I C E J O U R N A L 11 Central America Trade Pact Off to a Halting Start As the Central America-Domini- can Republic-United States Free Trade Agreement, the much-heralded southern extension of NAFTA, ekes its way toward implementation amid continuing controversy, the World Bank delivered a new report showing that pro-growth policies like trade lib- eralization are fruitless without com- plementary, targeted poverty-reduc- tion actions. Instead of the Jan. 1 target date for implementation of the agreement that would eliminate trade barriers between the U.S. and the six signato- ry countries over the next decade, CAFTA-DR will be implemented “on a rolling basis,” U.S. Trade Represen- tative spokesperson Christin Baker disclosed on Dec. 19. On Feb. 24, the USTR announced that El Salvador would be the first country to imple- ment CAFTA-DR, doing so on March 1 ( http://www.ustr.gov/Trade_Agre ements/Bilateral/CAFTA/Briefing _Book/Section_Index.html ). The U.S., Costa Rica, the Domini- can Republic, El Salvador, Guatema- la, Honduras and Nicaragua signed CAFTA-DR in August 2004, and all but Costa Rica have ratified it. But implementation is a major hurdle as each country is required to make, in some cases far-reaching, changes to domestic trade and commerce laws to comply. Central America is the second- largest U.S. export market in Latin America, behind Mexico, absorbing more than $16 billion in American exports. But controversy attends the agreement both in the U.S. and in the signatory countries, where sensi- tivity over the U.S. role is acute. For the opponents’ view see Public Citi- zen ( www.publiccitizen.org/tra de/cafta ). The “progressive case for CAFTA” is detailed by the Demo- cratic Leadership Council’s Progres- sive Policy Institute ( http://www.pp ionline.org/ppi_ci.cfm?knlgArea ID=108&subsecID=900010&con tentID=253428 ). Meanwhile, the World Bank re- port, “Poverty Reduction and Growth: Virtuous and Vicious Circles,” mobi- lizes data and expertise to argue that free trade is not enough ( www.world bank.org ). According to the study, a 10-percent increase in poverty levels lowers the growth rate by 1 percent and reduces investment by up to 8 percent of GDP, especially in coun- tries with underdeveloped financial systems. “The benefits of trade can be great- ly enhanced if countries complement their agreements with investments in areas such as education, infrastructure and conditional transfers for poor regions and farm workers who may suffer in the transition,” says Guil- lermo Perry, World Bank chief econo- mist for Latin America and the Caribbean and one of the report’s authors. “Fighting poverty is not only good for the poor; it’s also good busi- ness for the whole of society.” — Susan Maitra Sticks and Stones: Caricatures Ignite a Firestorm The uproar over the publication of several caricatures of the Prophet Mohammed deemed offensive by Muslims continues to have a signifi- cant political and economic impact. The images, originally published in September 2005 by the Danish paper Jyllands-Posten and subsequently reprinted in Europe and elsewhere, stirred outrage among the Muslim community, leading to a wave of protests, both peaceful and violent ( http://en.wikipedia.org/wiki/Jyl lands-Posten_Muhammad_car toons_controversy ). The diplomatic fallout was imme- diate. Denmark closed its embassies in Beirut and Damascus after they were significantly damaged in pro- C YBERNOTES T here is no evidence that we or anyone can guide from afar revolutions we have set in motion. [Pushing democracy in places that have no history of it] may, in fact, constitute an uncontrollable experiment with an outcome akin to that faced by the Sorcerer’s Apprentice. — Rep. Henry J. Hyde, R-Ill., chairman of the House International Relations Committee, Feb. 16, http://wwwc.house.gov/ international_relations/109/ hyde021606.pdf.