Central America FTA Has Dairy, Sugar Implications

February 6, 2002

President Bush's recent announcement that the United States is actively exploring a free trade agreement with five countries in Central America could spell implications for the U.S. dairy and sugar industries. The potential agreement would provide added momentum toward the realization of the Free Trade Area of the Americas (FTAA), a proposed Western Hemisphere trade liberalization pact that the International Dairy Foods Association supports.

U.S. trade officials began discussions with Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua last year, and leaders of the six countries met in Managua, Nicaragua, last September to discuss ways to forge closer economic relations and advance free trade. Based on the success of the Managua meeting, President Bush announced the initiative in a Jan. 16 speech.

With the talks in such early stages, the potential for specific agriculture segments is unknown, but sugar and dairy trade are expected to be a part of the upcoming negotiations.

In 2000, overall U.S. exports to Central America totaled about $8.8 billion, and Central American imports to the United States were valued at $11.8 billion. Currently, the United States imports virtually no dairy products from this Central American region and exported more than $28 million last year to these five markets. For sugar, the United States only exported about $3 million of products to this region last year but imported close to $80 million.

The United States' partners in the North American Free Trade Agreement (NAFTA), Mexico and Canada, have initiated similar talks with Central America. The United States currently has free trade pacts with Mexico, Canada, Israel and Jordan, and the Bush Administration hopes to conclude one with Chile sometime this year.

Negotiations for FTAA continue, with a deadline of completion by January 2005.