Go slow on Central America Free Trade Agreement

Hollister Free Lance, Hollister CA

Go slow on Central America Free Trade Agreement

Wednesday, July 13, 2005

By Tom Elias

A few words of unsolicited advice to Congress and the President, who appear bent on approving a Central America Free Trade Agreement to go along with the North American one best known as NAFTA: Please go slowly.

Taken together, NAFTA and a similar agreement for Central America would create a free-trade zone larger than the ever-expanding European Union. Only the proposed Asian free-trade area now contemplated by China and India would be larger. There is a theory that the Central American agreement is needed for this country and its immediate neighbors to compete with the pending colossal Asian economic zone.

But as Congress works this summer on details of the Central American pact, known as CAFTA, the lawmakers ought to pause first to fix what’s wrong with the almost 10-year-old NAFTA.

There’s the matter of the treaty overriding state and local governments’ ability to look after the health and welfare of their citizens. The most flagrant example here is the NAFTA lawsuit by Canada’s Methanex Corp., preeminent maker of the gasoline additive MTBE, which has sued the U.S. government for almost $1 billion because California banned its product from gasoline sold in the state.

Because NAFTA protects companies in each member country from local actions in the other nations that threaten their economic welfare, Methanex believes it can win, even though its additive put carcinogens in California water supplies for years, polluting the once-pristine Lake Tahoe, among many other water resources. Whatever action a NAFTA legal panel may take on the Methanex claim, it likely could not be appealed in the American court system.

This is an obvious flaw in NAFTA, not to be repeated in any other treaty if Congress has any wisdom at all.

Then there’s the matter of insurance. California Insurance Commissioner John Garamendi reports major problems with Mexican trucks entering this country under NAFTA, while Mexican officials complain of insurance companies scamming their citizens from safe havens in this country.

“The availability of insurance for Mexican vehicles entering the United States, especially trucks, is compromised by a lack of information on Mexican trucks and drivers,” Garamendi said. In short, insurance companies that might issue policies at the border have no idea whether Mexican cars and trucks have passed safety inspections, nor do they know whether drivers have good or bad safety records.

Mexican officials were supposed make a new database with much of this information available to American insurance companies this spring, but it’s too soon to know whether that’s working. In any case, insurance has been a NAFTA problem for years.

Fraud is common. One common scheme on both sides of the Mexican border: Owners of trucking fleets may buy policies for only a few of their trucks, but place copies in all vehicles they own. If border guards give insurance documents just a cursory check, that will generally get a truck over the border in either direction. But if the vehicle gets into an accident, it won’t be covered unless it’s the one named in the policy.

Another form of fraud sees companies from third countries operating from American soil selling fake insurance policies by telephone to Mexican citizens. The same kind of scam has sometimes been run against Americans from Mexican territory.

“The border states and the Mexican government have just now started coordinating enforcement against these scams,” said Garamendi. No one has any idea what that effort will accomplish.

Health and insurance are only two problem areas of NAFTA. There are also issues of labor including pay scales and workers compensation insurance, plus questions about agricultural pricing that has harmed farmers on both sides of the border

In short, plenty of flaws remain in NAFTA. Maybe Congress and President Bush should deal with them before setting up any new free trade agreements, no matter what China and India may plan.

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