Another Snag for U.S.-Latin Trade Accord

A new Guatemalan drug regulation has become the latest complication in the Bush administration’s effort to enact a proposed Central American free-trade pact.

Guatemala must amend the regulation or risk endangering congressional approval of the pact, U.S. officials said Friday.

The new regulation -- which pits Guatemalan producers of low-cost, generic drugs against U.S. pharmaceutical giants -- is not expected to derail the trade agreement. That’s because Guatemalan President Oscar Berger has promised to tackle the issue when his Congress resumes deliberations Jan. 14.

But the issue creates yet another headache for backers of the Central American Free Trade Agreement, known as CAFTA, which faces a tough battle in Congress amid fierce opposition by U.S. labor and environmental groups. The pact was finalized in 2004 but still requires congressional approval.

“CAFTA is going to be a close, bloody fight,” said Daniel Griswold, head of the trade program at the Washington-based Cato Institute, a think tank advocating freer trade.

If passed, the pact will eliminate duties on most U.S. exports to the region and will make it easier for Central American textile and apparel producers to sell to the United States. Critics say the deal will encourage U.S. companies to ship jobs south, where wages are low and there are fewer protections for workers and the environment.

Last year, the U.S. faced a similar complication to the one with Guatemala, when the Dominican Republic imposed a tax on soft drinks containing imported high-fructose corn syrup. After the U.S. threatened to remove the island nation from CAFTA, the Dominican government repealed the tax.

CAFTA’s other members are Costa Rica, El Salvador, Honduras and Nicaragua.

Despite the latest problem, the Bush administration remains convinced that it can wrangle enough votes from Democratic opponents to pass CAFTA early this year, according to a U.S. trade official who spoke on the condition he not be named.

He said Republican leaders realized Congress needed to clear the trade bill early so it didn’t get tangled up in contentious debates over social security or tax reform. In addition, the trade official said, Central American leaders recognize “we’re getting to a critical point” and “they really can’t afford these sorts of mistakes anymore.”

The latest tempest was triggered by the Guatemalan government’s decision last month to repeal a law that protects pharmaceutical companies’ test data from being used without their permission for five years. That would give Guatemalan producers earlier access to that data to produce generic drugs.

The five-year protection of pharmaceutical data, which was pushed by U.S. companies to bolster their patent protection, is mandated by CAFTA.

Richard Mills, a spokesman for the U.S. Trade Representative’s office, said the American government was “very disappointed” by Guatemala’s move but confident that the problem would be corrected soon.

Moises Merida, a commercial attache at the Guatemalan Embassy in Washington, confirmed that Guatemalan leaders had agreed to “address the problem.”