Free trade pact said to create big opportunities
Ana Morgan placed a bag of coffee on her desk as an example of the opportunities for Rhode Island firms in her native El Salvador. The locally grown Café Shasta sells well in the Central American country, she said, but with its dull blue packaging and blurry graphics, the brand could not compete here in the United States.
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“To me this packaging does not show what the quality of this coffee is all about,” Morgan said. “We need our design experts to go down there and help them get the packaging right.”
And so starts her pitch to connect Rhode Island companies with the six signatories of the Central America-Dominican Republic United States Free Trade Agreement (CAFTA-DR).
Since late February, the marketing consultant has been trying to enlist local companies to join her on a trade mission to El Salvador, Guatemala and the Dominican Republic.
Congress adopted the free trade agreement last summer to reduce tariffs and open new markets for the nation’s products and services. The CAFTA-DR region comprises the United States’ second-largest trading region in Latin America after Mexico.
While Morgan has heard criticisms of the agreement echoing those directed at the North American Free Trade Agreement (NAFTA) – that U.S. companies use it to exploit cheap labor and the environment in Mexico – she thinks that companies here should focus on the market potential in CAFTA-DR countries.
Between 2000 and 2004, U.S. exports to the five Central American countries and the Dominican Republic grew 16 percent, compared with 5-percent growth worldwide. In 2004 alone, the nation shipped $16 billion in goods to the six countries, the U.S. Department of Commerce reports.
Last year, Rhode Island companies made up a tiny fraction of the nation’s trade with those countries, shipping about $33.6 million in goods there, mostly manufactured products.
Morgan said that the region is ripe for doing business in telecommunications, financial services and various types of consulting. “I understand the [benefits] that this could have for Rhode Island,” she said in an interview at her office in the John H. Chafee Center for International Business at Bryant University.
Some companies already see those benefits.
Arpin International Group, of East Greenwich, has been doing business in Central America for years. In 2003, the moving company provided more than $177,000 in services in the region, according to the Rhode Island Export Assistance Center at Bryant.
Silvia Louro, director of commercial operations at Arpin, said its business in the region comes from the U.S. Department of State, which hires it to relocate government officials to foreign embassies, and from residential clients who retire to places such as Costa Rica.
Arpin also has corporate contracts with major U.S. companies such as Colgate, Black & Decker and General Electric, all of which hire the company to move executives into the region, Louro said.
Despite the growth in commerce between the state and CAFTA-DR countries, it appears that more R.I. companies are interested in penetrating markets in India, China, and Eastern Europe. The R.I. Economic Development Corporation’s International Trade Office coordinates trade missions for local companies to countries all over the globe, with its most recent stops in Mexico, India and Poland, according to Maureen Mezei, international trade director for the RIEDC.
Mezei said her office decides where to conduct trade missions primarily based on requests from companies in the state, “or if we start seeing a trend in inquiries for a particular country, we may take the initiative and look at a region that we haven’t been active in.”
Morgan said that her trade mission has attracted interest, but no companies have signed on yet.
The cost for a company to join the trade mission is $10,000 plus travel expenses. Morgan said the fee covers 10 months of her services, including two seminars to help companies prepare for the trip, setting up meetings for the participants with potential overseas trade partners, and helping them understand the ins and outs of CAFTA-DR.
The trade agreement already nixes tariffs on 80 percent of U.S.-manufactured goods and will eliminate duties on all items over the next 15 years, according to Morgan. It also establishes protections for patents, trade secrets and sets guidelines to streamline issues related to customs and resolving disputes, according to the commerce department.
Morgan believes that she has the qualifications to help businesses capitalize on the agreement.
The daughter of an El Salvadoran diplomat, she grew up in different in the region, spending five years in Costa Rica and several months in Mexico. A U.S. citizen, Morgan has worked for 15 years in marketing positions for companies doing business in Latin America.
Now with her own consulting firm, Morgan & Associates, she said, her close business and government contacts would be useful to businesses here.
Morgan said her contacts are particularly strong in her native El Salvador (the first and only country to adopt all the necessary laws to use CAFTA-DR). She served as an international observer for the country’s elections in March. Also, she attended college there and remains close Vice President Ana Vilma de Escobar, who heads up foreign trade.
“We need to do a little more to educate ourselves about what is going on in the rest of the world,” Morgan said, “and then adjust to meet our needs.”
