Friday, April 13, 2007

Costa Rica to hold referendum on U.S. trade pact

SAN JOSE, Costa Rica (Reuters) - Costa Rica will hold a referendum on whether to enter a regional free trade pact with the United States, President Oscar Arias said on Friday, in a blow to Washington's trade agenda.

The trade deal known as CAFTA is in force in much of Central America but has faced resistance from opposition lawmakers in Costa Rica.

"For the first time, Costa Ricans ... will be able to directly decide the future of a very important law for the country," Arias said at a news conference.

The referendum, which could take place within the next three months, opens the possibility that Costa Rica will reject the deal altogether. Recent opinion polls show backing for CAFTA is waning, with less than 40 percent of those polled in full support.

Costa Rica is the only participant of the Central American Free Trade Agreement not to have ratified it. It would be the first country to hold a referendum to decide the issue, rather than have Congress vote.

Arias made passing the pact into law a central part of his campaign platform ahead of the presidential election last year. He announced the referendum only after it looked like his opponents would force the measure with or without his support.

The White House struggled to win support for CAFTA in the U.S. House of Representatives in 2005, where a battle along party lines almost sunk the deal.

The passage of CAFTA is considered one of the significant achievements in trade during the administration of U.S. President George W. Bush.

The multilateral Doha round of World Trade Organization talks is floundering in the face of protectionist sentiment in the United State and Europe, and Washington has won only a few small bilateral deals in recent years.

Many in Costa Rica and other Central American countries oppose CAFTA on the grounds that competition from U.S. producers could hurt local farmers.

Others worry CAFTA could lead to the privatization of the state-run telephone company and hurt the social security system.

Arias' announcement came after Costa Rica's top election court ruled on Thursday it might authorize a referendum if citizens collect signatures in favor totaling 5 percent of the country's electoral roll over a nine-month period.

Pact opponents easily would have collected the roughly 130,000 signatures needed, observers say.

The other participants in CAFTA are the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua.

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