372 Explaining Business Support for Regional Trade Agreements
ELECTRONICS FIRMS AND THE CARIBBEAN BASIN INITIATIVE
Beginning in 1979, the Caribbean/Central American Action (CCAA) lobby,
representing the interests of 90 percent of the Fortune 500 firms with investments
in the Caribbean Basin, formed to lobby U.S. governmental officials to ease trade
restrictions on products imported from Caribbean Basin countries. The formation
of the CCAA anticipated and supported the efforts of the Reagan administration
to promote CBI, which lowered tariffs on selected manufactured goods exported
from Caribbean Basin countries that qualified....
U.S. electronics firms viewed CBI as a means to discriminate against foreign
competitors for the U.S. market. The agreement allowed producers of integrated
circuits and metal oxide semiconductors to export partially produced products
from the region duty-free. These provisions complemented the duty-free provisions
already established in Caribbean Basin free trade zones. In addition, CBI
implemented a low and flexible local content requirement that gave preferential
treatment to U.S. firms. Eligibility for duty-free treatment was contingent on 35
percent of the product being produced in the Caribbean Basin, of which 15 percent
could be accounted for by U.S. materials.
U.S.-based electronics firms joined with pharmaceutical firms and producers
of baseball gloves, belts, fabricated metals, and food processors to lobby for CBI.
Electronics firms saw the agreement as a way to regionalize their operations by
relying on low-cost, partial production in the Caribbean Basin to compete for the
U.S. market. U.S. controlled and/or operated firms accounted for five of the top
ten imports from the region eligible for duty-free treatment....
The battle over CBI reflected the diverse business interests involved in trade
legislation. First, there were the regionalist firms represented by electronics
companies that saw the agreement as leverage against foreign competition for the
U.S. market. Spokespersons for AVX, Dataram, and other U.S. electronics firms
testified before Congress that CBI would give them a necessary competitive
advantage in competing against Japanese and European firms for access to the
U.S. market. These firms saw CBI as further institutionalizing an ongoing trend
of corporate relocation and restructuring necessary to reverse declining profitability
and intensified global competition. As a result, U.S.-based electronics firms lobbied
for local content laws that would give preferential treatment to U.S. firms.
The second group of firms in favor of CBI were the multilateralists in
pharmaceuticals, services, and banking. These firms were more competitive in
global markets and did not seek the restrictive local content laws preferred by
electronics firms. Instead, they saw the regional trade agreement as complementary
to broader efforts to revitalize the multilateralism of GATT on a global scale.
They valued the agreement because it allowed for a further reduction in U.S.
tariff barriers, which in turn furthered free trade goals.
Reagan administration officials supported CBI mainly because it complemented
broader security goals in the region. The administration insisted that the largest
percentage of CBI money should go to El Salvador, where the administration
was actively engaged in bolstering the military regime against rebel insurgents.
As such, much of the aid attached to CBI reflected the Reagan administration’s