At a luncheon last fall in New Orleans for then-United States Trade Representative Robert Zoellick, few attendees expected more than the typical congratulatory speeches, question-and-answer sessions, and mass-produced lunch food. But the topic at hand was the U.S.-Dominican Republic-Central American Free Trade Agreement (CAFTA), a trade deal inked by Zoellick with five Central American nations and the Dominican Republic, but still awaiting approval in the US Congress. When you talk CAFTA in sugar-growing Lousiana, as the guests would quickly learn, it's controversial.

With CAFTA on the agenda, the luncheon soon descended into theatrics better suited for a professional wrestling match. After Zoellick gave a speech in favor of CAFTA, Charles Melancon, former head of the American Sugar Cane Growers League-and now a U.S. congressman from Louisiana, elected in November-stepped up to the mic to challenge Zoellick "to come out to the sidewalk outside" where he had assembled a group of Louisiana sugar growers who stood to lose from the agreement. Zoellick parried this let's-take-it-outside challenge, but "the rhetoric was so tough, you'd think people could [have] come to blows," remembers the luncheon participant. Melancon, too, held his ground, rallying his supporters and dominating the next day's local newspapers.

While the anger might have seemed out of place at a business lunch, it was typical of trade issues. Although Congress has passed five free trade agreements in five years, CAFTA is shaping up to be the most contentious deal yet, with advocates and opponents marshalling all their forces for battle. And in Louisiana, where the deal could have enormous positive and negative effects on certain industries, CAFTA dominates local politics at the center of the maelstrom.

Pro CAFTA

On a tropical spring day at the port of New Orleans, cargo from Central America hums in and out of broad wharves and massive modern container terminals on the sides of the broad Mississippi. Workers driving forklifts stack ships full of rolls of local paper products and massive boxes of hot sauce, to be shipped to countries south and east of the U.S. Nearby, in a broad building, tons of green coffee from Central America arrives to be cleaned and packaged.

"Central America is our neighbor-one of our biggest markets," says Ana Menes, the port's marketing manager for Latin America, who originally hails from Honduras. Menes notes that shipping service from the port to Central America has been increasing, with Maersk Sealand adding a route to Costa Rica. "Our deep water ports are heavily reliant on the Caribbean and Central America," agrees John Hyatt, vice president of imports for New Orleans freight forwarder Irwin Brown.

Louisiana is already a major gateway to nearby Central America-in 2002, its ports handled over 4.5 million tons of bulk commodities going from the U.S. to Central America; between 1998 and 2003, Louisiana exports to Central America grew by almost 35 percent by value. This growth is a mere harbinger of what will come, say CAFTA supporters, who point out how the agreement will reduce and eliminate tariffs on a large range of products (currently, most Central American tariff rates are much higher than those in the U.S.). One study commissioned in part by the Port of New Orleans estimates that CAFTA could add as much as $300 million in new business per year to the Louisiana economy. And there's a powerful fringe benefit, which Daniel Griswold, a trade analyst at the Cato Institute, a Washington think-tank, notes-that CAFTA would help increase the rule of law in Central America. This important development would benefit foreign investors. "By encouraging private sector growth, trade expansion would create a larger, more educated and politically aware middle class, which has traditionally formed the backbone of democratic systems," Griswold notes.

Freight forwarders and logistics managers like the Irwin Brown firm would benefit from CAFTA, but so too, the study predicted, would large industrial entities like petrochemicals firms, machinery companies, and plastics manufacturers. This new business would create what the study called a multiplier effect-companies that directly benefit from CAFTA would "spend their income at other establishments...purchasing supplies, utilities, materials, et cetera from other Louisiana firms, which also creates new sales, earnings and jobs at those establishments."

Louisiana's Hispanic businesses community, many of whom already have close cultural links to Central America, are particularly excited about CAFTA. (New Orleans has large communities of Honduran immigrants and other groups from Central America.) Manuel Blanco, founder of Atlantis International, a New Orleans-based lubricant company, heads up the Louisiana Hispanic Chamber of Commerce. Since 1977, when Blanco started his company, he's been exporting to Central America, but has always faced some barriers, such as high tariffs. "Support [for CAFTA] in our chamber is very strong," Blanco says. "We recognize the impact CAFTA is going to have on our economy...given the cultural ties."

Pegged to the potential growth from CAFTA, the Port of New Orleans, which says it generates $2 billion in annual earnings, has made the trade agreement a central part of its modernization strategy. The port has begun a major recruitment project, seeking to draw heavy industry companies, like petrochemicals, to the New Orleans area. Even after opening a new container terminal in spring 2004 that has a capacity of 366,000 containers per year, the port is considering a further terminal upgrade dependent in part on the trade deal. "If CAFTA passes, we'll be able to expand," says Menes.

What's more, rail operators are considering plans to increase New Orleans service to exploit CAFTA. And one of the Port of New Orleans' major tenants, freight warehouser and forwarder The Kearney Companies, has upgraded a 30,000-square-foot warehouse to be used for apparel coming from Central America. "The driving force in apparel is going to be speed," says David Kearney, president of The Kearney Companies, noting that speed is particularly important for seasonal, low-value items like T-shirts that must get to the U.S. market quickly. "CAFTA's speed to market is fast."

Meanwhile, says Hyatt, to boost the Central American market, New Orleans has initiated a capacity building initiative, in which the city will bring key Central American business leaders up to Louisiana to study business administration and provide expertise to companies in Central America. "This will help small and medium-sized Central American businesses develop, so they can compete in the global economy and buy from the U.S.," Hyatt says.

The sugar opposition

But for Ronald Gonsoulin, president of the Iberia Sugar Cooperative, a sugar mill operation in New Iberia, a marshy area of the Louisiana bayou, CAFTA looks far different. Gonsoulin, a third-generation farmer, has been in the sugar business since 1970, since he graduated college. It's not been all good times. "We've had three successive bad years of production, from hurricanes and bad weather," he says wearily, noting that many Louisiana sugar operations are consolidating to stay in business. "My son has told me, 'Daddy, I'm going to do everything I can not to have my kids farming.'" So difficult, in fact, that Iberia Sugar Cooperative teeters on the verge of closing, and Gonsoulin thinks this year's milled sugar may be the cooperative's last order.

Gonsoulin fears that CAFTA, which will increase sugar imports from Central American nations, could be the final blow for his industry. "International competition has excess sugar, and they'll dump it onto the world market," he says. "If CAFTA passes, there's a strong possibility we'll lose half the sugar industry in Louisiana."

Gonsoulin has powerful forces on his side. Louisiana's sugar industry, which grows and processes sugar cane, accounts for roughly 20 percent of the state's agricultural product, and supports other businesses, such as banks, that lend to growers. It also enjoys powerful political patrons and a long, emotional attachment with many average Louisiana residents. According to one longtime observer of Louisiana politics, support for sugar helped seal recent electoral victories for Democratic Governor Kathleen Blanco (no relation to Manuel Blanco) and Democratic Senator Mary Landrieu, who charged that her Republican opponent might support policies that would hurt the sugar industry.

Clearly, CAFTA would impact Louisiana sugar-though how much remains open to debate. One recent study, by a LSU economist, estimated that the additional sugar imports allowed under CAFTA-roughly 100,000 tons per year-would reduce the raw sugar price in the U.S. by over 3 percent, potentially "reducing market prices to sugar growers...[and] impacting a large majority of sugarcane growers in [Louisiana]." For its part, the United States Trade Representative argues that CAFTA has strict and relatively small quotas on the amount of sugar allowed into the U.S., while critics of the sugar industry note that U.S. sugar benefits from generous federal government support that might be better directed elsewhere. One study, by the U.S. International Trade Commission, even found that stopping the support would provide the U.S. economy with a net of over $1 billion per year.

What's more, many in the sugar industry see CAFTA as a template. If CAFTA passes, they fear, the White House may push through free trade deals with other tropical sugar producing nations, such as Thailand and the Andean countries-deals the U.S. sugar industry believes could swamp domestic sugar. U.S. sugar growers charge that unless sugar producers in other developed nations also slash their price supports-preferably through multilateral negotiations at the World Trade Organization-bilateral and regional deals like CAFTA will put American growers at a disadvantage.

Louisiana sugar is bringing out the big guns. According to the Center for Responsive Politics, a Washington research group, during the 2004 elections the sugar industry gave over $3 million to candidates across the country. Nationally, the top recipient was none other than Charles Melancon, who now serves on the House Agriculture Committee. Sugar trade groups have started bringing growers to Capitol Hill and making alliances with Louisiana shrimp farmers, as well as organized labor and environmental organizations, which also oppose the deal and worry that CAFTA's labor and enforcement mechanisms are not tough enough.

"This is a very concentrated effort fighting CAFTA," says Jim Simon, general manager of the American Sugarcane Growers League, a leading trade group. "We'll work to make sure every single member of Congress knows that it will devastate our industry," adds Philip Hayes, a spokesman for the American Sugar Alliance, another trade organization. The strategy seems to be working: Nearly the entire Louisiana congressional delegation, including U.S. senators David Vitter and Mary Landrieu, officially opposes CAFTA. "Congressman Melancon sees we're making a habit of selling out viable industries," says Melancon's spokesman, Ellery Gould, explaining the congressman's position on CAFTA.

Trade offs and compromise

Not to be outdone, CAFTA advocates in Louisiana are hardly giving up. Some CAFTA proponents are lining up support from non-sugar agricultural producers; after all, 80 percent of Louisiana agriculture is not involved in sugar, and a recent study by the American Farm Bureau, a national organization representing farmers, found that CAFTA could boost American agricultural exports, such as beef, poultry, and cotton, by nearly $1 billion annually. "Sugar's benefit is minute compared to what we can get from CAFTA," says Manuel Blanco. Indeed, Jackie Loewer, chair of the Louisiana Rice Producers group of trade organization USA Rice, says, "We think CAFTA is important, since we export more than 50, 60 percent of the rice we grow in Louisiana, and these are our neighbors." Loewer adds: "We don't think sugar will lose as much as we gain." (Nationally, USA Rice has stated that it favors CAFTA).

CAFTA advocates also are seeking out U.S. textile manufacturers, who are increasingly threatened by cheap Chinese textiles; U.S. textiles might survive by selling their yarn and fabric to apparel sewing plants in Central America, which then produce clothing sold back in the U.S. "Right now, most of the apparel that comes in comes from China, and a lot of it could come from Central America under the new agreement," says Kearney.

Ultimately, CAFTA's fate may rest upon one man. If President Bush uses his political capital to strongly back the agreement, he probably could discipline his GOP caucus and push it through Capitol Hill. "Now Vitter is a senator, interested in committee assignments, and he'll need to toe the party line," says Hyatt. Yet, the White House has many major priorities on its plate, notably Social Security reform as the voting nears, and as CAFTA moves into Congress, it may prove an extraordinarily close call. "This is going to be a tight vote," predicts Hayes, "that is going to go down to the wire."