China and Costa Rica move toward free trade agreement

SAN JOSE, Costa Rica — Jorge Vilarrasa's grandfather left Spain 50 years ago to start a wood production company. His business became a regional leader recognized for its forest conservation practices and eco-friendly plywood. 



"During our best times we were producing 2,000 cubic meters per month and we employed 400 people," boasted Vilarrasa, the company's president. Those days are over.



"Now we've closed our production line entirely," he said. The company has shed two-thirds of its work force and will transition entirely into forest protection and reforestation. Why? Vilarrasa said Chinese competition effectively chopped down his business. 



China's unbeatable prices have caused many local producers like Vilarrasa to tremble. This week, Costa Rica entered round five of negotiations for a free-trade agreement (FTA) with China, which would lift trade barriers between the countries. 
Negotiators say the deal is almost complete and should be wrapped up in the sixth round in late February.

For China, Costa Rica represents an important diplomatic tie, opening a gateway to strengthen its presence in the region, said Manuel Orozco, an analyst at the Washington-based Inter-American Dialogue. A deal would provide Costa Rican consumers with a host of Chinese-made goods and help the country diversify its exports.

But as Costa Rica inches closer to that FTA, a fierce opposition is mounting here.

"We don't see a win-win relationship through this agreement," said Mario Montero, vice president of the Chamber of the Food and Beverage Industry. China isn't on the growth radar for many companies here, he said, and business owners aren't convinced it's worth it to open up Costa Rican markets to Chinese imports.

Costa Rica's chief negotiator Fernando Ocampo said ample proposals from both countries are on the table, each offering more than 90 percent of their respective markets to no-tariff competition with the other. 



In political terms, these countries' relationship is only just beginning to bud. In June 2007, Costa Rican President Oscar Arias turned on longtime ally Taiwan and set up diplomatic ties with that country's neighboring rival, the People's Republic of China. 



Costa Rica's move to become China's first diplomatic friend in Central America did not come without Chinese gratitude: The Asian giant bought $300 million in Costa Rican bonds and pledged millions more in aid and projects, including San Jose's new national stadium and its first Chinatown. 



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