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Last Updated: Tuesday, 2 August 2005, 18:29 GMT 19:29 UK
Bush signs Latin free trade pact
President George W Bush signs up to Cafta, surrounded by senators and Central American representatives
President George Bush says the pact will help the whole region
US President George W Bush has signed into law a controversial free trade pact with six Central American nations.

The Central American Free Trade Agreement (Cafta) was approved in the House of Representatives by just two votes in the face of strong opposition.

Signing the pact, Mr Bush said it would be good for the US and "advance peace and prosperity" throughout the region.

It was opposed by Democrats and some Republicans because of fears it could put US jobs and industries at risk.

Workers' rights

The agreement brings together the US and Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic.

The US Senate voted in favour of it in June, but opposition in the House of Representatives was only narrowly overcome after intense lobbying by Bush officials.

US textile and sugar industries and trade unions had argued heavy job losses in the US could result because of competition from countries where workers' rights are poorly protected.

Sugar plantation
The US sugar industry fears the deal could spark job losses

Mr Bush argued the measure would help bolster economic growth and strengthen young democracies in Central America.

"The bill I'm about to sign is good for America," he said at the White House signing ceremony.

"The small nations of Cafta are making big and brave commitments and Cafta is a signal that the United States will stand with them and support them."

He also argued the deal would help curb illegal immigration into the US because Central Americans would have better opportunities to provide for their families without leaving their countries.

The agreement will eventually eliminate tariffs currently imposed on US sales in Central America, open up the market for US goods and services and make investment easier.

While it is expected to have limited economic impact for the US, the Bush administration sees the pact as an important element in its mission to spread democracy and combat terror.

Along with the six new nations within Cafta - and the Nafta agreement with Canada and Mexico - the US currently has free-trade agreements with Australia, Chile, Singapore, Jordan and Israel.

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