United States and the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR)

On August 5, 2004, the United States signed the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) with five Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua) and the Dominican Republic.

The CAFTA-DR is the first free trade agreement between the United States and a group of smaller developing economies. This agreement is creating new economic opportunities by eliminating tariffs, opening markets, reducing barriers to services, promoting transparency, and establishing state-of-the-art rules for 21st century commerce. It is facilitating trade and investment among the Parties and furthering regional integration.

Central America and the Dominican Republic represent the third largest U.S. export market in Latin America, behind Mexico and Brazil.

CAFTA–DR:

• Overall Trade in Goods between the United States and the CAFTA–DR countries grew from $35.0 billion in 2005 to $41.2 billion in 2007, an increase of 17.7 percent.

• Export Market: U.S. exports to the CAFTA–DR region were $22.4 billion in 2007, up 32.7 percent from 2005.

• Import Market: U.S. imports from the CAFTA–DR countries were $18.8 billion in 2007, up 3.8 percent from 2005.

• Status: The United States has implemented the FTA on a rolling basis as countries complete their commitments under the agreement. During 2006, CAFTA–DR went into force between the United States and four of our partner countries – El Salvador in March, Honduras and Nicaragua in April, and Guatemala in July. The agreement went into force for the Dominican Republic on March 1, 2007. Costa Rica, approved the agreement in a national public referendum on October 7, 2007, although entry into force is pending passage of necessary implementation legislation by the Costa Rican legislature.

• In 2007, the CAFTA–DR region was our 14th largest global market trading partner and the 21st largest source of U.S. imports.

Benefits of CAFTA–DR:

Tariffs: More than 80 percent of U.S. exports of consumer and industrial goods became duty-free in Central America and the Dominican Republic immediately upon implementation, with remaining tariffs phased out over 10 years. Key U.S. export sectors benefit, such as information technology products, agricultural and construction equipment, paper products, chemicals, and medical and scientific equipment.

Investment: The agreement establishes a secure, predictable legal framework for U.S. investors in Central America and the Dominican Republic. All forms of investment are protected under the FTA, including real property, enterprises, debt, concessions, and intellectual property. U.S. direct investment in the CAFTA–DR countries was $4.4 billion in 2006.

Services: Central America and the Dominican Republic accord substantial market access across the entire services regime. In addition, the agreement loosens restrictive “dealer protection” regimes that had previously locked U.S. firms into exclusive or inefficient distributor arrangements.

IPR: Once fully implemented, CAFTA–DR will establish the highest level of intellectual property protection in the Latin American region and will support the growth of trade in valuable digital and other intellectual property-based products.