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Contact us if you are considering using the provisions of the CAFTA-DR to expand your trade in the region.
The CAFTA-DR (Central America-Dominican Republic Free Trade Agreement) is the free trade accord that governs trade relations between Central America, the United States of America (USA), and the Dominican Republic (DR).
Initially, it was negotiated to only cover Central America and the US. From January 2003 to January 2004, it was known solely as the CAFTA. In July 2004, the Dominican Republic was added to the trading group and the accord expanded to become the CAFTA-DR, Central America -Dominican Republic Free Trade Agreement (CAFTA-DR).
The CAFTA-DR is composed of 22 chapters
This blog post will present the treaty’s highlights, as well as background information on the agreement. In this way, it will summarize the general conditions that characterize Central America’s trade opening at the beginning of the 1980s until the signing of CAFTA-DR in 2004. Commercial relations between this region and its main investment and trading partner, the United States of America, are also highlighted.
The CAFTA-DR document contains work resulting from the negotiation of 22 chapters. They are grouped into 5 topics. These include:
- Institutional and treaty administration issues.
- Trade in goods.
- Trade in services and investment.
- Public procurement of goods and services.
- Other non-commercial issues, although related to goods marketed through the CAFTA-DR, especially the following:
- Intellectual property.
- Labor standards.
- Environmental standards.
Similarly, an analysis of the application of this treaty is incorporated into the text, thus comparing it with other agreements. All this is viewed in the context of Central American economic integration. It is worth noting that the CAFTA-DR shares many common rules with other prominent trade treaties. In many instances, it reaffirms provisions included in World Trade Organization (WTO) Agreements.
As a result, the CAFTA-DR is said to have introduced improvements to Central American regulations, resulting in the furtherance of trade relations in the region. For this reason, it is important to consider the changes that the Central American countries had to make in terms of domestic legislative matters. These changes were activated prior to the implementation of the treaty, especially in the areas of telecommunications, services, and intellectual property.
Essentially, with the regulatory improvement motivated in the region by CAFTA-DR, greater opportunities for trade, investment and employment have arisen.
Goals of the CAFTA-DR
- Strengthen cooperation and amicable ties between signatory nations, promoting regional economic integration.
- Contribute to the expansion of world trade, providing a catalyst to broaden international cooperation. Likewise, promote harmonious development among the participating nations.
- Create, for the benefit of all, a broader and safer market for goods and services produced in each country. Similarly, differences in individual levels of development and the size of their economies are recognized.
- Avoid distortions in bilateral trade.
- Establish rules for trade for the mutual benefit of nations.
- Ensure a more predictable business framework that facilitates investment and business planning.
- Develop all respective obligations and rights arising from other bilateral and multilateral cooperation agreements. Mainly those of the Marrakesh Agreement governing the World Trade Organization.
- Stimulate innovation and creativity, promoting trade in goods and services subject to intellectual property rights protection.
- Seek to make regional trade easier by promoting transparent and efficient customs procedures in order to reduce costs and ensure predictability for its exporters and importers.
- Promote transparency to prevent and mitigate bribery and acts of corruption in international trade and investment.
- Create new and greater employment opportunities, improving working conditions as well as living standards in each of the participating countries.
- Protect, strengthen, and guarantee the fundamental rights of workers, while strengthening cooperation in labor matters.
- In accord with the previous, it is proposed that each country develop its respective international commitments on labor within the context of the CAFTA-DR.
- Create and promote new and better opportunities for the social and economic development of the region.
- Implement CAFTA-DR in a coherent manner by promoting environmental protection and conservation. In particular, by promoting sustainable and self-sustaining development, as well as strengthening cooperation on environmental issues.
- Protect and preserve the environment by improving the means to achieve this. This includes the promotion of the conservation of natural resources within each of the participating countries’ territories.
- Recognize the interest of Central American countries in strengthening and deepening their economic and regional integration.
- Contribute to greater integration of the Western Hemisphere by serving to promote the eventual adoption of the Free Trade Area of the Americas.
Currently, the Dominican Republic (DR) will propose to the USA the revision of the multilateral trade agreements signed, including CAFTA-DR. The most notable thing issue that is pending between the two trading partners is the elimination of tariffs on imports of rice and other agricultural products. This member country seeks to delay the timetable, initially agreed to dismantle tariffs on various agricultural products until 2020.
In particular, the main agricultural product affecting the Dominican Republic is rice. Beginning in 2020 tariffs on this commodity will be lowered by between 10 and 20% each year. In this way, trade in rice will be completely free of duties by 2026. The president of the Dominican Republic National Council of Small and Medium Rice Producers has asserted that there is no way for the members of his organization to compete with large producers. Therefore, it has been proposed there be a delay in the elimination of tariffs for another 10 to 12 years. If this is not done, the National Council has asserted that its members would go bankrupt.
In February 2005, CAFTA-DR member countries signed an Environmental Cooperation Agreement (ECA). Basically, this document communicated the shared agreement that environmental protection and economic and social development are interdependent aspects of achieving sustainable development. The signatories to the CAFTA-DR communicated that this is a fundamental factor in achieving the well-being of the current and future generations. This agreement, the ECA, was developed in accordance with Chapter 17 of CAFTA-DR.
In particular, the CAFTA-DR is the first free trade agreement signed between the US and a group of small developing economies. Essentially, this agreement creates new opportunities through the following mechanisms:
- Elimination of tariffs.
- Market opening.
- Reduction of barriers to the exchange of services.
- Promotion of economic transparency.
- The establishment of state-of-the-art rules for 21st-century trade.
Additionally, the CAFTA-DR was implemented to spur greater investment and trade between member countries while promoting regional integration. It is noteworthy to consider that Central America and the Dominican Republic make up the third most important market for U.S. exports to Latin America.
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