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Summary

On August 5, 2004, the United States, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic signed the Dominican Republic- Central America-United States Free Trade Agreement, or the DR-CAFTA. Enacting the agreement requires legislative action in all countries. To date, El Salvador, Honduras, and Guatemala have ratified the agreement. In the United States, implementing legislation has yet to be introduced and Trade Promotion Authority (TPA) legislation (P.L. 107-210) does not stipulate a time limit for doing so. Once introduced, however, the committees of jurisdiction (Ways and Means in the House and Finance in the Senate) have 45 legislative days to report the bill, after which it would be automatically discharged. Each chamber would then have 15 legislative days to vote on the bill. The DR-CAFTA would enter into force when the United States and at least one other country pass implementing legislation into law. <p> The DR-CAFTA was negotiated as a regional agreement in which all parties would be subject to the "the same set of obligations and commitments," but with each country defining its own separate schedules for market access on a bilateral basis. The DR-CAFTA is a comprehensive and reciprocal trade agreement, which distinguishes it from the unilateral preferential trade arrangement between the United States and these countries as part of the Caribbean Basin Initiative (CBI). It defines detailed rules that would govern market access of goods, services trade, government procurement, intellectual property, investment, labor, and environment. <p> Under the DR-CAFTA, more than 80% of U.S. consumer and industrial exports and over half of U.S. farm exports to Central America would become duty-free immediately. For the DR-CAFTA countries, 100% of non-textile and nonagricultural goods would enter the United States duty free immediately. Many goods would have tariffs phased out incrementally so that duty-free treatment is reached in 5, 10, 15, or 20 years from the time the agreement takes effect. Duty-free treatment would be delayed longest for the most sensitive products, and in some cases, the tariff reductions would not begin until 7 or 12 years into the agreement. To address asymmetrical development and transition issues, the DR-CAFTA specifies rules for transitional safeguards, tariff rate quotas (TRQs), and trade capacity building. <p> The DR-CAFTA is controversial. Supporters see it as part of a policy foundation supportive of both improved interregional trade, as well as, long-term social, political, and economic development. Concerns remain in all participating countries, however, over the need for adjustment policies to address the potential negative effects on certain import-competing sectors and their workers. Labor rights issues in some DR-CAFTA countries have caused organized labor to come out against the agreement, despite arguments that trade contributes to long-term economic growth, poverty reduction, and development. All these economic issues, however, are necessarily balanced against the politics of trade, which makes the outcome of the DR-CAFTA uncertain.

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