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• National Agricultural Law Center
• National Agricultural Law Center

Summary

The United States Trade Representative (USTR) and trade ministers from Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic signed the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) on August 5, 2004. Nearly one year later, it faced a contentious debate and close vote in both houses of the U.S. Congress. The Senate passed implementing legislation 54 to 45 on June 30, 2005, with the House following in kind 217 to 215 on July 28, 2005. President Bush signed the legislation into law on August 2, 2005 (P.L. 109-53, 119 Stat. 462). The United States has implemented the agreement for El Salvador, Honduras, Nicaragua, Guatemala, and the Dominican Republic. In Costa Rica, legislative consideration of CAFTA-DR has been a prolonged process, culminating in the decision to hold a national referendum. On October 7, 2007, the people of Costa Rica voted in favor of CAFTA-DR 51.6% to 48.4% (subject to official recount), setting the stage for final consideration by the National Assembly. The CAFTA-DR is a regional agreement with all parties subject to "the same set of obligations and commitments," but with each country defining its own market access schedule. It is a reciprocal trade agreement, basically replacing U.S. unilateral preferential trade treatment extended to these countries under the Caribbean Basin Economic Recovery Act (CBERA), the Caribbean Basin Trade Partnership Act (CBTPA), and the Generalized System of Preferences (GSP). It liberalizes trade in goods, services, government procurement, intellectual property, and investment, and addresses labor and environment issues. Most commercial and farm goods attain duty-free status immediately. Remaining trade will have tariffs phased out incrementally over five to twenty years. Duty-free treatment will be delayed longest for the most sensitive agricultural products. To address asymmetrical development and transition issues, the CAFTA-DR specifies rules for transitional safeguards, tariff rate quotas, and trade capacity building. The CAFTA-DR is not expected to have a large effect on the U.S. economy as a whole given the relatively small size of the Central American economies and the fact that most U.S. imports from the region had already been entering duty free under normal trade relations or CBI and GSP preferential arrangements. Adjustments will be slightly more difficult for some sectors, but none are expected to be severe. Supporters see it as part of a policy foundation supportive of both improved intraregional trade, as well as, long-term social, political, and economic development in an area of strategic importance to the United States. Opponents wanted better trade adjustment and capacity building policies to address the potentially negative effects on certain import-competing sectors and their workers. They also argued that the labor, intellectual property rights, and investment provisions in the CAFTA-DR needed strengthening. This report discusses issues and evolution of the CAFTA-DR debate and will be updated.

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