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• National Agricultural Law Center

Summary

On June 23, 2005, President Bush submitted to Congress a bill (H.R. 3045, S. 1307) to implement the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA). This initiated a 90-day period during which each chamber must consider this measure on an up or down vote, with no amendments allowed. Drawing much attention are the agreement's sugar provisions that would allow additional sugar from the region to enter the U.S. market. To assuage concerns expressed by some Members, the Administration pledged prior to Senate passage to take steps to ensure that all sugar imports, including those under DR-CAFTA, do not exceed a "trigger" that could undermine the U.S. Department of Agriculture's ability to manage the domestic sugar program. Sugar producers and processors responded that the offer is not a "deal," and reiterated they will work to defeat the agreement. In DR-CAFTA, the United States and six countries would completely phase out tariffs and quotas -- the primary means of border protection -- on all but four agricultural commodities traded between them in stages up to 20 years. The four exempted products are as follows: for the United States, sugar; for Costa Rica, fresh onions and fresh potatoes; and for the four other Central American countries, white corn. If approved, the U.S. agricultural sector would over time gain free access to the six highly protected markets on a reciprocal basis, matching these countries' current duty-free entry for nearly all their agricultural exports to the United States. Other agricultural provisions establish safeguards for specified agricultural products to protect U.S. and the region's producers from sudden import surges; prohibit the use of export subsidies between partners; and establish a mechanism to address sanitary and phytosanitary barriers to agricultural trade. DR-CAFTA's provisions, once fully implemented, are expected to result in trade gains, though small, for the U.S. agricultural sector. The U.S. International Trade Commission (ITC) estimates that $328 million in additional exports (primarily grains, meat products, and processed food products) would be offset by a $52 million increase in imports (largely reflecting additional access granted for sugar and beef from the six countries). Of the $2.7 billion increase in total U.S. exports that the ITC projects under DR-CAFTA, 12% would be attributable to the U.S. agricultural sector. Most U.S. commodity organizations, agribusiness and food manufacturing firms, and the American Farm Bureau Federation (a general farm organization) support DR-CAFTA, expecting to benefit from the guaranteed increased access to the markets of the six countries. Cotton producers announced their support, following a similar decision made by one major textile trade association. The U.S. sugar industry strongly opposes the additional access for sugar imports from these countries, fearing its economic impact on domestic producers and processors. This sector views DR-CAFTA as setting a precedent for including sugar in the other free trade agreements that the Bush Administration is negotiating. Two cattlemen trade organizations hold differing positions on the agreement's beef provisions. The National Farmers Union (a general farm organization) opposes DR-CAFTA. This report will be updated to reflect developments.

Related Legislation:
• H.R.3045
• S.1307

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