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Summary

This report explains the conditions in five countries in Central America (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua) and one country in the Caribbean (Dominican Republic) that will be partners with the United States in the U.S.-Dominican Republic-Central America Free Trade Agreement (DR-CAFTA) signed in August 2004. In U.S. approval action, the House and Senate passed the required implementing legislation (H.R. 3045) on July 27 and 28, 2005, and the President signed it into law (P.L. 109-53) on August 2, 2005. The agreement will enter into force for the other countries when their legislatures have approved it The legislatures of El Salvador, Honduras, and Guatemala have approved the pact so far. The DR-CAFTA partners are basically small countries with limited populations and economic resources, ranging in population from Costa Rica with a population of 4.0 million to Guatemala with a population of 12.3 million, and ranging in Gross National Income (GNI) from $4.0 billion for Nicaragua to $23.5 billion for Guatemala. While El Salvador, Guatemala, and Nicaragua experienced extended civil conflicts in the 1970s and 1980s, all of the countries have had democratically elected presidents for some time, and several of the countries have experienced recent electoral transitions. For each of the countries the United States is the dominant market as well as the major source of investment and foreign assistance, including trade preferences under the Caribbean Basin Initiative (CBI) and assistance following devastating hurricanes. The Bush Administration and other proponents of the pact argue that the agreement will create new opportunities for U.S. businesses and workers by eliminating barriers to U.S. goods and services in the region. They also argue that it will encourage economic reform and strengthen democracy in affected countries. Many regional officials favor the pact because it provides new access to the U.S. market and makes permanent many of the temporary one-way duty-free trade preferences currently in place. Critics argue that the environmental and labor provisions are inadequate, that the pact will lead to the loss of jobs for workers in the United States and for subsistence farmers in Central America, and that concessions in the textile/apparel and sugar sectors will be harmful to U.S. producers. In the context of legislative action, the Bush Administration promised to limit sugar imports, to make some adjustments for textile industries, and to support multi-year assistance to regional countries to strengthen enforcement of labor and environmental standards. Related information may be found in CRS Report RL31870, The Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA), by J.F. Hornbeck; CRS Report RL32110, Agriculture in the U.S.-Dominican RepublicCentral American Free Trade Agreement, by Remy Jurenas; and CRS Report RS22164, DR-CAFTA: Regional Issues, by Clare Ribando.

Related Legislation:
• H.R.3045
• S.2216

Related Reports:
• RL32322
• RL32322
• RL32322

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