U.S.- CAFTA-DR Free Trade Agreement
How U.S. Companies Can Benefit
The Central America-Dominican Republic-United States Free Trade Agreement (CAFTA-DR) includes seven signatories: the United States, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua. The U.S. Congress approved the CAFTA-DR in July 2005 and the President signed the implementation legislation on August 2, 2005.
The United States has implemented the CAFTA-DR on a rolling basis as countries make sufficient progress to complete their commitments under the Agreement. The Agreement first entered into force between the United States and El Salvador on March 1, 2006, followed by Honduras and Nicaragua on April 1, 2006, Guatemala on July 1, 2006, and the Dominican Republic on March 1, 2007.
The remaining partner country, Costa Rica, approved the agreement in a national public referendum on October 7, 2007, although entry into force is pending passage of necessary implementation legislation by the Costa Rican legislature. On February 27, 2008, the United States and the five other CAFTA-DR partners granted Costa Rica a seven-month extension until October 1, 2008, to complete the implementation process.
In addition to tariff reduction, CAFTA-DR provides new market access for U.S. consumer and industrial products and agricultural products. It also provides unprecedented access to government procurement in the partner countries, liberalizes the services sectors (see also financial services), protects U.S. investments in the region, and strengthens protections for U.S. patents, trademarks, and trade secrets. The Agreement covers customs facilitation and provides benefits to small and medium-sized exporters. Provisions are also included that address government transparency and corruption, worker rights, protection of the environment, trade capacity building, and dispute settlement.
CAFTA-DR creates the third-largest U.S. export market in Latin America, behind only Mexico and Brazil, and the 14th largest U.S. export market in the world (or the 10th largest if the European Union is considered a single destination). The United States exported $22.4 billion in goods to the five Central American countries and the Dominican Republic in 2007, more than all exports to Russia, Ireland, and Indonesia combined. CAFTA-DR already has given a strong boost to U.S. exports to the region (see 2007 Trade Overview). U.S. exports to the CAFTA-DR countries increased by 14.4 percent in 2007, following a 16.0 percent increase in 2006.
Most Dominican Republic and Central American exports into the United States have benefited from duty-free treatment as a result of a trade preference program provided by the U.S. Congress to promote regional economic development (the Caribbean Basin Initiative, CBI). CAFTA-DR reciprocally reduces tariff and non-tariff barriers for U.S. exports into the region. CAFTA-DR also ensures that U.S. companies are not disadvantaged by the trade agreements that Central America has already negotiated with our NAFTA partners and other countries.
CAFTA-DR requires important reforms of the domestic legal and business environment that encourage competitive business development and investment, protect intellectual property rights, and promote transparency and rule-of-law in the democratic systems that have solidified in the region over the past decade. CAFTA-DR is an important instrument to support U.S. national security interests; the FTA promotes closer economic cooperation among the Central American countries, thereby advancing regional integration and contributing to greater peace and stability in the region.
The Department of Commerce's Market Access and Compliance offices monitor this Agreement to ensure that the CAFTA-DR signatory-partner countries fully comply with their obligations. If you encounter problems under the CAFTA-DR, please contact our Agreements Compliance office.
Additional Resources:
U.S. Commercial Service Trade Americas Website
Textile and Apparel Information
United States Trade Representative (USTR) CAFTA-DR Website
U.S. Commercial Service Central America Website
U.S. Commercial Service Dominican Republic Website
For additional information please contact an International Trade Specialist at the Trade Information Center at 1-800-USA-TRADE.