Overview
The United States and five Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua) agreed to a historic free trade agreement that will benefit U.S. service companies by phasing out tariffs and trade barriers and by providing them with better access to affordable goods and services. The Central American countries will accord substantial market access across their entire services regime, subject to very few exceptions, using the negative-list approach (everything is within the scope of the agreement unless stipulated that it is excluded).
CAFTA is a large and growing market for U.S. services. The United States is a main supplier of goods and services to this region. CAFTA will further strengthen its emerging democracies and is a crucial element for building stronger trade liberalization in the region. In addition to the provisions in the Services Chapter, specific provisions contained in the following CAFTA Chapters, such as Investment, Financial Services, Telecommunications, Electronic Commerce, Intellectual Property Rights, Sanitary and Phytosanitary Measures, Customs Administration and Trade Facilitation, Labor, Environment, Transparency, Dispute Settlement will benefit various types of service companies.
The commitments in services cover both cross-border supply of services, such as services supplied through electronic means or through the travel of nationals, as well as the right to invest and establish a local services presence. Market access to services is supplemented by requirements for regulatory transparency. Regulatory authorities must use open and transparent administrative procedures, consult with interested parties before issuing regulations, provide advance notice and comment periods for proposed rules, and publish all regulations. Central American countries have agreed to change “dealer protection regimes” and loosen restrictions that lock many different types of U.S. service firms into exclusive or inefficient distributor arrangements.
Sector Specific Highlights
Advertising: Service companies will enjoy increased opportunities to advertise their goods and services due to increased protections for U.S. patents, trademarks and trade secrets. There are some restrictions on the types of stock mass media and advertising agencies can have.
Architecture, Construction, and Engineering: Improved regulatory regimes and strong investment environments will stimulate growth opportunities for architects, construction consultants, and engineers.
Distribution Services, including retail and wholesale services, direct marketing, direct selling, and franchising: Retailers will benefit from the removal of barriers that inhibit the movement of goods and agriculture products between manufacturers, wholesalers, retailers, and consumers. Intellectual property rights provisions will ensure the concept brands of the franchise companies are protected. Retailers working with transportation, telecommunications, financial, computer and other service providers may be able to improve and streamline the supply chain to better serve consumers in the United States and throughout the hemisphere. Direct marketers should take advantage of opportunities as a result of improved wireless telecommunication services, internet service, and specific sectors such as travel and tourism. Retailers will be able to invest in footwear production that will provide competition and Asia diversification at no risk to the U.S. marketplace. The Centrals, combined as a trading group, comprise the third largest supplier of apparel to the U.S. market. Textile and apparel account for more than 50 percent of the Central’s total exports to the United States. Importers may receive duty-free benefits for some apparel made in Central America that contain certain fabrics from NAFTA partners Mexico and Canada. While the CAFTA markets are relatively small, there is significant U.S. service company presence for companies providing consumer services.
Education and Training: The CAFTA locks in continued access for competitive U.S. higher education and training firms.
Energy: Energy service companies will be able to compete and bid on future energy projects, including privatizations, which tend to be huge investment projects.
Entertainment, including audiovisual and broadcasting: State-of-the-art protections and non-discriminatory treatment are provided for digital products such as U.S. software, music, text, and videos. Protections for U.S. patents, trademarks and trade secrets are strengthened. Improved market access for U.S. films and television programs over a variety of media including cable, satellite, and the Internet. Film distributors will also benefit from improved customs trade facilitation provisions.
Environmental: Environmental obligations are part of the core text of the CAFTA. It also has an environmental cooperation agreement that provides a framework for undertaking environmental capacity building in the agreement and establishes an Environmental Cooperation Commission, which identifies a number of environmental protection priorities.
Express Delivery: The Services Chapter contains specific commitments on express delivery services, including market access provisions and preventions from cross-subsidization from a postal monopoly. Also, improved customs trade facilitation will help express delivery service companies provide better services to its customers that are seeking to enhance their competitiveness in the hemisphere and global market place.
Healthcare: CAFTA provisions have ensured access for healthcare providers. However, there are licensing and reciprocity provisions that may limit some activities.
Information Services, including computer related services: New access in such sectors as banking, financial services, and telecommunications as a result of the CAFTA will increase demand for strong software development, data processing, and other information services.
Professional Services, including accounting, legal services, and management consulting: Improved opportunities in such sectors as banking, investment, and financial services will offer increased opportunities for professional services. However, some licenses may be required.
Real Estate: While there are improvements in investment and distribution services that will increase real estate opportunities, there are some limitations on location.
Transportation, including air, land, rail, and sea: While air transport services are not included in this agreement because they are part of separate air agreements, there are increased opportunities for other transportation modes such as land and rail. Transparency of regulations will allow companies a greater understanding of applicable requirements.