|
|
|
COMMODITY FACT
SHEETS:
Dominican
Republic-Central
America-United States Free Trade Agreement (CAFTA-DR)
What’s at Stake for Cotton?
May 2005
On August 5, 2004, the United States signed the
Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR)
with Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and
Nicaragua. The agreement will provide America’s farmers, ranchers, food
processors, and the businesses they support with improved, and in many cases,
new access to this growing regional market of 44 million consumers. The CAFTA-DR
calls for eventual duty-free, quota-free access on essentially all products, and
addresses other trade measures among the parties as well. Under the existing
terms of the Caribbean Basin Initiative, which the CAFTA-DR replaces, nearly all
agricultural exports from the CAFTA-DR countries to the United States already
receive duty free treatment. The CAFTA-DR levels the playing field, providing U.S. exporters
market access that is better than, or at a minimum equal to, that given to other
competitor countries.
U.S. Gains Improved Access to the Dominican and
Central American Dynamic Economies
Before CAFTA-DR. . .
U.S. cotton faced an applied import tariff of 1
percent on product shipped to Costa Rica, while product shipped to the other six
countries enters duty-free. The WTO permits duties as high as 60 percent.
Although all six countries import raw cotton from the United States, Guatemala
and El Salvador are the largest importers. From 2002 through 2004, U.S.
suppliers annually shipped on average 51,313 metric tons valued at $73.1 million
to all six countries combined.
After CAFTA-DR. . .
The CAFTA-DR will ensure continued access to
Central American markets for U.S. cotton producers by immediately eliminating
all bound import duties. Over the longer term the Agreement’s rules of origin
will continue to favor increased access to the U.S. market for Central American
and Dominican apparel and textiles made from U.S. cotton. The agreement also
includes an allowance for using NAFTA fabric for duty-free apparel, which also
favors U.S. cotton content.
U.S. Consumers Benefit
Before CAFTA-DR. . .
The CAFTA-DR countries produce a very small amount of cotton, most of which is
for domestic use. Although CAFTA-DR countries do not export raw cotton to the
United States, they are significant suppliers of apparel to the United States,
particularly under the Caribbean Basin Initiative.
After CAFTA-DR. . .
The
U.S. import duty on raw cotton from all six countries is phased out over 15
years. More importantly, these countries will gain increased access to the U.S.
market for textiles and apparel. There is also a special arrangement allowing
limited amounts of apparel and textiles, which are in short supply in the U.S.
market, to contain third-country fabrics, whether they are made from cotton,
synthetic, or natural fibers. The degree to which this special arrangement is
used for apparel made from synthetics will determine the impact on their demand
for U.S. cotton.
Nicaragua
In addition, Nicaragua will have a Trade Preference Level
of 100 million square meter equivalents. This means third-country yarn and
fabrics can be used in Nicaragua for an equivalent amount of duty-free apparel
exported to the United States.
Return to
CAFTA-DR
Commodity Fact Sheets
|
|
|
