The Central American Free Trade Agreement (CAFTA) talks with El Salvador, Guatemala, Honduras, and Nicaragua were initiated in October 2002 and concluded in December 2003.  Costa Rica has been involved in the negotiations from the outset, but was not part of the agreement that was announced on December 17, 2003.  However, Costa Rica agreed to join the pact on January 25, 2004

Why CAFTA?

The Agreement will help foster economic growth, improve living standards, and create higher paying jobs in the United States and CAFTA countries by reducing and eliminating regional barriers to trade and investment.  The Agreement will create improved market opportunities for U.S. agricultural products, as well as other goods and services. 

CAFTA will serve the United States’ broader economic interests, advancing the cause of trade liberalization and reform in the Western Hemisphere through the Free Trade Area of the Americas (FTAA) and globally in the World Trade Organization (WTO).  Finally, CAFTA will assist efforts to begin or improve implementation of the free market economic policies.

How Will America’s Farmers Benefit From CAFTA?

The Agreement is expected to expand a $2.4 billion two-way trade relationship in agricultural, food, and fishery products. CAFTA will give U.S. agricultural exporters the same or better access to CAFTA consumers as our competitors, providing promising new opportunities to a regional market where U.S. exports currently total nearly $1 billion.

Tariffs:  Under the agreement, over half of U.S. farm goods by value exported to the four CAFTA countries will receive duty free treatment immediately upon implementation.  Tariffs on other products will be phased out over the course of 5, 10, 12, or 15 years (18 years in the case of rice and chicken leg quarters, and 20 years in the case of dairy products).  In most cases, eliminating these tariffs will create preferences (or equal footing) for U.S. exporters over third country suppliers, helping to expand U.S. market share.  Certain sensitive products will be subject to tools and mechanisms provided for in the CAFTA, including tariff-rate quotas, long-term tariff phase-outs, nonlinear tariff reductions, and the application of an import safeguard.

Safeguard Mechanism:  For certain sensitive products, the agreement provides for the application of a volume-based safeguard designed to provide for market growth, while helping to protect against possible import surges during the agreement’s transition period.   

Rules of Origin:  CAFTA employs product-specific rules of origin similar to those contained in the NAFTA and the U.S.-Chile FTA.

SPS: As part of the Agreement, the United States and the Central American countries renewed their commitment to continue the work on resolving important SPS issues, such as meat inspection, which inhibit trade. CAFTA establishes a Committee on Sanitary and Phytosanitary (SPS) Matters, to expedite resolution of technical issues when implementing the WTO SPS Agreement.  The SPS Committee will provide a forum to review SPS matters that arise in the course of trade.  

Other Selected Benefits for U.S. Agriculture:

• Immediate duty-free treatment for U.S. high quality beef, apples, pears, grapes, raisins, cherries, peaches, cranberries and related products, frozen potato fries, frozen concentrated orange juice, sweet corn, almonds, pistachios, walnuts, wine, and whiskey.
• Duty-free tariff-rate quotas for U.S. pork, chicken leg quarters, rice, corn, and dairy products.
• Duty free access locked in for U.S. wheat, soybeans, and cotton.

What Happens Next?  

The United States and CAFTA are working to complete the legal review of the text of the Agreement and the agreed-upon tariff schedules.  The purpose of the review is to ensure that the texts accurately reflect the Agreement the negotiators reached.  

The President has not yet notified Congress of his intent to enter into an FTA with CAFTA countries. Once that notification is made, each of the private sector advisory commitments will provide the President and Congress with their assessment of the Agreement, including whether the Agreement is in the economic interest of the United States and makes progress in achieving U.S. negotiating objectives. These assessments must be provided within 30 days of the time of the President's notification.  

On or after a 90 day period from the time of the President's notification to Congress, the CAFTA Agreement can be signed.

Within 60 days after the Agreement is signed, the President will send Congress a list of changes to existing laws that are necessary to comply with the Agreement.

Within 90 days after the President signs the Agreement, the U.S. International Trade Commission will submit a report to the President and Congress assessing the likely impact of the FTA on the U.S. economy and on specific industry sectors and interests of consumers.

The President will then submit to Congress a copy of the final legal text of the Agreement, a draft implementing bill, statement of any administrative action necessary to implement the Agreement, and various other documents required for the implementing legislation to be considered under Trade Promotion Authority procedures.