About CAFTA-DR
The Central American - Dominican Republic Free Trade Agreement
(CAFTA-DR) is a comprehensive trade agreement between Costa
Rica, the Dominican Republic, El Salvador, Guatemala, Honduras,
Nicaragua, and the United States. It is a mechanism expected
to provide reciprocal trade liberalization among the participating
countries.
The agreement has now been formally ratified by the U.S., El
Salvador, Guatemala, the Dominican Republic and Honduras, and
is expected to be submitted soon to the Congresses of Costa Rica
and Nicaragua for their final approval.
CAFTA-DR
aims to eliminate barriers to trade, eliminate tariffs, liberalize
markets, and promote investment in the regions. In
the long run, this agreement will further Central America’s
and the Dominican Republic’s economic growth while concurrently
increasing U.S. access to regional markets. These countries already
represent America’s 6th largest growth market for exports (2003-2004).
For 20 years, most Central American and Dominican Republic exports
to the United States benefited from duty-free treatment, primarily
as result of the Caribbean Basin Initiative (CBI). CAFTA-DR will
make our relationship reciprocal, eliminating barriers to U.S.
agricultural products, manufactured goods and services. The market
access and trade disciplines provided by the CAFTA-DR offer an
opportunity to expand U.S. exports to a region that is already
seeing high export growth rates.
U.S. investors cite complex and confusing laws and regulations,
market restrictions, and red tape as disincentives to investment
in this region. The CAFTA-DR commitments will improve transparency
and remove barriers to investment. The CAFTA-DR will establish
a secure, predictable legal framework for U.S. investors in Central
America and the Dominican Republic. The agreement will also remove
most local residency requirements, which have imposed significant
barriers for U.S. professionals.
What CAFTA-DR means to Kentucky
Kentucky’s exports to the CAFTA-DR market equaled nearly $164
million in 2004, making it Kentucky’s 15th largest export market
worldwide. This represented a 144% increase over past years.
CAFTA-DR opens markets for new key Kentucky exports including
machinery manufacturers, chemical manufacturers, computer and
electronic products and more specifically, our agricultural
producers. Individually, the CAFTA-DR markets are multi-million
dollar trading partners for Kentucky. In 2004, El Salvador
alone received merchandise exports from us totaling $75 million,
making it the state’s 22nd largest market, and Honduras received
$58 million in exports last year.
The state’s largest export category to the CAFTA-DR group is
fabrics. Kentucky’s fabric mill exports to this region have grown
by $107 million since 2000, making this market our largest worldwide.
CAFTA-DR provides regional garment makers and their U.S. suppliers
of fabric and yarn a critical advantage in competing with Asia.
Garments made in the region will be duty-free under the agreement
if they use U.S. fabric and yarn, thereby supporting U.S. exports
and jobs.
Past trade agreements have positively impacted Kentucky businesses.
Since the North American Free Trade Agreement (NAFTA) was signed
in 1993, Kentucky’s combined exports to Canada and Mexico have
increased by more than 267%. In the first year of the U.S. –
Chile FTA, Kentucky’s exports to Chile increased by 25%. It seems
likely that the CAFTA-DR agreement will have the same positive
impact.
The
Office of the U.S. Trade Representative has published a CAFTA "briefing book" on
its web site at:
http://www.ustr.gov/Trade_Agreements/Bilateral/CAFTA/Briefing_Book/Section_Index.html
