Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA): Developments in Trade and Investments [April 9, 2012] [open pdf - 560KB]
"On August 5, 2004, the United States entered into the Dominican Republic-Central America- United States Free Trade Agreement (CAFTA-DR). Congress passed the implementing bill on July 28, 2005 (P.L. 109-53) and CAFTA-DR entered into force with El Salvador, Honduras, Nicaragua, and Guatemala by July 1, 2006, the Dominican Republic on March 1, 2007, and Costa Rica on January 1, 2009. This permanent, comprehensive, and reciprocal trade agreement eliminates tariff and non-tariff barriers to two-way trade, building on unilateral trade preferences begun under the 1983 Caribbean Basin Initiative (CBI). It enhances rules and other standards for services, intellectual property rights, government procurement, and investment, and other disciplines. It also reinforces Congress's historical support for trade as a foundation of broader foreign economic, political, and security policies in the region. This report supports congressional interest with an analysis of the trade and investment trends since CAFTA-DR entered into force. CAFTA-DR reinforces trade and investment trends that have been emerging at least over the past decade. The United States remains the region's dominant trade partner, but its share of total trade has begun to decline. Intra-Central America trade and trade with China have seen the largest growth. Still, the United States (1) has vibrant trade in intermediate goods reflecting increasingly integrated production with the region; (2) provides the largest portion of foreign direct investment to the region; and, (3) remains the largest market for high-technology content exports. Because U.S. tariffs were already relatively low, the United States International Trade Commission model predicted that U.S. exports would rise slightly faster than imports, which so far has been the case. […] CAFTA-DR reinforces the idea that growth in trade correlates closely with policies that promote economic stability, private investment in production, public investment in education, infrastructure, logistics, and good governance in general. Countries with worsening security and governance problems face additional problems in benefitting from CAFTA-DR. It is also important to promote productivity in part by avoiding delays in making necessary adjustments to trade liberalization, focusing public and private resources on trade facilitation, developing strategies for trade diversification, and examining CAFTA-DR trade rules (especially for textiles and apparel) that have perhaps inadvertently hindered trade growth expected from the accord."
CRS Report for Congress, R42468