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U.S. - Dominican & Central American Free Trade
AgreementAugust 2004
On May 28, 2004, the United States signed the Central American Free Trade Agreement (CAFTA) with Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. On August 5, the Dominican Republic and each of the Central American countries signed the Dominican Republic – Central America Free trade agreement (DR-CAFTA). This signing creates an agreement among seven nations. The agreement, which Congress must now approve and enact implementing legislation, 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 DR-CAFTA 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 DR-CAFTA replaces, nearly all agricultural exports from the DR-CAFTA countries to the United States already receive duty-free treatment. The DR-CAFTA 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 DR-CAFTA. . . U.S. vegetables faced average import tariffs of 15 percent, but in some cases as high as 47 percent, in the six countries. Without preferential access, U.S. vegetables are at a disadvantage to products from Argentina, Chile, and Mexico. From 2001 through 2003, U.S. suppliers annually shipped on average 41,000 metric tons of vegetables valued at $41.6 million to all 6 countries combined. Of this, fresh vegetables, excluding potatoes, accounted for 4,130 mt valued at over $1.8 million.
In the case of frozen fries, U.S. exporters annually shipped on average $4.7 million worth of frozen fries to all 6 countries combined from 2001 through 2003, and the U.S. share of their import market was 55 percent. Not only do frozen fries face strong competition from Canada, they are also subject to import duties ranging from 15 to 41 percent.
After
DR-CAFTA. . . U.S.
vegetables gain preferential access as all tariffs on vegetables are either
immediately eliminated or are scheduled for reduction and eventual elimination
over different transition periods. In
the case of frozen fries, import tariffs are immediately eliminated in El
Salvador, Guatemala, Honduras, and Nicaragua.
In the Dominican Republic, the tariff will be reduced over 5 years.
In Costa Rica, the U.S. tariff reduction is harmonized with Canada’s
tariff reduction schedule. These tariff elimination schedules will allow U.S. exporters
the opportunity to compete in these growing markets on equal terms with other
suppliers of frozen fries.
Central
American and Dominican Exporters Secure Improved Access to U.S. Buyers
Before
DR-CAFTA. . . Vegetable products and preparations from the 6 DR-CAFTA countries have,
for the most part, entered the U.S. duty-free under the provisions of the
Caribbean Basin Initiative (CBI). From
2001 through 2003, U.S. companies annually imported on average 266,600 metric
tons of vegetables and vegetable preparations valued at $154 million from the
six countries combined, and their share of the U.S. import market was 3 percent.
Fresh and frozen vegetables account for $118 million.
After DR-CAFTA. . . All 6 DR-CAFTA countries lock in duty-free access to the U.S. market as was previously granted under CBI.
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