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- DR-CAFTA Agreement
DR-CAFTA Agreement
- Published 08/22/2007
- Articles on Trade with the US and the DR-CAFTA
The United States concluded free trade agreement negotiations with El Salvador, Guatemala, Honduras and Nicaragua in December 2003 and with Costa Rica in January 2004. In May 2004, the six countries signed the United States-Central America Free Trade Agreement. During 2004, the United States and the Central American countries integrated the Dominican Republic into the free trade agreement. On 5 August 2004, the seven countries signed the Dominican Republic-Central America-United States Free Trade Agreement (DR-CAFTA). The U.S. Congress approved the DR-CAFTA in July 2005, and the President of the U.S. signed it into law on 2 August 2005. All of the signatory countries have ratified the agreement, with the exception of Costa Rica.
The agreement entered into force for the Dominican Republic on 1 March 2007. The agreement also has entered into force for El Salvador, Guatemala, Honduras and Nicaragua. The agreement removes barriers to trade and investment in the region and is expected to strengthen regional economic integration. The DR-CAFTA also requires the Central American countries and the Dominican Republic to undertake needed reforms to provide market liberalization as well as greater transparency and certainty in a number of areas, including: customs administration, protection of intellectual property rights, services, investment, financial services, government procurement, and sanitary and phytosanitary measures.
As a result of the DR-CAFTA having entered into force with respect to the DR in March 2007, about 80 percent of US industrial and consumer goods can enter the DR duty-free immediately, with the remaining tariffs, which currently range up to 20%, phased-out within 10 years. Nearly all textile and apparel goods that meet the agreement's rules of origin are to enter duty-free and quota-free immediately, providing new opportunities for US and regional manufacturers of fiber, yarn, fabric and apparel. The agreement's tariff treatment for textile and apparel goods is retroactive to 1 January 2004. In July 2006, the government eliminated an exchange surcharge that had levied a 13% tax on all imports.
Under the DR-CAFTA, more than half of US agricultural exports are to enter the Dominican Republic duty-free immediately. The agreement establishes that the DR will eliminate its remaining tariffs on nearly all agricultural goods within 15 years. The tariffs for rice, chicken leg quarters and dairy products are to be phased-out within 20 years. The DR applies a 20% tariff on US frozen french fries and dehydrated potatoes, that will be phased-out within 5 years for frozen french fries and ten years for dehydrated potatoes. For the most sensitive products, tariff-rate quotas (TRQs) will permit some immediate duty-free access for specified quantities during the tariff phase-out period, with the duty free amount expanding during that period.
Pre-DR-CAFTA, the Dominican Republic was already the United States main trading partner in the Caribbean region. However, the trade relationship did not include commercial reciprocity or ideal conditions for market access. With its entry into DR-CAFTA, the Dominican Republic will strengthen its preferential relationship with the world's largest economy. It is expected to consolidate the country's existing preferential access to the US market and create new entries into markets in the other member countries, by opening up new investment opportunities and business alliances across the seven member nations in the free trade area.
DR-CAFTA's regulatory requirements for the member nations, including the Dominican Republic, will result in the strengthening of government institutions. The treaty establishes clear ground rules for doing business; including measures aimed at bringing greater transparency to customs procedures. A series of anti-corruption measures with the purpose of bringing about greater confidence on the part of investors are also pre-requisites for entry into the treaty. By introducing these measures, the agreement will result in the strengthening of the rule of law in member nations, thus allowing investors to make informed decisions with a higher level of certainty and lower perception of risk. This is certain to give a tremendous boost to foreign investment in the member nations.
A significantly large portion of the anticipated economic benefits of DR-CAFTA is expected to accrue from the liberalization of trade in services and the opening up of government procurement in partner countries. DR-CAFTA also offers investors improved intellectual property protection by addressing issues related to trademarks and copyrights.
DR-CAFTA has called for updating of Dominican Copyright Law 65-00, Industrial Property Law 20-00, Law 173 (dating to 1966) on Foreign Dealerships, as well as passing of a new laws on bribery procurement. Likewise, it incorporates resolutions on the environment, labor, customs (digital products, rules of origin, temporary internment, expedite dispatching of merchandise) and agriculture (import licenses, sanitary and phyto-sanitary inspection systems, agriculture safeguards, and quotas) and decrees regarding general safeguards, numeric portability (mobile phones), and creating of an institution at the PUCMM university for resolution of conflicts on domain names.
In addition to tariff reduction, from a US perspective the DR-CAFTA provides new market access for US consumer, industrial products and agricultural products. These products need to meet rule of origin requirements. Thus a US brand product manufactured in China would not qualify, for instance.
The agreement covers customs facilitation and provides benefits to small and medium-sized exporters. Provisions are also included that address government transparency and corruption, worker rights, protection of the environment, trade capacity building, and dispute settlement.
For the region, DR-CAFTA is seen as offering more than the challenge of free trade. One of the major pluses expected is a strengthening of the rule of law, institutionalization and improving transparency to counter corruption.
In order to meet the requirements for entrance into DR-CAFTA the Dominican Republic introduced a number of legislative and regulatory reforms, notably in its fiscal structure and customs procedures.
The scale and scope of this agreement makes DR-CAFTA a significant advance toward hemispheric free trade. The DR's role in DR-CAFTA will be defined by its location at the heart of the new free trade region, lying as it does in the geographical center, between Central America and the United States. Because of this, the DR offers any company currently doing business in the DR-CAFTA region, or planning to do so, a particular set of advantages and resources. (Reviewed 10 June 2007)
For the complete text of the agreement, see
http://www.ustr.gov/
The agreement entered into force for the Dominican Republic on 1 March 2007. The agreement also has entered into force for El Salvador, Guatemala, Honduras and Nicaragua. The agreement removes barriers to trade and investment in the region and is expected to strengthen regional economic integration. The DR-CAFTA also requires the Central American countries and the Dominican Republic to undertake needed reforms to provide market liberalization as well as greater transparency and certainty in a number of areas, including: customs administration, protection of intellectual property rights, services, investment, financial services, government procurement, and sanitary and phytosanitary measures.
As a result of the DR-CAFTA having entered into force with respect to the DR in March 2007, about 80 percent of US industrial and consumer goods can enter the DR duty-free immediately, with the remaining tariffs, which currently range up to 20%, phased-out within 10 years. Nearly all textile and apparel goods that meet the agreement's rules of origin are to enter duty-free and quota-free immediately, providing new opportunities for US and regional manufacturers of fiber, yarn, fabric and apparel. The agreement's tariff treatment for textile and apparel goods is retroactive to 1 January 2004. In July 2006, the government eliminated an exchange surcharge that had levied a 13% tax on all imports.
Under the DR-CAFTA, more than half of US agricultural exports are to enter the Dominican Republic duty-free immediately. The agreement establishes that the DR will eliminate its remaining tariffs on nearly all agricultural goods within 15 years. The tariffs for rice, chicken leg quarters and dairy products are to be phased-out within 20 years. The DR applies a 20% tariff on US frozen french fries and dehydrated potatoes, that will be phased-out within 5 years for frozen french fries and ten years for dehydrated potatoes. For the most sensitive products, tariff-rate quotas (TRQs) will permit some immediate duty-free access for specified quantities during the tariff phase-out period, with the duty free amount expanding during that period.
Pre-DR-CAFTA, the Dominican Republic was already the United States main trading partner in the Caribbean region. However, the trade relationship did not include commercial reciprocity or ideal conditions for market access. With its entry into DR-CAFTA, the Dominican Republic will strengthen its preferential relationship with the world's largest economy. It is expected to consolidate the country's existing preferential access to the US market and create new entries into markets in the other member countries, by opening up new investment opportunities and business alliances across the seven member nations in the free trade area.
DR-CAFTA's regulatory requirements for the member nations, including the Dominican Republic, will result in the strengthening of government institutions. The treaty establishes clear ground rules for doing business; including measures aimed at bringing greater transparency to customs procedures. A series of anti-corruption measures with the purpose of bringing about greater confidence on the part of investors are also pre-requisites for entry into the treaty. By introducing these measures, the agreement will result in the strengthening of the rule of law in member nations, thus allowing investors to make informed decisions with a higher level of certainty and lower perception of risk. This is certain to give a tremendous boost to foreign investment in the member nations.
A significantly large portion of the anticipated economic benefits of DR-CAFTA is expected to accrue from the liberalization of trade in services and the opening up of government procurement in partner countries. DR-CAFTA also offers investors improved intellectual property protection by addressing issues related to trademarks and copyrights.
DR-CAFTA has called for updating of Dominican Copyright Law 65-00, Industrial Property Law 20-00, Law 173 (dating to 1966) on Foreign Dealerships, as well as passing of a new laws on bribery procurement. Likewise, it incorporates resolutions on the environment, labor, customs (digital products, rules of origin, temporary internment, expedite dispatching of merchandise) and agriculture (import licenses, sanitary and phyto-sanitary inspection systems, agriculture safeguards, and quotas) and decrees regarding general safeguards, numeric portability (mobile phones), and creating of an institution at the PUCMM university for resolution of conflicts on domain names.
In addition to tariff reduction, from a US perspective the DR-CAFTA provides new market access for US consumer, industrial products and agricultural products. These products need to meet rule of origin requirements. Thus a US brand product manufactured in China would not qualify, for instance.
The agreement covers customs facilitation and provides benefits to small and medium-sized exporters. Provisions are also included that address government transparency and corruption, worker rights, protection of the environment, trade capacity building, and dispute settlement.
For the region, DR-CAFTA is seen as offering more than the challenge of free trade. One of the major pluses expected is a strengthening of the rule of law, institutionalization and improving transparency to counter corruption.
In order to meet the requirements for entrance into DR-CAFTA the Dominican Republic introduced a number of legislative and regulatory reforms, notably in its fiscal structure and customs procedures.
The scale and scope of this agreement makes DR-CAFTA a significant advance toward hemispheric free trade. The DR's role in DR-CAFTA will be defined by its location at the heart of the new free trade region, lying as it does in the geographical center, between Central America and the United States. Because of this, the DR offers any company currently doing business in the DR-CAFTA region, or planning to do so, a particular set of advantages and resources. (Reviewed 10 June 2007)
For the complete text of the agreement, see
http://www.ustr.gov/