Economist Roberto Despradel, private sector trade representative for trade negotiations, writes in today’s El Caribe about the way in which the DR has been the big loser in the FTA signed between five Central American countries and the DR that went into effect in 2000.
Despradel attributes the lame exporting activity to the contrast between the DR exporting capacity primarily in free zones and that of Central America where non-free zone industries and free zone industries were integrated. “There is a contradiction in the maintenance of a marked duality between companies inside and outside free zones when seen from the perspective of open markets, via free trade agreements,” he writes. He explains that Central America, while maintaining a duality between both regimes, has maneuvered so that the differences are less pronounced, and even allows the same company to operate under both duty free and non duty free legislations.
The results are showing, and the DR should be concerned. In 2000 we had a US$70 million trade deficit with Central America. Six years later, this had increased to US$212 million. We export barely US$48 million to Central America, while we imported US$260 million, and maintain a trade deficit with each one of the five countries – Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. “It is no surprise that in recent months there has been an avalanche of companies seeking the special free zones category, so that their exports are not penalized, and they can compete in neighboring markets, such as Central America,” he comments.
Nevertheless, in his opinion this is not the solution to the problem, because it only increases the distortions in the market created by the two systems.
Despradel proposes that instead a legal framework needs to be created that promotes investment in industries and the instruments so that Dominican companies can compete. He mentions that the Executive Branch sent a Law of Competitiveness and Industrial Innovation to Congress that is awaiting approval. He also suggests creating a government entity that promotes exports, and thirdly, says that exporters need to be highly valued, a matter that this society has yet to accomplish.