The Central American Free Trade Agreement

Like most other trade agreements, CAFTA-DR removes tariffs and processing duties for trade. All tariffs on U.S. consumer and industrial exports have been eliminated from 2015, while tariffs on agricultural exports will be eliminated by 2020. Pending the full implementation of the agreement on 1 January 2025, everything will be duty free. To receive duty-free treatment under CAFTA-DR, products must comply with applicable rules of origin. The objective of Chapter 5 is to improve the legal environment for EFTA investors and Central American countries investing in the other country`s markets. This objective is achieved by granting non-discriminatory establishment and operating rights (“commercial presence”) in economic sectors that are not covered by the trade in services chapter. In some economic areas, the parties have introduced reservations in their national legislation concerning domestic treatment on the basis of restrictions (Annex XVIII). The chapter provides for a regular review of these reserves to increase the obligations of the parties over time.

The CAFTA-DR trade area is the third largest export market for the United States in Latin America, second only to Mexico and Brazil. According to the U.S. Department of Commerce, CAFTA-DR has benefited U.S. exporters of petroleum products, plastics, paper and textiles, as well as manufacturers of motor vehicles, machinery, medical equipment and electrical/electronic products. Producers of cotton, wheat, maize and rice have also improved their exports. Free trade negotiations between the United States and the five Central American countries began in 2002. The Dominican Republic joined the discussions in 2003. CafTA-DR was signed by all countries on 5 August 2004. The agreement was approved by the U.S. Congress in July 2005 and signed by President George W. Bush on August 2, 2005. Until 2007, all signatories, with the exception of Costa Rica, had proclaimed the agreement.

Approval in Costa Rica was lagging due to strong opposition from a large number of civil society organizations and unions. Voters in Costa Rica approved the agreement in a national referendum in 2007; it came into force in January 2009. In general, CAFTA-DR divided Central Americans into two camps: peasants, workers and indigenous groups that strongly opposed it, while businesses and governments believed they would attract more foreign investment and promote economic growth. El Salvador was the first country to formally implement CAFTA to enter into force on March 1, 2006, when the Organization of American States (OAS) received copies of the treaty. Honduras and Nicaragua fully implemented the agreement on 1 April 2006. On 18 May 2006, the Guatemalan Congress ratified THE CAFTA-DR, which came into force on 1 July 2006. The Dominican Republic implemented the agreement on 1 March 2007. In a referendum on 7 October 2007, Costa Rica supported the free trade agreement to just under 51.6% and voted “yes”; The agreement came into force on 1 January 2009. [6] The free trade agreement covers trade in goods, trade in services, investment, competition, protection of intellectual property rights, public procurement, trade and sustainable development, as well as cooperation.

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