| The Dominican Republic–Central America–United States Free Trade Agreement | |
|---|---|
 | |
| Type | Free trade agreement |
| Signed | August 5, 2004 |
| Location | Washington, D.C. |
| Effective | 1 March 2006 |
| Ratifiers | |
| Depositary | General Secretariat of theOrganization of American States |
| Languages | |
TheDominican Republic–Central America–United States Free Trade Agreement (CAFTA-DR;Spanish:Tratado de Libre Comercio entreRepública Dominicana,Centroamérica yEstados Unidos de América,TLC) is afree trade agreement (legally atreaty under international law). Originally, the agreement encompassed the United States and the Central American countries ofCosta Rica,El Salvador,Guatemala,Honduras, andNicaragua, and was called CAFTA. In 2004, theDominican Republic joined the negotiations, and the agreement was renamed CAFTA-DR.
CAFTA-DR, theUnited States-Mexico-Canada Agreement (USMCA), and active bilateral free trade agreements such as theCanada-Costa Rica Free Trade Agreement are seen as bloc agreements instead of aFree Trade Area of the Americas (FTAA) agreement. Panama has completed negotiations with the United States for a bilateral free trade agreement known as thePanama–U.S. Trade Promotion Agreement, and has been in effect since October 2012.
The CAFTA-DR constitutes the first free trade agreement between the United States and a small group of developing countries. It was created with the purpose of creating new and better economic opportunities by opening markets, eliminatingtariffs, reducing barriers to services, and more. In 2015, it was estimated that the total two-way trade resulted in $53 billion (~$68.3 billion in 2024).[1] Nearly all Central American exports to the United States had already been tariff-free thanks to the 1984Caribbean Basin Initiative.
The agreement is a treaty under international law, but not under theU.S. Constitution because in the United States laws require majority approval in both houses, while treaties require two-thirds approval in the Senate only. Under U.S. law, CAFTA-DR is acongressional-executive agreement.
TheU.S. Senate approved the CAFTA-DR on June 30, 2005, by a vote of 54–45,[2] and theU.S. House of Representatives approved the pact on July 28, 2005, by a vote of 217–215, with two representatives not voting.[3] Controversy arose over this vote because it was held open 1 hour and 45 minutes longer than the normal 15 minutes in order to get some members to change their votes.[4] For procedural reasons, the Senate took a second vote on CAFTA on July 28 and the pact garnered an additional vote from SenatorJoe Lieberman—who had been absent on June 30—in favor of the agreement.[5] The implementing legislation becamePublic Law 109-053 when it was signed by PresidentGeorge W. Bush on August 2, 2005.
The Dominican Republic, Costa Rica, El Salvador, Guatemala, Nicaragua, and Honduras have also approved the agreement. They are all the current members of CAFTA-DR.
El Salvador became the first country to formally implement CAFTA, which went into effect on March 1, 2006, when theOrganization of American States (OAS) received signed copies of the treaty. On April 1, 2006, Honduras and Nicaragua fully implemented the agreement. On May 18, 2006, theCongress of Guatemala ratified CAFTA-DR, which went into effect on July 1, 2006. The Dominican Republic implemented the agreement on March 1, 2007. In areferendum on October 7, 2007, Costa Rica narrowly backed the free trade agreement, with 51.6% voting "Yes"; the agreement took effect on January 1, 2009.[6]
The goal of the agreement is the creation of afree trade area similar toNAFTA, which currently encompasses the United States, Canada, and Mexico. CAFTA-DR is also seen as a stepping stone towards the FTAA, another (more ambitious) free trade agreement that would encompass all the South American andCaribbean nations as well as those of North and Central America exceptCuba. Canada is negotiating a similar treaty called theCanada–Central American Four Free Trade Agreement.
Once passed by the countries involved,tariffs on about 80% of U.S. exports to the participating countries were eliminated immediately and the rest were phased out over the subsequent decade. As a result, CAFTA-DR does not require substantial reductions in U.S. import duties with respect to the other countries, as the vast majority of goods produced in the participating countries already entered the United States duty-free due to the U.S. government'sCaribbean Basin Initiative.
With the addition of the Dominican Republic, the trade group's largest economy, the region covered by CAFTA-DR is the second-largest Latin American export market for U.S. producers, behind only Mexico, buying $29 billion (~$37.4 billion in 2024) of goods in 2015. Two-way trade amounted to about $50 billion in the same year.
While not necessarily a part ofPlan Puebla Panama, CAFTA is a necessary precursor to the execution of Plan Puebla Panama by theInter-American Development Bank. The plan includes construction of highways linkingPanama City to Mexico City,Texas, and the rest of the United States.
CAFTA-DR reduces tariffs, but every CAFTA country sets its overall tax level.
In January 2002 U.S. presidentGeorge W. Bush declared CAFTA as a priority and received "fast track" authority from Congress to negotiate it. Negotiations began in January 2003, and agreement was reached with El Salvador, Guatemala, Honduras, and Nicaragua on December 17, 2003, and with Costa Rica on January 25, 2004. That same month, negotiations began with the Dominican Republic to join CAFTA.
On May 28, 2004, U.S. trade representativeRobert Zoellick,Costa Rican minister of tradeAlberto Trejos, Salvadoran economy ministerMiguel Lacayo, Guatemalan economy ministerMarcio Cuevas, Honduran minister of industry and commerceNorman García, and Nicaraguan minister of development, industry and commerce Mario Arana signed the 2,400-page document at headquarters of theOrganization of American States. Negotiations with the Dominican Republic concluded on March 15, 2004, and a second signing ceremony including Dominican minister of industry and commerceSonia Guzmán was held on August 5, 2004.
In May 2004, theSalvadoran American National Network, the largest national association of Central Americancommunity-based organizations in the United States, expressed opposition to CAFTA, which they claimed was not ideologically motivated: "As immigrants, we have a deep understanding of the potential benefits of improved transnational cooperation. We would welcome an agreement that would increase economic opportunity, protect our shared environment, guarantee workers' rights and acknowledge the role of human mobility in deepening the already profound ties between our countries. However, the CAFTA agreement falls far short of that vision."[7]
While manufacturing costs ofgeneric drugs are relatively cheap, the costs of human tests are relatively expensive, and tests take months or years. If generic manufacturers had to redo the tests, the generic drug would be more expensive, and generic manufacturers might not be able to do the tests at all. Furthermore, if generic manufacturers had to redo the tests, they would have to compare the new, effective drugs to less-effective drugs, which according toDoctors Without Borders, would be unethical. In the United States, drug manufacturers must make test data public for generic manufacturers. Under CAFTA's test data exclusivity, drug manufacturers could keep test data secret, which would make it more difficult for local companies to produce generic drugs, and enable multinational pharmaceutical companies to keep a monopoly on branded drugs, including those used to treat AIDS, malaria, and tuberculosis.[8]
In Guatemala mass protests were violently repressed by the government and strikes occurred in Costa Rica in opposition to the trade agreement. Furthermore, many Catholic bishops in Central America and the United States opposed the treaty, just as many social movements in the region.[9]
To create an FTA, governments pledge to grantmarket access to foreign firms by reducing and eventually eliminating tariffs and other measures thatprotect domestic products. To do so, the CAFTA-DR treaty stipulatesnational treatment and includes amost-favored nation clause. It also includes the protection of international property rights and requires from their signatories certain measures in the realm oftransparency (e.g., parties are obligated to criminalize bribery in matters affecting international trade or investment).[10] Moreover, the agreement includes i.a. chapters oninvestment,public procurement procedures, andfinancial services.
Antidumping andcountervailing duty measures may not be challenged.[10]
Each member country must treat service suppliers of another member country no less favorably than its own suppliers or those of any other member country. It requires firms to establish a local presence as a condition for supplying a service on a cross-border basis.[10]
CAFTA-DR imposes rules requiring member countries to treat service suppliers of another member country no less favorably than its own suppliers or those of any other country, prohibits certain quantitative restrictions on market access of financial institutions, and bars restrictions on the nationality of senior management.[10]
CAFTA-DR establishes rules to protect investors from one member country against unfair or discriminatory government actions when they make or attempt to make investments in another member country's territory. Investors enjoy six basic protections:
Each member country must apply fair and transparentprocurement procedures and rules and prohibiting each government and its procuring entities from discriminating in purchasing practices against goods, services, and suppliers from the other member countries.[10]
CAFTA-DR requires that tariffs and quotas be administered in a manner that is transparent, nondiscriminatory, responsive to market conditions and minimally burdensome on trade and allows importers to fully utilize import quotas. Each member country will eliminate export subsidies on agricultural goods destined for another CAFTA-DR country.[10]
Member countries must ratify or accede to treaties governingintellectual property rights, such as theWIPO Copyright Treaty.[10]
Each member country must provide:
It also includes provisions on anticircumvention, under which member countries commit to prohibit tampering withdigital rights management technology.[10] Member countries agree to make patents available for any invention, subject to limited exclusions, and confirm the availability of patents for new uses or methods of using a known product. To guard against arbitrary revocation of patents, the grounds for revoking a patent must meet the high standard of not having merited the patent in the first place.[10]
CAFTA-DR also ensurestest data exclusivity for pharmaceutical corporations. It protects test data that a company submits in seeking marketing approval for such products by precluding other firms from relying on the data.[10]
If a dispute over an actual or proposed national rule cannot be resolved after a 30-day consultation, the matter may be referred to a panel comprising independent experts that the parties select. Once the procedure before the panel is concluded, the panel will issue a report. The parties will attempt to resolve the dispute based on the panel's report. If no amicable resolution is possible, the complaining party may suspend trade benefits equivalent in effect to those it considers were impaired, or may be impaired, as a result of the disputed measure. If a dispute arises under both CAFTA-DR and the WTO Agreement, the complaining party may choose either forum.[10]
CAFTA-DR contains certain provisions that do not have the quality of mere technical liberalization, but are rather a commitment to political standards. The treaty obligates governments to the enforcement of environmental laws andimprovement of the environment. CAFTA-DR Environmental Cooperation Agreement, signed in concert with the FTA, provides for environmental cooperation on issues of mutual environmental concern. Furthermore, CAFTA-DR contains provisions for the enforcement of theInternational Labour Organization's corelabor standards.
