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The US-Central America Free Trade Agreement, commonly referred to as “CAFTA,” was signed in December 2003 after twelve short months of negotiation. The negotiations involved the US, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. Costa Rica at first refused to join the agreement, then changed its position in late January 2004. The US separately negotiated a bilateral treaty with the Dominican Republic, with a view to folding the deal, and the country itself, into the US-CAFTA scheme.

The US-CAFTA was signed late May 2004, and the Dominican Republic became an additional party to it in August 2004. Since then, the accord has been officially renamed the “United States-Dominican Republic-Central America Free Trade Agreement” or US-DR-CAFTA. But the overall agreement — which a lot of people continue calling just “CAFTA” — still needs ratification by all parties to go into force.

CAFTA is a wide-ranging agreement covering many areas: agriculture, telecommunications, investment, trade in services (from water distribution to gambling), intellectual property, the environment, etc. It essentially serves US business interests by giving them a concrete and high-level set of rights to operate in Central America. Some US sectors, such as sugar producers, feel threatened by the treaty. But by and large, the threats are mainly against the Central American countries which signed on, as it opens the depths of their economies — public and private — to the interests and power of US companies.

In July 2005, US Congress approved the DR-CAFTA and Bush signed it into law in early August. The Central American parliaments eventually also approved it. For the Dominican Republic, the treaty took effect in 2006.

Costa Rica was the Central American country with the strongest resistance to DR-CAFTA. There were large public demonstrations and information campaigns, and a broad grouping of civil society organizations, from trade unions to small farm organizations, signed on. This coalition successfully pushed for a referendum on ratification, which was held on 7 October 2007. The result: 51.62% in favour and 48.38% opposed. The result was considered binding since more than 40% of the electorate voted. In view of these results, CAFTA was ratified.

On December 23, President Bush issued a proclamation to implement the DR-CAFTA for Costa Rica as of 1 January 2009.

last update: May 2012
Photo: Public Citizen

Postponement of DR-CAFTA gives government RD$9,320M more
The decision to maintain the exchange commission at a rate of 9% during 2006, plus duty charges to be collected during the first 6 months next year prior to entering the DR-CAFTA would give the Dominican government an extra-budgetary income of approximately RD$9.3 billion.
US ratifies DR not on board for DR-CAFTA in January
The United States ratified implementation of the Free Trade Agreement as of January 1st, 2006 with the sole inclusion of El Salvador and Honduras, since these were the only countries that met all requirements by the set deadline.
Improbable DR enters CAFTA in January
US Ambassador Hans Hertell affirmed yesterday that there is a good possibility that the Dominican Republic be impeded to integrate this upcoming January onto the Free Trade Agreement known as DR-CAFTA, given that the voluminous documentation that authorities recently sent to the United States is currently under review.
Agro producers favor postponing DR-CAFTA
The Pork Industry Association, president Jose Alba, considered that not entering the Free Trade Agreement (DR-CAFTA) in January 2006 would be a welcomed break for the productive sector. This grace period, in his view, would be well-used to correct distortions in the tax system and enable competitiveness.
Entrepreneurs, economists trust Free Trade starts in January
Entrepreneurs and economists trust that the Free Trade Agreement with Central America and the United States (DR-CAFTA) will in effect start as scheduled in January 2006.
Improbable implementation of free trade by January 2006
It is still unclear whether the DR-Central America and US Free Trade Agreement (DR-CAFTA) will start in January 2006, and if it does, most of the Central American countries lag in preparation to enter commercial activity.
Democrats and labor leaders balk at lack of workers rights under CAFTA
Democratic members of Congress and labor leaders say they want the Bush administration to move away from CAFTA’s failed trade model or face another tough battle in Congress.
DR should emulate neighbors, be more aggressive with FTA
Officials at the highest level along with private business persons from El Salvador are currently on tours that have been denominated as “CAFTA-Tours” throughout the United States, looking to attract investments, in addition to participating in work shops to train exporters on how to best benefit from markets to open with DR-CAFTA.
Farmers reject new taxes, ask for assistance with upcoming FTA
Associations in the Dominican farming sector today rejected some of the measures recommended by the International Monetary Fund (IMF) and requested from the government to establish a program to shore the sector up, prior to implementing the Free Trade Agreement (FTA) with the United States.
Trade liberalization challenges post-CAFTA
This CRS report for US Congress analyses some of the challenges that became apparent in the aftermath of a divisive trade debate and how they could affect consideration of future trade agreements.