An Expanding Circle of Free Trade in Latin America

Growing the Size of the CAFTA Market

Integrating the Dominican Republic (DR) with the U.S.-CAFTA (U.S.-Central America Free Trade Agreement) would expand the FTA by some 40%, creating a free market for U.S. goods andservices that would become the 2nd largest U.S. export market in Latin America.

Free trade with the current CAFTA countries plus the DR would create a major market: a U.S. export market larger than current U.S. exports to Thailand, Russia, India and Indonesia combined.

The DR is already the fourth largest U.S. trading partner in Latin America, after Mexico, Brazil and Colombia. The DR is among the world’s fastest-growing economies, and is already an important market for U.S. agricultural, fish, apparel, textiles and forestry products. For example, the DR is the 8th largest U.S. export market for corn, and the 5th largest export market for U.S. soybean meal.

But while most Dominican products enter the U.S. duty-free under various preference programs, tariffs on U.S. goods remain high. Average Dominican tariffs on U.S. goods are 8.6%, while some above-quota tariffs on U.S. farm products are well over 100%.

Major U.S. beneficiaries from a free trade agreement would include sectors such as computers, telecommunications equipment, air conditioning and refrigeration equipment, textile fabrics, building materials, electrical power systems, food processing and packaging, wheat, beef, pork, dairy, soybean meal, corn, rice, beans, fresh fruits, and wine.

The Competitive Liberalization Strategy: Producing Results

As a direct result of the launch of U.S. negotiations with CAFTA, the Dominican Republic and other countries in the region have become much more active in pursuing a free trade agenda in cooperation with the United States.

The DR is joining the free-trade bandwagon in the Hemisphere, not just in linking to CAFTA, but also working closely together with the United States to push for ambitious market-opening results in ongoing World Trade Organization (WTO) and Free Trade Area of the Americas (FTAA)negotiations.

The Dominican Republic Has Made Real Progress Toward Trade Reform

The DR has worked hard to demonstrate its readiness for an FTA since President Mejia first presented his request to President Bush in July 2002. Since then, there have been a number of positive exchanges through the bilateral Trade and Investment Council (TIC) process to enhance the bilateral trade dialogue and address problem areas. The U.S. uses such bilateral dialogues to address bilateral trade issues, and to work on deepening the trade relationship.

For example, the DR was moved on the U.S. Special 301 (Intellectual Property) from the Priority Watch List to the standard Watch List, largely reflecting progress on patent protection. The United States will continue to raise important bilateral issues (such as improved protection for U.S. intellectual property, especially confronting broadcast piracy, and improved access for U.S. agricultural products) in both the bilateral TIC process and as key U.S. objectives in FTA discussions.

Broad Bipartisan Support

There is bipartisan support for including the Dominican Republic in the CAFTA. Many Republican and Democratic members of the House of Representatives have written the President to express their strong support for a closer trade relationship with the DR as part of the CAFTA negotiations.

The U.S. Chamber of Commerce has expressed its strong support for expanding U.S. trade with the DR, and the trade ministers of the five Central American countries currently negotiating CAFTA have also sent a letter of support.

The Dominican Republic is an important trading partner for many parts of the United States. For example, the DR is the 2nd largest export market for the state of Florida and for Puerto Rico.

These communities recognize that most Dominican goods already enter the United States dutyfree through preference programs, while U.S. exports face high tariffs and other barriers in the Dominican Republic.

According to a recent Cato Institute paper by Dan Griswold, taken together as a group, the recently completed Chile and Singapore FTAs, the ongoing Morocco, Central America (CAFTA), South African Customs Union (SACU), and Australia FTA negotiations, and the proposed Bahrain FTA would constitute the 4th largest U.S. export market and the world’s 9th largest economy in terms of purchasing power.

The Administration will continue to consult closely with the Congress on the mechanisms for joining the Dominican Republic with CAFTA.

Joining the Dominican Republic with CAFTA would create the 2nd largest U.S. trading partner in Latin America, behind only Mexico.