CAFTA, the Central America Free Trade Agreement, or commonly known as the Dominican RepublicCentral America Free Trade Agreement (DR-CAFTA), is a free trade agreement. In international trade, free trade is an idealized market model, often stated as a political objective, in which trade of goods and services between countries are not hindered by government imposed tariffs (taxes on imports) or non-tariffs (Wikipedia, 2007).
CAFTA became known as DR-CAFTA in 2004 after the Dominican Republic joined the association. Initially the agreement included the United States, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. To date, Costa Rica has not formally sanctioned the new agreement yet, but that it is a priority and will be looked at within the next few months. In March 2006, DR-CAFTA entered into force for El Salvador. Honduras and Nicaragua followed one month later, and Guatemala in July. The Dominican Republic Senate has already approved the agreement and is expected to pass it soon after the Dominican administration adopts the implementation requirements from Washington for its entering into force (Chamber of Commerce, 2007).
According to the Office of the United States Trade Representative, the case for CAFTA is based on the growth, opportunity and democracy of the aforementioned regions. The agreement will eliminate 80% of tariffs on U.S. goods exported to these regions. Even though these countries are small, they represent big consumer markets. Central America and the Dominican Republic heads the second largest U.S. export market in Latin America, closely trailing Mexico. The rest of the tariffs will be phased out over the next decade. This will give American businesses, workers and farmers even greater access to 44 million Central American consumers.
Central America and the Dominican Republic has become America's tenth largest export market globally with exports to the region totaling $15 billion annually. The American Farm Bureau has predicted that CAFTA could increase U.S. farm exports by $1.5 billion annually (OUSTR, 2005). Other industries, including information technology, construction, paper and pharmaceutical products will also benefit considerably from this agreement.
Advantages of the CAFTA Agreement
The Office of the United States Trade Representative has outlined the advantages of CAFTA as follows:
Leveling the playing field for U.S. workers and farmers
Currently, almost 80% of products from Central America and the Dominican Republic already enter the United States duty-free. This is a direct result from unilateral preference programs such as the Caribbean Basin Initiative (CBI) and the Generalized System of Preferences (GSP).
"North American Free Trade Agreement (NAFTA)." Encyclopædia Britannica. Encyclopædia Britannica Online. Encyclopædia Britannica Inc., 2011. Web. 23 Nov. 2011. .
(q) Contribute to hemispheric integration and the fulfillment of the objectives of the Free Trade Area of the Americas (http://www.
When we look at just a few of the specifics of our trade with the U.S., we find that:
Being a member of the Central American Common Market (CACM) which includes Costa Rica, Nicaragua, El Salvador, and Honduras; Guatemala has worked towards full implementation of a common external tariff (CET) with very little if any tariffs between the members of CACM. Tariffs on products from sources other than those of CACM have been between one and nineteen percent.
Its economy is the largest in Latin American nations and the second largest in the western hemisphere.
...ic growth, modest inflation, reduction in government debt and a manageable external position. However growth may slow down in 2004 with low growth in the US economy, the source of 87% of export revenues. There have been many negative Political developments such as corruption within the Dominican Republic however the current president Mejia is taking positive steps to eradicate this widespread corruption. The indicators of welfare in the Dominican Republic have improved significantly over recent years, however the economic developments have not sufficiently trickled down to the poorest segments of the population. In conclusion it is clear from the findings of the report that development is not completely stable within the Dominican Republic. It is relatively well developed compared to the other Caribbean countries however as we have seen, figures can be deceptive.
The United States free trade agenda includes policies that seek to eliminate all restrictions and quotas on trade. The advantages of free trade can be seen through domestic markets and the growth of the world economy. T...
Academic Consortium on International Trade (2000) Letter to Presidents of Universities and Colleges. Available at: http://www.spp.umich.edu/rsie/acit/ [Accessed 1 April 2014]
The free trade that NAFTA has established among the United States, Mexico, and Canada has...
Roughly fifteen year ago the United States entered into an agreement with its neighboring countries Canada and Mexico. With the incarnation of this intercontinental free trade agreement; the United States acting as the conduit would not only increase trade productivity for itself but, allot its sister nations to the north and south the same advantages. The North American Free Trade Agreement (NAFTA) is beneficial to America because, it encourages the expansion of job opportunities, abolishes taxes and tariffs that can restrict the flow of imports and exports, and supplies the States with goods and services at lower costs causing profits to increase exponentially.
Lipsey, Richard G.. "Will there be a Canadian-American Free Trade Association? ." The World Economy 9 (2008): 218-238.
In today's globalized economies, virtually every country in the world belongs to some form of regional integrated trade organization whether by direct membership, bilateral or multilateral agreement. Regional integration is a process by which sovereign states in a particular region enter into an agreement to promote economic growth through the reduction of barriers to trade restrictions and safeguard common interests such as the environment. The removal of trade barriers results in a free trade zone thus creating a single market. Sovereign nations have many differences, some may be more economically sound and others may have a greater labor force or better technology. In the end, all regional nations must find a method to work together for the common good of all parties. The development of the North American Free Trade Agreement (NAFTA) was to solidify the nations occupying the North American continent, Canada, the United States (U.S.) and Mexico. Many proponents question the success of NAFTA for these nations. This essay will examine the advantages and disadvantages of regional integration and the regional economic development of these nations as members of NAFTA.
The most influential Free Trade Agreement is the North American Free Trade Agreement (NAFTA), signed by the United States, Canada, and Mexico. Canada and the United States accounted for 90% in exports and 55% in imports. The organization for Economic Co-Operation and Development (OECD) and the World Trade Organization (WTO) position and recognize the Mexican worker as the number one-hard working citizen. In r...
Congress established the Foreign-Trade Zones Board in 1934 to license and regulates FTZs in the United States. FTZs were established for a number of reasons, the primary being to encourage and expedite U.S. participation in international trade. Foreign goods may be admitted to an FTZ without being subject to customs duties and certain excise taxes. FTZs allow deferred payment of duties until goods are entered into the commerce of the United States. Under zone procedures, the usual customs entry procedures and payment of duties are not required on foreign merchandise until it actually enters customs territory for domestic consumption. Foreign mercha...
Free trade can be defined as the free access to the market by individuals without any restriction or any trade barriers that can obstruct the trade process such as taxes, tariffs and import quotas. Free trade in its own way unites and brings people together. Most individuals love the concept of free trade because it gives them the ability to move freely and interact with the market. The whole idea of free trade is that it lowers the price of goods and services by promoting competition. Domestic producers will no longer be able to rely on government law and other forms of assistance, including quotas, which essentially force citizens to buy from them.