On August 5, 2004, the United States signed the United States-Central America-Dominican Republic Free Trade Agreement (DR-CAFTA) with Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua. The agreement, which Congress must now approve and enact implementing legislation, will provide America’s farmers, ranchers, food processors, and the businesses they support with improved, and in many cases, new access to this growing regional market of 44 million consumers. The DR-CAFTA calls for eventual duty-free, quota-free access on essentially all products, and addresses other trade measures among the parties as well. Under the existing terms of the Caribbean Basin Initiative, which the DR-CAFTA replaces, nearly all agricultural exports from the DR-CAFTA countries to the United States already receive duty free treatment. The DR-CAFTA levels the playing field, providing U.S. exporters market access that is better than, or at a minimum equal to, that given to other competitor countries.

The second and concurrent step involves the immediate elimination of in-quota tariffs on dairy products. The over-quota dairy import tariffs and safeguard duties are phased out over a 20-year transition period (for some products the time period is 10-15 years). Over-quota tariffs on dairy TRQs, remain at base rates for years 1 through 10. Beginning the 11^th year, over-quota tariffs are reduced in 10 equal stages until all tariffs are eliminated in the 20^th year. The provisions for the activation of safeguard duties are identical for all DR-CAFTA members. When imports surpass the quota by 30 percent a safeguard measure may be used, which raises the tariff up to the base tariff rate in years 11 through 14. In years 15 through 17 a safeguard duty of 75 percent of the difference between the current applied tariff and the base tariff may be imposed. During years 18 and 19 the safeguard duty falls to 50 percent of the difference between the current applied tariff and the base tariff. Safeguards are only available until duties are fully eliminated.

The following table outlines the quotas (in metric tons) the United States receives in the 1^st year of the DR-CAFTA:

After DR-CAFTA... Under the reciprocal terms of the agreement, the United States also establishes duty-free TRQs for over 6,800 tons of imported dairy products. The TRQs are allocated among the 6 DR-CAFTA countries and sub-divided into product categories. These TRQs expand at a 5 percent annual compound rate for Central American countries, 10 percent simple growth for the Dominican Republic. These preferential TRQs have zero in-quota tariffs. . The over-quota base tariffs remain at current levels for years 1 through 10 of the implementation, and are then reduced in 10 equal annual steps until all tariffs are eliminated in the 20^th year. The United States has recourse to safeguard duties during the implementation period, and the criteria for these safeguards are identical to the criteria for DR-CAFTA countries outlined above.

The following table outlines the 1^st year for U.S. duty-free TRQs (in metric tons) on imports of dairy products from the 6 DR-CAFTA nations: