On August 5, 2004, the United States signed the
Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR)
with Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and
Nicaragua. The agreement 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 CAFTA-DR
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 CAFTA-DR replaces, nearly all
agricultural exports from the CAFTA-DR countries to the United States already
receive duty free treatment. The CAFTA-DR 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.
U.S. Gains Improved Access to the Dominican and Central American Dynamic
Economies
Before CAFTA-DR. . .
U.S. vegetables faced average import tariffs
of 15 percent, but in some cases as high as 47 percent, in the six countries.
The WTO permits tariffs as high as 60 percent. Without preferential access, U.S.
vegetables are at a disadvantage to products from Argentina, Chile, and Mexico.
From 2002 through 2004, U.S. suppliers annually shipped on average 39,741 metric
tons of vegetables valued at $40.9million to all 6 countries combined. Of this,
fresh vegetables, excluding potatoes, accounted for 2,450 mt valued at over
$1.02 million.
In the case of frozen fries, U.S. exporters annually
shipped on average $4.4 million worth of frozen fries to all 6 countries
combined from 2002 through 2004, and the U.S. share of their import market was
31 percent. Not only do frozen fries face strong competition from Canada, they
are also subject to import duties ranging from 15 to 41 percent.
In the case of fresh and canned tomatoes and tomato
pastes, U.S. exporters annually supplied on average $2.5 million to all 6
countries combined from 2002 through 2004, with import tariffs reaching as high
as 25 percent.
After CAFTA-DR. . .
U.S. vegetables gain preferential access as all tariffs on
vegetables either immediately eliminated or are scheduled for reduction and
eventual elimination over different transition periods.
In the case of frozen fries, import tariffs are
immediately eliminated in El Salvador, Guatemala, Honduras, and Nicaragua. In
the Dominican Republic, the tariff will be reduced over 5 years. Costa Rica will
remove the current disadvantage faced by U.S. exports due to the Costa
Rica-Canada FTA. These tariff elimination schedules will allow U.S. exporters
the opportunity to compete in these growing markets on equal terms with other
suppliers of frozen fries.
U.S. suppliers of fresh and canned tomatoes, and tomato
pastes benefit from the immediate elimination of tariffs by all Central American
countries on tomato paste, which is the largest export to CAFTA-DR countries
within this product grouping. All tariffs on these products will be eliminated
within 15 years, and earlier in many cases.
U.S. Consumers Benefit
Before CAFTA-DR. . .
Vegetable products and preparations from the 6 CAFTA-DR
countries have, for the most part, entered the U.S. duty-free under the
provisions of the Caribbean Basin Initiative (CBI). From 2002 through 2004, U.S.
companies annually imported on average 296,400 metric tons of vegetables and
vegetable preparations valued at $171million from the six countries combined,
and their share of the U.S. import market was 4.9 percent. Fresh and frozen
vegetables account for $134 million.
After CAFTA-DR. . .
All 6 CAFTA-DR countries lock in duty-free access to the U.S. market as was
previously granted under CBI.
