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The Dominican Republic-Central America Free Trade Agreement, more commonly known as DR-CAFTA, is a free trade agreement (legally a treaty under international law, but not legally a treaty under US municipal law). As CAFTA, the agreement originally encompassed the United States and the Central American countries Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. In 2004, the Dominican Republic joined the negotiations, and agreement became known as DR-CAFTA.
Bordering Central American nations not in the agreement include Belize and Panama on the mainland, Haiti which is on the island of Hispaniola with the Dominican Republic, and Cuba. Panama is currently in negotiations with the U.S. on a bilateral Free Trade Agreement, and Belize is a member of the Caribbean Community (CARICOM). Haiti was given certain trade preferences with the U.S. under the Haiti Economic Recovery Opportunity Act of 2003 (HERO Act).
The United States Senate approved the DR-CAFTA agreement on June 30, 2005 by a vote of 54-45. (The agreement is under international law classified as a treaty; however it is not classified as such under the U.S. Cons ution, which uses the word "treaty" in a more restricted sense. Laws require majority approval in both Houses while treaties (in the US sense) require 2/3rds approval in the Senate only. While an international agreement, DR-CAFTA is not a treaty and so required majority votes in both houses, and not a 2/3rds vote in the Senate alone. Under United States law it is classed as a congressional-executive agreement.) At midnight on July 28, 2005, the House of Representatives, by a narrow vote of 217 to 215, approved CAFTA. It became Public Law 109-053. For DR-CAFTA to be come into effect, it still must be approved by the legislatures of the other parties to the agreement. The Dominican Republic, El Salvador, Guatemala, Nicaragua, and Honduras also approved the agreement. Costa Rica has not ratified the agreement.
The goal of the agreement is the creation of a free trade zone, similar to the North American Free Trade Agreement (NAFTA) which currently encompasses the US, Canada, and Mexico. DR-CAFTA is also seen as a stepping stone towards the Free Trade Area of the Americas (FTAA), another, more ambitious free trade agreement which would encompass South American and Caribbean nations (with the exception of Cuba) as well. Canada is negotiating a similar treaty called the Canada Central American Free Trade Agreement.
If passed by the countries involved, tariffs on about 80% of U.S. exports to the participating countries will be eliminated immediately and the rest will be phased out over the subsequent decade. Due to the U.S. Government's Caribbean Basin Initiative, the vast majority of goods produced in the participating countries already enter the United States duty-free. As a result, it is important to note that the DR-CAFTA's implementation would not require substantial reductions in U.S. import duties with respect to the other countries participating in the agreement.
With the addition of the Dominican Republic, the largest economy in the region, the region covered by DR-CAFTA is the second-largest Latin American export market for U.S. producers, behind only Mexico, buying $15 billion U.S. dollars of goods a year. Two-way trade amounts to about USD$32 billion.
While not necessarily a part of Plan Puebla Panama, CAFTA is a necessary precursor to the execution of Plan Puebla Panama by the Inter-American Development Bank. The plan includes construction of highways linking Panama City to Mexico City and on to Texas and the rest of the United States.
DR-CAFTA reduce tariffs, which is a form of tax. However, every nation in CAFTA remains free to set its overall tax level as it sees fit.
More on CAFTA:Wikipedia
