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Summary

On August 5, 2004, the United States, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic signed the Dominican RepublicCentral America-United States Free Trade Agreement, or the DR-CAFTA. El Salvador, Honduras, and Guatemala have ratified the agreement; the rest have not. In the United States, following "mock markups" of draft implementing legislation by the House Ways and Means and Senate Finance Committees, the Bush Administration sent final legislation to Congress where identical bills were introduced jointly and referred to the House Ways and Means and Senate Finance Committees. Congressional consideration of the implementing bill is being done under expedited procedures as defined in Trade Promotion Authority (TPA). The Senate passed S. 1307 on July 1, 2005, and the House Ways and Means Committee favorably reported out H.R. 3045 on June 30. It awaits floor action by the House. The DR-CAFTA was negotiated as a regional agreement in which all parties would be subject to the "the same set of obligations and commitments," but with each country defining its own separate schedules for market access. It is a comprehensive and reciprocal trade agreement, which distinguishes it from the unilateral preferential trade arrangement between the United States and these countries as part of the Caribbean Basin Initiative (CBI), as amended. It liberalizes trade in goods, services, government procurement, intellectual property, investment, and addresses labor and environment issues. Most commercial and farm goods attain duty-free status immediately. Remaining trade would have tariffs phased out incrementally over five to twenty years. Duty-free treatment would be delayed longest for the most sensitive agricultural products. To address asymmetrical development and transition issues, the DR-CAFTA specifies rules for transitional safeguards, tariff rate quotas, and trade capacity building. The DR-CAFTA is not expected to have a large effect on the U.S. economy as a whole, but would be more of an incremental change from existing trade arrangements. Some sectors and groups, however, would be affected more than others. Supporters see it as part of a policy foundation supportive of both improved intraregional trade, as well as, long-term social, political, and economic development in an area of strategic importance to the United States. Opponents point to the need for better trade adjustment and capacity building policies to address the potential negative effects on certain import-competing sectors and their workers. In light of the region's poor labor standards in some cases, the perception of inadequate labor laws, and widely accepted lax enforcement, opponents also argue that the labor provisions in the DR-CAFTA need strengthening. In a broader perspective, this controversial agreement raises questions about the logic of pursuing bilateral FTAs given the inherent conflicts associated with the TPA legislation and effects of trade liberalization with developing countries. This report will be updated. For more on individual country perspectives, see CRS Report RL32322, Central America and the Dominican Republic in the Context of the Free Trade Agreement (DR-CAFTA) with the United States, coordinated by K. Larry Storrs.

Related Legislation:
• S.1307
• H.R.3045

Related Reports:
• RL31870

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