On May 28, 2004 the U.S.-Central America Free Trade Agreement, or CAFTA, was signed by the United States, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. Negotiations with the Dominican Republic are ongoing and once completed and signed, the agreement will be sent to Congress for implementing legislation. U.S. exports to these countries is nearly $15 billion, which represents a larger market than Russia, India and Indonesia combined and will be our second largest trading partner in Latin America behind Mexico. Two-way trade with the CAFTA signatories, including the Dominican Republic, is currently $23 billion.
The CAFTA will immediately eliminate the tariffs of nearly 80% of U.S. goods exported to the signatory Central American countries. The tariffs on the remainder of U.S. products will be reduced to zero over a fifteen year period. Because of the Caribbean Basin Initiative (CBI) and other agreements, 77% of the imports from the CAFTA signatories already enter the U.S. market duty-free, therefore the CAFTA provides the same benefits to U.S. exports that the CAFTA signatories are currently enjoying.
The U.S. Trade Representative predicts that the following sectors will most benefit from the agreement: information technology products; agricultural and construction equipment; paper products; chemicals; and medical and scientific equipment. Initially, more than half of U.S. agricultural products will enjoy duty-free entry into CAFTA countries including beef, cotton, wheat, soybeans, certain fruits and vegetables, processed food products and wine.
Textiles will be imported duty-free within CAFTA for originating products and Central American apparel made from certain NAFTA-originating fabrics will enter the U.S. duty- free immediately. CAFTA includes significant intellectual property safeguards and the Central American countries have agreed to open up their telecommunications, express delivery, computer services, tourism, energy, transport, construction and engineering, financial services, insurance, audio/visual and entertainment, professional, environmental, and other service sectors to U.S. access.
The United States has implemented free trade agreements with Canada and Mexico (NAFTA), Israel, Jordan, Chile and Singapore and has recently signed a free trade agreement with Australia. The U.S. recently completed free trade negotiations with Bahrain and is currently negotiating a number of other free trade agreements with the Andean countries, the South African Customs Union and Morocco.
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