Diplomacy

Strength in Unity

CAFTA-DR

The Dominican Republic has developed a comprehensive model for promoting FDI through the nurturing of Free Trade Agreements (FTAs) and the construction and licensing of Free Trade Zones (FTZs) on […]

The Dominican Republic has developed a comprehensive model for promoting FDI through the nurturing of Free Trade Agreements (FTAs) and the construction and licensing of Free Trade Zones (FTZs) on its territory. Party to a number of significant international trade pacts, the state has made sure not to miss out on any opportunities to build relations with neighboring countries, or nations in similar positions, geographically and economically. Such a strategy is central to the sustainable development of these nations, as their domestic markets are typically not sufficiently large enough to generate economies of scale in their own right. Embracing the potential of larger nearby markets in cooperation with other nations in a similar position is a proven method for fortifying an economy and guaranteeing a brighter future for citizens.

The Cotonou Agreement, signed by the EU and 78 African, Caribbean, and Pacific countries, aims to reduce poverty by assimilating nations into the world economy. The Caribbean Basin Trade Partnership Act (CBTPA) was signed in 2000, and outlined trade preferences for certain items between the US and certain Caribbean countries. Other FTAs include treaties with Central American countries and the Caribbean Community (CARICOM). However, these arrangements have presaged what is arguably the republic’s most significant FTA.

The Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) constitutes a broad process of tariff reduction for both imports and exports among member nations. Initially signed on August 5, 2004, the FTA involved the US, El Salvador, Guatemala, Honduras, Nicaragua, Costa Rica, and the Dominican Republic. The understanding took effect for the first five of these nations in 2006, with the Dominican Republic and Costa Rica following suit in 2007 and 2009, respectively.

After Mexico and Brazil, the CAFTA-DR market is the US’s third largest in the Latin America region. It represents the first such agreement between the US and a group of smaller developing economies, and demands higher levels of transparency and the characteristic elements of lowered tariffs and the elimination of barriers to trade. The FTA has been successful so far in its stated goals, and by 2015, 100% of US consumer and industrial goods exports to the other partners will be exempt from tariffs. In 2013, the market was the 14th largest US export market in the world. Exports have risen by over 74% since 2005, with $29.5 billion in commodities imported by the other members in 2013. The US has an approximate 43% share in the market in the Dominican Republic, with 70% of consumer goods imported into the country coming from the US.

On the Dominican side, the government is proud of the progress that membership of this and other FTAs have allowed the nation to make. “These and other agreements allow us to have preferential access to 876 million consumers worldwide offering tremendous advantages for companies established in our territory,” explained Danilo Medina, President of the Dominican Republic in a TBY interview. Bilateral trade between the US and the Dominican Republic reached $11.46 billion in 2012. The nation’s exports largely originate from its extensive FTZ network and its attractive legal structure which eradicates duties, income tax, and many other tax commitments. Dominican exports are primarily agricultural, with sugar, coffee, and tobacco remaining the major products that the US imports.

The FTA is intended to have beneficial effects on the signatory countries beyond increased trade. The wealth that such trade can create will, according to the agreement, promote political stability as economies become better integrated with other markets. Another positive consequence of CAFTA-DR relates to the environment. In parallel with the economic cooperation necessitated by such a process, member countries are also liaising on conservation and improving the environment. Sustainable development is an important element of the FTA, and governments’ commitments to future generations are demonstrated in projects that enhance biodiversity, the encouragement of economic activities that promote conservation, and that support the private sector in green practices and initiatives. The reinforcing of institutions and policy in this area is also a significant focus, as is public participation. In this way, the CAFTA-DR pact will ensure not only the sustained expansion of the Dominican economy, but also the survival of its flora and fauna, often overlooked by other countries eager to become more wealthy.

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