The Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) is a legal treaty under international law. Originally known as CAFTA, the deal covered the US as well as Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua in Central America. The negotiations with the Dominican Republic began in 2004, and the deal was called CAFTA-DR.
Purpose
The CAFTA-DR is the initial free trade pact between the US and a select group of developing nations. By opening markets, removing tariffs, lowering barriers to services, and other means, it was designed to provide new and better economic opportunities. The estimated value of the entire two-way commerce in 2015 was $53 billion. The Caribbean Basin Initiative of 1984 had already rendered almost all exports from Central America to the United States tariff-free.
Ratification
El Salvador, the Dominican Republic, Costa Rica, Guatemala, Honduras, Nicaragua, and the United States have all endorsed CAFTA-DR. The agreement qualifies as a treaty under international law, but not under the U.S. Constitution. In the US, laws must be approved by majorities in both houses, whereas treaties can only be approved by two-thirds of senators. CAFTA-DR is a congressional-executive agreement as defined by U.S. law. After President George W. Bush approved it on August 2, 2005, the implementation law became Public Law.
Implementation
On March 1, 2006, the Organization of American States (OAS) received signed copies of the CAFTA, making El Salvador the first nation to fully adopt it. Honduras and Nicaragua finished implementing the agreement on April 1, 2006. The Congress of Guatemala ratified CAFTA-DR on May 18, 2006, and it became effective on July 1 of that same year. On March 1, 2007, the Dominican Republic put the agreement into effect. Costa Rica narrowly supported the free trade agreement in a vote on October 7, 2007, with 51.6% voting in favor of the accord, which went into effect on January 1, 2009.
Provision
Governments agree to open their markets to foreign companies by lowering and eventually doing away with tariffs and other protections for domestic goods to establish an FTA. The CAFTA-DR treaty has a most-favored-nation clause and national treatment provisions to achieve this. The preservation of international property rights is also covered, and their signatories are required to take specific transparency-related actions. The agreement also contains provisions on financial services, public procurement practices, and investment.
International trade in services
Each member state is required to treat other members’ service providers equally as its own. However, for businesses to provide services internationally, they must first develop a local presence.
Financial services
CAFTA-DR imposes regulations that oblige members to treat service suppliers of other members no less favorably than their suppliers. It forbids certain quantitative restrictions on financial institutions’ access to the market and forbids restrictions on senior management’s nationality.
Investment
When investors from one member nation make or attempt to make investments in the territory of another member country, CAFTA-DR provides rules to protect them from unfair or discriminatory government acts. Investors benefit from many fundamental protections, including the unrestricted transfer of cash related to investments and the hiring of key managerial employees regardless of nationality.
Government procurement
Each member state is required to follow fair and open procurement policies and regulations. It is forbidden for any government or entity in charge of making purchases to discriminate against products, services, or suppliers from other states.
Agriculture
To fully enable importers to take advantage of import quotas, CAFTA-DR mandates that tariffs and quotas be administered in a way that is open, nondiscriminatory, responsive to market conditions, and minimally restrictive on trade. Each member state will stop providing export subsidies for agricultural products going to other CAFTA-DR nations.
Rights to intellectual property
Treaties governing intellectual property rights, like the WIPO Copyright Treaty, must be ratified or joined by member nations. Each member nation is required to offer protection for trademarks and geographical indications, including safeguarding older trademarks from being violated by more recent geographical indications. Additionally, works measured by a person’s life must be protected by copyright for the life of the author, or corporate works, for 70 years. The member nations agree to forbid tampering with digital rights management technology under its anti-circumvention clauses. Member nations affirm the availability of patents for new applications or ways to use a known product and concur to grant patents for any invention, subject to certain restrictions. Additionally, CAFTA-DR guarantees pharmaceutical companies the exclusivity of test data. By forbidding other companies from relying on the test data, it safeguards test data that a company presents when requesting marketing authorization for such products.
Dispute settlement
The matter may be referred to a panel of independent experts that the parties choose if a disagreement over an existing or proposed national regulation cannot be settled following a 30-day consultation period. The panel will release a report after the proceedings before it is finished. Based on the panel’s report, the parties will try to agree. In the absence of a mutually agreeable solution, the complaining party may suspend trade advantages equivalent in value to those it believes were or would be affected as a result of the disputed measure. The complaining party may decide which forum to use if a dispute arises under both CAFTA-DR and the WTO Agreement.
