CAFTA, the Central America Free Trade Agreement, or commonly known as the Dominican Republic?Central America Free Trade Agreement (DR-CAFTA), is a free trade agreement. In international trade, free trade is an idealized market model, often stated as a political objective, in which trade of goods and services between countries are not hindered by government imposed tariffs (taxes on imports) or non-tariffs (Wikipedia, 2007).
CAFTA became known as DR-CAFTA in 2004 after the Dominican Republic joined the association. Initially the agreement included the United States, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. To date, Costa Rica has not formally sanctioned the new agreement yet, but that it is a priority and will be looked at within the next few months. In March 2006, DR-CAFTA entered into force for El Salvador. Honduras and Nicaragua followed one month later, and Guatemala in July. The Dominican Republic Senate has already approved the agreement and is expected to pass it soon after the Dominican administration adopts the implementation requirements from Washington for its entering into force (Chamber of Commerce, 2007).
According to the Office of the United States Trade Representative, the case for CAFTA is based on the growth, opportunity and democracy of the aforementioned regions. The agreement will eliminate 80% of tariffs on U.S. goods exported to these regions. Even though these countries are small, they represent big consumer markets. Central America and the Dominican Republic heads the second largest U.S. export market in Latin America, closely trailing Mexico. The rest of the tariffs will be phased out over the next decade. This will give American businesses, workers and farmers even greater access t ...