What is CAFTA?

What is CAFTA?

An Overview
The United States-Dominican Republic-Central America Free Trade Agreement (CAFTA) is one in a series of Free Trade Agreements (FTAs) that the United States has entered into with its neighbors in the Western Hemisphere. The most familiar of these is the decade-old NAFTA, the North American Free Trade Agreement, which links the U.S., Canada and Mexico. In addition, the U.S. has negotiated or is still negotiating FTAs with Chile, Panama and the Andean Countries � Peru, Colombia, Ecuador and Bolivia.

Like these agreements, CAFTA opens, not only a new era in trade between the United States and its neighbors, but also new opportunities for U.S. companies and U.S. operations of foreign companies. Historically, the United States has been the main trading partner of each of the countries in the agreement�Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua. U.S. government policy have granted these countries relatively open access to U.S. markets for their goods, while protecting their own markets with tariffs and other barriers. These tariffs and barriers prevented or severely restricted U.S. access to the markets in these countries for U.S. manufactured goods, agricultural products, professional services, and investments.

CAFTA has eliminated all tariffs on 80 percent of U.S. manufactured goods, with the remainder phased out over a few years. Importantly, the agreement is not limited to manufactured goods, but covers virtually every type of trade and commercial exchange between these countries and the United States. It also strengthens regulatory standards and environmental protections in Central America and the Dominican Republic and provides for independent, outside monitoring. (Read the full text of the United States-Dominican Republic-Central American Free Trade Agreement.)

Barriers to trade fall

Over time, with the implementation of CAFTA, most of the tariffs and barriers that have previously limited access to these markets will fall. Duties on more than 80 percent of the $17 billion in U.S. goods exported to the region annually have ended. Within five years, 85 percent of U.S. exported goods have become duty-free, while the remaining tariffs will be phased out over 10 years. So even at the beginning, CAFTA provides companies located in the United States a measurable advantage in these markets over competitors from other parts of the world.

Service providers gain access

Notably, with services representing an ever larger share of the U.S. economy, CAFTA significantly enhances market access by U.S. service providers to the service sectors � financial services (banking, trade finance, insurance, securities); telecommunications and IT services; architectural, engineering, and design services; accounting and consulting; legal services; education and healthcare; transportation/distribution/logistics; and various other kinds of professional services�of the Dominican Republic and Central American economies.

Investment opportunities open

Significantly, barriers to U.S. investment are also falling. In the CAFTA countries, U.S. companies are being treated as if they are local. And, for the first time, they are operating within a reliable legal framework. In the same way, intellectual property rights are protected as they have been in the United States. The agreement is also structured to foster greater transparency in government procurement, opening yet another previously closed door for U.S. businesses.

Greater prosperity and stability in the region

Beyond the economic benefits to U.S. businesses, CAFTA paves the way for greater economic and political stability in the region by nurturing the rule of law; open, transparent governance; protection of private property rights and investments; market-based competition; and regional economic integration. As markets and civil society strengthen and become more stable, predictable and economically linked, citizens in the CAFTA countries will have greater economic prospects at home.

The wave of the future

The success of CAFTA and other hemispheric agreements provides an important boost to the eventual establishment of what will be the ultimate hemispheric FTA, the Free Trade Area of the Americas, FTAA. When finally implemented, the FTAA will unite into a single free-trade area the 34 economies of the Americas, making it the largest FTA in the world�surpassing even the 7-member European Union.

Now, what does CAFTA mean for your business?

Choose your corporate location and see how CAFTA can benefit you:

International

United States

Florida

CAFTA Country

Choose your corporate location and see how CAFTA can benefit you

International
United States
Florida
CAFTA Country

One third of the CAFTA countries� total merchandise trade with the rest of the world, and about 42% of their trade with the United States, passes through Florida � more than $18.6 billion a year.
A tenth of the CAFTA countries� total worldwide imports, and about 19% of all goods they import from the United States (close to $4.8 billion a year), are made in Florida.
Florida is the main investment gateway to the CAFTA countries: about 300 multinational firms have their Latin American & Caribbean regional HQs in Florida. In all, more than 2,000 companies based outside the U.S. operate in Florida.
Almost 40 companies from the CAFTA countries have operations in Florida, while about two dozen Florida companies have facilities in the CAFTA countries.
Florida�s airports offer more direct flights to CAFTA destinations than all other U.S. cities combined. Along with Florida�s 14 deepwater seaports and 20 Foreign Trade Zones, they offer unparalleled connections to the CAFTA markets.
Florida has one of the largest Spanish-speaking populations in the U.S., numbering almost 4 million. A seventh of them are of Central American or Dominican origin, with extensive family and business ties to the CAFTA countries.

Learn more about how your business can benefit from a Florida connection to the CAFTA countries.

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