:''Note: Within this article, "CAFTA" refers to the agreement as it stood before January 2004, and "CAFTA-DR" is used after that.''

The Dominican Republic–Central America–United States Free Trade Agreement (CAFTA-DR;
Spanish: ''Tratado de Libre Comercio entre
República Dominicana,
Centroamérica y
Estados Unidos de América,'' TLC) is a
free trade
Free trade is a trade policy that does not restrict imports or exports. In government, free trade is predominantly advocated by political parties that hold Economic liberalism, economically liberal positions, while economic nationalist politica ...
agreement (legally a
treaty
A treaty is a formal, legally binding written agreement between sovereign states and/or international organizations that is governed by international law. A treaty may also be known as an international agreement, protocol, covenant, convention ...
under international law). Originally, the agreement encompassed the United States and the Central American countries of
Costa Rica
Costa Rica, officially the Republic of Costa Rica, is a country in Central America. It borders Nicaragua to the north, the Caribbean Sea to the northeast, Panama to the southeast, and the Pacific Ocean to the southwest, as well as Maritime bo ...
,
El Salvador
El Salvador, officially the Republic of El Salvador, is a country in Central America. It is bordered on the northeast by Honduras, on the northwest by Guatemala, and on the south by the Pacific Ocean. El Salvador's capital and largest city is S ...
,
Guatemala
Guatemala, officially the Republic of Guatemala, is a country in Central America. It is bordered to the north and west by Mexico, to the northeast by Belize, to the east by Honduras, and to the southeast by El Salvador. It is hydrologically b ...
,
Honduras
Honduras, officially the Republic of Honduras, is a country in Central America. It is bordered to the west by Guatemala, to the southwest by El Salvador, to the southeast by Nicaragua, to the south by the Pacific Ocean at the Gulf of Fonseca, ...
, and
Nicaragua
Nicaragua, officially the Republic of Nicaragua, is the geographically largest Sovereign state, country in Central America, comprising . With a population of 7,142,529 as of 2024, it is the third-most populous country in Central America aft ...
, and was called CAFTA. In 2004, the
Dominican Republic
The Dominican Republic is a country located on the island of Hispaniola in the Greater Antilles of the Caribbean Sea in the Atlantic Ocean, North Atlantic Ocean. It shares a Maritime boundary, maritime border with Puerto Rico to the east and ...
joined the negotiations, and the agreement was renamed CAFTA-DR.
CAFTA-DR, the
United States-Mexico-Canada Agreement (USMCA), and active bilateral free trade agreements such as the
Canada-Costa Rica Free Trade Agreement are seen as bloc agreements instead of a
Free Trade Area of the Americas (FTAA) agreement. Panama has completed negotiations with the United States for a bilateral free trade agreement known as the
Panama–U.S. Trade Promotion Agreement, and has been in effect since October 2012.
The CAFTA-DR constitutes the first free trade agreement between the United States and a small group of developing countries. It was created with the purpose of creating new and better economic opportunities by opening markets, eliminating
tariff
A tariff or import tax is a duty (tax), duty imposed by a national Government, government, customs territory, or supranational union on imports of goods and is paid by the importer. Exceptionally, an export tax may be levied on exports of goods ...
s, reducing barriers to services, and more. In 2015, it was estimated that the total two-way trade resulted in $53 billion (~$ in ).
Nearly all Central American exports to the United States had already been tariff-free thanks to the 1984
Caribbean Basin Initiative.
Ratification
The agreement is a treaty under international law, but not under the
U.S. Constitution because in the United States laws require majority approval in both houses, while treaties require two-thirds approval in the Senate only. Under U.S. law, CAFTA-DR is a
congressional-executive agreement.
The
U.S. Senate approved the CAFTA-DR on June 30, 2005, by a vote of 54–45, and the
U.S. House of Representatives approved the pact on July 28, 2005, by a vote of 217–215, with two representatives not voting. Controversy arose over this vote because it was held open 1 hour and 45 minutes longer than the normal 15 minutes in order to get some members to change their votes. For procedural reasons, the Senate took a second vote on CAFTA on July 28 and the pact garnered an additional vote from Senator
Joe Lieberman
Joseph Isadore Lieberman (; February 24, 1942 – March 27, 2024) was an American politician and lawyer who served as a United States senator from Connecticut from 1989 to 2013. Originally a member of the Democratic Party (United States), Dem ...
—who had been absent on June 30—in favor of the agreement. The implementing legislation became
Public Law
Public law is the part of law that governs relations and affairs between legal persons and a government, between different institutions within a state, between different branches of governments, as well as relationships between persons that ...
109-053 when it was signed by President
George W. Bush
George Walker Bush (born July 6, 1946) is an American politician and businessman who was the 43rd president of the United States from 2001 to 2009. A member of the Bush family and the Republican Party (United States), Republican Party, he i ...
on August 2, 2005.
The Dominican Republic, Costa Rica, El Salvador, Guatemala, Nicaragua, and Honduras have also approved the agreement. They are all the current members of CAFTA-DR.
El Salvador became the first country to formally implement CAFTA, which went into effect on March 1, 2006, when the
Organization of American States
The Organization of American States (OAS or OEA; ; ; ) is an international organization founded on 30 April 1948 to promote cooperation among its member states within the Americas.
Headquartered in Washington, D.C., United States, the OAS is ...
(OAS) received signed copies of the treaty. On April 1, 2006, Honduras and Nicaragua fully implemented the agreement. On May 18, 2006, the
Congress of Guatemala ratified CAFTA-DR, which went into effect on July 1, 2006. The Dominican Republic implemented the agreement on March 1, 2007. In a
referendum on October 7, 2007, Costa Rica narrowly backed the free trade agreement, with 51.6% voting "Yes"; the agreement took effect on January 1, 2009.
Aims
The goal of the agreement is the creation of a
free trade area
A free trade area is the region encompassing a trade bloc whose member countries have signed a free trade agreement (FTA). Such agreements involve cooperation between at least two countries to reduce trade barriers, import quotas and tariffs, and ...
similar to
NAFTA, which currently encompasses the United States, Canada, and Mexico. CAFTA-DR is also seen as a stepping stone towards the FTAA, another (more ambitious) free trade agreement that would encompass all the South American and
Caribbean
The Caribbean ( , ; ; ; ) is a region in the middle of the Americas centered around the Caribbean Sea in the Atlantic Ocean, North Atlantic Ocean, mostly overlapping with the West Indies. Bordered by North America to the north, Central America ...
nations as well as those of North and Central America except
Cuba
Cuba, officially the Republic of Cuba, is an island country, comprising the island of Cuba (largest island), Isla de la Juventud, and List of islands of Cuba, 4,195 islands, islets and cays surrounding the main island. It is located where the ...
. Canada is negotiating a similar treaty called the
Canada–Central American Four Free Trade Agreement.
Once passed by the countries involved,
tariffs on about 80% of U.S. exports to the participating countries were eliminated immediately and the rest were phased out over the subsequent decade. As a result, CAFTA-DR does not require substantial reductions in U.S. import duties with respect to the other countries, as the vast majority of goods produced in the participating countries already entered the United States duty-free due to the U.S. government's
Caribbean Basin Initiative.
With the addition of the Dominican Republic, the trade group's largest economy, the region covered by CAFTA-DR is the second-largest Latin American export market for U.S. producers, behind only Mexico, buying $29 billion (~$ in ) of goods in 2015. Two-way trade amounted to about $50 billion in the same year.
While not necessarily a part of
Plan Puebla Panama, CAFTA is a necessary precursor to the execution of Plan Puebla Panama by the
Inter-American Development Bank. The plan includes construction of highways linking
Panama City
Panama City, also known as Panama, is the capital and largest city of Panama. It has a total population of 1,086,990, with over 2,100,000 in its metropolitan area. The city is located at the Pacific Ocean, Pacific entrance of the Panama Canal, i ...
to Mexico City,
Texas
Texas ( , ; or ) is the most populous U.S. state, state in the South Central United States, South Central region of the United States. It borders Louisiana to the east, Arkansas to the northeast, Oklahoma to the north, New Mexico to the we ...
, and the rest of the United States.
CAFTA-DR reduces tariffs, but every CAFTA country sets its overall tax level.
Support
In January 2002 U.S. president
George W. Bush
George Walker Bush (born July 6, 1946) is an American politician and businessman who was the 43rd president of the United States from 2001 to 2009. A member of the Bush family and the Republican Party (United States), Republican Party, he i ...
declared CAFTA as a priority and received "fast track" authority from Congress to negotiate it. Negotiations began in January 2003, and agreement was reached with El Salvador, Guatemala, Honduras, and Nicaragua on December 17, 2003, and with Costa Rica on January 25, 2004. That same month, negotiations began with the Dominican Republic to join CAFTA.
On May 28, 2004, U.S. trade representative
Robert Zoellick,
Costa Rica
Costa Rica, officially the Republic of Costa Rica, is a country in Central America. It borders Nicaragua to the north, the Caribbean Sea to the northeast, Panama to the southeast, and the Pacific Ocean to the southwest, as well as Maritime bo ...
n minister of trade
Alberto Trejos, Salvadoran economy minister
Miguel Lacayo, Guatemalan economy minister
Marcio Cuevas, Honduran minister of industry and commerce
Norman García, and Nicaraguan minister of development, industry and commerce Mario Arana signed the 2,400-page document at headquarters of the
Organization of American States
The Organization of American States (OAS or OEA; ; ; ) is an international organization founded on 30 April 1948 to promote cooperation among its member states within the Americas.
Headquartered in Washington, D.C., United States, the OAS is ...
. Negotiations with the Dominican Republic concluded on March 15, 2004, and a second signing ceremony including Dominican minister of industry and commerce
Sonia Guzmán was held on August 5, 2004.
Opposition

In May 2004, the
Salvadoran American National Network, the largest national association of Central American
community-based organizations in the United States, expressed opposition to CAFTA, which they claimed was not ideologically motivated: "As immigrants, we have a deep understanding of the potential benefits of improved transnational cooperation. We would welcome an agreement that would increase economic opportunity, protect our shared environment, guarantee workers' rights and acknowledge the role of human mobility in deepening the already profound ties between our countries. However, the CAFTA agreement falls far short of that vision."
While manufacturing costs of
generic drugs
A generic drug is a pharmaceutical drug that contains the same chemical substance as a drug that was originally protected by chemical patents. Generic drugs are allowed for sale after the patents on the original drugs expire. Because the active ch ...
are relatively cheap, the costs of human tests are relatively expensive, and tests take months or years. If generic manufacturers had to redo the tests, the generic drug would be more expensive, and generic manufacturers might not be able to do the tests at all. Furthermore, if generic manufacturers had to redo the tests, they would have to compare the new, effective drugs to less-effective drugs, which according to
Doctors Without Borders, would be unethical. In the United States, drug manufacturers must make test data public for generic manufacturers. Under CAFTA's test data exclusivity, drug manufacturers could keep test data secret, which would make it more difficult for local companies to produce generic drugs, and enable multinational pharmaceutical companies to keep a monopoly on branded drugs, including those used to treat AIDS, malaria, and tuberculosis.
In Guatemala mass protests were violently repressed by the government and strikes occurred in Costa Rica in opposition to the trade agreement. Furthermore, many Catholic bishops in Central America and the United States opposed the treaty, just as many social movements in the region.
[Comparative Politics of Latin America (page 469), Daniel C. Hellinger]
Provisions
To create an FTA, governments pledge to grant
market access
In international trade, market access refers to a company's ability to enter a foreign market by selling its goods and services in another country. Market access is not the same as free trade, because market access is normally subject to condition ...
to foreign firms by reducing and eventually eliminating tariffs and other measures that
protect domestic products. To do so, the CAFTA-DR treaty stipulates
national treatment and includes a
most-favored nation clause. It also includes the protection of international property rights and requires from their signatories certain measures in the realm of
transparency (e.g., parties are obligated to criminalize bribery in matters affecting international trade or investment).
Moreover, the agreement includes i.a. chapters on
investment
Investment is traditionally defined as the "commitment of resources into something expected to gain value over time". If an investment involves money, then it can be defined as a "commitment of money to receive more money later". From a broade ...
,
public procurement procedures, and
financial services
Financial services are service (economics), economic services tied to finance provided by financial institutions. Financial services encompass a broad range of tertiary sector of the economy, service sector activities, especially as concerns finan ...
.
Antidumping and
countervailing duty measures may not be challenged.
Cross-border trade in services
Each member country must treat service suppliers of another member country no less favorably than its own suppliers or those of any other member country. It requires firms to establish a local presence as a condition for supplying a service on a cross-border basis.
Financial services
CAFTA-DR imposes rules requiring member countries to treat service suppliers of another member country no less favorably than its own suppliers or those of any other country, prohibits certain quantitative restrictions on market access of financial institutions, and bars restrictions on the nationality of senior management.
Investment
CAFTA-DR establishes rules to protect investors from one member country against unfair or discriminatory government actions when they make or attempt to make investments in another member country's territory. Investors enjoy six basic protections:
# Non-discriminatory treatment relative to domestic investors as well as investors of non-parties;
# Limits on "performance requirements";
# Free transfer of funds related to an investment;
# Protection from expropriation other than in conformity with customary international law;
# A "minimum standard of treatment" in conformity with customary international law;
# The ability to hire key managerial personnel without regard to nationality.
Government procurement
Each member country must apply fair and transparent
procurement
Procurement is the process of locating and agreeing to terms and purchasing goods, services, or other works from an external source, often with the use of a tendering or competitive bidding process. The term may also refer to a contractual ...
procedures and rules and prohibiting each government and its procuring entities from discriminating in purchasing practices against goods, services, and suppliers from the other member countries.
Agriculture
CAFTA-DR requires that tariffs and quotas be administered in a manner that is transparent, nondiscriminatory, responsive to market conditions and minimally burdensome on trade and allows importers to fully utilize import quotas. Each member country will eliminate export subsidies on agricultural goods destined for another CAFTA-DR country.
Intellectual property rights
Member countries must ratify or accede to treaties governing
intellectual property rights, such as the
WIPO Copyright Treaty.
Each member country must provide:
* Protection for marks and
geographical indications, including protecting preexisting trademarks against infringement by later geographical indications.
* Efficient and transparent procedures governing the application for protection of marks and geographical indications.
* Copyright protection for the life of the author plus 70 years (for works measured by a person's life), or 70 years (for corporate works).
It also includes provisions on anticircumvention, under which member countries commit to prohibit tampering with
digital rights management
Digital rights management (DRM) is the management of legal access to digital content. Various tools or technological protection measures, such as access control technologies, can restrict the use of proprietary hardware and copyrighted works. DRM ...
technology.
Member countries agree to make patents available for any invention, subject to limited exclusions, and confirm the availability of patents for new uses or methods of using a known product. To guard against arbitrary revocation of patents, the grounds for revoking a patent must meet the high standard of not having merited the patent in the first place.
CAFTA-DR also ensures
test data exclusivity for pharmaceutical corporations. It protects test data that a company submits in seeking marketing approval for such products by precluding other firms from relying on the data.
Dispute resolution
If a dispute over an actual or proposed national rule cannot be resolved after a 30-day consultation, the matter may be referred to a panel comprising independent experts that the parties select. Once the procedure before the panel is concluded, the panel will issue a report. The parties will attempt to resolve the dispute based on the panel's report. If no amicable resolution is possible, the complaining party may suspend trade benefits equivalent in effect to those it considers were impaired, or may be impaired, as a result of the disputed measure. If a dispute arises under both CAFTA-DR and the WTO Agreement, the complaining party may choose either forum.
Political standards
CAFTA-DR contains certain provisions that do not have the quality of mere technical liberalization, but are rather a commitment to political standards. The treaty obligates governments to the enforcement of environmental laws and
improvement of the environment. CAFTA-DR Environmental Cooperation Agreement, signed in concert with the FTA, provides for environmental cooperation on issues of mutual environmental concern. Furthermore, CAFTA-DR contains provisions for the enforcement of the
International Labour Organization
The International Labour Organization (ILO) is a United Nations agency whose mandate is to advance social and economic justice by setting international labour standards. Founded in October 1919 under the League of Nations, it is one of the firs ...
's core
labor standards.
See also
*
General Agreement on Tariffs and Trade (GATT)
*
List of free trade agreements
*
World Trade Organization
The World Trade Organization (WTO) is an intergovernmental organization headquartered in Geneva, Switzerland that regulates and facilitates international trade. Governments use the organization to establish, revise, and enforce the rules that g ...
(WTO)
*
OceanaGold - unsuccessful attempt to invoke CAFTA-DR against El Salvador
*
Rules of origin
References
External links
Official U.S. Government CAFTA-DR website
{{DEFAULTSORT:Dominican Republic-Central America Free Trade Agreement
Trade blocs
Legal history of the United States
CAFTA-DR
Acts of the 109th United States Congress
Economic history of the United States
Economy of the Dominican Republic
United States federal trade legislation
United States–Caribbean relations
Treaties of the Dominican Republic
Treaties of Honduras
Treaties of El Salvador
Treaties of Nicaragua
Treaties of Guatemala
Treaties of Costa Rica
United States–Central American relations
Nicaragua–United States relations
Guatemala–United States relations
Costa Rica–United States relations
El Salvador–United States relations
Honduras–United States relations
El Salvador–Honduras relations
Dominican Republic–United States relations
Guatemala–Honduras relations
Honduras–Nicaragua relations
Foreign policy of the George W. Bush administration