U.S. Signs CAFTA with Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua
The Office of the U.S. Trade Representative (USTR) has issued a press release announcing that on May 28, 2004, the U.S., Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua signed the U.S.-Central America Free Trade Agreement (CAFTA).
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Next Step for CAFTA is Signing Agreement with Dominican Republic
President Bush notified Congress of his intent to sign CAFTA with Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua on February 20, 2004, and made such notification for the Dominican Republic on March 24, 2004. As 90 days from the date of notification must lapse before signature, the Bush administration will not be able to sign CAFTA with the Dominican Republic until approximately the end of June 2004. (See ITT's Online Archives or 03/31/04 news, 04033105, for BP summary of President Bush's intent to sign the CAFTA with the Dominican Republic.)
According to the USTR, the Bush Administration plans to submit a single legislative package to Congress that includes CAFTA for all six countries (Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua).
After CAFTA Signed with Dominican Republic, Next Step for CAFTA is Congressional Approval of Implementing Legislation
According to U.S. government sources, after the U.S. and Dominican Republic sign CAFTA, the next step is for the President to formally submit the CAFTA legislative package (CAFTA, implementing legislation, and statement of administrative action) to Congress. Congress will than have 90 legislative days to consider the CAFTA implementing legislation, which cannot be amended. If CAFTA implementing legislation is passed by Congress (both House and Senate), it could then be signed into law by the President, who would subsequently issue a proclamation implementing CAFTA.
Although U.S. government sources have previously stated that the Administration's "goal" is to complete the above steps in 2004 so that CAFTA could take effect as early as January 1, 2005, such sources acknowledge that Congress' schedule, the fall 2004 elections, and other factors could prevent the achievement of this goal.
Highlights of CAFTA
According to a USTR fact sheet, highlights of CAFTA include (partial list):
More than 80% of U.S. exports of consumer and industrial goods become duty-free immediately. More than 80% of U.S. exports of consumer and industrial goods will become duty-free in Central America (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua) immediately, with remaining tariffs phased out over 10 years.
More than half of current U.S. farm exports become duty-free immediately. More than half of current U.S. farm exports to Central America will become duty-free immediately and tariffs on most remaining U.S. farm products will be phased out within 15 years.
Access to U.S. sugar market will grow slowly over 15 years, no change in over-quota tariff on sugar. In the first year, increased sugar market access for Central American countries under CAFTA will amount to about 1.2% of U.S. sugar production and about 1.1% of U.S. sugar consumption. This will grow very slowly over 15 years to about 1.7% of production and 1.6% of consumption. The USTR notes that there is no change in the prohibitively high over-quota tariff on sugar.
Textiles and apparel meeting the CAFTA rule of origin will be duty- and quota-free immediately. Textiles and apparel will be duty-free and quota-free immediately if they meet the CAFTA rule of origin. CAFTA's benefits for textiles and apparel will be retroactive to January 1, 2004. An unprecedented provision will give duty-free benefits to some apparel made in Central America that contains certain fabrics from North American Free Trade Agreement (NAFTA) partners Mexico and Canada.
Central American countries will offer new access in express delivery, transport, etc. sectors. Central American countries will accord substantial market access across their entire services regime, offering new access in sectors such as telecommunications, express delivery, computer and related services, transport, financial services, etc.
Most Central American goods already enter the U.S. duty-free. The USTR notes that most Central American goods already enter the U.S. duty-free. According to the USTR, under the Caribbean Basin Initiative (CBI) , other U.S. preference programs, and most-favored nation (MFN) duty-free trade, nearly 77% of regional imports entered the U.S. duty-free in 2003.
Information on CAFTA, including press release, fact sheet, etc., is available at http://www.ustr.gov/new/fta/cafta.htm.