Washington, D.C. – Alaska Congressman Don Young late last night voted in support H.R. 3045, the Dominican Republic – Central American Free Trade Agreement Implementation Act (DR – CAFTA).  This bill will enhance market access to the Dominican Republic and Central America and moves the trading relationships from one-way preferences to reciprocity.  This billed passed by a narrow margin of 21`7 to 215.

 “I considered voting against DR-CAFTA due to the potential negative implications free trade has on the American manufacturing sector.  However I have been assured by House leadership and the Bush Administration that Alaskan laborers can expect to see growth in employment with the passage of DR-CAFTA.  In particular the Department of Commerce predicts that manufacturing in the Alaska Aerospace Industry will grow with the reduction in tariffs placed on aircraft and related products.  In order to assure individuals have the proper training needed to fill these new specialized positions, various trade adjustment programs are offered to introduce workers to growing job markets here in the United States.  

 “Overall, I am pleased with the results of this vote. Opening markets and encouraging free and fair trade with our neighbors will help keep and create jobs here at home while ensuring that American goods and services reach as many corners of the globe as possible. CAFTA is not only good for us and our economy and security; it’s great for our neighbors. By supporting this agreement, the United States stands shoulder-to-shoulder with our neighbors who share in our commitment to democracy and freedom.  We must recognize our national security depends on the stability of our neighbors. As this bill head’s to the President’s desk, I look forward to seeing this important agreement signed into law,” said Congressman Young.

 DR – CAFTA will boost opportunities for Alaska’s exporters throughout the region, providing new market access for the state’s products.  Alaska’s export shipment of merchandise manufacturers and non-manufacturers to the CAFTA – DR nations totaled $456 thousand in 2004.  This was nearly three times higher than the $153 thousand worth of goods the state shipped in 2003.  With the enhanced market access this figure will increase greatly.  The greatest potential impact of DR – CAFTA is likely to be on Alaska’s textile, apparel, and footwear industries.

Currently the Central American countries and the Dominican Republic are allowed to charge very high tariffs, limited only by WTO commitments. The average allowed tariff on agricultural products is 42 percent in Costa Rica, 40 percent in the Dominican Republic, 41 percent in El Salvador, 49 percent in Guatemala, 35 percent in Honduras, and 60 percent in Nicaragua. Applied tariffs may be lower on specific products, but in many cases these tariffs restrict U.S. exports. Moreover, there is no assurance the Central American countries will not raise tariffs to their WTO limits. In contrast, under the Caribbean Basin Initiative (CBI), permanent legislation passed through the Congress, the United States allows in over 99 percent of Central American exports into our market duty-free (trade weighted basis), effectively preserving tariff protection only for out-of-quota imports of products under U.S. tariff rate quota programs.

A primary U.S. objective in the CAFTA-DR Free Trade Agreement (FTA) negotiations was to change the "one-way-street" of duty-free access currently enjoyed by CAFTA-DR countries on most of their exports into a "two-way-street" that provides U.S. exporters with access to these markets and levels the playing field with other competitors. This objective was achieved.

The following are some key elements of the DR – CAFTA:  

Market Access: No products are excluded from the agreement. Liberalization will occur through tariff reductions, tariff-rate quota expansion and a combination of approaches. Each Central American country and the Dominican Republic will have a separate schedule of commitments providing access for U.S. products. The United States will provide the same tariff treatment to each of the six countries, but will make country-specific commitments on tariff-rate quotas. Tariffs will be eliminated for all products, except sugar for the United States, fresh potatoes and fresh onions for Costa Rica, and white corn for the other Central American countries.

Tariff Elimination: Tariffs will be phased-out according to specific schedules negotiated on a product and country-specific basis. Phase-outs will be immediate, 5 years, 10 years, 12 years or 15 years (17 - 20 years for chicken leg quarters, rice and certain dairy products). As a general rule, tariffs will be reduced in equal annual installments over the phase-out period. For certain products, tariff reductions will be back-loaded, with no cuts in the initial years of the phase-out period and larger cuts in the later years of the phase-out period.

Tariff-Rate Quotas (TRQs): For some products, immediate market access will be provided through the creation and expansion of TRQs (zero duty access for a specified quantity of imports). General principles -- and in some cases, specific commitments -- on TRQ administration will be established to encourage full utilization of the TRQs.

Safeguards: Safeguard measures will be available for specified products, providing for tariff increases during a given year after import quantities in that year increase to specified levels. Specific triggers to activate the safeguards and duty increases are established in the agreement. The possibility of employing safeguards will expire when tariff protection has been phased-out. The United States will operate safeguards on out-of-quota imports of dairy, peanuts, and peanut butter. If all parties agree, safeguard coverage could be extended beyond the tariff phase out period.

Sanitary and Phytosanitary Measures: The parties affirm the intent to apply the science-based disciplines of the WTO Agreement on Sanitary and Phytosanitary (SPS) Measures. An SPS Committee is established to expedite resolution of technical issues. In a process complementing the FTA negotiations, actions to resolve specific SPS measures restricting trade among the parties have also been agreed.

Export Subsidies: The parties agree not to use export subsidies into another party’s market except to compete with third party export subsidies.

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