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United States To Implement CAFTA In January 2006

by Mike Godfrey, Tax-News.com, Washington

26 December 2005


The United States government has announced that it will implement the Central American and Domincan Republic Free Trade Agreement (CAFTA-DR) on January 1, 2006 despite the fact that Costa Rica has yet to ratify the agreement.

Signed into law by US President, George W. Bush in April, the CAFTA is designed to reduce trade barriers between the United States and the Central American signatories, which comprise Costa Rica, the Dominican Republic, Guatemala, El Salvador, Honduras and Nicaragua.

CAFTA would immediately eliminate duties on more than half the value of US farm exports to the region, expand IP protections and open telecommunications and other markets.

Costa Rica's government wants to move towards freer trade with the country's partners, but legislators and the unions are not so sure. After some delay, President Abel Pacheco submitted the CAFTA to the Legislative Assembly in late October, in the face of threatened strikes, but the legislative process is expected to take several months.

However, in a statement by US Trade Representative spokesperson Cristin Baker, it emerged that the United States intends to forge ahead with the implementation of the agreement in January regardless of Costa Rica's preparedness or otherwise.

"The US is prepared to implement the free trade agreement among the United States, Central America and the Dominican Republic (CAFTA-DR) as soon as possible with those countries that the United States has determined to have taken sufficient steps to complete their commitments," Baker stated.

An announcement of whether any of the CAFTA-DR signatories will be ready by January 1 will be made before the end of the year. After January 1, the United States will put the agreement into force with the other countries on a rolling basis.

Baker continued:

"We want CAFTA-DR to start as close as possible to January 1, 2006, so that U.S. and regional businesses can begin taking advantage of the Agreement's benefits in the shortest possible time. The United States is prepared to have the CAFTA-DR enter into force as early as January 1, but only with countries that have made sufficient progress in adopting new laws and regulations where necessary. We will move forward as long as at least one country is prepared, and will accommodate new entrants as they become ready."

"We want to reward countries as they become ready and look forward to continued progress with the others. Countries can continue to enjoy existing preferences while they work with the United States to come on board. Preserving benefits during a brief transition period is a non-disruptive way to move countries over the goal line while keeping the Administration’s commitment to Congress to ensure full implementation of all obligations."

"To the extent possible, the United States will seek to create a seamless transition between the Caribbean Basin Initiative / Caribbean Basin Trade Partnership Act (CBI/CBTPA) and the CAFTA-DR. Countries that have ratified the Agreement would retain their benefits under CBI/CBTPA until the CAFTA-DR enters into force for them and would retain their ability to seek retroactive duty refunds for qualifying textiles and apparel. Moreover, U.S. partners for whom the Agreement enters into force by April 1 can retain their full year agricultural quotas for 2006; treatment of quotas after that date will be determined as appropriate."


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