U.S. inks free trade agreement with Central American countries

February 1, 2004
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On December 17 the U.S. signed the Central American Free Trade Agreement with 4 nations--El Salvador, Guatemala, Honduras, and Nicaragua. Combined total goods traded between the U.S. and the four CAFTA countries is $15.4 billion. According to the U.S. government, the CAFTA countries and many other developing countries already enjoy duty free access to the U.S. market for the majority of their exports through trade preference programs provided by Congress to promote economic development. Yet, these countries often have high tariff and non-tariff barriers for American exports and impose restrictions on U.S. businesses. Free trade agreements like the CAFTA not only reduce barriers to U.S. trade, but also require reforms of the domestic legal and business environment that are key to encouraging business development and investment. Such reforms include providing greater transparency for government actions and rule making; strengthening the rule of law; and improving the protection and enforcement of intellectual property rights. Highlights of the CAFTA include:

More than 80 percent of U.S. exports of consumer and industrial goods will become duty free in Central America immediately, with remaining tariffs phased out over 10 years. Key U.S. export sectors will benefit, such as IT products, agricultural and construction equipment, paper products, chemicals, and medical and scientific equipment.

More than half of current U.S. farm exports to Central America will become duty free immediately, including high quality cuts of beef, cotton, wheat, soybeans, key fruits and vegetables, processed food products, and wine, among others. Tariffs on most remaining U.S. farm products will be phased out within 15 years. U.S. farm products that will benefit from improved market access include pork, beef, poultry, rice, fruits and vegetables, corn, processed products and dairy products.

The 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, tourism, energy, transport, construction and engineering, financial services, insurance, audio/visual and entertainment, professional, environmental, and other sectors. Central American countries have agreed to change "dealer protection regimes" and loosen restrictions that lock U.S. firms into exclusive or inefficient distributor arrangements.

State of the art protections and non-discriminatory treatment are provided for digital products such as U.S. software, music, text, and videos. Protections for U.S. patents, trademarks, and trade secrets are also strengthened.

Provides important anti-corruption measures in government contracting. U.S. firms are guaranteed a fair and transparent process to sell goods and services to wide range of Central American government entities.

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