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Opening CAFTA-DR Export Markets for U.S. Small- and Medium- Sized Businesses

The United States- Dominican Republic- Central America Free Trade Agreement (CAFTA-DR) has been an important tool in expanding U.S. exports to the region since rolling implementation began in early 2006, thus supporting jobs at home and creating new opportunities for American small businesses selling their goods and services into these markets. Total two-way trade between the United States and the Central American partners and the Dominican Republic grew from $35 billion in 2005 prior to the implementation of the agreement to $48 billion in 2010. The United States trade surplus with the six CAFTA-DR countries was $461 million in 2010, reversing a trade deficit of $1.2 billion in 2005, the year before the agreement entered into force.

• U.S. exports to all the CAFTA-DR countries have experienced significant growth during the first five years of the agreement, led by Guatemala (up 57 percent), followed by Nicaragua (57 percent), Costa Rica (44 percent), Honduras (42 percent), Dominican Republic (39 percent) and El Salvador (32 percent).

• Key U.S. exports that have experienced growth to the CAFTA-DR countries since the implementation of the agreement include leading export product categories for small- and medium-sized manufacturers, such as petroleum products, machinery, electrical/electronic products, paper products, and medical instruments. Additional U.S. export growth categories to the CAFTA-DR are cotton yarns, grains (wheat, corn, rice), plastics, and motor vehicles.

• The U.S. and the CAFTA-DR partners recognize the essential role that small businesses play in creating jobs in all the partner countries, and the countries agreed at the February 2011 Free Trade Commission (FTC) meeting in San Salvador on further work to help small companies take advantage of the export opportunities that the Agreement provides.

• Easing and improving customs procedures can help reduce administrative costs and delays for small business seeking to get their products to market. As a study by the U.S. International Trade Commission (USITC) has noted, improving customs is particularly important for small business, as the administrative and financial burdens of customs procedures can be particularly onerous for companies with limited staff. The U.S. and CAFTA-DR partners agreed to cooperate to address these issues and others under a new Trade Facilitation Initiative to expand and broaden the benefits of trade, with special attention to promoting greater participation by small business.

• Access to information about the Agreement and government resources to help small businesses expand their exports is a key challenge. To address this, the CAFTA-DR FTC released a brochure entitled “Frequently Asked Questions about Opportunities for Small Businesses to Export in the CAFTA-DR Region.” This brochure answers basic questions for firms that want to expand their business by taking advantage of the CAFTA-DR Agreement and develop their export markets, and can be found at www.ustr.gov in both English and Spanish.

• For small businesses new to export and in need of counseling, U.S. Small Business Development Centers located throughout the United States can provide a flexible model for establishment in the region, with the goal of linking to an online trade assistance and information portal for SBDC centers and small businesses at SBDCglobal.com. Countries will explore these and other activities to foster greater participation of small businesses in CAFTA-DR trade. U.S. small businesses seeking further information about resources for export assistance can go to www.export.gov.

• Textiles and apparel trade supports some 500,000 jobs in the U.S. and CAFTA-DR countries through a regionally integrated supply chain. The partners agreed upon changes to the Agreement’s rules-of-origin for textiles and yarns that will encourage a vibrant supply chain in the Western Hemisphere to effectively face the challenge that Asian competitors represent. In 2008, 2,319 United States SME textile companies (less than 500 employees) contributed one third of all US textiles exports to the CAFTA-DR region.