USTR - CAFTA- Expanding shares of the Free Trade Pie
Office of the United States Trade Representative

 

CAFTA- Expanding shares of the Free Trade Pie
By: Gregory Walters, Director of Small Business Affairs, Office of the U.S. Trade Representative 01/10/2004


On December 17, 2003, the Bush Administration concluded a historic free trade agreement with El Salvador, Guatemala, Honduras, and Nicaragua.  This agreement will further open the Central American marketplace, which presently receives more than $4.5 billion dollars in U.S. small business exports.  This agreement will help reduce the cost of U.S. products to consumers in the Central American marketplace, creating more customers for your products or services.  Upon implementation, more than 80 percent of U.S. exports of consumer and industrial products will be duty-free immediately.  Additionally, 85 percent will be duty free within five years. All remaining tariffs will be eliminated within ten years.

In addition to cutting tariffs, the Central American countries will accord substantial market access across their entire service regime, subject to very few exceptions, using the so-called “negative list” approach.  The Central American countries have agreed to dismantle significant distribution barriers.  Changes in the “dealer protection regimes” will loosen restrictions that lock U.S. firms into exclusive or inefficient distributor arrangements.  The agreement will remove most local residency requirements that have served as significant barriers to U.S. professionals.  Central America will allow U.S.-based firms to supply insurance on a cross-border basis.  Central America will allow U.S.-based firms to offer services cross-border in areas such as financial information and data processing, and financial advisory services.  The commitments in services not only cover cross-border supply of services, but also the right to invest and establish a local presence in Central America. 

These commitments are supplemented by requirements for regulatory transparency. Central America is committed to creating open and transparent administrative procedures, consultative processes with interested parties, and providing advance notice and comment periods for proposed rules and regulations.

Of special interest to U.S. small business is the commitment of the Central American governments to open up their government procurement to U.S. companies.  The agreement requires fair and transparent procurement procedures, such as advance notice of purchases and timely and effective bid review procedures.

These are just some of the benefits U.S. small business will receive from the implementation of the US-Central American Free Trade Agreement.

 
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