CAFTA-DR Trade Agreement 2025: Boosting U.S. and Central America Economic Ties

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Central America Free Trade Agreement-Dominican Republic (CAFTA-DR): A Comprehensive Overview

The CAFTA-DR treaty is a landmark agreement that eliminates tariffs and fosters trade between the United States and several Central American countries such as Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and later, the Dominican Republic. This pact is commonly known simply as CAFTA.

Key Highlights

• CAFTA-DR removed most tariffs between the U.S. and participating Central American countries, facilitating smoother trade.
• The agreement aims to create employment opportunities and improve labor conditions across member nations.
• It was initially part of a broader Pan-American trade initiative that was ultimately discontinued.

In-Depth Look at CAFTA-DR

Signed into law by President George W. Bush in 2005 and ratified by member countries between 2006 and 2009, CAFTA-DR was designed alongside NAFTA and other bilateral agreements to pave the way for a Free Trade Area of the Americas (FTAA), excluding Cuba.

Despite ambitious goals, negotiations for the FTAA collapsed after missing the 2005 deadline. NAFTA itself evolved into the United States-Mexico-Canada Agreement (USMCA) in 2020.

Criticism and Challenges

CAFTA-DR has faced criticism for adversely affecting small-scale farmers in Central America, who found themselves competing against large U.S. agribusinesses.

The treaty outlines a phased elimination of customs duties over 20 years. While most tariffs were lifted immediately, special provisions protect sensitive sectors like textiles and food.

The pact’s goal is to boost exports and job growth by removing trade barriers, alongside commitments to enhance working conditions throughout the region.

Opposition and Concerns

Opponents, including the AFL-CIO, have condemned CAFTA-DR for lacking compassion and failing to provide opportunities for the millions of impoverished Central Americans and vulnerable immigrant workers in the U.S.

Critics emphasize the negative impact on small farmers who struggle to compete with dominant American agricultural corporations.

Economic Impact of CAFTA-DR

A 2012 Congressional Research Service report noted that U.S. trade volume with CAFTA-DR countries decreased relative to other signatories post-agreement, yet intra-Central American trade increased significantly. The International Monetary Fund recognizes the region as the most internally trade-integrated worldwide.

Since the agreement's implementation, the U.S. has maintained a trade surplus with the region, exporting approximately $7.5 billion more in goods than it imported in 2018.

Key U.S. exports to Central America include petroleum products, machinery, grains, plastics, and medical instruments. Imports primarily consist of coffee, sugar, fruits, vegetables, cigars, and petroleum products.

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