The Dominican Republic and International Trade
The Dominican Republic is a proactive partner in international trade, embracing a policy of openness and non-discrimination to advance internal development as well as the development of other developing and less developed countries. Located between Cuba and Puerto Rico, it boasts the largest economy in the Caribbean with convenient access to markets in the United States, Canada, Latin America, and Europe. It represents the 7th largest market in the Western Hemisphere for US exports and bilateral trade between the two countries is expected to grow, particularly with the U.S. initiative to double U.S. exports between 2010 and 2015. The primary markets for its goods have been the U.S., Haiti, and Western Europe. The predominant imports have been from the U.S., Venezuela, Mexico, and Colombia.
As a member of the (WTO) since its founding in 1995, the Dominican Republic is party to several free trade agreements, and regularly explores trade opportunities with other countries that represent new markets for its goods. Currently, it enjoys advantageous trade with the United States, Europe, Caribbean countries, and certain Central American countries. Two significant agreements are the free trade agreement with the United States and Central America () and the Economic Association Agreement with the European Union (). Both encourage the free flow of trade among the member states by significantly reducing tariffs, opening new markets, and promoting regional integration. Furthermore, the country has initiated discussions for free trade agreements with Canada, Mexico and Taiwan. These current and potential trade agreements constitute a portfolio of opportunities for any international investor or business looking to start or expand its operations in the country and export to any of the member markets.
IMPORTANT FREE TRADE AGREEMENTS
Dominican Republic and Central American Free Trade Agreement ()
Signed August 5, 2004 and effective in the Dominican Republic March 1, 2007, DR-CAFTA facilitates trade and investment among member states and promotes regional integration by eliminating tariffs, opening markets, reducing barriers to services, and advancing transparency. Parties to the agreement are, beside the United States, the Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. These states represent the third largest export market for U.S. goods in Latin America after Brazil and Mexico.
The agreement permanently guarantees the Dominican Republic duty-free access to thousands of goods and services from the member states, and grants it the ability to export most Dominican products and services to these states without customs duties. In particular, almost 80% of the consumer and industrial goods from the U.S. are duty free immediately with remaining tariffs to be phased out over a ten-year period. Tariffs on U.S. autos and auto parts will be eliminated by 2012. Apparel made in the Dominican Republic with U.S. fabric and yarn and which meets the rule of origin provisions is duty free and quota free, retroactive to January 1, 2004. In addition, the agreement provides duty-free benefits to apparel made by a DR-CAFTA state using certain fabrics from Mexico or Canada. Finally, the agreement opens Dominican access to new service sectors such as telecommunications, express delivery, computer and related services, tourism, energy, transport, construction and engineering, and the financial, insurance, audio/visual and entertainment, professional, and environmental industries. Importantly, laws that protect domestic dealers by locking companies into distributorship arrangements have been loosened.
In 2009, the combined two-way trade between the United States and the other DR-CAFTA states was US$37.9 billion. That same year, the Dominican Republic supplied the U.S. with US$3.3 billion worth of Dominican products, and imported US$5.3 billion worth of U.S. products.
Economic Association Agreement (AAE)
Signed in 2007 and adopted by the Dominican Republic on October 15, 2008, evolved from an earlier 1975 trade agreement (the ) and the subsequent 2000 between the 27 countries of the European Union (EU) and less-developed countries of Africa, the Caribbean, and the Pacific. The Dominican Republic coordinates and supervises its projects under the AAE within the framework of CARIFORUM, which is governed by the Caribbean Community and Common Market (CARICOM) and its 1998 free trade agreement with the Dominican Republic. Where there is a conflict in trade treatment between the AAE and CARICOM, the agreement with the least restrictive trade provisions for the product or sector will prevail.
The AAE makes the unilateral trade programs formerly granted under the Cotonou Accord compatible with the policies of the WTO of integrating developing countries into the world economy through trade, financial development, and political dialogue. The AAE offers the Dominican Republic, and by extension its investors, favorable provisions for cooperative foreign investment by liberalizing trade with the countries of the European Union. This encourages the Dominican Republic to export non-traditional products and diversify its economy.
Access to markets under the AAE is asymmetrical. Provisions for exports from less-developed countries to the countries of the EU are liberal for eligible products. In contrast, provisions for similar imports from the EU are subject to restrictions for up to 25 years, while some highly sensitive products are completely excluded from the scope of the AAE. This asymmetry safeguards certain products and sectors in the less-developed countries from the potential unequal effect of trade with the EU while affording the less-developed member states access to EU products.
The Free Trade Agreement between Central America and the Dominican Republic
Signed in 1998 and effective in the Dominican Republic in 2001, this is a bilateral agreement between the Dominican Republic and each of the Central American countries of Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. It permits the free exchange of local goods between any member state and the Dominican Republic except for those few goods mutually agreed upon as not benefitting from the Agreement. This Agreement coexists with DR-CAFTA, and where there is a conflict in the treatment of a product or sector between the Agreements, the one with the least restrictive trade treatment will prevail.
Free Trade Agreement between CARICOM and the Dominican Republic (CARIFORUM)
Signed in 1998 and ratified by the Dominican Republic in February 2001, this agreement involves the Dominican Republic and the 14 CARICOM states (Bahamas, Barbados, Guyana, Jamaica, Surinam, Trinidad & Tobago, Antigua & Barbuda, Belize, Dominica, Grenada, Montserrat, St. Kitts & Nevis, St. Lucia, St. Vincent & the Grenadines). It establishes free trade zones in the region along WTO guidelines that promote the exchange of goods and prevent unfair trade practices. Trade with the Dominican Republic is equal with developed member states and differentiated with less-developed member states. The Agreement legally coexists with the AAE described above, and where there is a conflict in the treatment of a product or sector between the Agreements, the one with the least restrictive trade treatment will prevail.
GUZMáN ARIZA’S SERVICE IN INTERNATIONAL TRADE
Involvement exemplifies Guzmán Ariza’s experience in trade agreements. We dedicate a large part of our practice to helping foreign individuals and international corporations meet their operational and strategic business objectives in the country. We have actively participated in the negotiation of the most important international trade agreements, giving us intimate knowledge of the local impact of their contents on your business. When DR-CAFTA was enacted, we pioneered the field of public procurement law in the Dominican Republic to meet the objectives of that trade agreement.
Our presence in and attention to trade issues enable us to monitor provisions that impact your business, such as technical barriers to commerce, rules of origin, domestic components, and tariff. Armed with timely information, we can anticipate legal changes and guide your business for the long term. |
