CAFTA-DR

Definition

CAFTA-DR, or the Central America-Dominican Republic Free Trade Agreement, is a trade agreement signed in 2004 between the United States, Central American nations (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua), and the Dominican Republic. The agreement aims to promote trade and economic integration by reducing tariffs and fostering investment among the member countries. This initiative plays a crucial role in shaping contemporary U.S. policy regarding trade, security, and migration in the region.

5 Must Know Facts For Your Next Test

1. CAFTA-DR was designed to enhance the economic relationship between the U.S. and Central America, promoting growth and stability in the region.
2. The agreement eliminates tariffs on many goods traded among the member countries, benefiting exporters and consumers by lowering prices.
3. CAFTA-DR also includes provisions for labor rights and environmental protection, aiming to address concerns about working conditions and sustainable practices.
4. The agreement is seen as a strategic move by the U.S. to strengthen its influence in Central America, especially in response to concerns about migration and security threats from regional instability.
5. Critics of CAFTA-DR argue that it can lead to job losses in some industries within the U.S. as companies relocate production to take advantage of lower labor costs in Central America.

Review Questions

• How does CAFTA-DR facilitate economic relations among its member countries?
  • CAFTA-DR facilitates economic relations among its member countries by reducing tariffs on goods traded between them, making products more affordable for consumers and promoting exports from each country. By eliminating these trade barriers, it encourages businesses to engage in cross-border trade and investment, which can lead to economic growth and greater integration of the economies involved. This agreement also aims to create a more competitive market environment, which benefits consumers through lower prices and more choices.
• In what ways does CAFTA-DR address labor rights and environmental concerns while promoting trade?
  • CAFTA-DR addresses labor rights and environmental concerns by incorporating provisions that require member countries to adhere to certain labor standards and environmental protections. These commitments aim to ensure that trade liberalization does not come at the expense of worker rights or environmental sustainability. By setting these standards within the agreement, it encourages responsible practices among businesses operating in member countries while supporting economic development.
• Evaluate the impact of CAFTA-DR on U.S. foreign policy towards Central America, particularly concerning migration and security issues.
  • CAFTA-DR significantly impacts U.S. foreign policy towards Central America by framing economic cooperation as a means to address migration and security challenges in the region. By promoting economic growth through trade, the U.S. seeks to create stable conditions that reduce the push factors driving migration from these countries. Additionally, enhanced economic ties can foster stronger partnerships for regional security efforts against crime and violence, making CAFTA-DR not just a trade agreement but a strategic tool in broader U.S. initiatives aimed at stabilizing Central America.

Related terms

Trade Liberalization: The process of reducing government restrictions on international trade, often through agreements that lower tariffs and other barriers.

NAFTA: The North American Free Trade Agreement established in 1994 between the U.S., Canada, and Mexico to promote trade by eliminating tariffs and other trade barriers.

Economic Integration: The process by which countries reduce or eliminate barriers to trade and investment, leading to increased economic interdependence.