US and Central America sign historic free trade agreement

USTR Press Release 2004-45 | May 28, 2004

United States and Central America Sign Historic Free Trade Agreement
Tariffs on 80% of U.S. Exports to Central America are Eliminated Immediately

WASHINGTON - U.S. Trade Representative Robert B. Zoellick and Ministers of five
Central American countries today signed the U.S. Central American Free Trade
Agreement (CAFTA) a historic agreement that will eliminate tariffs and trade barriers
and expand regional opportunities for the workers, manufacturers, consumers, farmers,
ranchers and service providers of all the countries.

CAFTA will immediately eliminate tariffs on more than 80 percent of U.S. exports of
consumer and industrial products, phasing out the rest over 10 years. The Central
American countries already enjoy duty free access to the U.S. for over 75% of their
exports, and the agreement expands their opportunities and promotes the kind of positive
domestic reforms that will help them grow and prosper and trade with the United States.

“For the United States, the signing of CAFTA opens a new chapter in the history of our
relationship with Central America. CAFTA will put the U.S. relationship with Central
America on a more solid mutual foundation, firmly grounded in our shared commitment
to democracy, free markets, free people, and hope,” said Zoellick. “For the United
States, the economic gains will be significant, for these small countries are very big
markets. With the addition of the Dominican Republic, CAFTA is the 2nd largest U.S.
export market in Latin America, behind only Mexico, buying more than $15 billion in
U.S. exports.

“CAFTA will do much to create the new economic opportunity that will bolster the
democratic commonwealth in the hemisphere,” said Zoellick. “It will eliminate tariffs,
open markets, promote transparency, and establish state-of-the-art rules for 21st Century
commerce.”

Signing on behalf of their countries were Costa Rican Minister of Trade Alberto Trejos,
El Salvadoran Minister of the Economy Miguel Lacayo, Guatamalan Minister of the
Economy Marcio Cuevas, Honduran Minister of Industry and Commerce Norman García,
and Nicaraguan Minister of Development, Industry and Commerce Mario Arana.
“Through long hours and many tough issues, each of my colleagues shared the goal of
making the vision of CAFTA into a reality. They and their teams worked hard and
represented their countries and their peoples with great skill, diligence, and dignity. You
have been great partners, and I am proud of our work together,” said Zoellick. Citing
their dedication, spirit and service, Zoellick also recognized “the hard working
professionals from USTR and the many other U.S. government agencies that helped craft
this agreement.”

“Today is just the beginning of the most critical chapter for CAFTA. In both the United
States and Central America, we must now turn our attention to winning approval of the
agreement from our respective legislatures,” said Zoellick. “I especially want to thank
Representatives Kevin Brady and Cass Ballenger. They have been strong leaders on
trade and tireless friends of Latinos and Central Americans,”

Zoellick noted the importance of Congressional passage of Trade Promotion Authority in
2002, and thanked business and farm leaders for their strong support. CAFTA has been
endorsed by every national business association and virtually every farm association.

Negotiations began in January 2003. Following nine rounds of negotiations, agreement
was reached with El Salvador, Guatemala, Honduras, and Nicaragua on December 17,
2003, and with Costa Rica on January 25, 2004. The draft text was made available to the
general public on January 28, 2004, only three days after conclusion of the negotiations
and three weeks before the President notified Congress on February 20, 2004 of his intent
to enter into the CAFTA. Negotiations to include the Dominican Republic in CAFTA
began in January 2004 and concluded on March 15, 2004, but a period of Congressional
consultation on that agreement required under the Trade Act has not yet concluded. A
date for signing an agreement that includes the Dominican Republic will be announced
after those consultations are complete. Carolina Mejía, Ambassador to the FTAA and
FTA Negotiations, participated in the CAFTA signing ceremony as an observer
representing the Dominican Republic. The Administration plans to submit a single
legislative package to Congress that includes CAFTA and the Dominican Republic
together.

The signing of the final agreement, a 2,400 page document, took place in the Hall of the
Americas at the headquarters of the Organization of American States (OAS), where
President Bush first announced his plan to negotiate an FTA with Central America during
a speech in January 2002. The OAS is an elegant, historical building that hosts the
Permanent Council meetings of the OAS and h
as been the site of numerous ceremonies
marking important events in the Americas. The OAS will also serve as the depository of
the official CAFTA documents.

The United States and Central America enjoy a strong and growing trade partnership.
U.S. exports to the CAFTA countries have grown over 70 percent since 1996, totaling
$10.9 billion in 2003.

CAFTA is a key export market for important U.S. manufacturing sectors such as
information technology products, agricultural and construction equipment, paper
products, chemicals and medical and scientific equipment, all of which will enjoy
immediate duty-free access. More than half of current U.S. farm exports to Central
America will become duty-free immediately, including high quality cuts of beef, cotton,
wheat, soybeans, key fruits and vegetables, processed food products, and wine, among
others. Each of the 50 U.S. states and the District of Columbia export to the CAFTA
region. The leading states exporting to CAFTA countries are Florida, North Carolina,
Texas, Louisiana, California, Georgia, Alabama, Massachusetts, South Carolina, and
Pennsylvania.

Background
The United States is working to open markets globally in the Doha World Trade
Organization (WTO) negotiations; regionally, through APEC and the Free Trade Area
(FTAA) of the Americas negotiations; and bilaterally, with FTAs.

The U.S. has completed FTAs with nine countries - the five countries of Central
America, the Dominican Republic, Australia, Morocco and Bahrain - over the past six
months. New and pending FTA partners, taken together, would constitute America’s
third largest export market and the sixth largest economy in the world.

Negotiations were complete on May 27 with Bahrain. Last month the United States and
Panama conducted their first round of free trade negotiations, FTA negotiations with
Colombia, Ecuador and Peru began in mid-May, and negotiations with Thailand are
expected to begin shortly. In addition the U.S. is negotiating with the five nations of the
Southern African Customs Union (SACU).

Just 10 days ago the United States signed the U.S.-Australia Free Trade agreement.
The United States currently has FTAs with Israel, Canada and Mexico (NAFTA), Jordan,
Chile and Singapore.

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