Dominican Republic-Central American Free Trade Research Articles

Moving toward Sustainable Rice Production in Northwest Dominican Republic

Pesticide runoff from the rice production area of Las Matas de Santa Cruz in NW Dominican Republic degrades biodiversity in the ecosystems of the Yaque del Norte River, Montecristi National Park, and Caribbean Sea. This degradation prompted the Dominican NGO AgroFrontera to develop a program for the creation of a new sustainable rice value chain, starting with the formation of a rice growers association in Las Matas. This project was to evaluate “organic” as a potential certification for the new growers association. The project found that while organic certification is years away, other barriers to a sustainable rice value chain exist: competition with US rice imports due to Dominican Republic-Central American Free Trade Agreement (DR-CAFTA), an informal labor system, and access to credit. Recommendations for the new growers association include: to lower the cost of production to compete with imports, to formalize the labor system, to mediate financing for rice producers, and to maintain balanced leverage across the value chain. A recommendation for future research is the resiliency of farmer institutions against internal corruption and in-fighting.

The Dominican Republic–Central American Free Trade Agreement’s Symbolic Nod to Environmental Protection: Legal Perspectives on the Citizen Submission Process

ABSTRACTThe Dominican Republic–Central America Free Trade Agreement (CAFTA) contains a chapter on the environment, ostensibly included to mitigate the North American Free Trade Agreement (NAFTA) environmental oversights. The environment chapter created a citizen submission process designed to foster public participation in supporting each participating nation’s environmental laws. This article examines the outcomes to date of the citizen submission process, based on an analysis of the articles of the agreement and an examination of the rulings made on each case submitted under the citizen submission process. The analysis shows that CAFTA poses significant obstacles to citizen participation and has made minimal, if any, contributions to environmental law enforcement among the Parties to the agreement.

Better Work in Central America: Assessing the Opportunities for Upgrading in Nicaragua's Apparel Sector

What can Better Work offer producers in a country like Nicaragua to alleviate the burden caused by the heavily trade-dependent nature of the industry’s development, and how do the relatively high-level institutional development and work-place protections in the country affect the willingness of manufacturers to cooperate with Better Work Nicaragua? Drawing on data collected by the authors during fieldwork in Nicaragua, as well as from secondary literature, this working paper explores the contemporary context of the Nicaraguan industry, outlining the opportunities and challenges confronting the country’s apparel sector. Nicaragua is the first and only Central American country to participate in Better Work. The second poorest country in the hemisphere, its manufactured exports are heavily concentrated in apparel. While Latin America’s share of the US apparel import market has declined in recent years, Nicaraguan export growth has remained robust. Nicaragua’s strong performance relative to other regional exporters reflects the special benefits it has received under the Dominican Republic-Central American Free Trade Agreement (CAFTA-DR) with the US, namely the tariff preference levels (TPLs) that permit apparel exports from Nicaragua to enter the US market duty-free even when these garments do not meet CAFTA rules of origin (RoO). Although these preferences have enhanced Nicaragua’s competitiveness vis-a-vis other regional exporters, the TPL programme is set to expire in 2014. Better Work Nicaragua is thus being implemented during a period of uncertainty, therefore it is critical to understand what local stakeholders in both the public and the private sectors believe will be the consequences of this change in the regulatory regime, and how they are trying to respond to it. This paper concludes that there is a crucial need to craft a programme that reflects the specific conditions that characterize Nicaragua and differentiate it from other Better Work countries.

DR-CAFTA: An Impact Analysis Thus Far

The signing of the Central American Free Trade Agreement (CAFTA) and its subsequent implementation in 2006 by El Salvador, Guatemala, Honduras, Nicaragua, and the United States, with Costa Rica and the Dominican Republic entering the agreement in 2009, renaming it the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA), continued trade liberalization trends in Latin America. Economists, scholars, and politicians alike view NAFTA and DR-CAFTA as a movement towards an even more ambitious Free Trade Agreement of the Americas (FTAA) and economic integration of the region from Canada to the southern cone. The present study does not discuss NAFTA or FTAA in detail, but rather elucidates the impact DR-CAFTA has had on member nations since their respective entrance. The study does so by first examining historical, economic, and political context and forces in Latin America. Second, DR-CAFTA its stipulations and arguments for and against the agreement are discussed. Next, regression analyses shed light on the impact of DR-CAFTA on trade and GDP growth in participating countries. Finally, future consequences of DR-CAFTA are elaborated.

Macroeconomic Synchronization and Policy Coordination After Regional Economic Integration in the Americas

In spite of many significant differences between high-income and developing country partners in the North American Free Trade Agreement (NAFTA), business cycle synchronization has followed increased trade integration in the post-NAFTA period. There is also some preliminary support for some convergence between Dominican Republic-Central American Free Trade Agreement (CAFTA-DR) economies post-CAFTA-DR, although it is too soon to reach any significant conclusions. Macroeconomic synchronization has important implications for policy making because it indicates the need for and benefits from policy coordination. Policy coordination with high-income partners may benefit developing country partners by reducing macroeconomic volatility and increase stability, when macroeconomic variability is due to common shocks and not country-specific shocks. Idiosyncratic volatility would require monetary and fiscal policy autonomy rather than coordination. Examining policy coordination between NAFTA states and between CAFTA-DR members, I find little evidence for policy coordination before and after implementation of the FTA. For the developing partners in NAFTA and CAFTA-DR, even as trade integration shrinks the available policy options for member states, the costs of losing policy autonomy largely outweigh the benefits of coordination because of the idiosyncratic macroeconomic variability of the developing partners.

Effects of Free Trade on Women and Immigrants: CAFTA and the Rural Dominican Republic

Summary We construct a disaggregated rural economywide model with a focus on gender and immigration as well as on the allocation of time to wage work, household production activities, and housework (reproduction). We use this model to simulate the impacts of the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) on rural incomes and welfare in the Dominican Republic. We find that elimination of agricultural import tariffs hurts both agricultural and non-agricultural households, via adverse factor-market effects, but impacts vary substantially by workers’ gender and country of origin. Females and Haitian immigrants tend to fare better than Dominican males, and there are ramifications for both market and non-market activities.

Strategic Role, Challenges And Opportunities For Small And Medium Enterprises Facing DR-CAFTA: The Case Of Costa Rica

The development of regional business treaties and the subsequent removal of trade barriers has created new paradigms and challenges for companies in Latin America, especially in fast-growing Central America. This paper examines the role, challenges, and opportunities for small and medium enterprises (SMEs) in Costa Rica relative to the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA, or CAFTA in the US). Opportunities and challenges facing SMEs and the potential impact of DR-CAFTA on industry performances in Costa Rica are discerned. Central American nations and Costa Rica in particular, are facing new challenges, threats and opportunities that arise from trade agreements. Such is the case with DR-CAFTA. These paradigms and competitive pressures will directly impact external trade and sustainable economic development. Opportunities are associated with new laws and regulations, incentives to reinforce and improve business practices especially with regard to human capital, as well as new scenarios for international cooperation, commercial agreements and the growing use of outsourcing. The implications of DR-CAFTA are far-reaching and directly impact the development of small and medium enterprises in Costa Rica.

A Study of the Environmental Issues Associated with the Dominican RepublicCentral American Free Trade Agreement (DR-CAFTA)

The Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) with the United States was passed on July 28, 2005. The main goal of DR-CAFTA is to create a free trade zone for economic development. The Agreement is highly controversial with many contentious issues including concern about the environment, which is the focus of this study. The concern is that the environmental objectives are expected to be subservient to trade and other economic incentives which will lead to further deterioration of the environment in countries where the environmental standards are already low. The effects on the U.S. environment are expected to be minimal. However, it is feared that the U.S. manufacturing facilities may relocate to Central American countries to take advantage of low wages and low environmental requirements, which may result in loss of jobs and capital investment in the U.S. However, overall DR-CAFTA is expected to be beneficial in many ways, including an increase in trade and economic growth in all participating countries.

Globalization and Free Trade Agreements: A Profile of a Nicaraguan Factory Community

This study examines a Nicaraguan community 3 years after the signing of the Dominican Republic-Central American Free Trade Agreement (CAFTA). Qualitative and quantitative methods were used to learn how families, living in a community constructed near a US-owned factory, maintained resilience under growing negative conditions. These conditions relate to family dislocation, loss of support systems, lack of childcare, safe water, and food security, in addition to labor injustices. Although maintaining relatively high scores on a baseline resilience test, these families and others like them in Central America, demonstrate a struggle for survival in a globalized context.

El Salvador and the Central American Free Trade Agreement: Consolidation of a Transnational Capitalist Class

On December 17, 2004, El Salvador became the first of six signatory countries to ratify the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) and on March 1, 2006, it became the first to implement the agreement. However, even staunch supporters of trade agreements would likely agree that DR-CAFTA provides questionable advantages for the five Latin American signatories, as they already received most of the DR-CAFTA-related trade benefits through the Caribbean Basin Initiative (CBI) with fewer conditions. Meanwhile, the potential benefits are questionable, at best. Thus, begs the question, why would any of the five Latin American economies sign on to such an agreement? Understanding El Salvador's participation in CAFTA-DR is critical not only because it's government was the most vociferous supporter of the agreement but because DR-CAFTA demonstrates the consolidation of the country's previously nascent Transnational Capitalist Class (TCC). Keywords:Caribbean Basin Initiative (CBI); DR-CAFTA; El Salvador; Latin American economies; Transnational Capitalist Class (TCC)

Do Regional Trade Pacts Benefit the Poor? An Illustration from Dominican Republic—Central American Free Trade Agreement in Nicaragua

The main objective of this paper is to provide an ex-ante assessment of the poverty and income distribution impacts of the Central American Free Trade Area agreement on Nicaragua. The authors use a general equilibrium macro model to simulate trade reform scenarios and estimate their price effects, while a micro-module maps these price changes into real income changes at the individual household level. A useful insight from this analysis is that even if the final total impact on poverty is not too large, its dispersion across households - due to their heterogeneity of factor endowments, inputs use, commodity production, and consumption preferences - is significant and should be taken into account when designing compensatory policies. Additionally, growth and redistribution decomposition show that, at least in the short to medium run, redistribution can be as important as growth. The main policy message that emerges from the paper is that Nicaragua should consider enlarging its own liberalization to countries other than the United States to boost trade-induced poverty reductions.

The informational efficiency of the black and official exchange markets of DR-CAFTA nations

This study examines the long-run informational efficiency and short-run predictability of the black and official exchange markets of Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) nations. Applying a battery of nonparametric as well as time series models, this study finds that the black market information exhibited a nonrandom behaviour. In four of the six examined countries, the black and official markets were found to have a co-integrating relationship. Both the vector error correction model and the Granger causality test confirmed that the black market information was a good predictor of the official rates.