Background Information
CAFTA-DR
An examination into the history
and effects of the free trade
agreement on the nations involved
Signed into law in the US on Aug. 5, 2004
First free trade agreement between America and
a group of smaller, developing economies
US, Costa Rica, El Salvador, Guatemala,
Honduras, Nicaragua, and the Dominican
Republic
Costa Rica joined the agreement in 2009
http://www.ustr.gov/trade-agreements/free-trade-agreements/cafta-dr-dominican-republic-central-america-fta
Important Aspects of CAFTA-DR
US Trade Statistics
Eliminates Tariffs
Opens markets
Removes barriers to services
Promotes Transparency
Facilitates trade
Furthers regional integration
http://www.ustr.gov/trade-agreements/free-trade-agreements/cafta-dr-dominican-republic-central-america-fta
The United States has enjoyed a sizable
trade surplus with the Central American
nations for the past years. Recently
(2009), the surplus was $1.2 billion and as
high as $3.7 billion in 2008. This is a
reversal from the $1.2 billion trade deficit
of 2005, the year before implementation of
CAFTA-DR.
http://trade.gov/press/publications/newsletters/ita_0308/freetrade_0308.asp
Comparative Advantage (US)
Table of US Exports
Based on main exports
U.S. EXPORTS TO CAFTA-DR COUNTRIES
Merchandise exports reported in 2007 (billions of dollars)
Costa Rica:
$4.58
Dominican Republic:
$6.09
El Salvador:
$2.31
Guatemala:
$4.08
Honduras:
$4.46
Nicaragua:
$0.89
Total:
$22.41
Petroleum products
Machinery
Cotton yarns
Grains (wheat, corn, rice)
Plastics
Motor vehicles
Medical instruments
http://www.export.gov/static/CAFTA-DR%202007%20Trade%20Review_Latest_eg_main_017575.pdf
Source: U.S. Department of Commerce, Bureau of the Census.
Comparative Advantage (C.A.)
Based on main exports
Fruits and vegetables
Coffee
Petroleum products
Metals
Electrical apparatus
Medical instruments
Cigars
Sugar
http://www.export.gov/static/CAFTA-DR%202007%20Trade%20Review_Latest_eg_main_017575.pdf
Export Volume: 1989 - 2009
250
200
Dominican Republic
150
El Salvador
Guatemala
Honduras
100
Nicaragua
Costa Rica
50
0
198919901991199219931994199519961997199819992000200120022003200420052006200720082009
Export Volume Indexed by Country – Adjusted so that base year 2000 = 100
Data Source: *http://databank.worldbank.org
Import Volume: 1989 - 2009
Nicaragua
250
200
Dominican Republic
150
El Salvador
Guatemala
Honduras
100
Nicaragua
Costa Rica
50
0
Nicaragua is the smallest of the nations in CAFTA
As part of the CAFTA agreements, the United
States Government, through USAID, has provided
assistance to market based agricultural
endeavors*
Trades with the USA account for two thirds of total
exports (1.6 billion) in 2009**
What will happen in Nicaragua as a result of
CAFTA?
198919901991199219931994199519961997199819992000200120022003200420052006200720082009
*http://www.suite101.com/content/cafta-dr-and-its-effects-on-latin-americanand-the-us-a272548
**http://www.state.gov/r/pa/ei/bgn/1850.htm
Import Volume Indexed by Country – Adjusted so that base year 2000 = 100
Data Source: *http://databank.worldbank.org
Model Predictions
This American funding of Nicaraguan agriculture acts as
Since the inception of CAFTA, Nicaraguan exports of
an increase in technology. For any given allocation of
fresh produce have increased from USD$300,000 to
labor they can produce more agriculture. This “increase
USD$3,000,000*
in technology” can also serve as an increase in the MPK.
Empirical Data
Either way, we should see both and increase in the
production of agriculture, and an increase in the
exportation of agriculturally related goods.
See graphic
*http://www.ustr.gov/trade-agreements/free-trade-agreements/cafta-dr-dominican-republic-central-america-fta
Imports from Nicaragua have increased from $1,180.8 in
2005 to million to $2,005.4 million in 2010.
Exports to Nicaragua have increased from $625.5 in
2005 to $979.8 in 2010.
http://www.suite101.com/content/cafta-dr-and-its-effects-on-latin-american-and-the-us-a272548
Nicaragua’s
Agricultural
Exports with
United States
Product
Green coffee
Cocoa beans
2005
50,814
386
2006
88,404
0
2007
82,513
0
2008
139,806
2
2009
111,518
0
Cane and beet sugar
27,063
26,165
28,115
16,838
36,386
Agricultural Exports to USA
400000
Meat products, poultry,
and edible animals
56,630
56,541
81,520
102,026
78,182
Dairy products and eggs
3,124
4,381
6,471
8,530
9,398
13,007
14,252
18,684
13,786
13,089
10,049
13,710
17,825
27,048
23,487
350000
300000
Fruits and preparations,
including frozen juices
Vegetables and
preparations
250000
Nuts and preparations
9
1,051
1,087
2,597
3,565
Food oils and oilseeds
4,173
10,272
7,511
17,210
12,139
200000
Agricultural Exports to USA
150000
Bakery and
confectionary products
Tea, spices, and
preparations
879
469
199
331
199
136
557
476
722
640
2,540
1,146
950
499
1,721
199
351
530
171
308
24
94
57
103
87
1,708
170,741
3,075
220,468
2,556
248,494
4,157
333,826
3,997
294,716
100000
50000
Other (soft beverages,
processed coffee, etc.)
Wine and related
products
Feedstuff and
foodgrains
Alcoholic bevs, except
wine and related
products
TOTALS
0
Conclusions
There was a significant rise in Nicaraguan
agricultural exports following the CAFTA.
This supports the prediction using the
factor-specific and HO models.
Interesting area to explore: United States
costs of USAID vs. benefits from lower
import costs from CAFTA
2005
2006
2007
2008
2009
5 Days
The time it takes the U.S. economy to
produce the combined annual GDP of
Honduras, Costa Rica, El Salvador and
Guatemala.
America. (USA)