Positive Evaluation of DR-CAFTA’s First Year in the Country

Secretary of Industry and Commerce Melanio Paredes, confirmed that the main achievement of the first year of implementation of the Central American and Dominican Republic Free Trade Agreement with the United States (DR-CAFTA) has been in the area of regulation and normalization.

Speaking at a luncheon at the American Chamber of Commerce, Paredes said the laws approved for the treaty to go into effect have strengthened the institutions. Paredes pointed out that Law 424-06 was approved and promulgated for the implementation of DR-CAFTA and that it regulates the application of electronic trademark systems and registration of soundtrack trademarks. The Law of Competitiveness and Industrial Innovation permitted the transformation of the Corporation of Industrial Works “into a modern institution offering competitive incentives and innovation” that includes such things as the elimination of the ITBIS payment in customs fees for natural resources, machinery and to establish fiscal incentives for investments made in the new industrial parks.

Paredes added that part of the actions implemented for the agreement to go into effect had to do with setting up and formalizing a business in several hours through the government website creatuempresa.gob.do without having to fill out unnecessary paperwork and without the costs associated with starting up a business.

The Industry and Commerce Secretary said the productive sector has benefitted from DR-CAFTA in that it has increased export of production materials. Figures show the increase, from March to August 2007, to be $982.3 million dollars. Of this, capital gain represents 23%, natural resources and investments 54.7% and consumption 22.3%.

Paredes indicated that in the free trade zone, between March 2007 and February 2008, 104 permissions for installations were approved, of which 34 will operate as special free trade zones. He explained that these new businesses have pulled together an investment of some RD$5.635 million pesos and have generated earnings of some $97.6 million US dollars with more than 10,400 employees. He attributed the difficulties the sector has confronted with the import of Chinese goods and the elimination of textile quotas with the United States.

Other benefits of the treaty were “the liberalization of customs taxes to the United States of 99.6% of all taxation on Dominican goods. In the meantime, the country only liberalized 77% of the import tax on US products, with a gradual reduction over a period of 20 years.” In terms of relative benefits for consumers, Paredes expressed that they can also be “considered reasonable” in that the majority of the basic products are being imported to countries which are not part of the trade agreement.

The DR-CAFTA “represents the most important milestone in commercial terms for this country,” despite the fact that it “does not represent, in and of itself, a formula for development unless it is accompanied by adequate strategies and an integral competitive plan.”