|
DR-CAFTA: Challenges and Opportunities
Roland W. Bullen, Chargé d’Affaires, American Embassy
American Chamber of Commerce Luncheon, Santo Domingo
November 21, 2007
(As Prepared for Delivery) It is an honor to address the members of the American Chamber of Commerce. I
would like to thank Chris Paniagua, the AmCham President, and the Board of
Directors for inviting me to speak.
First, on behalf of the United States Embassy I wish to offer my condolences to
the government and people of the Dominican Republic for the loss of those who
perished during Tropical Storm Noel. So far my government has given nearly 3
million dollars in aid for those who are displaced or suffering. In addition,
the U.S. military marshaled its resources – helicopters, planes, medicines,
supplies and personnel – to assist in rescue and relief efforts. Dozens of Peace
Corps volunteers helped deliver supplies to people affected by the flooding. Our
USAID staff has worked closely with the Dominican public and private sectors in
the rebuilding that is underway. Thousands of private American citizens have
made donations as well. We stand by you in good and bad circumstances.
The private sector is playing a vital role in helping communities to recover
from the devastating floods. At this moment businesses, NGOs, schools, religious
groups, labor unions and others have timely opportunities to partner with the
public sector in rebuilding
and developing communities. I commend those companies that are civically active.
When we help people get back to work and help kids get back to their studies, we
not only help society but also the economy. Witness the outpouring of gratitude
shown when Father Quinn passed away recently. His selfless devotion to community
development and to furthering international understanding can serve as an
example to us all.
I wish to thank the AmCham for its civic-mindedness. By fostering greater
business and trade you have helped strengthen our societies. I particularly
appreciate the Chamber’s efforts facilitating public-private sector dialogue
about our topic today: the United States-Dominican Republic-Central America Free
Trade Agreement, or DR-CAFTA. The Chamber played a critical role in generating
support for the agreement, and now the Chamber is a key player in helping its
successful implementation.
Whether we hail from the public or private sector our common goal is to help
meet people’s basic needs, like health and education, but also to help citizens
improve their standard of living and unleash their opportunity to economically
prosper.
Earlier this month at the White House Forum on International Trade and
Investment President Bush reminded us that the purpose of trade agreements is
“to help build a hemisphere that lives in liberty, and trades in freedom, and
grows in prosperity.” At its heart DR-CAFTA is about helping people by helping
our trade partner’s governments deliver the benefits of open markets to their
diverse populations. The trade accord is tapping into new reserves of human
capital in our countries. The accord is also creating new networks of commerce
and friendship between our people.
The passage of DR-CAFTA has opened the door to new opportunities to strengthen
the Dominican economy, democratic institutions and processes. On March 1, when
DR-CAFTA entered into force, import tariffs for over 4,300 products from the
United States and Central America were immediately eliminated. Dominican exports
began receiving more favorable treatment in the U.S. and Central American
markets, including the duty-free entry to the United States of 99.6 percent of
all products. Let me repeat that: 99.6 percent of all Dominican products
exported to the U.S. now enter duty-free.
That was the easy part of implementing the treaty. Many of the provisions of DR-CAFTA
require further changes to laws and regulations that will take time to approve
and implement. These reforms, which aim to provide market liberalization,
transparency, and certainty in key areas of the economy, will help lay the
groundwork for long-term economic growth and development. The Dominican economy
grew significantly in 2005 and 2006. It is expected to grow 8 percent this year,
though the flooding may impact that figure somewhat. Regardless, if the
Dominican Republic hopes to sustain this impressive level of growth, the process
of economic reform will require a lot of work counting on the sustained
commitment and efforts of the government, the private sector, and civil society
as a whole.
The creation of a rules-based trading system that is institutionalized and
transparent will benefit all members of society. To achieve an effective
rules-based international trading system here, additional efforts are needed to
strengthen customs administration, protection of intellectual property rights,
trade in services, investment, and financial services, government procurement,
administration of tariff rate quotas (TRQs), and compliance with sanitary and
phytosanitary (SPS) regulations.
DR-CAFTA is a new foundation for building a bright future for the Dominican
Republic. This treaty gives the Dominican Republic permanent duty free access to
the largest economy in the world – approximately $13 trillion. Now that the
Dominican Republic has this access, it needs to determine how best to take
advantage of it. The United States is working closely with the government,
private sector, and civil society organizations to support the effective
implementation of the treaty in the Dominican Republic. The United States is
also providing assistance to support programs aimed at enhancing labor and
environmental practices, to ensure that a broad spectrum of society benefits
from free trade in a sustainable manner. It is important to remember that the
United States and the Dominican Republic are more than just partners in trade --
we are friends committed to building a strong, prosperous, and democratic
Western Hemisphere. The question is how best to take advantage of the
opportunities and address the challenges created by DR-CAFTA in order to achieve
this goal. I would like to begin to answer that challenge by talking about the
opportunities that have already been created as a result of DR-CAFTA:
I started off by noting that 99.6 percent of all Dominican products now receive
duty-free entry to the U.S. market. However, because the Dominican Republic
benefited from preferential, duty-free treatment under the Caribbean Basin
Initiative (CBI) even before the agreement took effect, the initial effects of
the treaty may not have been as dramatic as expected. Overall, Dominican exports
to the United States have fallen so far this year compared to last year.
However, this decline is the result of intense competition from Asian textile
and apparel producers. It is important to note that the decline of Dominican
exports to the United States began prior to the implementation of DR-CAFTA. But
if you look at how the rest of Dominican exports to the United States are doing
excluding textiles and apparel, you’ll note that exports grew 6.5% from January
to September this year compared to that same period last year. So there is
growth in Dominican exports under CAFTA. While CAFTA is not a magic solution to
the DR’s textile and apparel industry, it can help Dominican companies
dramatically reduce costs through cheaper sourcing of supplies for production
and increased affordability of advanced technology, while also exploiting the
strengths of other parts of the Dominican economy that are particularly
competitive.
To truly exploit the expanded marketplace in the U.S. and Central America it is
important to identify areas where local companies have a comparative advantage
as well as look for potential niche markets and target customers such as the
Dominican-American community in the U.S. Whether it’s exporting Dominican beer
or coffee, there are markets out there waiting to be identified.
One sector of the economy that has seen a significant increase in exports over
the last few years is agriculture -- agricultural exports to the U.S. increased
by 3.5 percent in the first eight months of this year. Specifically, the U.S.
has increased its imports of a wide variety of high-value agricultural products
that are non-traditional Dominican exports, such as fruits and vegetables.
To support this kind of growth, the U.S. Agency for International Development,
known as USAID, has been working to promote economic development through trade
capacity building assistance. For example, USAID helped develop agriculture
clusters for products with promising export potential. USAID brought together
mango farmers, suppliers, transport companies and government agencies to create
strong public-sector partnerships that improved their ability to compete
globally. This assistance helped to ensure sanitary and phytosanitary
requirements were met and that all exports were pest free. USAID also introduced
new pruning and packaging methods and worked closely with the U.S. agencies for
final approval to import the mangos. The results are that private investors are
investing in treatment facilities for mangos and pruning techniques introduced
by USAID, which are doubling yields, improving fruit quality and lowering costs.
They have increased market knowledge and are becoming successful exporters.
USAID has also worked with the Jarabacoa coffee cluster to help small farmers
improve quality in order to meet international standards and to develop greater
awareness of international market opportunities. Other producers are now
emulating the success of these clusters, including those involved in pineapples,
cacao, organic bananas and other products. Of course, all of these quality and
price improvements will benefit local consumers as well.
Bringing new investment opportunities to the DR is another important way to
increase export growth. Investors are seeking entry into the DR-CAFTA markets.
Foreign direct investment in the Dominican Republic was reported to be over $1
billion in 2006 according to the Central Bank. In the last few years, foreign
direct investment has been concentrated in the areas of tourism, free-trade zone
activity, electricity generation, real estate development and communications.
Improving the investment climate will help to attract more foreign investment.
I was very pleased to see the great improvements the Dominican Republic made
during the past year to make it easier to start a business. The World Bank’s
“Doing Business 2008” report recognized the country’s efforts and the Dominican
Republic moved up an impressive 18 spots in the country rankings. This is an
important measure of progress and I would like to congratulate those
institutions that collaborated to make this achievement possible.
That being said, DR-CAFTA can help position the Dominican Republic as an
attractive location for international companies seeking a geographic and
business platform to export to the U.S. and Central American markets. Studies
have shown that investors look for political and economic stability, the rule of
law, and good governance when deciding where to invest. Under the investment
provisions in DR-CAFTA, investors will have more effective legal protection and
more efficient means of dispute settlement. The consistent and transparent
enforcement of laws and regulations minimizes risk and will provide investors
with greater certainty that they can do business competitively in the Dominican
Republic.
To achieve investor confidence the Dominican Republic must make good on its
commitments under DR-CAFTA and fully implement the laws, rules, and regulations
it has agreed to in order to ensure transparency. The Dominican Republic agreed
to make public its laws, regulations, procedures and administrative rulings of
general application respecting any matter covered by the treaty. It also agreed
to publish in advance any measure that it proposes to adopt, and provide
interested persons a chance to comment on such proposed measures. Finally, the
Dominican Republic committed to eliminate bribery and corruption in
international trade and investment, making it a criminal offense for any
official to receive or offer a bribe as well as for anyone who aids, abets or
conspires in these offenses. Implementing all of these measures will contribute
to an open and attractive investment climate.
Globalization is no longer a matter of choice. It is a reality. Those who take
advantage of it and view it as an opportunity will succeed and those who fail to
adapt will struggle. Most Dominicans are aware of this, certainly in the private
sector. DR-CAFTA, and the process leading up to it, has already generated new
attitudes among countless Dominican businesses, which recognize that they need
to prepare not only for the agreement but for increasing international
competition. This recognition has already generated millions of dollars of
investments in technology, training and other requirements of a competitive
enterprise. During the last three years, the Government and the private sector
(with USAID assistance) have undertaken significant policy reforms. Many, such
as the competition policy law to create fair business practices, are not
necessarily part of the agreement, yet they were catalyzed by DR-CAFTA.
Dominicans understand that it is not an issue of simply complying with the
agreement, but one of staking out a platform of reform that meets the demands of
a global economy head-on.
Successful implementation of DR-CAFTA will largely depend on the strengthening
of public and private institutions. The government agencies responsible for
carrying out the obligations under the treaty need to develop the knowledge and
technical expertise required to implement a complex trade agreement. They will
need to focus on administering trade policy, observing and enforcing relevant
laws, regulations and policies, compliance with laws and treaty obligations, and
developing the institutional capacity of training human resources. By focusing
on these institutions, the Dominican Republic will create a solid foundation on
which to strengthen economic development and at the same time enhance the rule
of law. However, if a strong organization is not in place to monitor compliance
and ensure that the treaty obligations are being met, businesses will not
benefit from the opportunities available under the treaty and investors will not
have confidence in the country.
Fortunately the government is not on its own in trying to implement these
changes. DR-CAFTA is the first free trade agreement in Latin America and the
Caribbean to include a component on trade capacity building. The U.S. is working
with the DR-CAFTA countries to design National Action Plans which will identify
each country’s trade capacity building needs. The action plan serves as a tool
for mobilizing and managing trade capacity building assistance – both from
public and private sources – to support implementation of negotiated agreements,
and help to make the transition and changes necessary to realize the linkage
between trade and development.
In 2007, USAID provided approximately $11.8 million in direct bilateral trade
capacity building assistance funding to the Dominican Republic and expects to
provide another $11 million in 2008. Included in USAID’s future trade capacity
building assistance are the projects to assist the Dominican Government to
implement DR-CAFTA effectively, to increase the exports of small farms and
processors in the agricultural sector, and to promote sustainable tourism based
on the country’s natural and cultural resources. This trade capacity building
assistance is expected to total $50 million over the next 5 years thanks to the
Portman-Bingaman earmark. These funds will focus on helping the country to
reduce poverty and become more competitive in a global economy.
The DR-CAFTA Implementation Project which started in September 2007 will support
the efforts of Dominican Government institutions, especially the Directorate of
Foreign Commerce (DICOEX) in the State Secretariat of Industry and Commerce (SEIC),
private firms and business associations, and civil society organizations to
implement effectively DR-CAFTA in the Dominican Republic.
The USAID Rural Economic Diversification (RED) program is a five year program
that will build on and expand the current agricultural cluster program funded by
the Consejo Nacional de Competitividad, BID, and USAID. This program will
continue to provide marketing, technological, and financial advice to assist
small farms and agribusinesses to increase their sales and net incomes by
becoming more competitive in the global market.
USAID’s Dominican Sustainable Tourism Alliance Project, currently in its design
phase, is a five year project that is expected to start implementation in the
first quarter of 2008. This project, working closely with the Secretariats of
Tourism, the Environment and Natural Resources, and Culture, the hotel
associations, and community based organizations, has the primary objective to
increase the growth of small and medium tourism-related businesses in an
environmentally sustainable manner. This program is expected to bring together a
world-class team of individuals and institutions from the public, private, NGO,
and international tourism sectors to find new ways to increase the investment in
sustainable tourism in the Dominican Republic.
The U.S. Government also committed $39.6 million in 2006 to help DR-CAFTA
countries enhance labor and environmental practices, and to ensure that the
broad spectrum of DR-CAFTA societies benefit from free trade in a socially
equitable and sustainable manner. Labor projects in the Dominican Republic
include working with worker organizations to raise awareness of their rights, as
well as strengthening the capacity of the Ministry of Labor to enforce labor
laws and the Ministry of Education to help enforce existing child labor laws. On
the environmental side, USAID is providing technical assistance and funding for
developing environmental regulations and policies, as well as
environmentally-friendly small business projects dealing with ecotourism, coffee
improvement, cocoa improvement, and solid-waste to organic-fertilizer
conversion.
All of these efforts to strengthen institutions and provide trade capacity
building assistance will not be effective without a well-trained and educated
work force to implement these programs.
I would like to stress how important education is as a basis for development for
this country and every other country. A strong education system that focuses on
improving quality learning is critical in order to be competitive in a global
economy. The Dominican Republic needs to invest in improving the quality of its
education, especially in its primary public schools, in order to ensure that the
benefits of DR-CAFTA are enjoyed by the full spectrum of Dominican society. The
development of a well-educated work force will attract investors and lead to
higher paid jobs. USAID provides approximately $2 million per year to strengthen
public basic education primarily through cooperative agreements with PUCMM to
improve teacher training programs, a small grants program for out-of school at
risk youth, and with AMCHAM in support of your Programa de Invertir en la
Educación para la Competitividad. I know that many of you here today are
actively contributing to this latter program. For those of you who do, I
congratulate you. For those of you who don’t, I encourage you do to so, given
the critical need to improve the quality of public basic education in this
country.
A healthy democracy and strong institutions play an important role in increasing
trade and promoting broad-based economic growth. So before I conclude, I would
like to say a few words on the upcoming presidential election.
In just six months, this country will engage in a grand exercise of democracy.
While the election is a sovereign exercise, the United States stands ready to
assist. We do so with the confidence that the Junta Central Electoral will
capably administer the elections and important civil society organizations such
as Participación Ciudadana will monitor the campaign and electoral process.
We recognize that there are issues regarding the election process that have yet
to be resolved. Some Dominicans have raised concerns about the set of election
regulations proposed by the Junta Central Electoral. Others have commented on
what they consider to be the inappropriate use of government funds to promote
political candidates. This is a healthy debate, and we encourage our Dominican
friends to continue to discuss these issues openly and to seek a resolution that
contributes to the strengthening of your democratic system. In the last election
here, over 60 percent of the eligible population voted. This is an impressive
figure, and one which we in the United States have not matched in recent years.
We congratulate the Dominican people on your enthusiasm for democracy, and wish
you good luck on May 16.
At the beginning of my remarks I said that DR-CAFTA is a foundation upon which
to build a bright future for the country. The entry into force of the treaty was
the first step toward this goal. However, the work that comes next to implement
the treaty is the real key to success. Now is the time to make sure the needed
reforms and strengthening of institutions are done correctly. Once this strong
base is in place, investment, trade and economic development will follow. The
United States government looks forward to continuing to work with our Dominican
partners to expand our long-standing democratic ties so that we contribute to
our hemisphere’s economic stability and prosperity. Working together our future
is bright.
(End) |
