Order Code RL32110
CRS Report for Congress
Received through the CRS Web
Agriculture in the U.S.-Dominican Republic-
Central American Free Trade Agreement
(DR-CAFTA)
Updated June 24, 2005
Remy Jurenas
Specialist in Agricultural Policy
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

Agriculture in the U.S.-Dominican Republic-
Central American Free Trade Agreement (DR-CAFTA)
Summary
President Bush on June 23, 2005, submitted to Congress a bill (H.R. 3045, S.
1307) to implement the Dominican Republic-Central American Free Trade
Agreement (DR-CAFTA). This initiates a 90-day period during which each chamber
will consider this measure on an up or down vote, with no amendments allowed. Of
the agreement’s agricultural provisions, the issue of increased access for sugar from
the six countries allowed to enter the U.S. market appears to be pivotal as proponents
and opponents seek to line up votes. Discussions between Administration officials
and some Members of Congress continue on a possible deal to address the sugar
production sector’s concerns. Sugar producers have stated these talks have not
resulted in a deal, and reiterated that their intent is to defeat the agreement.
In DR-CAFTA, the United States and six countries would completely phase out
tariffs and quotas — the primary means of border protection — on all but four
agricultural commodities traded between them in stages up to 20 years. The four
exempted products are as follows: for the United States, sugar; for Costa Rica, fresh
onions and fresh potatoes; and for the four other Central American countries, white
corn. If approved, the U.S. agricultural sector would over time gain free access to the
six highly protected markets on a reciprocal basis, matching these countries’ current
duty-free entry for nearly all their agricultural exports to the United States. Other
agricultural provisions establish safeguards for specified agricultural products to
protect U.S. and the region’s producers from sudden import surges; prohibit the use
of export subsidies between partners; and establish a mechanism to address sanitary
and phytosanitary barriers to agricultural trade. DR-CAFTA does not address the
issue of domestic subsidies that distort production or trade.
DR-CAFTA’s provisions, once fully implemented, are expected to result in
trade gains, though small, for the U.S. agricultural sector. The U.S. International
Trade Commission (ITC) estimates that $328 million in additional exports (primarily
grains, meat products, and processed food products) would be offset by a $52 million
increase in imports (largely reflecting additional access granted for sugar and beef
from the six countries). Of the $2.7 billion increase in total U.S. exports that the ITC
projects under DR-CAFTA, 12% would be attributable to the U.S. agricultural sector.
Most U.S. commodity organizations, agribusiness and food manufacturing
firms, and the American Farm Bureau Federation (a general farm organization)
support DR-CAFTA, expecting to benefit from the guaranteed increased access to
the markets of the six countries. Cotton producers announced their support,
following a similar decision made by a major textile trade association. The U.S.
sugar industry strongly opposes the additional access for sugar imports from these
countries, fearing its economic impact on domestic producers and processors. This
sector views DR-CAFTA as setting a precedent for including sugar in the other free
trade agreements that the Bush Administration is negotiating. Two cattlemen trade
organizations hold differing positions on the agreement’s beef provisions. The
National Farmers Union (a general farm organization) opposes DR-CAFTA. This
report will be updated to reflect developments.

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
U.S. Agricultural Trade with DR-CAFTA Countries . . . . . . . . . . . . . . . . . . . . . . 1
Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Trade Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Barriers to Agricultural Trade Used by Central America,
the Dominican Republic, and the United States . . . . . . . . . . . . . . . . . . . . . . 3
Negotiating Objectives for Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
DR-CAFTA’s Main Agricultural Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Market Access for U.S. Agricultural Products Sold to Central America
and the Dominican Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Market Access for Central American and Dominican Republic’s
Agricultural Products Sold to the United States . . . . . . . . . . . . . . . . . . . . . . 8
Potential Impacts of DR-CAFTA on Agricultural Trade and Sectors . . . . . . . . . . 8
U.S. Agriculture and Food Sectors’ Views on DR-CAFTA’s
Agricultural Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Commodity and Food Trade Associations . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Processed Foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Rice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Pork . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Corn and Corn Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Poultry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Dairy Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Sugar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Possible Deal? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Cotton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Beef . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
General Farm Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Trade Advisory Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

List of Tables
Table 1. U.S. Agricultural Trade with Countries Covered by the DR-CAFTA,
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Table 2. Average Tariffs and Tariff-Rate Quotas on Agricultural Imports:
United States and the Six Countries Covered by DR-CAFTA . . . . . . . . . . . 4
Table 3. Impact of DR-CAFTA on U.S. Trade, by Economic Sector . . . . . . . . . 9
Table 4. Impact of DR-CAFTA on U.S. Agricultural Trade . . . . . . . . . . . . . . . 10
FOR MORE INFORMATION, SEE THE FOLLOWING CRS PRODUCTS:
CRS Report RL31870, The Dominican Republic-Central America-United States Free
Trade Agreement (DR-CAFTA)
CRS Report RL32322, Central America and the Dominican Republic in the Context
of the Free Trade Agreement (DR-CAFTA) with the United States
CRS Report RS21868, U.S.-Dominican Republic Free-Trade Agreement

Agriculture in the U.S.-Dominican Republic-
Central American Free Trade Agreement
Introduction
Unique to free trade agreements (FTAs), as illustrated by the North American
Free Trade Agreement (NAFTA), are provisions designed to liberalize trade by
reducing and eliminating tariffs, quotas, and non-tariff barriers between partners
within an agreed-upon time period. Bilateral FTAs are generally comprehensive in
scope, and in addition to including provisions on agricultural trade, cover trade in all
other goods and services, investment rules, and intellectual property rights, among
other issues. FTAs do not address the trade-distorting impact of domestic farm
subsidies, which distinguish them from the WTO-Uruguay Round multilateral
agreement on agriculture.
Some U.S. agricultural commodity groups and most food manufacturers see
export potential under free trade in prospective FTAs, and support U.S. government
efforts to negotiate agreements that more quickly open up market opportunities. Of
most interest to them is the pace of access U.S. negotiators are able to secure for U.S.
agricultural products that prospective FTA partners view as import-sensitive to their
agricultural sectors. U.S. producers and some processors of import-sensitive
commodities seek to shape market access commitments that could directly affect
their competitive position in the domestic market. Frequently, their objective is for
U.S. negotiators to exclude their product from the agreement’s scope altogether, or
to secure the longest possible transition periods before imports can enter freely.
Other provisions negotiated in FTAs that affect agricultural trade include rules
of origin, safeguards against import surges, rules that address other trade barriers, and
the terms under which rules to ensure food safety and plant and animal health are
applied.1
U.S. Agricultural Trade with DR-CAFTA Countries
Exports. U.S. agricultural exports in 2004 to the six countries covered by the
DR-CAFTA (Costa Rica, the Dominican Republic, El Salvador, Guatemala,
Honduras, and Nicaragua) totaled $1.7 billion, and represented 2.8% of U.S.
worldwide sales (see Table 1). These countries combined represented the seventh-
largest export market for U.S. agricultural products after Canada, Japan, Mexico,
1 Rules of origin specify what is required for a product to be considered to have been
produced or processed in a country that is a party to a trade agreement. They are used to
determine whether a product benefits from an FTA’s preferential terms (e.g., duty-free and
additional quota access). See “DR-CAFTA’s Main Agricultural Provisions” in this report
for an explanation of other terms.

CRS-2
China, South Korea, and Taiwan. Leading exports were corn, wheat, rice, soybean
meal, and tobacco. The Dominican Republic was the largest market — with $461
million in sales that accounted for 27% of all agricultural exports to the region,
followed by Guatemala ($383 million with a 23% share). U.S. farm exports
accounted for 11% of total U.S. merchandise exports to the six countries, and have
increased 56% in value terms since 1995.
Imports. Agricultural imports from these six countries equaled almost $2.5
billion, or almost 5% of all U.S. farm and food imports (see Table 1). These
countries combined ranked as the fourth-largest source of U.S. agricultural imports
in 2004. U.S. purchases of bananas, raw coffee, other fresh fruit, raw cane sugar, and
fresh and frozen vegetables led the list. Costa Rica was the largest supplier of food
products — shipping $903 million, or 37% of all agricultural imports from the
region, followed by Guatemala ($784 million, or 32%). U.S. farm imports accounted
for 14% of total U.S. merchandise imports from the six countries, and have grown
by 23% in dollar terms over the last decade.
Table 1. U.S. Agricultural Trade with
Countries Covered by the DR-CAFTA, 2004
COUNTRY/
U.S.
SHARE OF U.S.
U.S.
SHARE OF U.S.
REGION
AGRICULTURAL
AG EXPORTS
AGRICULTURAL
AG IMPORTS
EXPORTS
TO REGION
IMPORTS
FROM REGION
million $
percent
million $
percent
Costa Rica
282
16.5
903
36.5
Dominican
461
27.0
261
10.6
Republic
El Salvador
246
14.4
101
4.1
Guatemala
383
22.5
784
31.7
Honduras
220
12.9
264
10.7
Nicaragua
113
6.6
114
6.4
Total
$1,705
100.0
$2,470
100.0
DR-CAFTA
SHARE TO /
2.8% a
4.6% b
FROM WORLD
Source: U.S. Department of Agriculture (USDA), Foreign Agricultural Service; and U.S. International Trade
Commission (ITC).
Notes: Exports refer to domestic exports. Imports refer to imports for U.S. consumption only.
a of U.S. agricultural exports of $61.3 billion to the world.
b of U.S. agricultural imports of $54.0 billion from the world.

CRS-3
Trade Balance. The United States in 2004 recorded an agricultural trade
deficit of $765 million with the six countries covered by the DR-CAFTA. However,
if shipments of bananas and coffee — two tropical products produced in very small
amounts domestically — are excluded from U.S. imports from this region, bilateral
trade with these countries would result in an agricultural trade surplus of $354
million in 2004.
Entries under two unilateral U.S. trade preference programs (the Caribbean
Basin Initiative and the Generalized System of Preferences) accounted for 45% of
U.S. agricultural imports from the six countries in 2003 — meaning they entered duty
free. Practically all other agricultural imports (primarily tropical products such as
bananas and raw coffee) entered at MFN zero duty rates.2 Though imports of certain
commodities (sugar, beef, dairy products, peanuts, tobacco, among others) that the
United States protects using tariff-rate quotas (TRQs) generally enter free, amounts
allowed to enter are limited by quotas.3
Barriers to Agricultural Trade Used by
Central America, the Dominican Republic,
and the United States
The United States and the six countries primarily use tariffs and TRQs to protect
their agricultural sectors. The five Central American countries and the Dominican
Republic committed under the multilateral Uruguay Round Agreement on
Agriculture to bind their average tariffs on agricultural imports at relatively high
levels (ranging from Honduras’s 35% to Nicaragua’s 73%), compared to the U.S.
commitment to bind its average rate at 12%.4 However, in practice, the six countries
generally have imposed much lower average tariffs on agricultural imports (with
applied tariffs ranging from 6.7% in Nicaragua to 23.3% in the Dominican Republic),
2 The United States grants eligible developing countries unilateral preferential tariff
treatment under these two and other programs, meaning imports are eligible for lower than
MFN (most favored nation) rates (in practice, zero or very low duty). Such treatment gives
their products a competitive advantage in the U.S. market.
3 A TRQ combines two policy instruments that nations use to restrict imports: quotas and
tariffs. In a TRQ, the quota component works together with a specified tariff level to
provide the desired degree of import protection. Imports entering under the quota portion
of a TRQ are usually subject to a lower, or sometimes a zero, tariff rate. This “in-quota”
amount represents the minimum that a country has committed to allow to enter under
multilateral or other trade agreements. Imports above the quota’s quantitative threshold
(referred to as above-quota) face a much higher (usually prohibitive) tariff.
4 The global average bound tariff on agricultural imports is 62% (U.S. Department of
Agriculture (USDA), Economic Research Service, Profiles of Tariffs in Global Agricultural
Markets
, January 2001, p. 11). A “bound” tariff rate represents the maximum that a country
agrees to impose on the value of imports of a particular product, and is based on the
outcome of negotiations under the last multilateral negotiations (the Uruguay Round).
These bound rates are incorporated as an integral component of a country’s schedule of
concessions or commitments to other World Trade Organization members. However, for
various reasons, a country may decide to impose a lower, or “applied,” tariff rate.

CRS-4
and at times have allowed larger amounts of commodities than spelled out in their
TRQ minimum commitments to enter duty free or at a lower duty.5 The average U.S.
applied tariff on imports from these six countries is very low (two-tenths of 1%)
when U.S. trade preference benefits are taken into account (see Table 2). These
applied tariff averages, though, understate the higher level of border protection the
United States and the six countries provide their most sensitive agricultural products
through the use of quotas and other restrictive measures.
Table 2. Average Tariffs and
Tariff-Rate Quotas on Agricultural Imports:
United States and the Six Countries Covered by DR-CAFTA
WTO
APPLIED
BOUND
TARIFF
TARIFF-RATE QUOTAS
a
RATE
RATE
percent
United States
12.0
12.0 b
dairy products, sugar, sugar-containing
products, peanuts, tobacco, cotton, beef
Costa Rica
48.0
14.6
pork, poultry, dairy products, beef, rice,
corn, beans, sugar, tobacco
Dominican
40.0
23.3
chicken meat, onions, garlic, powdered
Republic
milk, dry beans, corn, rice, sugar
El Salvador
43.2
10.3
beef, dairy products, yellow corn,
vegetable oils, sugar, tobacco
Guatemala
58.3
9.9
apples, yellow corn, rice, wheat or meslin
flour
Honduras
35.0
11.1
None — uses a price band for grains and a
commodity absorption arrangement
Nicaragua
73.4
6.7
corn, rough & milled rice, sorghum,
vegetable oil, beans, beef, poultry, dairy
products, sugar
Source: U.S. Trade Representative (USTR) and U.S. International Trade Commission (ITC) for
bound and applied rates; World Trade Organization (WTO) for commodities subject to TRQs.
a 2001 for United States, 2000 for the Central American countries and the Dominican Republic.
b The U.S. applied tariff on agricultural imports from the five Central American countries and the
Dominican Republic is much lower — 0.02%, reflecting duty-free treatment of imports that entered
under two trade preference programs and the commodity/product composition of imports.
5 For example, for 2005, Guatemala increased the TRQ on yellow corn imports to 600,000
metric tons (MT). Imports within the TRQ are subject to a 5% tariff; imports above the
quota amount face a 35% tariff (F.O. Licht’s World Grain Markets Report, January 12,
2005, p. 11). Under its WTO commitments, Guatemala agreed to a minimum corn TRQ of
88,670 MT, but has raised this several times.

CRS-5
Negotiating Objectives for Agriculture
U.S. objectives in negotiating DR-CAFTA’s agricultural provisions were to (1)
eliminate Central American and Dominican Republic tariffs, quotas, and non-tariff
barriers to trade, (2) provide adequate transition periods and relief mechanisms for
the U.S. agricultural sector to adjust to increased imports of sensitive products from
the region, (3) eliminate any unjustified sanitary and phytosanitary (SPS) restrictions
imposed by the six countries and seek their affirmation of their World Trade
Organization (WTO) commitments on SPS measures, and (4) develop a mechanism
with its FTA partners to support the U.S. objective to eliminate all agricultural export
subsidies in the WTO and Free Trade Area of the Americas (FTAA) negotiations.6
The U.S. position called for no product or sectoral exclusions from the final
agreement. U.S. officials also repeatedly made clear that the issue of U.S. farm
support or subsidies, which the Central American countries sought to place on the
negotiating table, should only be addressed in WTO multilateral negotiations.
Almost all of the agricultural exports to the United States from the FTA partner
countries already enter duty free under trade preference programs or at MFN zero
rates. Consequently, the six countries were most interested in securing unrestricted
market access for those commodities now subject to U.S. TRQs: sugar and certain
sugar-containing products, beef, dairy products, peanuts, tobacco, and cotton.
However, Central American and Dominican Republic negotiators expressed fears
that opening up their markets to U.S. corn and rice would undermine the region’s
small subsistence farmers unable to compete against subsidies that U.S. producers
receive under current farm programs. Though these countries had pressed to include
the subsidy issue on the negotiating agenda, they eventually did accept the U.S.
position that this issue should be addressed multilaterally in the WTO context.
DR-CAFTA’s Main Agricultural Provisions
In the signed agreement, the United States and the six countries agreed to
completely phase out tariffs and quotas — the primary means of border protection
— on all but four agricultural commodities and food products in six stages:
immediately, five years, 10 years, 12 years, 15 years, and more than 15 years. The
6 The WTO Doha Development Agenda (DDA) Round’s objectives for agriculture are to
substantially improve market access for agricultural products, reduce and phase out export
subsidies, and substantially reduce trade-distorting domestic support. For more information,
see CRS Report RL32053, Agriculture in WTO Negotiations, and CRS Report RS21905,
The Agriculture Framework Agreement in the WTO Doha Round. The FTAA’s stated
objectives are to reduce and eliminate barriers to trade in goods (including agricultural
commodities and food products) and services, facilitate cross-border investment, among
others, to allow 34 countries of the Western Hemisphere (excluding Cuba) to trade and
invest with each other under the same rules. Participating countries initiated formal talks
in 1998 with a target of creating a hemispheric free trade area by January 2005. For
additional background, see CRS Report RL30935, Agricultural Trade in the Free Trade
Area of the Americas
, and CRS Report RS20864, A Free Trade Area of the Americas: Status
of Negotiations and Major Policy Issues
.

CRS-6
four most sensitive commodities — fresh potatoes and fresh onions imported by
Costa Rica, white corn imported by the other four Central American countries, and
sugar entering the U.S. market — would be treated uniquely. After a specified
period, the size of the quotas established for these four commodities would increase
about 2% each year in perpetuity. In other words, a cap limiting imports would
always be in place. The tariff on entries above the quota level (frequently referred
to as the over-quota tariff) would not decline at all, but stay at current high levels to
keep out above-quota imports, in order to protect producers of the four commodities.
For all other sensitive products that fall into any of the over-10-year transition
periods, negotiators on all sides agreed to provide some measure of protection.
While details vary by commodity and food product, these would take the form of
tariff-rate quotas effective only during the transition to free trade, long tariff and
quota phase-out periods, nonlinear tariff reductions, and the use of an import
safeguard mechanism. Nonlinear refers to a practice known as “backloading,” where
most of the decline in a tariff occurs in the last few years of the transition period.
Safeguards serve to protect agricultural producers from sudden surges in imports,
triggered when quantities increase above specified levels. When triggered, an
additional duty — temporary in duration — is applied to provide protection,
according to detailed terms found in annexed schedules. Each country negotiated its
own list of agricultural products eligible for safeguard protection. A country’s right
to use safeguards would expire at the end of the transition period.
All countries commit under DR-CAFTA not to introduce or maintain
agricultural export subsidies to sell commodities or food products to each other.
Such subsidies, though, are allowed to counter the trade-distorting effects of exports
subsidized by third countries if an exporting country and an importing country fail
to agree on counter measures.
The agreement commits all countries to apply the science-based disciplines of
the WTO Agreement on Sanitary and Phytosanitary (SPS) Measures to facilitate
trade.7 Should disagreements arise, a working group would serve as a forum for
consultations and resolving technical issues. The text precludes the use of DR-
CAFTA’s dispute settlement provisions to resolve differences when SPS problems
cannot be resolved.
7 This multilateral agreement includes understandings or disciplines on how countries will
establish and use measures to protect “human, animal or plant life or health,” taking into
account their direct or indirect impact on trade in agricultural products. It requires countries
to base their SPS standards on science, and encourages countries to use standards set by
international organizations to guide their actions. The agreement seeks to ensure that
countries will not use SPS measures to arbitrarily or unjustifiably discriminate against the
trade of other WTO members or to adopt them to disguise trade restrictions.

CRS-7
Market Access for U.S. Agricultural Products Sold
to Central America and the Dominican Republic
The Office of the U.S. Trade Representative (USTR) states that DR-CAFTA
will grant immediate duty-free status to more than half of the U.S. farm products now
exported to the six countries.8 Such treatment would apply to high-quality beef cuts,
cotton, wheat, soybeans, certain fruits and vegetables, processed food products, and
wine destined for the five Central American countries. U.S. exports of corn, cotton,
soybeans, and wheat to the Dominican Republic would benefit also from immediate
duty-free treatment. Central American tariffs and quotas on most other agricultural
products (pork, beef, poultry, rice, other fruits and vegetables, yellow corn, and other
processed products) would be phased out over a 15-year period. Longer transition
periods would apply to imports from the United States of rough/milled rice and
chicken leg quarters (18 years) and dairy products (20 years). Dominican Republic
tariffs and quotas on most other U.S. agricultural products (beef, pork, and selected
dairy and poultry products) would be eliminated over 15 years. However, 20-year
transitions would cushion the impact of the entry of U.S. chicken leg quarters, rice,
and certain dairy products (cheese and milk products).9 An overview of these
countries’ DR-CAFTA commitments with respect to imports from the United States
of selected commodities appears in the section “U.S. Agriculture and Food Sectors’
Views on DR-CAFTA’s Agricultural Provisions,” below.
With El Salvador, Guatemala, Honduras, and Nicaragua designating white corn
as their most sensitive agricultural commodity (produced by subsistence farmers and
used as a staple to make tortillas), negotiators agreed to establish a quota (i.e., equal
to the current import level) that increases about 2% annually in perpetuity.
Compared to all other commodities imported from the United States, there would be
no reduction in the over-quota tariff for white corn. U.S. exports of fresh potatoes
and onions to Costa Rica would be subject similarly to quotas that increase slowly
in perpetuity but face permanent high over-quota tariffs.
USTR further states that U.S. agricultural products will have “generally better”
access to the Central American countries than is given to similar imports from
Canada, Europe, and South America. The six FTA partners also agreed to “move
toward recognizing export eligibility for all U.S. plants inspected under the U.S. food
safety and inspection system.”
8 USTR, “Free Trade with Central America: Summary of the U.S.-Central America Free
Trade Agreement,” December 17, 2003; “Putting CAFTA into Perspective: Fact Sheet on
Agriculture,” February 9, 2004; “Fact Sheet on Specific Agricultural Products in CAFTA,”
March 9, 2004; “Adding Dominican Republic to CAFTA: Combining to Create America’s
Second-Largest Export Market in Latin America,” March 15, 2004 (available at [http://
www.ustr.gov/Trade_Agreements/Bilateral/CAFTA/Section_Index.html]).
9 The U.S. Department of Agriculture has issued fact sheets that detail the DR-CAFTA’s
provisions for beef, cookies, cotton, dairy products, pet food, feed grains (corn, sorghum,
barley) and food grains (wheat and rice), fruits and nuts, peanuts and peanut butter, pork,
poultry, pulses (beans, lentils, peas), soups, soybean oil, soybeans and soymeal, sugar, and
vegetables (available at [http://www.fas.usda.gov/info/factsheets/CAFTA/commodity.
html]).

CRS-8
Market Access for Central American and
Dominican Republic’s Agricultural Products
Sold to the United States
Almost all agricultural imports (in value terms) from the six countries already
enter the U.S. market duty free. DR-CAFTA, according to USTR, “will consolidate
those benefits [immediately] and make them permanent.” For the U.S. sensitive
agricultural products (sugar, sugar-containing products, beef, peanuts, dairy products,
tobacco, and cotton), U.S. negotiators granted duty-free access in the form of
country-specific preferential quotas. These quotas would be in addition to (i.e., not
carved out of) the existing agricultural TRQs established by the United States under
its existing WTO commitments, which the six countries have taken advantage of
historically to export to the U.S. market.
Because of its sensitivity, the United States will similarly treat sugar imports as
the four Central American countries protect white corn imports. The new sugar
quotas would expand gradually each year, but the high and prohibitive over-quota
tariff will remain unchanged, in perpetuity. Details on the U.S. provisions for sugar
and other selected commodities are provided in the section “U.S. Agriculture and
Food Sectors’ Views on DR-CAFTA’s Agricultural Provisions,” below.
Potential Impacts of DR-CAFTA on
Agricultural Trade and Sectors
In an economy-wide, quantitative analysis of the DR-CAFTA, the U.S.
International Trade Commission (ITC) projects that 12% of the agreement’s overall
export gains would flow to U.S. agriculture.10 Two-thirds of the export gains would
be realized by the U.S. manufacturing (36%) and textile (30%) sectors (see Table 3).
Textile imports from the six countries would account for almost all of the
growth in total U.S. imports under full implementation of the agreement, according
to the ITC. Additional U.S. agricultural imports would represent almost 2% of the
import change under DR-CAFTA. The ITC analysis shows small negative changes
in imports of manufactured products, energy and other raw materials, and services
(see Table 3).
10 U.S. International Trade Commission (ITC), U.S.-Central America-Dominican Republic
Free Trade Agreement: Potential Economywide and Selected Sectoral Effects
, Publication
3717, August 2004 (available at [http://www.usitc.gov/WAIS/pub3717.PDF]). This
summary is based on Tables 4-4 and 4-5 (pp. 75-76) and the accompanying text. This
assessment used a general equilibrium simulation to look at the impact of the agreement’s
market access provisions on all U.S. economic sectors, taking also into account each sector’s
relative economic importance. Because the ITC used two different data and analytical
frameworks, this quantitative assessment is not directly comparable to the sectoral analyses
for the grains and sugar sectors. The latter involved ITC’s qualitative analysis of the
agreement’s detailed provisions, which are summarized in the following paragraphs.

CRS-9
Table 3. Impact of DR-CAFTA on U.S. Trade,
by Economic Sector
U.S. EXPORTS TO DR-CA
U.S. IMPORTS FROM DR-CA
Change to Base
Share of
Change to Base
Share of
Base Value
Base Value
after FTA Full
Export
after FTA Full
Import
before FTA
before FTA
Implementation
Change
Implementation
Change
million $
percent
million $
percent
Agriculture
1,921.9
+ 328.4
+ 12.3
4,065.7
+ 52.1
+ 1.9
Textile, Apparel, &
5,350.0
+ 802.8
+ 30.1
11,763.9
+ 3,067.5
+ 110.5
Leather Products
Manufactured
5,561.5
+ 967.8
+ 36.3
3,434.7
- 170.3
- 6.1
Products
Energy, Minerals &
Other Raw
3,770.6
+ 533.5
+ 20.0
1,306.1
- 73.2
- 2.6
Materials &
Related Products
Services
710.4
+ 32.8
+ 1.2
1,738.3
- 100.0
- 3.6
TOTAL
17,314.0
+ 2,666.6
100.0
22,308.6
+ 2,776.2
100.0
Source: Adapted by CRS from Table 4.4 in ITC’s U.S.-Central America-Dominican Republic Free Trade Agreement: Potential
Economywide and Selected Sectoral Effects
, p. 75.
Increases in U.S. sugar, meat, and dairy imports (due to the expansion and/or
elimination of U.S. agricultural TRQs under DR-CAFTA) would be offset to some
degree by a drop in imports of vegetables, fruits, nuts, processed food and tobacco
products, and other crops imported from the six countries. According to the ITC,
these small declines would largely reflect the movement of labor and resources in the
DR and Central American countries away from producing the latter products (which
already benefit from preferential duty-free access to the U.S. market) to the more
profitable textile, apparel, leather products, and sugar sectors, which expand output
to take advantage of the agreement’s openings in the U.S. market. Under DR-
CAFTA, U.S. agricultural imports from the six countries would increase 1.3% (
Table 4). This $52 million in net imports would equal one-tenth of 1% of total U.S.
agricultural imports ($73 billion, according to the ITC).
ITC’s qualitative analysis examined how two agricultural commodity sectors
would be affected over time — grains and sugar. U.S. corn and rice exports to the
region would see little change in the short term, but would rise as the six countries’
quotas expand. Once quotas are fully phased out, U.S. grain exports are expected to
increase substantially. The ITC estimates that by the end of the 15-20 year transition
period, annual U.S. grain exports to the region likely would increase by at least 20%
($120 million), based on 2003 prices — broken out among corn ($75 million), rough
rice ($35 million), and milled rice ($10 million). Though the impact of these
additional sales in the long run is small (equal to 1.2% of 2003 U.S. grain exports
worldwide), the ITC views the potential increase as offering significant market
opportunities for U.S. corn and rice producers. The ITC further found that the U.S.
grains sector would, of all economic sectors, experience the most noticeable positive
changes, though very small. Grain output, revenues, and employment would rise
between one-quarter to one-third of 1%.11
11 Ibid., pp. 51-52, 78-79.

CRS-10
Table 4. Impact of DR-CAFTA on U.S. Agricultural Trade
U.S. EXPORTS TO DR-CA
U.S. IMPORTS FROM DR-CA
Base Value
Change after FTA
Base Value
Change after FTA
before FTA
Full Implementation
before FTA
Full Implementation
million $
percent
million $
percent
Agriculture
1,921.9
328.4
17.1
4,065.7
52.1
1.3
Grains
722.8
157.3
21.8
0.1
0.0
-1.0
Meat Products
204.0
84.1
41.2
79.4
13.2
16.7
Other Processed Food
639.7
53.5
8.4
1,126.2
-25.5
-2.3
& Tobacco Products
Other Crops
237.6
17.3
7.3
746.0
-19.3
-2.6
Vegetables, Fruits &
53.8
7.7
14.2
1,717.5
-31.5
-1.8
Nuts
Dairy Products
22.9
5.9
25.8
4.7
2.9
62.2
Animal Products
37.3
1.7
4.5
61.8
-0.9
-1.4
n.e.c.
Sugar Manufacturing
0.4
0.6
166.4
329.3
113.2
34.4
Cattle & Horses
3.4
0.3
10.2
0.7
0.0
-2.1
Sugar Crops
0.0
0.0
NA
0.0
0.0
NA
Source: Adapted by CRS from Table 4.4 in ITC’s U.S.-Central America-Dominican Republic Free Trade Agreement:
Potential Economywide and Selected Sectoral Effects
, p. 75.
The ITC expects that the DR-CAFTA’s sugar provisions likely would result in
a “small increase” in U.S. sugar and sugar-containing product (SCP) imports from
the region equal to the quantities spelled out in the new preferential quotas. Prices
(calculated to drop by about 1%) due to increased imports “likely would have an
adverse impact on production and employment for U.S. sugar producers.” At the
same time, lower prices “likely would benefit production and employment for U.S.
producers of certain SCPs,” particularly of those containing high sugar content. The
ITC’s analysis further shows that the U.S. sugar manufacturing and sugar crops
sectors would both experience the largest percentage decrease of all sectors in
domestic output and employment — more than 2%.12
U.S. Agriculture and Food Sectors’ Views on
DR-CAFTA’s Agricultural Provisions
Most U.S. commodity organizations, agribusiness and food firms, and the
American Farm Bureau Federation (a general farm organization) support this trade
agreement, expecting their producer-members and exporters to benefit from the
increased access guaranteed to the Central American and Dominican Republic
markets. Supporters in the spring of 2005 formed the Agricultural Coalition for DR-
CAFTA to present and argue their position to Members of Congress. The U.S.
12 Ibid., pp. 46-47, 78-79.

CRS-11
cotton sector initially opposed the agreement, primarily reflecting the concerns of
textile firms, but in early May 2005 came out in favor following the decision by a
major textile trade association to support it.
Other commodity groups concerned about the competitive pressures they expect
to face under DR-CAFTA oppose the agreement. These include the sugar industry,
and one livestock/beef trade association. The U.S. sugar industry strongly opposes
the additional access given to sugar, fearing its economic impact on domestic
producers and processors. Sugar producers’ and processors’ greatest concern is that
DR-CAFTA sets a precedent for including sugar in the other FTAs that the Bush
Administration is negotiating, a position that the industry strongly opposes. One
trade organization representing cattlemen with concerns about free trade agreements
in general opposes DR-CAFTA’s beef provisions. The National Farmers Union (a
general farm organization) opposes the agreement.
Commodity and Food Trade Associations
Many U.S. agricultural commodity and food organizations support DR-CAFTA,
expecting their producer-members and exporters to benefit from the market openings
negotiated to increase sales to the six countries. On March 22, 2004, a coalition of
39 groups sent a letter to President Bush “to underscore their support” for this trade
agreement. Their letter contended the agreement “will expand U.S. agriculture
exports and put U.S. agriculture on an equal footing with its competitors in these
markets” that already have FTAs with other countries. They argued that if CAFTA
is not implemented, agricultural trade with these countries would continue on a non-
reciprocal basis, with U.S. farm exports facing significant barriers, while over 99%
of U.S. agricultural imports from these countries continue to receive duty-free
treatment. Similar coalitions sent nearly identical letters on September 3, 2004, and
February 1, 2005, to each Member of Congress.13

Processed Foods. Food manufacturers view the six countries as strong
markets for U.S. processed food products, pointing out that such exports already
account for some 25% of their total food imports and are increasing faster than any
other U.S. agricultural export. With processed foods facing average tariffs of 15%
in the Central American countries and 20% in the Dominican Republic, an analysis
prepared for the Grocery Manufacturers Association (GMA) estimates that the
elimination of tariffs and quotas on key food products could result in an 84% increase
(from $359 million to $662 million) in U.S. exports to the region one year after DR-
CAFTA is fully implemented. Growth is foreseen in particular in exports of snack
foods, confectionary products, and soups. GMA expects other long-term benefits for
its member companies with the adoption of new rules that “will lead to a stronger,
more predictable business climate in the region.” Examples cited are dealer
protections that give manufacturers more flexibility and efficient product distribution,
enhanced intellectual property and investor protections that are viewed as better
protecting trademarks and providing a more secure business environment for
13 Available at [http://www.uscafta.org/articles/view.asp?ID=34], [http://www.uscafta.org/
policy/view.asp?POLICY_ID=81], and [http://www.uscafta.org/policy/view.asp?POLICY_
ID=112].

CRS-12
increased sales of branded products, and impetus for further integrating the region’s
market that results in economies of scale for production and distribution and
increased demand for U.S. food products.14
Rice. The USA Rice Federation supports DR-CAFTA, noting it achieves
market access gains for U.S. rice producers, millers, and exporters. It points out that
the agreement improves existing access to an already leading market for U.S. rice
exports, reduces high import duties, remedies tariff discrimination against certain
forms of rice, and extends preferential duty treatment that is not available to any
other rice-exporting country. DR-CAFTA preserves existing access for U.S. rough
(unmilled) rice, and provides for immediate guaranteed access for milled and brown
rice. The Central American countries agree to establish separate TRQs for rough and
milled rice (the Dominican Republic created TRQs for brown and milled rice)
totaling almost 407,000 metric tons in year 1, increasing slowly over 18 to 20 years
to almost 609,000 MT. This compares to U.S. rice exports to the six countries of
714,000 MT in 2004 (valued at $184 million). In-quota rice imports from the United
States would no longer be subject to applied tariffs ranging from 29% to 99%. The
separate TRQs, the Rice Federation notes, will allow end users in these countries to
chose between rough and milled rice, and over time, enable U.S. exporters to sell
higher-value rice to these markets.15
Pork. Pork producers represented by the National Pork Producers Council
(NPPC) support DR-CAFTA, because of the immediate benefits created through
negotiated market openings. Each country agrees to create duty-free TRQs for pork
cuts totaling 13,613 MT in year 1, which then annually rise slowly to equal 29,040
MT in year 15, after which quotas and tariffs disappear altogether. In 2004, U.S.
pork sales to all six countries totaled 8,442 MT (valued at $16 million). In-quota
pork imports from the United States during this transition will not face applied tariffs
that now range from 15% to 47%. The NPPC anticipates that the income growth
from free trade with the region will boost demand for pork, even though at present
most consumers in the region do not eat meat on a regular basis. The NPPC also
notes that SPS discussions have led all countries to recognize the U.S. meat
inspection system and to accept pork from any U.S. Department of Agriculture
(USDA)-inspected facility.16
14 GMA’s Statement to the House Ways and Means Committee, April 21, 2005. GMA is
the trade association for food, beverage, and consumer product companies, with reported
U.S. sales of more than $500 billion and 2.5 million employees throughout the country, and
advocates reducing trade barriers and increasing market access for processed food products
globally. The analysis referred to can be accessed at [http://www.gmabrands.com/public
policy/docs/cafta.pdf].
15 USA Rice Federation Testimony to the Senate Finance Committee, April 13, 2005 (at
[http://finance.senate.gov/hearings/testimony/2005test/thtest041305.pdf]). Quota amounts
and current in-quota tariffs are from the DR-CAFTA text’s general notes and tariff schedule
annex for each country.
16 NPPC, “U.S. Pork Producers Support the CAFTA-DR,” January 3, 2005 (at [http://www.
nppc.org/hot_topics/CAFTABackgrounder010305.pdf]).

CRS-13
Corn and Corn Products. The National Corn Growers Association (NCGA)
views the DR-CAFTA as creating new export opportunities for U.S. corn farmers and
locking in the current U.S. market share in the region. It expects the agreement to
stimulate U.S. exports of corn co-products like corn gluten feed and meal, distillers
dried grains (DDGs), corn starches, corn oil, and sweeteners (e.g., high fructose corn
syrup). The six countries would reduce tariffs on some corn products (such as
HFCS) within 15 years, with tariffs eliminated immediately on corn gluten products,
starch, oils, and DDGs. The Corn Refiners Association (CRA) also supports the
agreement, seeing excellent export prospects for these value-added products that have
averaged $19 million in recent years. CRA notes that the sweetener provisions in
DR-CAFTA are “unambiguous,” unlike those in NAFTA, which have led to the
“total loss” of a market for U.S.-produced HFCS.17
Tariff and quota provisions on access for U.S. corn in these markets distinguish
between yellow and white corn. Four countries agree to establish duty-free TRQs for
yellow corn (used primarily as a feed for their livestock sectors) totaling 1.15 million
metric tons (MMT) in year 1, rising to 1.74 MMT at the end of transition periods (10
years for Guatemala, and 15 years for El Salvador, Honduras, and Nicaragua). In
2004, all U.S. corn exports to these four countries totaled 1.22 MMT (valued at $150
million); corn exports to Costa Rica and the Dominican Republic were 1.24 MMT
($147 million). Current tariffs imposed by the four countries on yellow corn ranging
from 15%-45% would disappear by the end of the transition period. Access to Costa
Rica and the Dominican Republic would be duty-free in the first year.
Because of its sensitivity and symbolic status as a staple food, negotiators
agreed to treat white corn differently. The same four Central American countries
would also create duty-free TRQs for white corn totaling 84,660 MT in year 1,
growing slowly to reach 116,200 MT in year 20. Thereafter, each country’s quota
(except Nicaragua’s) would increase by about 1.5% each year in perpetuity, but the
10%-45% tariff on over-quota imports (depending upon the country) would remain
in place indefinitely. Costa Rica would eliminate its tariff on U.S. white corn over
15 years; the Dominican Republic would continue current duty-free treatment.
Poultry. The National Chicken Council, National Turkey Federation, and the
U.S. Poultry and Egg Council support the agreement. The agreed-upon provisions
largely reflect a framework that the U.S. poultry sector developed with the poultry
sectors in Central America, which trade negotiators on both sides adopted with minor
changes. This framework is based on the consensus reached that there be “restricted
access to the most sensitive [poultry] products and more generous access for those
products that are less sensitive.”18
Applied tariffs on fresh and frozen poultry imports imposed by some of these
countries can range up to 164%. According to USDA, U.S. poultry exports to the six
countries in the 2000-2004 period averaged each year just above 73,000 MT and
17 NCGA, “Central America FTA,” early 2004; CRA, “CAFTA and the U.S. Corn Refining
Industry,” January 26, 2005.
18 Food Chemical News, “U.S. food industry hails CAFTA agreement,” December 22, 2003.

CRS-14
were valued at $51 million. Chicken leg quarters accounted for some 55% of the
value of all U.S. poultry sold to these countries.
Under DR-CAFTA, the six countries would provide immediate duty-free access
on chicken leg quarters. Each country would create a TRQ on leg quarters that
slowly increases as tariffs are eliminated in 17 to 20 years, depending on country.
Costa Rica’s TRQ of 330 MT in year one would grow by 10% each year. The other
Central American countries (each with its own minimum quota level) would establish
a regional TRQ of 21,810 MT in the first year, which would rise slowly through year
12. Beginning in year 13, the TRQ would be not less than 5% of regional chicken
output. The Dominican Republic agreed on an initial TRQ for leg quarters of 550
MT, growing by 10% annually. All countries’ tariffs on other poultry products (e.g.,
wings, breast meat, and mechanically de-boned chicken) would be reduced at a faster
pace, with many eliminated within 10 years.
The Dominican Republic would also establish separate TRQs for mechanically
de-boned chicken (phased out over 10 years) and for turkey products (with a 15-year
phase-out).
Dairy Products. The National Milk Producers Federation, the U.S. Dairy
Export Council, and the International Dairy Foods Association support DR-CAFTA.
They view this agreement as providing an opportunity to export more U.S. dairy
products to the region on a duty-free basis while minimizing imports from these
countries. The dairy industry notes that U.S. export access to the six countries offsets
the market access that U.S. negotiators granted to Australia (a major dairy exporter)
under that FTA.19 The agreement’s provisions largely reflect the outcome of
discussions held between representatives of the U.S. and Central American dairy
sectors. The longest transition period to free trade in DR-CAFTA applies to dairy
products traded in both directions, with provisions structured to provide nearly
reciprocal access in the amounts traded between the U.S. and the five Central
American countries during the 20-year period. U.S. dairy exporters, though, receive
more access to the Dominican Republic market than the other way around. The U.S.
dairy sector points out that the agreement’s declining tariffs and preferential quotas
will improve U.S. competitiveness vis-a-vis the European Union, New Zealand, and
Canada, which also sell to these countries.
For each country, DR-CAFTA would create duty-free TRQs for six dairy
products: cheese, milk powder, butter, ice cream, fluid milk and sour cream (U.S.
only), and other products. High over-quota tariffs and safeguards (imposed when
imports exceed specified volumes) are phased out over the 20-year transition. Quota
amounts agreed upon by negotiators differ by country and by type of product.
19 The NMPF is the trade association that represents dairy farmers and their marketing
cooperatives. The USDEC’s objective is to help promote dairy exports by helping member
firms increase sales or reduce their costs of doing business. Its membership includes milk
producers, dairy cooperatives, proprietary processors, export traders and industry suppliers.
IFDA advocates on behalf of the dairy foods industry on domestic and international dairy
policies, and represents dairy food manufacturers, marketers, distributors and industry
suppliers in the United States, Canada, and other countries.

CRS-15
The United States receives quota access in the six markets combined in year 1
for almost 10,100 MT of dairy products. Quotas in the Central American countries
would expand by 5% each year; those in the Dominican Republic would increase by
10% annually. For non-quota products, the United States gains immediate duty-free
access in these markets for whey and lactose. From 2000 to 2004, U.S. dairy exports
(some products subject to quotas, others not) to the six countries averaged 20,700
MT ($52 million) annually, according to USDA.
In return, the six countries together would receive in year 1 duty-free quota
access to the U.S. market for over 6,800 MT of specified dairy products. U.S. quotas
would each year grow by 5% for the Central American countries, and by 10% for the
Dominican Republic. In 2000-2004, U.S. dairy imports from these six countries
totaled an annual average of 18,290 MT (valued at $7.4 million).
Sugar. The new preferential quotas offered by the United States for sugar from
the six countries are in addition to the minimum level of duty-free access they already
have to the U.S. market. Together, they are allowed to sell each year a minimum of
311,700 MT of raw cane sugar under their respective shares of the U.S. sugar import
quota. This represents 28% of the 1.117 million MT market access commitment that
the United States has entered into with some 40 countries around the world. Under
DR-CAFTA, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the
Dominican Republic each would each receive varying levels of duty-free access for
a combined additional 109,000 MT of sugar in year 1 — a 35% increase over their
current level. Increasing on average about 3% per year, by year 15, these countries
would have access for an additional 153,140 MT of sugar in the U.S. market above
the 2004/05 current level. Thereafter, their preferential quotas combined would
increase by almost 2% (2,640 MT) annually in perpetuity. The U.S. over-quota tariff
(calculated by the ITC to be 78% in 2003) would stay at the current high level
indefinitely, and not decline. Negotiators agreed upon a “compensation” mechanism
that the United States can exercise at its sole discretion in order to manage U.S. sugar
supplies. If activated, the United States commits to compensate the six countries for
sugar they would not be able to ship to the U.S. market under the above market
access provisions.
The U.S. sugar industry (producers of sugar beets and sugarcane and processors
of their crops) opposes DR-CAFTA, claiming that the additional sugar imports
allowed under its provisions combined with those envisioned in additional FTAs
being negotiated “will destroy the domestic sugar industry ... and overwhelm an
already abundantly supplied market.” The industry has continually advocated that
sugar trade issues be instead addressed multilaterally in the WTO trade negotiations.
Its membership wrote to President Bush (January 14, 2004), and the lead U.S.
agricultural trade negotiator (March 23, 2004), to restate its opposition and to request
that the Bush Administration reconsider the sugar access commitments offered the
Central American countries, and withdraw the access commitment granted to the
Dominican Republic.20
20 American Sugar Alliance, “U.S. Sugar Industry Rejects Proposed CAFTA; Favors WTO,”
December 17, 2003; “U.S. Sugar Industries Letter to President Bush Regarding Opposition
(continued...)

CRS-16
In response, the USTR has pointed out that the additional access granted all six
countries will equal about 1.2% of current U.S. sugar consumption in year 1, and
1.7% in year 15.21 The Trade Representative has continued to argue that the sugar
sector will be protected by the sugar compensation mechanism, a prohibitive tariff
on above-quota imports, and the prohibition on third-country transshipments of sugar
through any of the six countries to the U.S. market.
The Sweetener Users Association (SUA), composed of industrial users of sugar
and other caloric sweeteners and the trade associations that represent them, supports
the DR-CAFTA. It argues this agreement will enhance competition in the U.S. sugar
market, increase export opportunities for other U.S. food and commodity sectors in
the six countries, and have a positive employment effect on the U.S. confectionery
and other sugar-using industries by reducing incentives for them to relocate offshore
to take advantage of lower-priced world sugar.22 The International Dairy Foods
Association and the National Confectioners Association similarly favor the
agreement, because of the access provided for additional imports of sugar.
Responding to the ITC’s analysis of the DR-CAFTA’s impact on the U.S. sugar
sector (see page 10), the American Sugar Alliance (ASA), speaking for producers and
processors, stated it “seriously underestimates the danger of the [agreement] for our
industry.” The ITC report, according to the ASA, did not take into account the U.S.
commitment under NAFTA to allow free access to sugar imports from Mexico
starting in 2008 and potential obligations to open the U.S. sugar market to imports
from other sugar-exporting countries with which the United States is negotiating free
trade agreements. Sugar import obligations in addition to those in CAFTA, ASA
argues, would cause lower prices, more bankruptcies, and lost jobs. The Sweetener
Users Association responded that the ITC’s projections “appear to be overstated” —
by not considering the additional demand for sugar created by U.S. population
growth over time and USDA’s authority to limit the amount of domestic sugar that
can be marketed to ensure that no change in domestic prices occurs.
Possible Deal? The prospect that there might not be enough votes to approve
the Administration’s draft bill to implement DR-CAFTA during its “mock markup”
by the Senate Finance Committee on June 14, 2005, prompted a commitment by
Secretary of Agriculture Johanns to sit down with Members to discuss their concerns
about the agreement’s sugar provisions. Members of the House and Senate from
districts and states where sugar crops are grown subsequently met with USDA and
White House officials to discuss options. Proposals presented by some Members on
20 (...continued)
to CAFTA,” January 14, 2004, at [http://www.sugaralliance.org/desktopdefault.aspx?page_
id=110].
21 USTR, “Sugar: A Spoonful A Week,” February 2005 (available at [http://www.ustr.gov/
assets/Trade_Agreements/Bilateral/CAFTA/Briefing_Book/asset_upload_file923_7210.
pdf]).
22 ITC, Hearing on the U.S. Free Trade Agreement with Central America and the Dominican
Republic: Potential Economywide and Selected Sectoral Effects, April 27, 2004, “Statement
of Thomas Earley for the Sweetener Users Association before the U.S. International Trade
Commission,” p. 4.

CRS-17
behalf of the sugar producers and processors reportedly included (1) earmarking the
additional sugar imported under DR-CAFTA and any future trade agreements for the
production of ethanol by U.S. sugar processors, to be subsidized by the federal
government, (2) an immediate resolution of the ongoing trade dispute about Mexican
sugar access to the U.S. market, and (3) a commitment to continue the current
features of the sugar program.23
On June 22, USDA Secretary Johanns responded with a proposal to Members
that would have USDA administer the domestic sugar program through FY2008
(when current authority expires) so that total U.S. sugar imports would never exceed
1.532 million short tons. This is the statutory level that triggers the suspension of
“marketing allotments” — a mechanism agreed to by sugar processors to limit sales
of domestically-produced sugar to ensure that the total supply of sugar available to
meet domestic demand does not result in market prices falling below effective
support levels. Should allotments be triggered, the sugar industry argues that the
stocks of sugar they would be free to release into the market, when added to the
additional imports, would depress prices low enough to result in USDA acquiring
sugar as price support loans came due. This would result in program outlays and
USDA not being able to meet the “no-cost” objective called for by the 2002 farm
bill.24
To keep imports below the trigger level, USDA proposes to donate surplus
commodities in its inventories or make cash payments to compensate sugar exporters
in Central America or Mexico for sugar they would not ship to the U.S. market under
DR-CAFTA’s and NAFTA’s terms. The commitment would reportedly extend only
through the end of current sugar program authority (the 2007 crop, or FY2008).25
Reactions by Members are mixed, with some interested and others remaining
opposed. The U.S. sugar industry responded that “there is no sugar deal that
addresses their concerns,” and vowed to continue efforts to defeat CAFTA.26
Cotton. The National Cotton Council of America (NCC) on May 10, 2005,
announced it will now support DR-CAFTA. Because NCC’s diverse membership
includes cotton producers, ginners, cottonseed handlers, warehousers, merchants,
cooperatives, and textile manufacturers, the organization’s position reflected a shift
in an earlier consensus reached among all of these interests. The resolution adopted
states that the agreement “should provide the United States the best opportunity to
supply apparel manufacturers and other end-use manufacturing industries in the
23 The Times-Picayune, “Sugar industry offers deal to end standoff over CAFTA,” June 16,
2005; PalmBeachPost.com, “Ethanol subsidy can’t woo sugar to accept CAFTA,” June 17,
2005.
24 For more information, see CRS Issue Brief IB95117, Sugar Policy Issues.
25 Inside US Trade, “Administration isolates sugar industry on CAFTA, sets stage for vote,”
June 24, 2005, pp. 1, 18-19; Washington Trade Daily, “Bush submits CAFTA Final Bill,”
June 24, 2005.
26 Congress DailyAM, “Sugar-state lawmakers not so sweet on latest CAFTA offer,” June
24, 2005; U.S. Sugar Industry, “There is no CAFTA sugar deal,” statement issued June 23,
2005.

CRS-18
western hemisphere” with U.S. cotton fiber and U.S. produced cotton textile
products. The NCC also urged the Administration to address the U.S. cotton
industry’s trade priorities, seeking in particular action on increased textile
competition (e.g., from China). The council initially opposed DR-CAFTA and had
called upon Congress to defer considering the agreement until its textile provisions
were “thoroughly reviewed and significantly improved.” The NCC’s reversal
followed the decision of the National Council of Textile Organizations (NCTO) on
May 5, 2005, to support DR-CAFTA.27
Though the NCC favors reciprocal liberalization in cotton fiber trade, it has
pointed out that textile and apparel provisions in trade agreements can have “as much
or more of an impact” on the domestic cotton sector than simply their agricultural
provisions. In FTA negotiations to date, the NCC has sought NAFTA-type rules-of-
origin that directly benefit U.S. textile workers and firms as well as those in FTA
partner countries, but not those in third countries. For the most part, NAFTA rules
require that the cotton used in yarn (the fiber-forward rule) and the yarn used in
cotton textiles (the yarn-forward rule) must originate in the United States or in the
partner country for the product to qualify for preferential trade treatment. Any
relaxation of such rules of origin, the NCC argues, opens the U.S. cotton and textile
sectors “to unfair, unbridled competition” from third countries that transship textile
goods through a FTA partner country to take advantage of its duty-free access to the
U.S. market. Because of its less restrictive rules of origin, the NCC opposes the DR-
CAFTA — referring to tariff preference levels (TPLs) and “cumulation” provisions
for NAFTA-origin textiles that would allow third-country textile products to qualify
for preferential treatment.28
Beef. Cattlemen are divided on DR-CAFTA. The Ranchers-Cattlemen Action
Legal Fund (R-CALF) opposes DR-CAFTA, arguing the trade agreement “does not
provide balanced rights for US cattle producers.” The National Cattlemen’s Beef
Association (NCBA) supports the agreement.
Under DR-CAFTA, the five Central American countries would immediately
eliminate their tariffs on imports of U.S. prime and choice cuts of beef, an objective
sought by the U.S. beef industry. All countries would phase out tariffs on imports
of all other beef products in 5, 10, or 15 years. Certain countries’ tariff reduction
schedules are backloaded for the more sensitive beef products, meaning most of the
tariff reduction is delayed until the last few years of the transition period. The
27 The NCTO is a fairly new lobbying association, established in March 2004 to represent
the fiber, fabric, supplier and yarn industries that comprise the textile sector.
28 NCC, “Trade Policy Issues,” presentation made at 2004 Mid-Year Board Meeting, August
26, 2004 (available at [http://www.cotton.org/events/board/2004midyear/trade.cfm]);
Woody Anderson, NCC Chairman, testimony to House Committee on Agriculture, May 19,
2004, in Agricultural Trade Negotiations (Serial No. 108-29), pp. 160-161. TPLs grant
tariff preferences to quantities of specified types of third-country (“non-originating”) fabric
used to produce finished textile products for export duty free to the United States.
Cumulation allows certain apparel to contain woven fabrics from Canada and Mexico up to
a specified cap and still qualify for duty-free access. For additional background, see CRS
Report RS22150, DR-CAFTA, Textiles, and Apparel.

CRS-19
Dominican Republic, El Salvador, and Guatemala would create duty-free TRQs for
other beef cuts totaling 2,265 MT in year 1, which would expand slowly to equal
4,110 MT in the year just before quotas are completely eliminated. In 2004, U.S.
sales of beef to all six countries totaled 1,134 MT (valued at $4.2 million). USDA
notes that all six countries are working to recognize the U.S. meat inspection and
certification systems so as to facilitate U.S. exports.
The United States would create separate duty-free TRQs for beef imported from
all countries except Guatemala. Currently, the U.S. tariff on such imports is 26%.
In year 1, the quotas would total almost 23,000 MT, rising slowly each year to 37,962
MT before eliminated in year 15. U.S. beef imports from Nicaragua (the leading
supplier in the region), Costa Rica, and Honduras totaled 31,258 MT (almost $82
million) last year.
In elaborating on its position, R-CALF points out there are no safeguards for
U.S. beef imported from the region, while two countries are allowed to impose
special safeguards against U.S. beef exports. It is concerned also that the rule of
origin for beef imports could allow cattle born and raised in Argentina and Brazil but
slaughtered for meat in Central America to qualify for preferential tariff treatment
when sold to the U.S. market. Though R-CALF acknowledges that the United States
obtains immediate duty-free access for prime and choice beef cuts, its spokesman
states that demand in the six countries for these products is limited because the
region is a small market and many consumers cannot afford such cuts.29
The NCBA argues that DR-CAFTA levels the playing field by eliminating the
15%-30% applied tariffs that U.S. beef exports now face in the region while
providing for adequate protections. It points to the long transition periods,
safeguards, and the stipulation that country-specific beef TRQs can be filled only
after the U.S. beef TRQ under its WTO commitment is filled.30
29 “R-CALF USA Joins National Grassroots Coalition Opposing CAFTA,” January 27, 2005
(available at [http://www.r-calfusa.com/News%20Releases/012705-r-calf.htm]). R-CALF
(with a claimed membership of over 12,000) represents cattle producers on domestic and
international trade and marketing issues. R-CALF is a fairly new trade association (founded
in 1998 to pursue three trade cases) but has taken a more skeptical approach to the Bush
Administration’s trade policies. It generally has offered “populist” policy views that tend
to diverge from those advocated by the National Cattlemen’s Beef Association (see footnote
27).
30 NCBA, “U.S.-Central America-Dominican Republic Free Trade Agreement Beef
Backgrounder,” January 25, 2005 (available at [http://hill.beef.org/pdfs/CAFTA-DRFact
Sheet.pdf]). The NCBA with a claimed membership of 230,000 cattle producers, breeders,
and feeders advocates policy positions and economic interests on behalf of farmers and
ranchers and 40 national breed and industry organizations. NCBA has been the traditional
“main line” trade association representing the interests of U.S. cattle producers for over 100
years, and historically has been supportive of efforts to expand two-way trade and “free
trade” generally.

CRS-20
General Farm Organizations
The American Farm Bureau Federation (AFBF) backs DR-CAFTA, stating that
U.S. agriculture has much to gain. In an economic analysis of its agricultural
provisions, the AFBF projects that the agreement will result in an estimated net gain
of $1.44 billion for U.S. agricultural trade once fully implemented in 20 years. In
2024, it projects U.S. agricultural exports to the six countries (including the
Dominican Republic) will be $1.52 billion higher than under a continuation of
current trade policy. Its analysis acknowledged the U.S. sugar industry will
experience costs as a result of the increased access to the domestic sugar market
granted to these countries — by $81 million in year 20.31 Four state-level farm
bureaus (Colorado, Louisiana, North Dakota, and Wyoming) reportedly oppose DR-
CAFTA, largely because members in these sugar-producing states have strong
concerns on the agreement’s sugar provisions.
The National Farmers Union (NFU) opposes the agreement, stating that CAFTA
“offers few benefits” to U.S. farmers and “will adversely impact domestic producers
of sugar, fruit, vegetable, dairy and other commodities.” The NFU claims that
CAFTA does not address exchange rate issues, and labor and environmental
standards, and argues that the agreement’s “proponents overestimate [its] potential
benefits,” ignoring the fact that the six countries “represent small populations with
low purchasing power.”32
Trade Advisory Committees
On March 22, 2004, USTR made public the reports of the trade advisory
committees laying out their positions and views on CAFTA. Authorized by the
Trade Act of 1974, these committees provide the views of the private sector to USTR
on trade and trade policy matters, and serve as a formal mechanism through which
the U.S. Government seeks advice during trade negotiations. The Agricultural Policy
Advisory Committee’s opinion is that CAFTA “will improve opportunities for U.S.
agricultural exports” by providing for “eventual duty-free, quota-free access on
essentially all products.” Most of the commodity-oriented agricultural technical
advisory committees (ATACs) for trade favor the agreement, pointing out the
benefits associated with increased market access in the region.
31 AFBF, Implications of a Central American Free Trade Agreement on U.S. Agriculture,
March 2004 (available at [http://www.fb.org/issues/cafta/DR-CAFTA-Report-Final.pdf]).
The AFBF is a “main line” farm organization representing farmers and ranchers across the
country with a claimed membership of five million (agricultural producers and also rural
residents).
32 “National Farmers Union Opposes CAFTA,” December 19, 2003 (available at
[http://www.nfu.org/newsroom_news_release.cfm?id=1143]); “CAFTA Will Hurt American
Farmers and Ranchers,” April 11, 2005 ([http://www.nfu.org/newsroom_news_release.
cfm?id=1292]). The NFU is a “populist” farm organization with a claimed membership of
nearly 250,000 farm and ranch families throughout the country. Its membership is
concentrated in the upper Midwest.

CRS-21
The sweeteners ATAC reported mixed views. Sugar industry representatives
expressing the majority opinion oppose the increased access to the U.S. market the
five countries receive for their sugar, pointing out its effects on U.S. sugar producers
and the threat posed to the domestic sugar program. The sugar users in the minority
support the agreement, acknowledging the “modest but meaningful improvement”
in Central American sugar access. These committees issued separate reports on the
agricultural provisions in the FTA with the Dominican Republic on April 23, 2004.33
Outlook
Because full implementation of the DR-CAFTA would result in a reciprocal
trading relationship, a large portion of the U.S. agricultural and food sectors would
benefit slightly from expanding exports over time as the six countries eliminate their
tariffs and quotas on practically all U.S. commodities and food products. The
projected increase would represent a very small share (one-half of 1%, according to
the ITC) of total U.S. agricultural exports to the world. This outcome largely reflects
the small population of the six countries (a combined 44 million in 2003) and low per
capita incomes when contrasted to the much larger markets in Asia where average
incomes are higher and agricultural import demand is growing rapidly. At the same
time, the market openings granted these countries could place additional pressure on
the U.S. sugar and cotton/textile sectors. Fearing what increased competition from
additional imports might mean for their business outlook, sugar and cotton/textile
interests are lobbying Congress to defeat or to modify this agreement.
Of more interest to the U.S. agribusiness sector might be the agreement’s
investment provisions — structured to give U.S. investors in the region a predictable
legal framework and equal treatment with local investors, protections for all types of
investment, and transparent procedures for handling disputes. Accordingly, some
U.S. food manufacturers may take advantage of lower input and labor costs to
establish food processing plants to supply the regional market as well as to export
(e.g., Hispanic food products) to the U.S. market.
The congressional debate has created divisions within the U.S. agricultural
sector between commodity groups that expect to gain from DR-CAFTA and those
which foresee losses. Whether this tension is short-lived or continues beyond the
debate on this one issue will depend on whether the Bush Administration includes
comparable openings affecting these same sensitive sectors in other FTAs (e.g.,
Andean, Panama, Southern African Customs Union, Thailand) currently being
negotiated. Recognizing this, U.S. trade negotiators are likely to craft these other
bilateral free trade agreements acknowledging the political realities involved in
securing congressional approval. This means translating potential agricultural export
gains in a trade agreement into a bloc of supportive congressional votes. It also
suggests that USTR’s negotiating strategy must incorporate limiting U.S. trade
33 The CAFTA-related reports can be viewed at [http://www.ustr.gov/Trade_Agreements/
Bilateral/CAFTA/ CAFTA_Reports/ Section_Index.html]. The DR FTA-related reports are
available at [http://www.ustr.gov/Trade_Agreements/Bilateral/CAFTA/DR_Reports/Section
_Index.html].

CRS-22
concessions on U.S. sensitive agricultural commodities in order to minimize the
number of congressional “no” votes on a concluded free trade agreement.
Most observers acknowledge that securing a majority in both the House and
Senate for DR-CAFTA is problematic at present, in large part due to opposition by
the sugar sector and some segments of the textile sector. Consequently,
Administration officials faced a dilemma. Should they press ahead, submit this
agreement to Congress under trade promotion rules (which only allow for limited
debate, and a floor vote without any amendments), and work to cut deals to line up
the necessary votes to make a majority? Or, should they consider making some
changes to the sugar and textile provisions sufficient to yield enough “yes” votes to
win approval? As precedent for the latter course of action, the Clinton Administration
negotiated last-minute changes in November 1993 to NAFTA’s sugar and orange
juice provisions in order to secure enough votes for House passage. U.S. trade
officials, though, have signaled their reluctance to consider this option, for fear of
unraveling the overall DR-CAFTA package. Though the Administration made
commitments to some Members to address certain textile issues, it has chosen to
generally pursue the former option with the President’s decision to forward the final
implementing bill to Congress. H.R. 3045/S. 1307 do not contain any provisions, for
example, detailing the sugar compensation provision, though this issue still is under
discussion between the Administration and some Members.
A similar debate also has already occurred, or will soon occur, in each of the
legislative chambers of the six countries, as their commodity and related groups seek
to influence whether DR-CAFTA is approved or not. To date, the legislatures of El
Salvador, Guatemala, and Honduras have approved the trade agreement. The debate
in Guatemala was marked by street clashes, before and after the vote, in which small
farmers with others joined in calls for a public referendum on the agreement.
The six countries’ agricultural sectors would, in the aggregate, gain little from
this agreement, according to the ITC’s analysis, since almost all exports to the U.S.
market would continue to benefit from duty-free access that they already receive
under U.S. trade preference programs. What would change is that the agreement
makes this duty-free access permanent and sets into motion a process that in 15-20
years gives these countries unrestricted access to the U.S. market for all sensitive
commodities (except sugar) now subject to U.S. agricultural tariff-rate quotas. The
expanding quotas reserved for these countries would benefit sugar processors in the
region, and, to a lesser extent, exporters of beef and dairy products, that seek to sell
to the U.S. market.
Commercial farmers that produce — and agribusiness firms that process —
sugar, beef, dairy products and non-traditional products with export potential (e.g.,
fruits and vegetables) generally support DR-CAFTA. Subsistence farmers of staple
crops and citizen groups concerned with the trade agreement’s impact on rural,
primarily agricultural, areas, though, fear that the gradual removal of quotas (even
with the safeguard provisions available during the long transition to free trade) will
not sufficiently protect their livelihood and result in families moving to urban areas
in search of employment. Representatives reflecting the views of these constituents

CRS-23
in their national legislatures plan to work to defeat the DR-CAFTA when submitted
for consideration.34
Also not yet clear is the extent to which the governments of the six countries
have, or might be willing to dedicate, financial and technical resources to assist
subsistence and small farmers, and rural areas dependent on agriculture, adjust to
possible adverse consequences of increased imports of staple commodities from the
United States. Another issue that may arise is whether the United States would direct
some resources from its foreign aid program in the region to help producers adversely
affected by the agreement’s agricultural provisions to adjust. Another approach
would be to expand upon efforts to assist interested producers and entrepreneurs to
explore opportunities to increase food exports to neighboring country and U.S.
markets. Also, some Central American leaders view the textile provisions of DR-
CAFTA as necessary to keep their textile and apparel sectors viable against Chinese
competition in the U.S. retail market and to absorb the movement of labor out of the
agricultural sector.35
34 To illustrate, an initiative was launched in September 2004 by sugar cane producers and
processors to protect the Dominican Republic’s sugar sector. Their proposal called for the
imposition of a 25% tax on soft drinks sweetened with imports of U.S. high-fructose corn
syrup (HFCS). The President accepted this reluctantly in order to secure legislative passage
of a fiscal package to address International Monetary Fund stipulations for the release of
financial assistance (see CRS Report RS21718, Dominican Republic: Political and
Economic Conditions and Relations with the United States
). In response, U.S. trade
officials warned that if the Government did not eliminate this tax, the Dominican Republic
portion of the free trade agreement would be dropped when submitted to Congress and
began to take administrative steps in that direction. Some members of Congress, the
American Farm Bureau Federation, corn producers, and HFCS manufacturers also signaled
they would not support the country’s inclusion in CAFTA unless this tax was removed. In
a policy reversal, the Dominican Republic’s lower chamber voted to repeal this tax on
December 27, 2004, and the President signed this measure into law the next day.
35 CRS Report RL32322, Central America and the Dominican Republic in the Context of the
Free Trade Agreement (DR-CAFTA) with the United States
, pp. 34, 45, 55, 65-70;
Washington Office on Latin America, Fair Trade or Free Trade: Understanding CAFTA,
July 2004, pp. 1, 4-5 (available at [http://www.wola.org/economic/briefs_ complete_packet_
july04.pdf]); HondurasThisWeek Online, “CAFTA: Free Trade or Trading Off,” December
27, 2004 (available at [http://www.marrder.com/htw/2004dec/national.htm]).