Continuation of the report issued by the Council on Hemispheric Affairs:

Contrary to initial promises, DR-CAFTA has largely failed to expand Central American export markets, instead bolstering imports from the US to the region. In fact, Central American countries were better off prior to DR-CAFTA. Before this new deal was signed, 80 percent of Central American exports already entered the US duty-free under existing agreements including the Caribbean Basin Initiative, which was implemented in 1984. Under this previous initiative, Central American countries maintained tariffs on many US imports to prevent goods from flooding domestic markets and paralyzing the growth of nascent industries in the region. However, in a push to implement DR-CAFTA, the Bush administration threatened Central American governments with the removal of existing trade preferences, thus strong-arming them into signing an agreement that was not truly in their best interests. Despite rhetoric about DR-CAFTA’s benefits to Central America, the accord was in fact designed to remove the region’s existing protective tariffs, “leveling the playing field” to give the US significantly more access to Central American markets.

Upon implementing DR-CAFTA, Central American governments removed all tariffs on 80 percent of US industrial goods and most agricultural products. United States Trade Representative Robert B. Zoellick enthusiastically pointed out that “small countries can be big export markets for the United States,” and went on to say that “CAFTA will expand opportunities for US exports in everything from construction equipment to high-tech software, from fruits and vegetables to financial services.” Indeed, many Central American countries have seen imports from the U.S. grow dramatically since the implementation of DR-CAFTA. In 2006, imports to El Salvador from the United States jumped 16.7 percent, turning the country’s previous trade surplus of $118 million into a deficit of over $286 million. Likewise, in Honduras and Guatemala, trade deficits with the U.S. multiplied by two and three times in the first year after DR-CAFTA’s implementation. Not surprisingly, these uneven trade balances are causing negative repercussions in a number of Central American and Caribbean countries, and consequently lowering the standard of living across the region.