President Bush today signed the Dominican Republic-Central America-United States Free Trade Agreement ("CAFTA-DR").  The trade pact, involving the United States, the Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua, is designed to eliminate barriers to trade and investment among member countries.

The President's signature follows an extended and oftentimes heated congressional approval process.  Powerful lobbying groups engineered a vigorous campaign against passage.  U.S. labor unions argued that the absence of worker protections in the trade pact would further erode the condition of U.S. and Central American workers and encourage U.S. companies to export jobs.  The U.S. sugar and textile industries expressed strong opposition to the agreement because of a potential flood of cheap goods into the United States.  Proponents countered that 70 to 80 percent of imports from the CAFTA-DR partner countries already enter the United States duty-free, that the agreement would open markets for U.S. exports, and that it was necessary to stave off further inroads into the region by China.  Certain supporters in the Congress and in the Administration also argued that passage of CAFTA-DR was a national security issue, encouraging the economic growth and political stability of democracies in the region.  Although the volume of trade at issue is relatively small, passage of the trade pact was thought to have broader implications as a barometer for U.S. passage of other larger and strategically important free trade agreements. 

Because passage was doubtful, the measure was never put to a vote during the 108th Congress.  It appeared that the chances for approval improved only marginally as a result of Republican gains in the 109th Congress, and that passage of the agreement would hinge on the involvement of the Administration in general and President Bush in particular.  In the end, on June 30, 2005 the Senate approved the trade agreement by a vote of 54 to 45.  Following intense lobbying by opponents and proponents, pressure from the Administration and Republican leaders, concessions to certain key Members, and finally an unusually long voting period, the measure was approved by the House by a vote of 217 to 215 early on Thursday July 28. 

The legislatures of Honduras, Guatemala and El Salvador have already approved the trade agreement.  Now that the United States has completed the approval process, the agreement will enter into force with respect to the United States and those countries on an agreed upon future date.  The remaining CAFTA-DR partner countries - Nicaragua, the Dominican Republic and Costa Rica -will have two years to ratify the agreement.

For further information, please contact Judith A. Lee at (202) 887-3591 or Andrea F. Farr at (202) 955-8680 in the Washington, D.C. office of Gibson, Dunn & Crutcher LLP.

© 2005 Gibson, Dunn & Crutcher LLP