CaCU granted free trade access throughout the region for 99.9% of Central American products (excluding sugar and unroasted coffee for the region). The harmonised common duty rate so far amounts to 97% of Central American products. Central America introduced a common timetable for external tariffs in 1998. The six countries signed a revised Protocol on Economic Integration and Macroeconomic Coordination in October 1993. The Integration Protocol allows Central American countries to move at different speeds towards more open trade. The trade part of the Association Agreement will replace the unilateral preferential market access granted to Central America under the EU`s Generalised System of Preferences. The EU and the Central American region concluded a new Association Agreement on 29 June 2012. The Association Agreement is based on three complementary and equally important pillars, namely political dialogue, cooperation and trade, which are mutually reinforcing and have their impact. They are the right tools to support economic growth, democracy and political stability in Central America. In February 2015, Honduras and Guatemala signed a bilateral agreement to create a customs union to remove trade barriers, reduce costs and speed up the movement of goods throughout the region. This single customs territory has created central border crossing points to ensure the rapid movement of goods and cross-border controls of goods not subject to free movement. El Salvador also negotiated its accession to the customs union in 2018.
In June 2019, Nicaragua expressed interest in joining the customs union. The Honduran trade regime is relatively open, with an average tariff rate of about 6% in 2012 (relatively stable at this rate for more than 10 years), modest use of non-tariff barriers and the absence of emergency measures. Agricultural products are subject to an average tariff of 10.5%, while the average tariff for non-agricultural products was 5.0%. Dairy products are subject to a relatively high average applied tariff of 22.5% and some animal products are subject to a high maximum tariff of 165%. Honduras not only has free trade agreements with Colombia, Mexico, Chile, Taiwan and Panama, but it also participates in the Central American Common Market (CACM), which also includes Guatemala, El Salvador, Nicaragua and Costa Rica. As a member of the CACM, Honduras applies a Common External Tariff (CET) of up to 15% to most items, with a few exceptions. In addition, the MCAC concluded free trade agreements with the United States and the Dominican Republic (CAFTA-DR) in 2004 and concluded a free trade agreement with the EU in 2011. The implementation of these free trade agreements has led to the modernization and liberalization of the country`s trade and investment systems. (WTO, 2012). Free trade negotiations between the United States and the five Central American countries began in 2002.
The Dominican Republic participated in the discussions in 2003. CAFTA-DR was signed by all countries on 5 August 2004. The agreement was approved by the U.S. Congress in July 2005 and signed by President George W. Bush on August 2, 2005. In 2007, all signatories, with the exception of Costa Rica, announced the agreement. In Costa Rica, support has lagged behind due to strong opposition from a large number of civil society organizations and trade unions. Costa Rican voters approved the agreement in a national referendum in 2007; it entered into force in January 2009.
In general, CAFTA-DR divided Central Americans into two camps: peasants, workers, and indigenous groups strongly opposed it, while businesses and governments believed it would attract more foreign investment and promote economic growth. The trade pillar of the Association Agreement has been provisionally applied with Honduras, Nicaragua and Panama since 1 August 2013, with Costa Rica and El Salvador since 1 October 2013 and with Guatemala since 1 December. Describes the trade agreements in which this country is involved. Provides resources for U.S. companies to obtain information on the use of these agreements. Free Trade Agreement between Central America and the Dominican Republic (CAFTA-DR), a trade agreement signed in 2004 to phase out most tariffs, tariffs and other barriers to trade in goods and services between the countries of Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua and the United States. It was the first free trade agreement between the United States and a group of developing countries. Essentially, the pact aimed to provide the United States with better market access and promote economic growth in Central American countries and the Dominican Republic through increased direct investment and export diversification. According to EUROSTAT`s date, trade flows between the EU and Central America amounted to €12 billion in 2019.
The EU`s trade balance with Central America shows a surplus of 0.4 billion in 2019. (the previous year there was a surplus of €0.1 billion). THE DCFTA-DR, which came into force in 2006, replaced the former Caribbean Basin Initiative and the subsequent trade benefits of the Caribbean Basin Economic Recovery Act. CAFTA-DR liberalized bilateral trade between the United States and the region and fostered integration efforts among Central American countries by removing trade and investment barriers for U.S. companies in the region. DCFTA-DR requires countries to implement the necessary reforms to mitigate systemic problems in areas such as customs administration; protection of intellectual property rights; market access and protection of services, investments and financial services; public procurement; sanitary and phytosanitary (SPS) barriers; and other non-tariff barriers. The main provision of the DCFTA-DR was to remove some tariffs immediately and others over periods of 15 to 20 years. Tariffs on more than half of U.S. agricultural exports were abolished when the agreement went into effect.
Major U.S. exports to DCFTA-DR countries included petroleum products, machinery, grain, plastics, and medical devices. Significant U.S. imports included coffee, sugar, fruits and vegetables, cigars, and petroleum products. Other provisions of THE DCFTA-DR have been developed to give the United States better access to Central American markets in the banking, telecommunications, media, insurance and other services sectors, as well as to purchases by the governments of Central America and the Dominican Republic. The trade agreement included measures to ensure transparency and efficiency of all transactions, as well as to protect workers` rights and the environment. The Republic of Honduras is a low- and middle-income country facing major challenges: more than two-thirds of the country`s population lives in poverty and about 46% in extreme poverty. Honduras ranked 78th out of 132 countries in the World Economic Forum`s (WEF) Enabling Trade Index (2012), which measures institutions, policies and services to facilitate trade in countries. The Honduran trade regime is very open.
Worldwide, the country`s exports have very good access to foreign markets. In return, the country is open to imports; However, due to a poor business environment (especially cumbersome and time-consuming bureaucratic regulations) and the poor performance of key tradable infrastructure services, foreign trade activities are significantly hampered. .
