How will CAFTA impact integration?
The CAFTA-DR free trade agreement is modeled after similar U.S. free trade agreements with Chile and Singapore, and the United States is currently negotiating similar bilateral agreements with Colombia, Ecuador, Panama, and Peru. Although the region already has preferential access to the U.S. market under the Caribbean Basin Initiative, CAFTA-DR will make this access permanent, providing greater predictability for both domestic and foreign investors. In addition, CAFTA-DR provides enhanced market access to the United States, including reduced local content requirements. And it goes substantially beyond trade to include investment flows, financial and government services, and provisions that will strengthen the institutional framework in the region, including property rights. Trade agreements similar to CAFTA-DR are relatively recent and, therefore, empirical evidence to analyze the impact of such agreements is scant. Nevertheless, Mexico’s experience under the North American Free Trade
