U.S. Proposal to Initiate Free Trade Negotiations with the Dominican Republic
Statement by Mark Smith on behalf of the U.S. Chamber of Commerce
and the Association of American Chambers of Commerce in Latin America
October 8, 2003
Introduction
On August 4, the Office of the U.S. Trade Representative announced its intent to initiate free trade negotiations with the Dominican Republic. In a formal letter of notification to the Congress, U.S. Trade Representative Robert B. Zoellick wrote that he expected "these negotiations to get underway in January 2004."
He added:
Through these negotiations, we expect to provide for essentially the same disciplines as those in the free trade agreement [FTA] we are currently negotiating with the five member countries of the Central American Economic Integration System (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua, hereinafter "Central America"), and to negotiate specific market access commitments with the Dominican Republic. Recognizing the benefits of strengthening the economic ties among the Dominican Republic, Central America, and the United States, we will seek to integrate the Dominican Republic into the agreement that we are currently negotiating with Central America. We would then work to present the Congress one FTA covering both the Dominican Republic and Central America, provided this would not delay enactment of the Central American agreement.
The U.S. Chamber of Commerce and the Association of American Chambers of Commerce in Latin America (AACCLA) welcome the substance of the announcement as well as the general approach of this new initiative to bring the Dominican Republic into the U.S.-Central America FTA negotiations, which are already well advanced. The U.S. Chamber and AACCLA have long advocated free trade between the United States and the countries of Latin America and the Caribbean through the Free Trade Area of the Americas (FTAA) negotiations. Our two organizations were also among the most active in efforts to shape the U.S.-Chile FTA and to secure its approval by the U.S. Congress, and we intend to be just as active with regard to the U.S.-Central America FTA as its scope is expanded to include the Dominican Republic.
The scale of the trade flows that this initiative aims to liberalize is already impressive. The Dominican Republic and the five countries taking part in the U.S.-Central America FTA negotiations together constitute the second-largest market for U.S. exports in Latin America. The Dominican Republic is now the fourth largest U.S. trading partner in Latin America (after Mexico, Brazil and Colombia), and the region's sixth largest exporter to the United States. Reflecting this boom in trade, the Dominican economy has enjoyed the highest average rate of economic growth in Latin America (6.1%) over the past decade, surpassing even Chile (5.5%).
This vibrant commercial partnership arises from shared values. The Dominican Republic has a democratic tradition that spans four decades. This Caribbean nation was one of the first countries in the world to sign a bilateral immunity agreement with the United States on September 16, 2002, and the Dominican Republic signed the Inter-American Convention against Terrorism on July 16, 2002. Most recently, the Dominican Republic was one of six Latin American countries to publicly state its solidarity with the American people, and the Bush Administration, in the Iraq conflict.
Including the Dominican Republic in the U.S.-Central America FTA agreement itself is an excellent way to proceed toward the goal of free trade. It appears that the emerging text of the U.S.-Central America FTA will be a worthy successor to the U.S.-Chile FTA, which includes comprehensive market access provisions (not one product was excluded) as well as high-standard disciplines covering sectors from intellectual property and services to government procurement and investment.
In this sense, the Administration's initiative to include the island republic in the U.S.-Central America FTA represents an opportunity to address a range of persistent concerns about the Dominican Republic's failure to adhere to basic commercial commitments, including WTO obligations in the intellectual property sector. We regard the opening of free trade negotiations as an ideal opportunity for the Dominican Republic to make a clean break in its treatment of intellectual property, in terms of its laws and regulations as well as its enforcement efforts. In this sense, it is critical that the Dominican Republic assume the same obligations and commitments as the five Central American countries participating in the U.S.-Central America FTA negotiations.
The U.S. Chamber of Commerce is the world's largest business federation, representing three million businesses of every size, sector, and region. AACCLA represents 23 American Chambers of Commerce in 21 Latin American and Caribbean nations, and its 20,000 member companies manage over 80% of all U.S. investment in the region. Many of our two organization's member companies and their employees stand to benefit directly from the inclusion of the Dominican Republic in the U.S.-Central America FTA. Consequently, we are prepared to do all we can to support the negotiation of a high-standard U.S.-Central America-Dominican Republic FTA and to secure its approval by the U.S. Congress.
Market Access
Given that much of the benefit of the FTA for U.S. businesses will flow from the elimination of tariffs and non-tariff barriers on substantially all goods and services, the Administration should aim for nothing short of this goal. Accordingly, the FTA negotiations should strive for the earliest possible removal of all tariffs, quotas, and other barriers to trade, and more specifically the elimination of a high proportion of tariffs within five years. The negotiators can employ various procedures toward this end, including the immediate removal of low tariffs, the adoption of ceiling rates from which progressive reductions can be made, and the establishment of sectoral arrangements, where appropriate. No sectors should be exempted from the negotiations. The Dominican Republic, like the five Central American countries, should be required to grant national treatment to goods and services provided by firms based in any other FTA country. The Dominican Republic should also be required to provide national treatment with respect to internal taxation and regulations, which would include the elimination of its discriminatory excise tax regime for distilled spirits.
The Chamber also seeks the incorporation in the FTA with the Dominican Republic of language similar to the provisions of the NAFTA and the U.S.-Chile FTA recognizing bourbon and Tennessee whisk(e)y as distinctive products of the United States.
In addition, the FTA should establish a system (such as a surety, satisfactory guarantee, bond, or other appropriate instrument) that enables the eligible importer or agent to obtain the goods (not posing environment, health, or safety threats) prior to the completion of administrative requirements and payment of duties, taxes, or fees. In addition, the FTA should adopt straightforward, transparent, and easy-to-use rules to determine origin. It should avoid requirements to "trace" the origin of components.
Agricultural trade is a major component of international trade and must be treated as other goods in the FTA. There must be a strong commitment among all participants to remove tariffs on all agricultural commodities and value-added finished food products. The Dominican Republic, like the five Central American countries, should take steps to make the sanitary and phytosanitary health certification process more transparent and efficient, including publishing regulations and explanations of the certification process in English and Spanish on the Internet. Minimum entry price schemes and price band systems for imported commodities and related finished food products must also be eliminated. Such mechanisms undermine the integrity of the market access negotiations.
Disciplines
The Dominican Republic should commit to the same disciplines covering services, government procurement, investment, and intellectual property as the five Central American countries participating in the ongoing U.S.-Central America FTA negotiations. For convenience, we repeat here in summary form the recommendations we submitted in November 2002 to the Office of the U.S. Trade Representative:
Services
International trade in services is a rapidly growing element of total trade, and we believe that the FTA should entail a maximum liberalization of all modes of supply, including cross border supply of services. To this end, the FTA countries should negotiate liberalization according to a negative list approach. The FTA should provide rights of establishment with majority ownership and national treatment for companies operating in foreign markets while allowing investors to establish in whatever corporate form is most appropriate to their business objectives.
The FTA should promote transparency of regulatory processes, including rulemaking, licensing, setting standards, and judicial and arbitral proceedings. It should also facilitate the establishment of clear professional qualification requirements, and technical standards and licensing requirements based on objective criteria, such as professional competence.
In the telecommunications sector, the FTA should be consistent with the WTO Basic Telecom Agreement and the Reference Paper on basic telecommunications services provisions including competitive safeguards, interconnection requirements, transparency, and national treatment.
Government Procurement
The FTA should remove domestic preferences and requirements in government procurement with limited exceptions (e.g., for sensitive sectors and national or regional security), because such stipulations reduce the ability of governments to make the most efficient use of fiscal resources. Furthermore, the FTA should include rules that ensure non-discriminatory treatment for suppliers of goods and services from any company bidding on government procurement contracts in any other member country.
At a minimum, the FTA should contain commitments on the following elements of transparency: adequate notice of procurement opportunities, neutral technical standards, objective criteria for contract evaluation, public tenders and bid openings, rules for contract award, bid protest mechanisms, and protection of intellectual property. The U.S. proposals for an FTAA transparency agreement and the draft transparency agreement language that the United States has submitted to the WTO should provide the basis for these provisions.
With regard to the FTA's scope and coverage of commitments, the agreement's government procurement provisions should apply to procurement of all goods and services. They should also cover procurement by all central and sub-central (provincial, state and local) government entities on a negative list basis. The FTA's commitments on government procurement should apply to the full range of financing and contracting arrangements used to conduct procurements, including "build-operate-transfer." Thresholds for coverage should be set at the lower of the levels specified in the WTO Government Procurement Agreement or the NAFTA, where applicable.
Investment
The FTA should establish investment protections and transparent and efficient legal recourse for investment disputes. It should also eliminate trade-distorting rules affecting cross-border investment between the seven countries. The FTA countries should guarantee one another the better of national treatment or most favored nation (MFN) treatment when the investors are in like circumstances. These protections should hold when they are initiating investment, as well as throughout the tenure of that investment. The FTA should endorse classic expropriation disciplines and afford investors the right to submit investment disputes to international arbitration.
In this vein, the FTA should include a requirement that the seven countries take the necessary steps to accede to arbitral conventions, including the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), which Honduras and Nicaragua have yet to sign and which Guatemala has yet to ratify; and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention), which Guatemala has yet to ratify.
In sum, the proposed FTA should include provisions to protect investors in the same fashion as the NAFTA's Chapter 11 and over 40 U.S. bilateral investment treaties have done for many years. In addition, the U.S. negotiating team should ensure that unreasonable and discriminatory laws targeting foreign investors such as Nicaragua's Law 364 are adequately addressed before any country can participate in the proposed U.S.-Central America-Dominican Republic FTA.
Intellectual Property Rights
As noted in the introduction, violations of intellectual property rights are a particular concern in the Dominican Republic, especially with regard to patents, product approvals, and broadcast piracy. As with the other disciplines above, the best way to overcome the Dominican Republic's historically very poor record in protecting intellectual property rights is to insist that the country accept every intellectual property-related provision of the emerging U.S.-Central America FTA without exception. The Dominican government should also immediately implement legal changes necessary to comply with all aspects of the WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) it signed in 1994.
The FTA should employ a balanced approach to copyright issues in the digital environment, with careful consideration to the interests of all stakeholders, including copyright owners and intermediaries such as Internet service providers. Any model to protect copyright rights in the digital environment must be coupled with appropriate limitations on liability for ISPs, consistent with the Digital Millennium Copyright Act and other regional balanced solutions, such as the E-Commerce directive.
To reiterate a general recommendation we submitted to the Office of the U.S. Trade Representative in November 2002, the FTA should set a precedent for the FTAA, including strong protections for intellectual property. In the interim, the Dominican Republic and the five Central American nations must abide by TRIPs obligations before becoming eligible for expanded trade benefits.