In August of 2004 the governments of Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic signed a free trade agreement with the United States--CAFTA. The agreement must, however, still be passed by the Congress of each country.
Once CAFTA is approved by each country, more than 80 percent of U.S. exports of consumer and industrial products would be duty-free immediately. In addition to tariff reductions, CAFTA expands market access across all sectors, provides new protections for U.S. investors in the region, and has strong provisions for trademarks, copyrights, and patents. CAFTA also includes provisions addressing protection of the environment, worker rights, trade capacity building and dispute settlement.
From the perspective of a United States based exporter, Central America is a very important market because CAFTA countries comprise the 16th largest market worldwide. In 2003, United States companies exported $10.9B dollars worth of goods to the region.
From the perspective of a CAFTA based exporter, the United States is the most important trading partner, with between 40 and 50 percent of all exports going to the United States. Likewise, the United States provides the CAFTA countries with some 50 percent of all imports. CAFTA seeks to solidify the present relationships by strengthening "the special bonds of friendship and cooperation among their nations and promot[ing] regional economic integration."
CAFTA seeks to promote a secure market for goods and services produced in the respective territories, while still recognizing the differences in their levels of development and economic size.
History of Trade
Trade between tribes, neighboring civilizations, and countries has been a necessary part of every society since the beginning of time. In the ancient world trade was typically in kind, with the parties bartering for the quantity of one product they would exchange for another. Over time, as technology and communications advanced this exchange went from in kind exchanges to the exchange of some sort of currency—gold, shells, and finally paper currency.
The advances in technology in the past couple decades have allowed businesses to purchase products from overseas through electronic means.
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