CAFTA-DR, which entered into force in 2006, replaced the earlier Caribbean Basin Initiative and latter Caribbean Basin Economic Recovery Act trade benefits. CAFTA-DR liberalized bilateral trade between the United States and the region and furthered integration efforts among the countries of Central America, removing barriers to trade and investment in the region by U.S. companies. CAFTA-DR requires countries to undertake needed reforms to alleviate systemic problems in such areas as customs administration; protection of intellectual property rights; services, investment, and financial services market access and protection; government procurement; sanitary and Phyto-sanitary (SPS) barriers; and other non-tariff barriers.
The final act of the Multilateral Commercial Negotiations of the Uruguay Round, which established the World Trade Organization (WTO), was signed by Honduras on April 15, 1995. Honduras is a member of the Central American Economic Integration System (SIECA) along with Guatemala, El Salvador, Nicaragua, Costa Rica, and Panama. As part of Central America, FTAs have also been signed with the United Kingdom, European Union, Panama, Colombia, Chile, South Korea, and Mexico. Honduras has bilateral FTA’s with Canada, and Peru. It is also in the initial phase of negotiations of an FTA with China.
The Association Agreement between the European Union (EU) and Central America was signed on June 29, 2012. The Association Agreement relies on three pillars, political dialogue, cooperation, and trade. The trade pillar of the Association Agreement entered into force on August 1, 2013, with Honduras, Nicaragua, and Panama, on October 1, 2013, with Costa Rica and El Salvador, and on December 1, 2013, with Guatemala. Honduras and Guatemala halted negotiations with the European Free Trade Association (EFTA), comprising of Switzerland, Iceland, Liechtenstein, and Norway in June 2013.
Central American countries agreed to establish an Economic Integration System and a Central America Customs Union (CACU) in December 1960. This commitment was reaffirmed in 1993. Between 2000 and 2002, Central American countries incorporated CACU into a legal framework agreement. The subscription of the agreement for the creation of CACU was held in 2006. The goal is to allow unrestricted movement of products and a Central American uniform tariff with duty-free privileges among the region’s countries. Products must originate in the Central America region to receive CACU benefits.
The CACU has granted free trade access throughout the region for 99.9 percent of the Central American products (except for sugar and un-roasted coffee for the region). The harmonized common tariff up to now applies to 97 percent of Central American products. Central America established a common external tariff schedule in 1998. The six countries signed a revised protocol for economic integration and macroeconomic coordination in October 1993. The integration protocol allows Central American countries to advance at varying rates toward more open trade.
In February 2015, Honduras and Guatemala signed a bilateral agreement creating a Customs Union to eliminate trade barriers, cut costs and speed up the transportation of goods throughout the region. Through this single customs territory, one-stop border posts have been created to guarantee expeditious movement of goods and cross border control for those goods that are not subject to free movement. El Salvador has also negotiated its entry into the Customs Union in 2018. In June 2019, Nicaragua also signaled its interest in joining the customs union.
For information on FTA partner countries, including how to take advantage of an FTA, U.S. exporters are encouraged to visit the Free Trade Agreements Help Center at: https://www.trade.gov/free-trade-agreements-help-center