	Introduction(1)

On October 1, 2002, the Bush Administration notified Congress of the intention to enter intonegotiations leading to a free trade agreement with five Central American countries (Costa Rica, ElSalvador, Guatemala, Honduras, and Nicaragua). Two other countries in Central America have distinctivebackgrounds. (3) 
The DR-CAFTA partner countries are basically small countries with limited population andeconomic resources, with some differences in level of development (see Table 1). The combined population of the countries is 45 million, ranging from Costa Rica with apopulation of 4.1 million to Guatemala with a population of 12.6 million. With a combined national income of about $92 billion, the Gross National Incomes (GNI)of the countries range from $4.5 billion for Nicaragua to $26.9 billion for Guatemala. In the early 1980s, with a revolutionary regime in Nicaragua and a threatening insurgencyin El Salvador, Congress responded to President Reagan's 1982 call for a Caribbean Basin Initiativeby increasing economic assistance to the Central American and Caribbean region, and by providingone-way duty-free trade preferences for the region for 12 years in the Caribbean Basin EconomicRecovery Act (CBERA). They also argued that the agreement willstrengthen economic reform and democracy in the affected countries. (13) On the eve of the signing of the CAFTA pact with CentralAmerican countries on May 28, 2004, several Democratic Members from the House and the Senatecriticized the labor and environmental provisions of the agreement. Agriculture. While many U.S. commodity organizationssupport the DR-CAFTA agreement, the U.S. sugar industry opposes it on grounds that the increasein the quota sets a precedent for other free trade agreements and would result in a substantial increasein sugar imports that would be damaging to U.S. producers. Duty-free treatment will be accorded to someapparel produced in Cental America and the Dominican Republic that contains certain fabrics fromNAFTA partners Mexico and Canada, or from other countries in the case of fabrics and materialsdeemed to be in "short supply" in the United States and Central America. The measure was signed into law ( P.L. 109-53 ) by President Bushon August 2, 2005, in the presence of legislators and regional ambassadors. In conjunction with thelate June votes in the relevant committees and in the Senate, the Administration agreed to takemeasures to limit sugar imports, to study the feasibility of using sugar for the production of ethanol,and to support multi-year assistance to regional countries to strengthen the enforcement of labor andenvironmental standards and to assist regional farmers who might be adversely affected by thepact. According to pressreports, the partner countries have tentatively agreed that the agreement will enter into force onJanuary 1, 2006, for approving countries. Relations with the United States

Relations with the United States have been strong. Major U.S. companies currently invested in Costa Rica include the following by sector. On September 6, 2005, theDominican Republic approved the U.S.-Dominican Republic-Central American Free TradeAgreement (DR-CAFTA). Foreign Aid. By signing DR-CAFTA, the Dominican Republic hopes to improve accessfor its exports to the U.S. market and to encourage new investment in its FTZs. (77) 
Textiles and Apparel. government report. Critics argue that the labor provisions under DR-CAFTA are less stringent than thosecurrently in place under U.S. preferential trade arrangements. Crime and Human Rights. Military and Counternarcotics Issues. Migration Issues. market."
This report explains the conditions in five countries in Central America (Costa Rica, ElSalvador, Guatemala, Honduras, and Nicaragua) and one country in the Caribbean (DominicanRepublic) that will be partners with the United States in the U.S.-Dominican Republic-CentralAmerica Free Trade Agreement (DR-CAFTA) signed in August 2004. All of the signatory countriesexcept Costa Rica have approved the pact. The agreement will enter into force for the approvingcountries on an agreed date, tentatively January 1, 2006. In U.S. approval action, the House andSenate passed the required implementing legislation ( H.R. 3045 ) on July 27 and 28,2005, and the President signed it into law ( P.L. 109-53 ) on August 2, 2005.
The DR-CAFTA partners are basically small countries with limited populations andeconomic resources, ranging in population from Costa Rica with a population of 4.1 million toGuatemala with a population of 12.6 million, and ranging in Gross National Income (GNI) from $4.5billion for Nicaragua to $26.9 billion for Guatemala. While El Salvador, Guatemala, and Nicaraguaexperienced extended civil conflicts in the 1970s and 1980s, all of the countries have haddemocratically elected presidents for some time, and several of the countries have experienced recentelectoral transitions. For each of the countries the United States is the dominant market as well asthe major source of investment and foreign assistance, including trade preferences under theCaribbean Basin Initiative (CBI) and assistance following devastating hurricanes.
The Bush Administration and other proponents of the pact argue that the agreement willcreate new opportunities for U.S. businesses and workers by eliminating barriers to U.S. goods andservices in the region. They also argue that it will encourage economic reform and strengthendemocracy in affected countries. Many regional officials favor the pact because it provides newaccess to the U.S. market and makes permanent many of the temporary one-way duty-free tradepreferences currently in place. Critics argue that the environmental and labor provisions areinadequate, that the pact will lead to the loss of jobs for workers in the United States and forsubsistence farmers in Central America, and that provisions relating to textiles/apparel and sugar willbe harmful to U.S. producers. In the context of legislative action, the Bush Administration promisedto limit sugar imports, to make some adjustments for textile industries, and to support multi-yearassistance to strengthen regional enforcement of labor and environmental standards.
Related information may be found in CRS Report RL31870 , The DominicanRepublic-Central America-United States Free Trade Agreement (DR-CAFTA), by J.F. Hornbeck; CRS Report RL32110 , Agriculture in the U.S.-Dominican Republic-Central American Free TradeAgreement , by [author name scrubbed]; CRS Report RS22164 , DR-CAFTA: Regional Issues , by ClareRibando; and CRS Report RS22159 , DR-CAFTA Labor Rights Issues , by [author name scrubbed].