Benefits of CAFTA
The Central Free Trade Agreement, commonly known as CAFTA covers different types of commercial trade between the member states and the U.S. The trade agreement eliminates barriers to investment and trade among the main signatories: El Salvador, Honduras, Guatemala, the U.S, Dominican Republic and Costa Rica. CAFTA also allows these countries immediate access to the United States trade markets and establishes mutual environmental and regulatory standards.
1. Opens investment opportunities
CAFTA opens all trade barriers and member signatories enjoy common trade and regulatory standards. With CAFTA, member signatories typically treat U.S companies as locals. This gives them the opportunity to operate in a friendly environment under a legal framework. On the other hand, intellectual properties laws are observed to foster transparency in business practices.
2. Better customer satisfaction
Because CAFTA promotes free trade, consumers have access to a wide range of products as a result of stiff completion brought by each country. When the member signatories produce same products cheaper, consumers can buy the items at a lower price.
3. Enhances market access
Notably, when member signatories have access to U.S trade markets, CAFTA enhances market access which in turn attracts service providers from the U.S to institutions such as banking, insurance, trade finance, securities, and so forth. On the other hand, Central American countries and the Dominican Republic enjoy better telecommunication services, as well as health care and education.
4. Greater stability and prosperity
Besides the economic gains to U.S companies, CAFTA fosters greater political and economic stability in member states by nurturing transparent governance, regional economic integration, as well as protection of property rights. As markets become more economically linked, stable and predictable, member states can enjoy great economic prospects.
Despite having many economic benefits, many believe that only wealthier nations benefit from this agreement. Globalization typically results in developing countries importing from developed countries, leading to no substantial economic gain from the latter.