The Central America Free Trade Agreement (DR-CAFTA) is an ambitious attempt to meld the markets and interests of the United States with those of the five Central American countries and the Dominican Republic. The treaty is an expression of the belief that removing barriers to trade and investment is the surest way to raise income and enhance growth prospects in developing countries. The treaty determines the time path of trade liberalization between the United States and each of the Central American trading partners as well as rules regarding the treatment of foreign direct investment, intellectual property rights, labor rights, environment and conflict resolution.The proposed treaty has ignited a contentious debate both in the United States and Central America about the impact it will have on farmers, poverty, and the environment and on the development prospects in the countries of Central America. The treaty will bring significant trade liberalization for both industrial and agricultural commodities in Central America. But there are widespread fears that this could cause significant hardships particularly for smallholders by exposing them to low-cost and subsidized agricultural products from the United States. Many in the region also feel that their countries have been too generous in the proposed treatment of foreign investment and the environment.
