72576 v1 World Trade Indicators 2009/10 Dominican Republic Trade Brief Trade Policy of its LAC and upper-middle income country comparators (3.2 and 3.1 percent, respectively), with For the last several years, the Dominican Republic’s its agricultural exports facing 3.5 percent and its simple average MFN tariff has remained constant at manufactured exports 0.6 percent tariffs. The around 8.6 percent (in 2008), lower than an average Dominican peso appreciated by 0.9 percent in real Latin America and Caribbean (LAC) or an upper- terms in 2008, making exporters less competitive middle-income country (with average tariffs of 9.3 and abroad. 9 percent, respectively). It ranks 92nd among 181 countries (where 1st is least restrictive). The country’s A comprehensive Economic Partnership Agreement simple average MFN tariff on agricultural products is (EPA) between the EU and 15 Caribbean states in the almost twice as high as that for non-agricultural Caribbean Forum of African, Caribbean, and Pacific products at 13.6 percent. When taking into account States (CARIFORUM) EPA group, including the the preferences, the simple average applied tariff is 8.0 Dominican Republic, was signed in 2008. This percent. The 40 percent maximum tariff rate replaced the expired preferences given under the (excluding alcohol and tobacco) is relatively low and Africa, Caribbean, and Pacific (ACP)-EU Cotonou has not changed in years. The trade policy space in Agreement. The EU committed to immediately 2008, as measured by the wedge between bound and removing all tariffs and quotas on Caribbean exports applied tariffs (the overhang), has been constant since with the exception of sugar and rice, which will get full 2001 at 26.4 percent, with all tariff lines bound. In duty-free and quota-free access by the end of 2009. April 2009, the government initiated a safeguard The Caribbean countries, on the other hand, investigation on imports of glass bottles.1 Regarding committed to an asymmetric and gradual opening of the extent of its commitment to trade liberalization in their economy to EU imports.2 services, the Dominican Republic is ranked 77th out of 148 countries according to the GATS Commitment After more than a decade of market reforms and Index. significant advances in trade reforms, five nations of Central America (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua) and the Dominican External Environment Republic embarked on negotiations for a free trade agreement with the United States in early 2003. The The 2008 rest of the world simple average applied outcome is DR-CAFTA, an agreement that was signed tariff (including preferences) on the Dominican by the executive branches of all countries involved in Republic’s exports is 9.9 percent, compared to 6.6 August 2004; the Dominican Republic ratified the percent in 2006. But, when its trade flows are taken agreement on March 1, 2007. As a result of DR- into consideration, it is apparent that the country’s CAFTA, duties affecting trade with the United States exports have good access to international markets. Its are being eliminated for virtually all goods. Due to 2008 rest of the world weighted average applied tariff strong sensitivities, some agricultural products were is low at 1.0 percent, especially when compared to that exempted from the eventual zero-duty status: sugar for entry into the United States, and some other agricultural products for the Central American Unless otherwise indicated, all data are as of August 2009 countries. While the bulk of tariffs were removed and are drawn from the World Trade Indicators 2009/10 upon implementation, some tariffs are being phased Database. The database, Country Trade Briefs and out gradually.3 Trade-at-a-Glance Tables, are available at http://www.worldbank .org/wti. Behind the Border Constraints If using information from this brief, please provide the following source citation: World Bank. 2010. Between June 2007 and May 2008, the Dominican “Dominican Republic Trade Brief.� World Trade Indicators Republic implemented a series of regulatory reforms, 2009/10: Country Trade Briefs. Washington, DC: World including reforms in easing cross-border trade, leading Bank. Available at http://www.worldbank.org/wti. to its rank as the ninth top reformer in the 2008 Doing World Trade Indicators 2009/10 Dominican Republic Trade Brief Business Index. As a result, its business environment imports grew by 18.4 percent in 2008 and are expected improved as well, and its Doing Business rank was to fall in 2009. The most important imports include 102nd out of 183 countries in 2008 and further foodstuffs, petroleum, cotton and fabrics, chemicals, improved to 86th out of 183 countries in 2009. and pharmaceuticals, mainly obtained from the United Regarding trade facilitation, deficient port States, Colombia, and other LAC countries. infrastructure is particularly problematic and the Remittances accounted for a share of 7.6 percent of country lags behind the LAC and upper-middle- GDP in 2008. Partially due to the crisis, remittances’ income groups with a rank 96th (out of 150) on the share of exports fell from 8.7 percent in 2007 to 7.6 2007 Logistics Performance Index and a score of 2.38 percent in 2008. FDI inflows accounted for 3.7 (on the scale of 1 to 5, with 5 being the best). The percent of GDP in 2007. country’s weakest indicator was the quality of transportation and information technology (IT) infrastructures, while its strongest one was domestic Notes transportation costs. The country has been facing 1. World Trade Organization, July 2009. regular energy shortages in the last few years which 2. Bridges, November 2008. have been hampering economic growth. 3. SICE, 2009. 4. Nominal output data from Central Bank of the Trade Outcomes Dominican Republic, 2009. 5. The Economist, 2009. Dominican Republic’s real (in constant 2000 US dollars) growth in total trade of goods and services reached a peak at 7.5 percent in 2007, decelerating to References an estimated 3.7 percent in 2008, and is expected to Bridges. November 2008. “EU, Former Colonies Sign shrink by 4.3 percent in 2009. Real exports grew by 2.4 First New Generation Trade Pact.� Bridges 12(5). July percent in 2007 and by 2.7 percent in 2008. Real 20, 2009. . imports grew by 4.4 percent in 2008. Both exports and Central Bank of the Dominican Republic. 2009. “Balance imports are expected to decline in 2009, by 3.0 and 5.5 of Payments of the Dominican Republic.� percent, respectively. . In nominal terms, total trade increased by an estimated International Monetary Fund (IMF). August 2009. 11 percent in 2008. Exports decreased by an estimated International Financial Statistics (Country Tables). 3 percent.4 The services share of exports was more IMF, Washington, DC. than a third of total exports (40 percent in 2007) and Economist, The. January 29, 2009. “A Fall in Tourism, and like most other Caribbean countries, tourism was the Other Body Blows.� biggest export sector, contributing about 34 percent of Foreign Trade Information Service (SICE). 2009. total exports. However, given the recession, there has “Dominican Republic: Trade Agreements in Force.� been significant decrease in tourism recipients.5 The . free trade zones known as maquiladora that were World Trade Organization. 2008. “Trade Policy Review primarily geared towards garments. Due to falling Body—Trade Policy Review—Dominican demand for these top exports, trade in the first quarter Republic—Report by the Secretariat.� October 20, of 2009 has outpaced its forecast, with exports falling 2008. WTO, Geneva. by 39.8 percent over the same quarter in 2008. The ———. 15 July 2009. “Report to the TPRB from the United States is the Dominican Republic’s largest Director-General on the Financial and Economic destination market, accounting for over 70 percent of Crisis and Trade-Related Developments.� WTO, all exports, followed by the EU, and both are hard hit Geneva. by the recent recession. Largely due to increases in commodity prices during the first half of 2008,