72576 v1
World Trade Indicators 2009/10
Dominican Republic Trade Brief
Trade Policyï€ 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,