Did DR-CAFTA Affect the Exports of the Dominican Republic to the United States?

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Abstract

This article evaluates the impact the Dominican Republic and Central America Free Trade Agreement (DR-CAFTA) had on the exports of the Dominican Republic (DR) to the United States. We estimate a gravity model for the DR exports to the 109 trade partners of the country from 1990 to 2014. This model quantifies the effect of the DR-CAFTA since 2007, when the agreement was ratified, and finds that the DR-CAFTA negatively affected DR exports to the US. We conduct further analysis of factors that could explain the decline in exports, in spite of the ratification of the agreement. We find that the 2008–09 crisis was not the driver of the slowdown of DR exports to the US. The increasing competition with Central American countries and other export oriented economies, like China, in the US market seem to have the leading role in the export contraction that we find in our study.