Note: This Report Is Subject to Restricted Circulation and Press Embargo Until the End s5

RESTRICTED WORLD TRADE WT/TPR/S/XX 9 September 2002 ORGANIZATION (02-4688)

Trade Policy Review Body

TRADE POLICY REVIEW

Dominican Republic

Report by the Secretariat

This report, prepared for the second Trade Policy Review of the Dominican Republic, has been drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), sought clarification from the Government of the Dominican Republic on its trade policies and practices.

Any technical questions arising from this report may be addressed to Mr. A. Klau (tel. 739 5706) and Mr. R. Valdés (tel. 739 5346).

Document WT/TPR/G/105 contains the policy statement submitted by the Government of the Dominican Republic.

Note: This report is subject to restricted circulation and press embargo until the end of the meeting of the Trade Policy Review Body on the Dominican Republic. Dominican Republic WT/TPR/S/105 Page iii

CONTENTS Page SUMMARY OBSERVATIONS ix (1) Introduction ix

(2) ECONOMIC DEVELOPMENTS ix

(3) INSTITUTIONAL ENVIRONMENT x

(4) MARKET ACCESS FOR GOODS x

(5) OTHER MEASURES AFFECTING TRADE IN GOODS xi

(6) SECTORAL POLICIES xi

I. ECONOMIC ENVIRONMENT 1

(1) INTRODUCTION 1

(2) MAIN ECONOMIC DEVELOPMENTS 1 (i) Output and employment 1 (ii) Fiscal policy 4 (iii) Monetary and exchange rate policies 5 (iv) Balance of payments 7

(3) MERCHANDISE TRADE AND INVESTMENT FLOWS 9 (i) Composition of trade 9 (ii) Direction of trade 9 (iii) Foreign direct investment 10

(4) OUTLOOK 10

II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES 11

(1) INTRODUCTION 11

(2) TRADE POLICY FORMULATION AND IMPLEMENTATION 11 (i) General legal and institutional framework 11 (ii) Trade policy objectives and formulation 12 (iii) Main trade laws and regulations 12

(3) INTERNATIONAL RELATIONS 14 (i) World Trade Organization 14 (ii) Preferential agreements 17 (iii) Other arrangements 19

(4) FOREIGN INVESTMENT REGIME 20

III. TRADE POLICIES AND PRACTICES BY MEASURE 22

(1) OVERVIEW 22

(2) MEASURES AFFECTING IMPORTS 23 (i) Procedures 23 (ii) Customs valuation and rules of origin 24 (iii) Tariffs 25 (iv) Tariff quotas 31 (v) Other charges affecting imports 32 (vi) Import prohibitions, restrictions, and licensing 33 (vii) Local-content schemes 34 (viii) Contingency measures 34 (ix) Standards and other technical requirements 35 WT/TPR/S/105 Trade Policy Review Page iv

Page (x) Government procurement 38 (xi) Other measures 40

(3) MEASURES AFFECTING EXPORTS 40 (i) Registration and documentation 40 (ii) Export taxes, charges, and levies 41 (iii) Export prohibitions and other restrictions 41 (iv) Subsidies, free-trade zones, and similar arrangements 41 (v) Export promotion and marketing assistance 44 (vi) Export finance, insurance, and guarantees 44 (vii) Measures applied in foreign markets 45

(4) OTHER MEASURES AFFECTING PRODUCTION AND TRADE 47 (i) Incentives 47 (ii) Regional assistance 48 (iii) State-trading enterprises, state-owned companies, and privatization 48 (iv) Competition policy 50 (v) Intellectual property rights 50

IV. TRADE POLICIES BY SECTOR 55

(1) INTRODUCTION 55

(2) AGRICULTURE AND RELATED PRODUCTS 56 (i) Main features 56 (ii) Policy objectives and instruments 57 (iii) Key subsectors 59

(3) MINING AND ENERGY 64 (i) Mining and mineral processing 64 (ii) Electricity 65 (iii) Hydrocarbons 67

(4) MANUFACTURING 68 (i) Main features and domestically oriented sector 68 (ii) Free-trade zones 69

(5) SERVICES 72 (i) Principal characteristics 72 (ii) Commitments under the GATS and other agreements 72 (iii) Banking and insurance 75 (iv) Telecommunication 77 (v) Transport 78 (vi) Tourism 81 SELECTED BIBLIOGRAPHY 83 APPENDIX TABLES 85

CHARTS

III. TRADE POLICIES AND PRACTICES BY MEASURE

III.1 Distribution of MFN tariff rates, January 2002 28 III.2 Tariff escalation for selected manufactured products, January 2002 29 III.3 In-quota and out-of-quota tariff and fill rates 32 III.4 Public procurement, 1995-00 39 III.5 Breakdown of total exports, 1993-01 42 Dominican Republic WT/TPR/S/105 Page v

Page IV. TRADE POLICIES BY SECTOR

IV.1 Production, export and export price for sugar and coffee, 1995-01 60 IV.2 Tariff protection in the industrial sector, 2001 70

TABLES

I. ECONOMIC ENVIRONMENT

I.1 Basic economic indicators, 1995-01 2 I.2 Employment indicators, 1996-01 3 I.3 Government finances, 1996-01 5 I.4 Balance-of-payments, 1996-01 8

II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES

II.1 Main laws and regulations relating to foreign trade, May 2002 13 II.2 Dominican Republic's notifications under the WTO Agreements, May 2002 14

III. TRADE POLICIES AND PRACTICES BY MEASURE

III.1 Products subject to minimum prices 25 III.2 Summary analysis of the Dominican Republic's tariff, January 2002 26 III.3 Import-related fiscal revenue, 1995-01 27 III.4 Tariff-rate quotas in the Dominican Republic's Schedule of Commitments 31 III.5 Products subject to import permits 34 III.6 Exports to the U.S. under the CBI and CBTPA for selected products by HS-2 digit, 1996-01 46 III.7 Privatization of state-owned enterprises 49 III.8 The Dominican Republic's participation in international IPR agreements 51 III.9 Overview of IPR protection in the Dominican Republic, 2001 52

IV. TRADE POLICIES BY SECTOR

IV.1 GDP shares, 1995-01 55 IV.2 Production and export of tobacco leaves, 1995-01 62 IV.3 Cocoa beans production and export, 1995-01 63 IV.4 Exports of selected non-traditional agricultural products, 1996-01 63 IV.5 Mineral exports, 1996-01 64 IV.6 Production and sales of electricity, 1995-01 67 IV.7 Petroleum statistics, 1995-01 68 IV.8 Value-added in the manufacturing sector (excluding free-trade zones), 1995-00 69 IV.9 Key indicators on the Dominican Republic's free-trade zones, 1995-01 69 IV.10 Value-added of Dominican services sectors, 1995-01 72 IV.11 Summary of the Dominican Republic's commitments under the GATS 73 IV.12 Telephone connections in the Dominican Republic, 1996-01 77 IV.13 Dominican ports, handled cargo, 1997-01 79 IV.14 Tourism, 1996-01 81 APPENDIX TABLES

I. ECONOMIC ENVIRONMENT

AI.1 Exports (f.o.b.) by product, 1998-01 87 AI.2 Imports (f.o.b.) by product, 1998-01 88 AI.3 Exports (f.o.b.) by partner country, 1998-01 89 AI.4 Imports (f.o.b.) by partner country, 1998-01 90 WT/TPR/S/105 Trade Policy Review Page vi

GLOSSARY (The translation into English should not be considered official)

Agreement on Customs Issues for Free Trade Zones Acuerdo de Asuntos Aduanales para Zonas Francas de Exportación Agricultural and Forestry Development Centre Centro para el Desarrollo Agropecuario y Forestal, CEDAF Association of Dominican Agroenterprises Junta Agroempresarial Dominicana Bidding Committee Comité de Licitación Central Bank (of the Dominican Republic) Banco Central (de la República Dominicana) Certificate of Industrial Operation Certificado de Inscripción Industrial Chamber of Commerce Cámara de Comercio y Producción de Santo Domingo Civil Registry Registro Civil Commercial Code Código de Comercio Commission for Agricultural Imports Comisión de Importaciones Agropecuarias Commission for National Trade Negotiations Comisión Nacional de Negociaciones Comerciales, CNNC Commission for the Reform of Public Enterprises Comisión de Reforma de la Empresa Publica, CREP Commission for the Reform of Ports and Airports Comisión de Reforma Portuaria y Aeroportuaria Commission for the Regulation of Unfair Trade Practices and Safeguard Measures Commission for Tariff Analysis Comisión de Estudio Arancelarios Coordination Council for Border Development Consejo de Coordinación de la Zona Especial de Desarrollo Fronterizo Copyrights Law Ley de Derecho de Autor Council for Tourism Development Consejo de Fomento Turístico, CONFOTUR Court of First Instance Tribunal de Primera Instancia Customs Declaration Declaración del Valor en Aduana, DVA Customs Law Ley para el Regimen de las Aduanas Customs Reform Law Ley de Reforma Arancelaria Decree Eliminating Export Licences Decreto que elimina la Licencia de Exportador Decree on Foot and Mouth Disease Decreto sobre Fiebre Aftosa Department of Inland Revenue Directorate-General of Civil Aviation Dirección General de Aviación Civil Directorate-General of Customs Dirección General de Aduanas Directorate-General of Mining Directorate-General of Norms and Quality Systems Dirección General de Normas y Sistemas de Calidad Directorate-General of Taxes Dirección General de Impuestos Internos Directorate-General of Telecommunications Dirección General de Telecomunicaciones Dominican Agriculture and Forestry Research Institute Instituto Dominicano de Investigaciones Agropecuarias y Forestales, IDIAF Dominican Centre for Export Promotion Centro Dominicano de Promoción de Exportaciones, CEDOPEX Dominican Coffee Council Consejo Dominicano de Café Dominican Corporation of State Enterprises Corporación Dominicana de Empresas Estatales Dominican Electricity Corporation Corporación Dominicana de Electricidad, CDE Dominican Exporters Association Asociación Dominicana de Exportadores, ADOEXPO Dominican Hydroelectric Generation Company Empresa de Generación Hidroeléctrica Dominicana, EGEHID Dominican Industry Association Asociación de Industrias de la República Dominicana, AIRD Dominican Institute of Industrial Technology Instituto Dominicana de Tecnología Industrial, INDOTEC Dominican Institute of Telecommunications Instituto Dominicano de las Telecomunicaciones, INDOTEL Dominican Postal Institute Instituto Dominicano de Postal Dominican Ports Authority Autoridad Portuaria Dominicana, APORDOM Dominican Telephone Company Companía Dominicana de Teléfonos Draft Monetary and Financial Law Anteproyecto de Ley Monetaria y Financiera Dominican Republic WT/TPR/S/105 Page vii

Export Promotion Law Ley de Reactivación y Fomento de las Exportaciones Finance Programme for Free Trade Zones Programa de Financiamiento para Empresas Industrales de Zonas Francas Foreign Investment Law Ley de Inversión Extranjera Free Trade Zone Law Ley de Zonas Francas Fund for the Promotion of Tourism Fondo Oficial de Promoción Turística, FOPT Government Supply Commission Comisión de Aprovisionamiento del Gobierno Health Law Ley General de Salud Import Declaration Form Formulario de Declaración de Importación Industrial Property Law Ley de Propiedad Industrial Insurance and Bonding Law Ley sobre Seguros y Fianzas de la República Dominicana Institute for Market Regulation Instituto de Ordenamiento de Mercado Inter-American Convention for the Facilitation of Convenio Interamericano para Facilitar el Transporte International Maritime Transport Acuático Internacional Labour Code Código Laboral Law on Animal Health Ley de Sanidad Animal Law on Customs Duties Ley de Arancel de Aduanas Law on the Environment and Natural Resources Ley sobre Medio Ambiente y Recursos Naturales Law on Plant Health Ley de Sanidad Vegetal Law on Unfair Trade Practices and Safeguard Measures Ley sobre Prácticas Desleales de Comercio y Medidas de Salvaguardia Mining Industry Parks Parques Mineros Industriales Minister Secretario de Estado Ministry of Agriculture Secretaría de Estado de Agricultura Ministry of Defence Secretaría de Estado de las Fuerzas Armadas Ministry of the Environment Secretaría de Estado de Medio Ambiente Ministry of Finance Secretaría de Estado de Finanzas Ministry of Industry and Trade Secretaría de Estado de Industria y Comercio Ministry of Health Secretaria de Estado de Salud Pública y de Asistencia Social Ministry of the Presidency Secretaría Técnica de la Presidencia Ministry of Tourism Secretaría de Estado de Turismo Monetary Board Junta Monetaria National Cocoa Commission Comisión Nacional del Cacao National Commission on Norms and Quality Systems Comisión Nacional de Normas y Sistemas de Calidad National Copyright Office Oficina Nacional de Derecho de Autor, ONDA National Copyright Register National Council for Agriculture Consejo Nacional de Agricultura,CAN National Council for the Development of the Mining Consejo Nacional para el Desarollo Minero Industry National Council for Free Trade Zones Consejo Nacional de Zonas Francas de Exportación, CONAZONA National Council of Foreign Trade Consejo Nacional de Comercio Exterior National Council of Magistrates Consejo Nacional de Magistratura National Council for Micro, Small and Medium-Sized Consejo Nacional para la Micro, Pequena y Mediana Enterprises Empresa National Energy Commission Comisión Nacional de Energía National Frequency Attribution Plan Plan Nacional de Atribución de Frequencias National Export Finance Programme Programa Nacional de Finaniamiento a las Exportaciones Asociación Nacional de Hoteles y Restaurantes National Office for Industrial Property Oficina Nacional de la Propiedad Industrial, ONAPI National Sugar Institute Instituto Nacional de Azúcar, INAZUCAR Office for the Promotion of Investment in the Oficina para la Promoción de Inversiones de la Dominican Republic República Dominicana, OPI - RD One-Stop Office for Exporters Sistema Integrado de Ventanilla Unica de Comercio Exterior, (SIVUCEX) Patent Law Ley sobre Patentes de Invención WT/TPR/S/105 Trade Policy Review Page viii

Price Stabilization Institute Instituto Nacional de Estabilización de Precios, INESPRE Public Enterprise Reform Law Ley General de Reforma de la Empresa Publica

Regulations on the Allocation of the Textile Quota Reglamento de Distribución de la Cuota Textil Regulations for the Free Trade Zone Law Reglamento para la Aplicación de la Ley sobre Zonas Francas Regulations Establishing the Prohibition of the Interception of Public Telecommunications Services Regulations for the Export Promotion Law Reglamento para la Aplicación de la Ley de Reactivación y Fomento de las Exportaciones Regulations for the Financing of Post-Shipment Credits Reglamento de Financiamiento a las Exportaciones Post-embarque 52/VF-DR Regulations on the Foreign Investment Law Reglamento de la Ley sobre la Inversión Extranjera

Regulations on the Interconnection of Public Reglamento General de Interconexión para las Redes de Telecommunications Services Servicios Públicos de Telecomunicaciones Regulations on Merchandise Re-exports Reglamento de los Depósitos para la Reexportacion Mercancías Regulations for the National Export Financing Programme Regulations on Pesticides Regulación de Pesticidas Regulations on Public Procurement and Contracts Reglamento de Compras y Contrataciones de Bienes y Servicios de la Administración Publica Regulations on the Provision of Cable Services Reglamento de la Difusión por Cable Regulations on the Provision of FM and AM Services Reglamento de Servicio de Radiodifusión Sonora de Frequencia Modulada y Amplitud Modulada Regulations for Radio Services Reglamento para el Servicio de Radioaficionados Regulations on the Solution of Disputes between Reglamento para la Solución de Controversias entre los Consumers and Operators of Public Telecommunication Usuarios y las Prestadores de Servicios Públicos de Services Telecomunicaciones Regulations on the Telecommunication Development Reglamento del Fondo de Desarrollo de Fund Telecomunicaciones Regulations on the Use of the Radio Wave Spectrum Reglamento de Uso del Espectro Radioeléctrica Security Market Law Ley de Mercado de Valores Single Export Form Formulario Unico de Exportador Specific Consumption Tax Impuesto Selectivo al Consumo, ISC Standards and Quality System Division Dirección General de Normas y Sistemas de Calidad, DIGENOR State Sugar Council Consejo Estatal del Azúcar Superintendency of Banks Superintendencia de Bancos Superintendency of Electricity Superintendencia de Electricidad Superintendency of the Stock Market Superintendencia de Valores Tax Reform Law Ley de Reforma Tributaria Tax Code Código Tributario Technical Routing Plan Plan Técnico Fundamental de Encaminamiento Telecommunications Development Fund Fondo de Desarrollo de Telecomunicaciones Telecommunications Law Ley General de Telecomunicaciones Textile Commission Comisión Textil Textile Coordinator Coordinador Textil Tobacco Institute Instituto del Tabaco, INTABACO Tourism Development Law Ley de Fomento al Desarrollo Turístico Value-added Tax Impuesto sobre el Transfer de Bienes y Servicios, ITBIS Dominican Republic WT/TPR/S/105 Page ix

SUMMARY OBSERVATIONS has also been one of the world's fastest growing economies; its average real growth (1) INTRODUCTION rate between 1996 and 2000 was 7.6%. Economic activity was particularly sustained 1. Since its previous Trade Policy by a boom in private investment. GDP growth Review in 1996, the Dominican Republic has dropped in 2001, to 2.7%, but picked up again sustained a fast pace of economic growth in the first half of 2002. Despite the driven in good part by continued efforts to economy's strong growth performance, about open and restructure its economy. Its trade a quarter of the Dominican population still and investment regimes are largely liberal lives below the national poverty line. although issues remain in areas such as customs valuation, export subsidies, 4. Since 1995, the Dominican Republic privatization, and domestic competition. has posted a fiscal deficit only twice. Fiscal Participation in the global economy is intense, reforms in 2000 have led to significantly and is reflected in high levels of trade in reduced reliance on customs duties for goods and services, investment flows, and government income and less distortionary remittances from nationals living abroad. resource allocation. As a result of the reform Under the Free Trade Zone (FTZ) regime package, the share of customs duties in total most merchandise trade is exempt from the government revenue decreased from about general trade regime, in order to deal with its 26% in 2000 to 16% in 2001; reduced fiscal anti-export bias regime. Liberalization has revenue from lower tariffs was compensated been largely autonomous; preferential trade by increased income from internal taxes. agreements and multilateral commitments have played complementary roles. 5. The Dominican Republic has three principal foreign exchange markets (an 2. The Dominican Republic is official, market-based rate, a free exchange- approaching a juncture where the duality and house market, and a free commercial bank enclave features of its economy may have to rate); the spread between the markets is very be addressed. Activities in FTZs and tourism narrow. It maintains no controls on foreign are responsible for the lion's share of exchange transactions but purchases of Dominican exports, and are important foreign exchange are subject to a fee set at generators of employment and investment, but 4.75%, which is under review. Real interest their backward linkages to the rest of the rates remain relatively high, having ranged economy remain weak. Moreover, the benefits between 13% and 21% since 1996. Inflation granted in FTZs have made it more difficult has been moderate; the average increase of for "domestic" sectors to attract resources, the consumer price index is estimated at 6.9% and several of these have stagnated, at best. during 1996-01. The distortions associated with a narrowly focused, export-led growth strategy, and 6. The Dominican Republic's current persistent inefficiencies in sectors like account has registered considerable deficits in electricity, may well become obstacles for the recent years, due mainly to persistent and further improvements in living standards growing trade deficits. They have been coveted by the Dominican Republic. financed largely by current transfers, most of which are remittances by Dominicans living (2) ECONOMIC DEVELOPMENTS abroad, and inflow of foreign investment capital. In contrast to merchandise trade, 3. With a per capita GDP of some services have shown successive surpluses, US$2,400 and a population of about 9 million, largely due to income from the tourism sector. the Dominican Republic is the largest economy in the Central American-Caribbean 7. The Dominican Republic's main region. Since the beginning of the 1990s, it export products are clothing and electronic WT/TPR/S/105 Trade Policy Review Page x

goods produced in the FTZs, agricultural (4) MARKET ACCESS FOR GOODS goods and their related manufactures, and ferro-nickel. Despite a relatively limited 11. The Dominican Republic grants at contribution to GDP, FTZs remain crucial for least MFN treatment to all its trading the Dominican Republic's export performance. partners. Tariffs are the Dominican The United States is by far the Dominican Republic's main instrument of border Republic's most important trading partner, protection; the average applied MFN tariff is with an estimated share of 95% in FTZ trade 8.6%. Agricultural goods (WTO definition) and about 52% in "domestic" trade. are levied an average tariff of 12.9%, while Intermediate and capital goods dominate non-agricultural products excluding Dominican imports. petroleum face an average tariff of 7.9%. The Dominican Republic maintains tariff quotas (3) INSTITUTIONAL ENVIRONMENT on a number of agricultural products, with current out-of-quota rates of up to 118%. 8. The Ministry of Foreign Affairs is the lead agency for all issues related to foreign 12. A wide gap exists between applied and trade. The Dominican Republic became a bound rates, which somewhat undermines the WTO Member in March 1995; it has been predictability of market access conditions. In active in the extended negotiations on the Uruguay Round, the Dominican Republic telecommunications and financial services. As bound all its tariffs. While non-agricultural an international treaty, the WTO Agreements goods were bound at a general ceiling rate of take precedence over domestic legislation. 40%, final bound rates for agricultural products, some of which were subject to 9. The Dominican Republic has renegotiations, range from 5% to 99%. increasingly sought to foster regional economic integration; in 1998 it concluded its 13. Tariff reductions under preferential first free-trade agreements, with the agreements have contributed to improved Caribbean Community (CARICOM) and the access to the Dominican market for some Central American Common Market (CACM). trading partners. Duty-free access is offered The Dominican Republic has formally asked to most imports from the Central American to be part of the proposed U.S.-Central Common Market and from CARICOM. America Free Trade Agreement and attaches great importance to the ongoing negotiation 14. The Dominican Republic obtained an for the Free Trade Area of the Americas. extension until July 2001 on the application of the WTO Agreement on Customs Valuation. 10. The Foreign Investment Law of 1995 Since then, the Dominican Republic has been accords national treatment to foreign applying the Agreement with the exception of investors. A privatization programme, a list of 24 tariff subheadings, including used initiated by the Public Enterprise Reform Law vehicles and sound reproducers, for which it of 1997, has significantly reduced government obtained permission to use reference prices involvement in economic activities. The until July 2003. The provisions of the WTO principal mode of privatization chosen Agreement on Customs Valuation are already involves at least 50% of the newly created applied for preferential imports. companies remaining government-owned but management control passing to private 15. Irrespective of their origin and in investors. State enterprises continue to accordance with the national treatment operate in electricity generation and principle, imports are subject to domestic transmission, financial services, and maritime taxes, most notably a 12% tax on the transfer ports. of industrialized goods and services. In addition, various goods such as alcoholic beverages, electric household goods, tobacco Dominican Republic WT/TPR/S/105 Page xi products, and vehicles are subject to specific exporters, but certain procedures still appear consumption taxes ranging from 15% to 80%. cumbersome. To promote exports of non- traditional goods, two official export finance 16. The use of non-tariff trade barriers programmes were instituted in 1999; no appears limited. The Dominican Republic government-supported export insurance maintains various import restrictions and programme is in place. As an additional tool prohibitions, which apply equally to all for export promotion, a duty-drawback trading partners, for reasons of security, scheme for enterprises located outside FTZs health, and environmental protection. The was established in 1999, however, it has been Dominican Republic has not made recourse to used only to a limited extent. Other than the contingency measures. The Dominican free-trade zone and rebate regimes, no fiscal Republic is not a party to the Plurilateral incentives linked to export performance are in Agreement on Government Procurement; its place. Export taxes are maintained for certain regulations on public procurement grant mineral products, live fish, and crustaceans. preferences to local suppliers. 20. The Dominican Republic does not yet (5) OTHER MEASURES AFFECTING TRADE have a legal framework for competition IN GOODS policy, apart from sector-specific regulations. However, the authorities indicated that 17. The Dominican Republic has placed comprehensive legal provisions for great emphasis on export promotion; FTZs competition policy were under preparation. constitute the most important instrument to In 2000, the Dominican Republic adopted new this end. The Free-trade Zones Law of 1990 legislation to improve the protection of provides for substantial benefits to exporting intellectual property rights; it has also enterprises located in FTZs, most notably strengthened enforcement measures. wide-ranging tax and tariff exemptions. In 2001, more than 85% of the Dominican (6) SECTORAL POLICIES Republic's total exports came from FTZs, up from 52% in 1990. Since 1996, FTZs have 21. The economic importance of also been increasingly used as an instrument agriculture has been decreasing in recent of sectoral and regional policy. In 2001, the years, although the sector still contributes Dominican Republic notified the WTO that its about 11% to GDP, employs about 15% of the FTZ regime provided export subsidies, and labour force and generates 10% of subsequently requested an extension of the merchandise export earnings. The sector transition period to eliminate them. benefits from above-average border protection, but may have been penalized in 18. Dominican exports benefit from relative terms by privileges granted to other preferential access to foreign markets under producers, notably in FTZs. The Dominican various unilateral schemes such as GSP Republic's main agricultural exports, sugar schemes, the Lomé IV Convention, and the and coffee, have also come under U.S. Caribbean Basin Initiative (CBI). The considerable pressure in recent years from CBI, enhanced by the Caribbean Basin Trade low world market prices and damage caused Partnership Act, is by far the most important by Hurricane George in 1998. preferential scheme granted to the Dominican Republic; it covered Dominican exports 22. Manufacturing production, which valued at US$2.4 billion in 2001. contributes about 16% to GDP, has a strongly dual nature, defined by whether firms are 19. Since 1996, efforts have been located in FTZs or elsewhere. Investment in undertaken to streamline export procedures FTZs is largely made up of foreign firms through the introduction of a single export producing textiles, jewellery or electronics for form and the creation of a one-stop office for export, whereas non-FTZ enterprises, WT/TPR/S/105 Trade Policy Review Page xii comprising mostly Dominican firms, engage 24. Since 1996, the legal and institutional mainly in food processing to supply the framework for services has been reformed and domestic market. The manufacturing sector, the State has reduced its involvement in the largely FTZ firms, generates the lion's share sector to certain basic infrastructure, notably of Dominican exports. However, high maritime ports; this infrastructure is being reliance on imported inputs and weak upgraded by granting concessions to private backward linkages limit the sector's operators. Pursuant to the Foreign contribution to net exports and domestic Investment Law, market access to most welfare and make it highly dependent on services is guaranteed to foreign investors on foreign business cycles and, potentially, a non-discriminatory basis. Although market unilateral policy changes in trading partners. access in banking may be subject to a public interest test, access appears not to have been 23. The services sector is the cornerstone impaired in practice. of the Dominican economy, both in terms of value added and of employment. Since 1996, 25. The Dominican Republic made growth rates have been particularly high in commitments in seven of the twelve categories communication and tourism-related services, of services of the GATS. Policy changes since such as transport and the hotel and restaurant the end of the Uruguay Round have made industry. With international arrivals conditions for foreign participation in approaching three million, tourism also plays Dominican services far more liberal than a key role for foreign earnings. However, those implied by its GATS commitments. The inefficiencies and lack of competition persist Dominican Republic ratified the Fourth in certain services activities; for example, Protocol to the GATS (on chronic problems in the electricity industry telecommunications) but is still in the process are a handicap for the rest of the economy, of ratifying the Fifth Protocol (on financial and the cost of supplying financial services services). appears high.