RESTRICTED WORLD TRADE WT/TPR/G/105 9 September 2002 ORGANIZATION (02-4687)

Trade Policy Review Body Original: Spanish

TRADE POLICY REVIEW

Dominican Republic

Report by the Government

Pursuant to the Agreement Establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), the trade policy statement submitted by the Government of the Dominican Republic is attached.

Note: This report is subject to restricted circulation and press embargo until the end of the meeting of the Trade Policy Review Body on Dominican Republic. WT/TPR/G/105 Trade Policy Review Page 2

TABLE OF CONTENTS

Page

INTRODUCTION...... 5

I. MACROECONOMIC ENVIRONMENT...... 5

II. CURRENT MULTILATERAL TRADE NEGOTIATIONS...... 11

III. TRADE POLICY REGIME...... 12

CONCLUSIONS...... 14

ANNEX...... 15 Dominican Republic WT/TPR/G/105 Page 3

INTRODUCTION

1. Over the past six years, the Dominican Republic's economy has had one of the strongest growth rates in Latin America and the world. To a large extent, this was due to macroeconomic stability, increased openness and large-scale participation by the private sector in the economy. At the same time, the Dominican Republic signed important free trade agreements with the Central American Common Market and the Caribbean Community so as to expand trade with these countries. The Dominican Republic also participates extensively and actively in a number of multilateral and regional forums, especially the World Trade Organization, and in the negotiations on the Free Trade Area of the Americas (FTAA).

2. In addition, the Dominican Republic has undertaken far-reaching reforms, which include new foreign investment legislation, new customs procedures, the promotion of exports, telecommunications, electricity, intellectual property, hydrocarbons, tariff and tax measures, and a broad capitalization process that encompasses joint investment by the government sector and private investors in a number of State enterprises producing electricity, sugar, certain goods and services, inter alia.

3. This statement will focus on a number of issues, including the economic environment and the reform and opening processes; current multilateral and regional trade negotiations; trade policy objectives; and conclusions.

I. MACROECONOMIC ENVIRONMENT

4. The Dominican Republic's economic performance during the period 1996-2001 was remarkable and its gross domestic product rose at an average annual rate of 6.8 per cent, which is 4.2 percentage points higher than the growth rate for Latin America as a whole over the same period. Even in 2001, when this high rate of growth came to a halt, the Dominican Republic's GDP nevertheless grew at a rate that was 5.4 times higher than the average in the region. The downturn in external demand as a result of a general weakening of the global economy caused a brusque shock that had a negative effect on production over the past year.

5. There was particularly strong growth in communications, construction, electricity, tourism, trade, and manufactures during this period. New sectors emerged to replace the more traditional sectors in the national production structure, thereby causing significant changes in the population's way of life. The reason for this dynamism can be found in the economic policy action taken to enhance the accumulation of capital through domestic savings, raise the competitive capacity of human resources, and provide facilities for business activities.

6. Current per capita GDP in the Dominican Republic in dollar terms increased at an average annual rate of 7.2 per cent, which is higher than the average of only 1.2 per cent reached in Latin America and the Caribbean over the same period. This indicator shows that there has been an improvement in the population's living standards.

7. The prudent macroeconomic policy implemented by the Dominican authorities since the last trade policy review in 1996 and up to 2001 enabled this high annual rate of growth to be achieved, in conjunction with a low rate of inflation averaging 6.44 per cent calculated in December each year. The average level of consumer prices was much lower than elsewhere in the Latin American region and amounted to 10.72 per cent over the period. The Dominican Republic's low level of inflation is to a large extent due to the stable exchange rate. WT/TPR/G/105 Trade Policy Review Page 4

8. As regards production and employment, the Dominican Republic has a population of around 8.9 million. Over the past 50 years, the rate of population increase has gradually been falling. Consequently, the economically active population has been going down in recent years with a growth rate of 4.5 per cent, whereas the working population has been rising at a rate of 4.8 per cent. The demographic transition can also be seen in the figures for those employed, 72.2 per cent of whom were in urban areas in 2001 compared with 27.8 per cent in rural areas. One interesting feature that needs to be underlined is the increasingly important role played by women in production, with an annual cumulative rate of growth of 7.3 per cent, whereas for men the figure was only 3.6 per cent.

9. The production sector, employs the largest number of people in the Dominican Republic, with services accounting for 58.6 per cent during the period 1996-2001, followed by manufacturing with a figure of 24 per cent and agriculture with 17.4 per cent. Agriculture's share of the labour market has nevertheless been decreasing, from 16.5 per cent in 2000 to 15.1 per cent in 2001. The rise in the demand for jobs in the services sector is directly linked to this sector's share of the GDP, which amounts to an average of 57 per cent. The manufacturing sector accounts for an average of 29.2 per cent and the primary sector for 13.8 per cent.

10. It is important to note that the unemployment situation in the Dominican Republic, calculated on the basis of open unemployment, was only 6.1 per cent over the period under review, which is lower than the figure of 8.1 per cent for Latin America as a whole.

11. Concerning the Dominican Republic's fiscal policy, there was a sustained annual increase of 14.4 per cent in fiscal revenue, and an increase of 16.3 per cent in spending. The ratio between current GDP for both revenue and spending remained virtually the same from 1996 to 2001. The figures show that there were only two years of deficit over the period, which highlights the fiscal discipline exercised by the government authorities.

12. With regard to 2001, after curbing spending during the first nine months of the year, in the last quarter the Government implemented an expansive policy so as to boost internal demand and, thereby, production. Even so, due to the performance in 2000, the consolidated public sector managed to lower the deficit from 2.2 per cent as a proportion of GDP to 1 per cent in 2001.

13. The central Government generated an equivalent budgetary surplus amounting to an average of 0.5 per cent of GDP over the period. Local spending rose by 21.9 per cent in 2001 as a result of the 9.7 per cent increase in current expenditure caused by a rise in the number of people employed and in wages.

14. The fiscal reform yielded good results. Tax revenue increased by 16.7 per cent in current terms, and this was reflected in the level of fiscal pressure, which rose from 14.7 per cent in 1996 to 16.7 per cent in 2001. This was achieved despite the decline in revenue due to the tariff reductions adopted upon the Dominican Republic's accession to the World Trade Organization (WTO). In conjunction with the tariff reductions, the tariff structure was simplified and divided into five tariff rates of 0 per cent, 3 per cent, 8 per cent, 14 per cent and 20 per cent. Revenue from import duties rose by 30.8 per cent and accounted for 28 per cent of the total taxes received. This was due to the measures taken to broaden the tax base. The tax reform set a maximum rate of 25 per cent for income tax and also introduced a minimum tax of 1.5 per cent on gross sales for companies with sales exceeding RD$6 million, as well as an advance on income tax.

15. Revenue from taxes on goods and services amounted to 20.3 per cent annually, providing on average over 40 per cent of total revenue. Taxes paid in the form of the tax on the transfer of industrialized goods (ITBIS) increased at an annual rate of 25.3 per cent. It should be noted that, in Dominican Republic WT/TPR/G/105 Page 5

2001, as a result of the increase in the rate from 8 per cent to 12 per cent and the abolition of exemptions, together with the broader tax base, the increase was 27.9 per cent and accounted for over 53 per cent of taxes on goods. The selective consumption tax and the petroleum differential tax were also the subject of reforms and rose by 22.9 per cent overall. In November 2000, the mechanism for taxing fuel (known as the petroleum differential) was modified and a fixed tax per gallon was set for each product instead of the previous policy of fixed prices, which led to a fall in tax revenue as a result of the rise in international petroleum prices. In addition, taxes on rum and other alcoholic beverages rose from 25 per cent to 35 per cent and the tax on beer from 20 per cent to 25 per cent.

Monetary and Exchange Policy

16. The fundamental objective of the Dominican monetary authorities is price stability as the major element of its monetary policy so as to boost growth and enable reserves to be built up through the formulation of a monetary programme that is reviewed at least once every quarter, taking into account internal seasonal factors affecting the economy and any impact caused by the international economy or unforeseen circumstances.

17. The principal policy instrument used by the Central Bank has been open market operations and, in the light of the situation, it imposes maximum ceilings on credit. This has made it possible to keep inflation low and achieve remarkable growth.

18. Monetary creation in the Dominican Republic increased at an average rate of 16.3 per cent. In December 2001, it closed the year with an increase of 16.5 per cent in comparison with the previous year, notably due to the exchange of sovereign bonds and the refund of share certificates owned by the public and issued by the Central Bank.

19. Furthermore, the money supply rose at an average annual rate of 11.9 per cent. In 2000, this figure fell by 10.1 per cent, but in 2001 it rose by 24.7 per cent, which underlines the recovery in demand for money by economic agents in response to the lower rates of interest and the upturn in the Dominican economy.

20. To a large extent, the channelling of resources to the economy has been adequately covered by the commercial bank and the various services in the Dominican Republic, and this can be seen from the average annual figure for loans, which rose by 28.3 per cent while deposits increased by 23.3 per cent.

21. The Central Bank of the Dominican Republic has kept inflation under control with an average rate of 6.44 per cent over the period. The weighted average active interest rate fluctuated, but there was a downward trend of 0.7 per cent annually. The weighted average passive rate, on the other hand, showed an annual increase of 3.3 per cent. The monetary authorities implemented countercyclical policies in order to offset the external shock felt by the economy as a result of the unfavourable international environment.

22. With regard to foreign exchange, the basic objective of the Central Bank's policy over the past six years has been to maintain a unified exchange rate so as to achieve macroeconomic stability and control inflation. The difference between the private and official markets has therefore been only 1.3 per cent on average, although in the past three years the figure has been 0.8 per cent. The segmentation in the foreign exchange market has not been an obstacle to maintaining a fairly stable exchange rate during this period because the Dominican peso depreciated at an annual average figure of 4.6 per cent. As the aim of the exchange policy has been to allow the domestic competitiveness of sectors that generate foreign currency, according to the findings of recent studies, the WT/TPR/G/105 Trade Policy Review Page 6 appreciation of the Dominican Republic's real exchange rate is barely perceptible if one takes into account labour productivity and not the purchasing power parity of the exchange rate.

23. The preliminary draft of the Monetary and Finance Law approved by the Monetary Board of the Central Bank states that the basic purpose of the monetary policy is price stability. The text also provides for the total liberalization of the foreign exchange market, for which there will be full unification and free convertibility.

24. The Dominican economy's external sector, evaluated according to the balance-of-payments, shows that over the period reviewed the traditional deficit in the current account became more marked as of 1998 due both to cyclical and structural factors. Among the former, there were three shocks of external origin: the hurricane Georges in 1998, international prices for petroleum since mid-1999- 2000, and the downturn in the global economy in 2001, which mainly affected the tourism sector, remittances from family members, and the export of goods, especially from free zones. The structural factor included the high rate of growth in imports of goods1, not only due to the strong and sustained expansion in the gross domestic product (GDP) and domestic demand, but also to the high percentage of imported inputs needed for domestic production. In addition, Dominican exports, particularly of traditional or agricultural and mining products, performed poorly, with a negative annual rate of growth (3.4 per cent).

25. The balance in the capital and financial account was positive each year during the period and increased at a high cumulative annual rate of 87.8 per cent, so the accumulated amount for the period (US$5,608.0 million) largely exceeded the deficit in the current account (US$3,008.7 million). The decisive factor in the favourable trend in the financial account was foreign direct investment (FDI), which amounted to RD$4,706.0 million during the period and generated sufficient foreign currency to cover amply the deficit in the current account.

26. The other important component in the capital and financial account was external debt (disbursement less amortization on loans), which had a negative balance up to 1998 when disbursement of loans started to exceed amortization and the Dominican Republic ceased to be a net exporter of capital.

27. As a result of the trend in the two aforementioned accounts, the overall balance in the balance-of- payments was for the most part positive over the period, reaching a figure of US$706.0 million, which meant that in most of the years it was not necessary to utilize instruments to finance the balance: loss of reserves, use of IMF credit and loans, and special financing.

28. The positive trend in all the balance-of-payments flows meant that the Central Bank's international reserves increased substantially, the gross reserves by 2.5 and the net reserves by 9.1 over the period, and in 2001 they reached the highest levels ever in the history of the Central Bank since its creation in 1947.

29. It should also be noted that this increase meant that the international risk rating agencies such as Moody's and Standard and Poor's raised the Dominican Republic's risk rating by three points, making it the only country in Latin America and the Caribbean to see an improvement in its rating in 2001. These aspects, together with others such as the favourable FDI climate, contributed towards the

1 The elasticity of imports in comparison with GDP was 1.3 over the period 1996-2000, which means that for each percentage point increase in GDP, imports increased by 1.3 percentage points, in other words by 30 per cent more. Dominican Republic WT/TPR/G/105 Page 7 growth in investment and greater economic dynamism, thereby creating a sort of "virtuous circle" for the Dominican economy in recent years.

30. Regarding the trend in the traditional current account deficit for at least three decades, with the exception of 1990 and 1991, there was also a deficit in the period reviewed. Nevertheless, in comparison with the economy as a whole (in terms of GDP in dollars) 2, the deficit has fluctuated in recent years. From 1993 to 1997, there was a marked decrease. As of 1997, however, there was an upward trend as a result of the two external shocks.

31. Throughout the period 1996-2001, the deficit in the current account was mainly due to the trade balance in goods and, to a lesser extent, to the balance in income as the growing surpluses for services and current transfers only offset 86.3 per cent of the two accounts in deficit. In 2001, this figure fell to 81.6 per cent, mainly as a result of a reduced surplus in the services balance and a lower rate of increase in current transfers.

32. The trade balance shows that its deficit, which had risen at an annual rate of 22.3 per cent between 1996 and 2000, improved considerably in 2001, falling by 7.8 per cent in comparison with the previous year, mainly due to a reduction of 7.3 per cent in the Dominican Republic's total imports, both at the national level as a result of the lower rate of expansion of the Dominican economy and in imports into free zones due to the fall in demand for their manufactures by the North American economy.

33. The total value of goods exported by the Dominican Republic rose at an annual cumulative rate of 9.1 per cent between 1996 and 2000, but fell by 7 per cent in 2001 (US$403.8 million) in comparison with 2000. Of this figure, 57.6 per cent was due to the fall in exports from free zones. The fall in global demand3 was one of the external factors that caused this decrease in total exports in 2001.

34. During the period under review, the trend in exports from free zones showed that made-up textile articles, which had risen at an annual rate of 9.9 per cent (1996-2000), had a negative rate of 8.3 per cent in 2001, with a fall in their share of total exports by free zones. Electronic goods, which had shown substantial growth since the beginning of the 1990s, also fell by 14.1 per cent in 2001, although their share of total exports by free zones increased by almost 3 percentage points. Jewellery produced the highest annual rate of growth (30.9 per cent up to 2000). Although this fell by almost four percentage points in 2001, its share of total exports increased from 4.7 per cent to 12 per cent over the period. Pharmaceuticals, which had shown an excellent annual rate of growth of 21.9 per cent up to 2000, also fell by 3.9 per cent in 2001, although their share increased by 2.2 percentage points over the period.

35. Some of these increases in export share are indicative of greater diversification in free zones and, as a result, the latter have become less dependent on made-up textile articles. This is a positive development bearing in mind the keen competition mentioned above and the new situations that will arise after 2005.

36. In connection with imports, the Dominican economy is a significant importer and between 1996 and 2000 its total imports rose at an annual rate of 13.4 per cent. This trend was reversed in 2001, however, shrinking to 7.3 per cent. The overall decrease amounted to US$694.3 million, of which 69 2 In order to establish a quantitative link between the variables in the balance-of-payments and other variables in the economy, the latter must be expressed in current United States dollars so that the figures are comparable. 3 Global trade in goods barely increased by 0.5 per cent in 2001 compared with 12.5 per cent the previous year. WT/TPR/G/105 Trade Policy Review Page 8 per cent were national imports due to the slower expansion of the Dominican economy. The remaining 31 per cent were imports by free zones as a result of the decrease in external demand for their products following the recession in North America.

37. Concerning services, the Dominican Republic's service transactions abroad showed positive and increasing balances, which rose at an annual rate of 16.2 per cent (1996-2000), but fell by 8.1 per cent in 2001, mainly due to the fall in tourism as a result of the global economic situation.

38. Among the various components of the services balance, travel (65.8 per cent) and transport (20.9 per cent) played a leading role in absolute terms, together with communications – more specifically telecommunications – which grew strongly from 1994 onwards.

39. Earnings from travel increased by 8.6 per cent annually, but in 2001, for the first time in 30 years, they fell by 5.8 per cent in comparison with 2000. This was a cyclical trend due inter alia to the decrease in the number of tourists from economies affected by the slowdown and recession, as well as the depreciation of the Euro in comparison with the dollar. The number of tourists decreased even more after the events of 11 September. In the case of non-resident foreigners, which had the largest share (an average of 87.1 per cent of revenue), there was a negative rate of 7.9 per cent in 2001.

40. The majority of tourists still come from Europe, but Europe's share fell from 54.8 per cent to 48.1 per cent over the period. The depreciation of European currency in comparison with the United States dollar, particularly since the arrival of the Euro (24 per cent during the period 1999-2001) was one of the reasons for this decrease. One factor of particular importance was the 5.4 percentage point decrease in Europe's share during 2001, not only due to the depreciation of the Euro (5.4 per cent in 2001) but also because there was a significant downturn in growth in the European economies.

41. The Dominican Republic has shown that prudent and appropriate management of macroeconomic policy has been a decisive factor in the growth and stability of the economy as a whole. The Dominican authorities are therefore determined that these policies should be pursued in order to maintain sustained growth that ensures the progress and well-being of the Dominican people.

42. In another sector, one of the Dominican Republic's major achievements in relation to intellectual property in the international sphere was the successful presentation of its intellectual property legislation for review by the other Members of the WTO at the meeting of the TRIPS Council held from 18 to 22 July 2001.

43. The up-to-date legislation, the efforts made and action taken by the Dominican Republic to ensure the enforcement of intellectual property rights in the Dominican Republic, as well as the excellent preparations for the review made by the Dominican authorities, were widely praised by delegations present at the review.

44. As regards legislation, it should be emphasized that the Domincan Republic has one of the most modern intellectual property legislations in Latin America and, above all, it is in conformity with the substantive provisions in the TRIPS Agreement.

45. This up-to-date legislation is the result of the efforts made by the Dominican Government over the past five years to protect and regulate intellectual property rights as a tool for promoting industrial and cultural development through the following: the enactment of the General Telecommunications Law No. 153 in 1998, which created the Dominican Telecommunications Institute (INDOTEL) as the regulatory body for this sector within a system of free competition; the Industrial Property Law No. Dominican Republic WT/TPR/G/105 Page 9

20-00 of 2 April 2000 and its Regulations No. 408-00 of August 2000; the Law on Copyright and Related Rights No. 65-00 of August 2000 and its Regulations No. 362.01 of March 2001.

46. As far as enforcement is concerned, it should be noted that the Government has been untiring in its efforts to control violations of intellectual property laws and, by means of Executive Decree No. 303-01 of March 2001, it established the National Commission for Intellectual Property Rights. The purpose of the Commission is to coordinate national policy on infringement of intellectual property rights with the various government authorities that have related activities. The Commission works closely with the Intellectual Property Department in the Attorney General's Office, which coordinates action by the Public Prosecutor's Office at the national level.

47. In addition to its inspection activities and anti-piracy action, the National Copyright Office has signed an agreement with the Dominican Telecommunications Institute (INDOTEL) with a view to taking joint action to ensure observance of copyright by broadcasting organizations, such as television and the transmission of television signals by cable.

48. As regards preparations for the review, warm appreciation was expressed regarding the quality of the replies and the efforts made by the Dominican Republic to respond promptly to all the questions posed by Members (United States, Canada, Switzerland, Japan, European Communities) and to the questions by the WTO on enforcement. These replies are contained in an official WTO document of 103 pages. It should be noted that the replies given by the Dominican Republic are fully consistent with its positions on the subjects negotiated in the TRIPS Council of the WTO.

II. CURRENT MULTILATERAL TRADE NEGOTIATIONS

49. The Dominican Republic is involved in a complex process of integration into international markets. It is complex from several standpoints: the pressure to open up and integrate, the issues and the scope of the agenda in the multilateral trade negotiations in the WTO and the FTAA, the Economic Association Agreements with the European Union, and bilateral agreements.

50. The authority responsible for trade negotiations is the National Trade Negotiations Commission (CNNC), established under Decree No. 74-97 of 10 February 1997. This Decree also established the Civil Society Advisory Council in order to guarantee the utmost transparency by involving business and academic organizations, trade unions and non-governmental organizations concerned by these issues.

51. The CNNC is composed of 12 government bodies and is chaired by the Office of the Secretary of State for Foreign Relations, which coordinates the Dominican Republic's negotiation activities.

52. The Dominican Republic's trade agenda encompasses two major areas: the bilateral agenda, which includes the completion of the free trade agreements signed with the Caribbean Community (CARICOM) and with Central America, and the negotiation of further free trade or partial scope agreements with Canada, Panama, Venezuela, Cuba and Haïti.

53. The multilateral agenda includes relations with the WTO, the Free Trade Area of the Americas (FTAA) and the Association Agreement with the European Union or Cotonou Agreement.

54. At the multilateral level, the main task is the work programme defined at the WTO's Fourth Ministerial Conference, which is both broad, in-depth and intensive for the next few years. The agenda comprises five major components that are being followed up in meetings in Geneva. The WT/TPR/G/105 Trade Policy Review Page 10

Dominican Republic has made a number of specific proposals, on agriculture and services in particular.

55. Secondly, there is the establishment of the Free Trade Area of the Americas (FTAA), which should conclude in 2005, and contains broader disciplines than those in the WTO. The texts of the Agreement are revised in nine negotiating groups that meet weekly in Panama (Market Access, Agriculture, Services, Investment, Intellectual Property, Subsidies, Anti-dumping and Countervailing Measures, Government Procurement, Competition Policies, and Dispute Settlement).

56. It is planned that the schedules of offers on tariff reduction should be submitted between 15 December 2002 and 15 February 2003. The timetable and pace of tariff reduction has yet to be defined.

57. Measures on special and differential treatment are also being drawn up to take into account the differences in the size and levels of development of the countries concerned and these will be applied to each of the nine topics.

58. Lastly, but no less important, is the Economic Association Agreement between the Group of African, Caribbean and Pacific States (ACP Group) and the European Union (EU), also known as the Cotonou Agreement. The Cotonou negotiations should lead to the establishment of a timetable for the gradual elimination of obstacles to trade and improved access on the basis of rules of origin. These negotiations will begin in September 2002 and will take into account the levels of development of the ACP countries, their capacity to adapt and to bring their economies into line with the liberalization process, and they should be consistent with the WTO principles.

59. The Dominican Republic has participated in the preparatory stage for these negotiations as one of the 18 countries representing the 77 ACP States. It also chairs the ACP Group in Geneva that is harmonizing the Cotonou negotiations with the WTO principles.

60. This overall agenda in which the Dominican Republic is involved poses a challenge in reaching defendable positions within the framework of a strategy that is consistent with the various negotiating systems. At the same time, there is interaction with and dissemination among the private sector and civil society.

III. TRADE POLICY REGIME

61. Since 1990, the main feature of the Dominican trade policy regime has been ongoing reform and liberalization. The objective of the policy on trade and investment has been to promote, facilitate and strengthen integration into the global economy. For example, new laws have been enacted: foreign investment, tariff reform, simplification of customs procedures for export and import, telecommunications, tax reform, inter alia.

62. The Dominican Republic plays an active role in the multilateral trading system and has participated in the negotiations on agriculture, financial services, basic telecommunications and others. It has also signed two free trade agreements with the Caribbean Community (CARICOM) and the Central American Common Market.

63. The objective of the Dominican Republic's trade policy is to raise standards of living for all its population through economic and social development. It also aims to boost the efficiency and competitiveness of domestic producers, lower the effective level of protection and eliminate any Dominican Republic WT/TPR/G/105 Page 11 aspect of the tariff structure that is unfavourable to exports, while at the same time fostering regional economic cooperation.

64. The Office of the Secretary of State for Industry and Trade, with the cooperation of the Directorate-General of Customs, is responsible for implementing the agreements. A special office has been set up to monitor compliance with the terms of the commitments undertaken and to resolve problems of access experienced by domestic producers when penetrating the markets of signatory countries and problems encountered by the latter in access to the domestic market.

65. In addition to the Dominican Export Promotions Centre (CEDOPEX), the National Council on Competitiveness has recently been set up in order to implement the agreements and it is responsible for laying down the bases for a real and effective increase in productivity in the key sectors of the Dominican economy. It is a joint authority bringing together both the public and private sectors concerned.

66. In 2001, the amendments to the import tariff regime agreed at the end of 2000 entered into effect. The tariff structure has accordingly been simplified and now only has five rates. In 2001, the new import valuation system also entered into effect, based on declarations by importers in accordance with invoices, and this procedure has replaced the former procedure under which price lists were used as a reference.

67. Under the Free Trade Agreement signed between the Dominican Republic and Central American countries in 1998, the components relating to El Salvador, Guatemala and Honduras entered into effect in 2001, and in March 2002, following the signing of the Memorandum of Understanding, the agreement with Costa Rica came into effect. Ratification with Nicaragua is still pending, after which it will be fully integrated in the Central American Agreement. This preferential scheme complements that contained in the protocol of implementation signed by the Dominican Republic and the Caribbean Community (CARICOM) in April 2000.

68. The Dominican Republic considers that the issue of free trade at the continental level through the Free Trade Area of the Americas (FTAA), which will start in 2005 according to the mandate agreed at the Third Summit of Heads of State and Government held in Quebec, represents an opportunity for achieving the objectives of growth, employment, income distribution, increased production with the creation of exportable goods, access to better technology and specialized inputs, so as to achieve greater prosperity, fulfil the human potential and implement institutional developments.

69. To this end, the Dominican Republic has participated in all the negotiating groups, helping to draw up procedures that ensure efficiency and progress in implementing the FTAA. In this context, special and differential treatment for small economies in the region has been established because of the asymmetry that exists among countries in the region.

70. The Dominican Republic has formally asked to participate in the proposed free trade agreement between the United States and Central America. This request shows that domestic sectors wish to expand trade through this agreement. The Dominican Republic is also interested in concluding a free trade agreement with the United States on an individual basis.

CONCLUSIONS

71. This brief description of the measures taken in relation to trade and other aspects of the Dominican Republic's economic policy over the past six years underlines the Government's firm determination to create a more open and liberal economy that will allow it to take full advantage of WT/TPR/G/105 Trade Policy Review Page 12 the benefits of the multilateral trading system. The Dominican Republic has undertaken to pursue the reform process in order to reach sustained levels of growth and economic development.

72. The Dominican Republic recognizes that international trade is an essential component of any development strategy and may become an effective tool for economic growth, job creation and poverty reduction. It also believes that the WTO is the proper forum for promoting the liberalization of trade and economic development throughout the world. At the same time, efforts to conclude bilateral and regional trade agreements will continue to complement the trade liberalization efforts being undertaken within the WTO. Dominican Republic WT/TPR/G/105 Page 13

ANNEX

CHART 1.1 TREND IN THE CURRENT ACCOUNT DEFICIT/GDP, 1993-2001 (%) 5.5 5.2

2.6 4.0 2.1 2.5

1.5 1.6 1.1

1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: International Department, Central Bank of the Dominican Republic.

TABLE 1.2 BALANCE OF TRADE, 1996-2001 (f.o.b. value in US$ million) 1996 1997 1998 1999 2000 ACGR* 2001** GR*** TOTAL

Exports 4,052.8 4,613.7 4,980.5 5,136.7 5,736.7 9.1 5,332.9 -7.0 29,853.3 Domestic*** 945.5 1,017.3 880.3 805.2 966.1 0.5 794.7 -17.7 5,409.1 Free Zones 3,107.3 3,596.4 4,100.2 4,331.5 4,770.6 11.3 4,538.2 -4.9 24,444.2

Imports 5,727.0 6,608.7 7,597.3 8,041.1 9,478.5 13.4 8,784.2 -7.3 46,236.8 Domestic 3,580.7 4,192.0 4,896.6 5,206.8 6,416.0 15.7 5,937.1 -7.5 30,229.2 Free Zones 2,146.3 2,416.7 2,700.7 2,834.3 3,062.5 9.3 2,847.1 -7.0 16,007.6

Balance -1,674.2 -1,995.0 -2,616.8 -2,904.4 -3,741.8 22.3 -3,451.3 -7.8 -16,383.5 Domestic -2,635.2 -3,174.7 -4,016.3 -4,401.6 -5,449.9 19.9 -5,142.4 -5.6 -24,820.1 Free Zones 961.0 1,179.7 1,399.5 1,497.2 1,708.1 15.5 1,691.1 -1.0 8,436.6 *ACGR: Annual cumulative growth rate, 1996-2000 **Estimates

***GR: Growth rate, 2001/2000 Includes general goods and goods procured in port by carriers

Source: International Department, CBDR. WT/TPR/G/105 Trade Policy Review Page 14

TABLE 1.3 TOTAL EXPORTS 1996-2001 (f.o.b. value in US$ million) Goods General procured Goods for Total goods in port by processing carriers 1996 829.2 116.3 3,107.3 4,052.8 1997 884.5 132.8 3,596.4 4,613.7 1998 739.7 140.6 4,100.2 4,980.5 1999 627.6 177.6 4,331.5 5,136.7 2000 783.0 183.1 4,770.6 5,736.7 ACGR* -1.4 12.0 11.3 9.1 2001** 652.4 142.3 4,538.2 5,332.9 Total 4,516.4 892.7 24,444.2 29,853.3 GR*** -16.7 -22.3 -4.9 -7.0 % average 7.6 1.5 40.9 50.0

*ACGR: Annual cumulative growth rate, 1996-2000

**Estimates ***GR: Growth rate, 2001/2000

Source: International Department, CBDR. Dominican Republic WT/TPR/G/105 Page 15

CHART 1.2 GROWTH IN EXPORT OF MADE-UP TEXTILE PRODUCTS, 1996-2001

26.1

7.5

0.9 5.3

1.9 -8.3

1996 1997 1998 1999 2000 2001*

*Estimates Source: International Department, CBDR.

CHART 1.3 FREE-ZONETABLE EXPORTS 1.4 BY PRODUCT GROUP STRUCTURE(Percentage OF DOMESTIC share, 1996 IMPORTS, and 2001)TABLE 1.51996-2001 TREND IN BALANCE OF SERVICES, 1996-2001 56.4 TABLE 1.6 51.6(f.o.b. value in US$ million)(Net values in US$ million) TRANSPORT TRANSACTIONS, 1996-2001 Consumer Raw 1996 1997Capital1998 1999 2000 ACGR* 2001** GR*** Total Transportation -591.2(Net-617.9 values-719.3 in US$-705.0 million)-756.7Total 6.4 -696.6 -7.9 -4,086.7 Travelgoods 1996materials19971,582.3 1,878.71998goods1,898.91999 2,219.220002,551.2ACGR*12.72001**2,403.2GR***-5.8 12,533.5Total CommunicationsFreight -528.7 -554.9121.2 -649.595.4 -637.599.5 95.1-689.489.0 6.9 -7.4-622.960.9 -9.6-31.6-3,682.9561.1 1996 InsuranceSea 1,722.2 -490.1 1,300.2-520.2-139.4 -609.0-151.4 -166.0558.3-598.6 -77.7-647.2 -86.9 3,580.7 7.2 -11.1-585.6-93.9 -9.58.1-3,450.7-715.3 Financial services -2.712.0-11.6 -5.910.1 -8.4 -8.8 34.4 -13.1 48.9 -50.5 1997 Domestic 2,026.4 8.5 -353.410.7 1,469.4-397.7 -471.5 7.2 696.2-453.8 -491.6 4,192.0 8.6 -454.9 -7.5 -2,622.9 Other business6.7 services7.8 7.6 7.9 36.4 35.8 39.0 49.2 44.7 5.3 13.9 -68.9 219.0 Free Zones -136.7 -122.54.7 -137.55.0 -144.8 4.0-155.6 3.3 -130.7 -16.0 -827.8 1998 Royalties 2,178.3 and licence fees 1,636.3-28.5 -16.1 1,082.1-25.3 -29.8 -29.7 4,896.7 1.0 -22.0 -25.9 -151.4 s

Air -38.6 -34.7 -40.5l -38.9 -42.2 2.3 -37.3 -11.6 -232.2 s r o 40.5y 62.4 61.1 59.7 51.5 51.4 326.6

Government transactions r 6.2 -0.2 p a c r g a c i e u c e n e i c - n l h i t l t

Net total a 1,018.6 1,275.3 1,182.0 1,602.2 1,854.3 16.2 1,703.8 -8.1 8,636.3 e

1999 2,368.9 o 1,787.4 1,050.5 5,206.8 h w u e t r t b d O t e o o o

a *ACGR: Annual cumulative growth rate, 1996-2000 w l c c

Passengerso -114.5 -118.1 -126.0 -127.0 -130.8 3.4 -133.5 2.1 -749.9 e c T e a l M 2000 **Preliminary 3,187.4 dataF ***GR: Growth 2,031.1 rate, 2001/2000J 1,197.1 6,416.0 m E Source:Other International Department,52.0 CBDR. 55.1 56.2r 59.5 63.519965.1 2001 59.8 -5.8 346.1 a h

ACGR* Net total 16.6 -591.2 -617.911.8 -719.3 P -705.021.0 -756.7 6.415.7 -696.6 -7.9 -4,086.7 Source: International Department, CBDR. *ACGR: Annual cumulative growth rate, 1996-2000 2001** **Preliminary 2,859.2 data ***GR: 1,792.6 Growth rate, 2001/2000 1,285.3 5,937.1 GR*** Source: International-10.3 Department, CBDR.-11.7 7.4 -7.5 Total 14,342.4 10,017.0 5,869.5 30,229.3

*ACGR: Annual cumulative growth rate, 1996-2000

**Preliminary data ***GR: Growth rate, 2001/2000

Source: International Department, CBDR. WT/TPR/G/105 Trade Policy Review Page 16

TABLE 1.7 TRAVEL TRANS ACTIONS , 1996-2001 (Values in US $ million) Non resident Non-resident Other Residents Net total foreigners Dominicans (net) 1996 1,575.4 194.5 -197.2 9.6 1,582.3 1997 1,827.4 263.2 -219.7 7.8 1,878.7 1998 1,864.1 269.8 -253.2 18.2 1,898.9 1999 2,149.0 314.3 -263.1 19.0 2,219.2 2000 2,511.9 326.9 -308.0 20.4 2,551.2 ACGR* 12.4 13.9 11.8 20.7 - 2001** 2,314.3 314.0 -285.6 60.5 2,403.2 GR*** -7.9 -3.9 -7.3 196.6 - Total 12,242.1 TABLE1,682.7 1.8-1,526.8 135.5 12,533.5 *ACGR: AnnualBALANCE cumulative growth rate, OF 1996-2000 INCOME, 1996-2001 **Preliminary data ***GR: Growth rate, 2001/2000 Source: International (NetDepartment, balances CBDR. in US$ million)

Payment of Investment Balance Employees income 1996 39.8 -764.6 -724.8 1997 45.7 -841.1 -795.4 1998 61.3 -951.4 -890.1 1999 94.6 -1,069.4 -974.8 2000 130.5 -1,171.8 -1,041.3 ACGR* 34.6 11.3 9.5 2001** 152.2 -1,271.1 -1,118.9 GR*** 16.6 8.5 7.5 Total 524.1 -6,069.4 -5,545.3 *ACGR: Annual cumulative growth rate, 1996-2000 **Preliminary data ***GR: Growth rate, 2001/2000 Source: International Department, CBDR. Dominican Republic WT/TPR/G/105 Page 17

______