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05SANTODOMINGO2648 2005-05-10 15:57:00 UNCLASSIFIED Embassy Santo Domingo
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1. On May 6, 20 of the 32 Dominican senators voted and
published a resolution declaring the urgent need to pass
legislation granting local industry assistance to compensate
for expected losses to help compete under the CAFTA, a
regional free trade agreement with the United States. The
resolution sets submission to Congress of the legislation as
a precondition for CAFTA ratification. It stresses the need
to involve the Fernandez administration along with Congress
and the private sector in identifying appropriate
compensatory measures, and indicates that the measures should
be in agreement with the CAFTA, the WTO and the IMF Stand-by

2. The compensation debate is not new, having been a topic
of discussion particularly evident since the repeal of a
protectionist 25% tax on fructose sweetened beverages late
last year. This is, however, the most formal notice coming
out of the Senate that it wants the executive branch
involved in defining compensatory measures legislation and
that it will not ratify CAFTA until the other legislation is
submitted to Congress.




Local papers carried a full-page announcement on May 9 by the
lobbying confederation Agricultural Emergency Committee (CEA)
demanding Congress and the presidency address "the great
disparity between costs of agricultural production for U.S.
and other CAFTA producers and those faced by Dominican
producers." The CEA claims that the only way that the
Dominican Republic will be able to compete is by subsidizing
or otherwise supporting agriculture producers. The CEA
proposed to the Senate a program of subsidies and other
benefits for Dominican producers that it asserts will put it
on equal footing with the other CAFTA countries. The
announcement gives "examples of assistance in the United
States," consisting of a list of ten agriculture products
with an estimate of subsidies received in support from U.S.
Government. Several of the products, including garlic,
onions, pork, beef and chicken, receive no direct U.S.
government subsidies according to the Embassy's Agricultural
Attach. The CEA announcement does not explain the figures
and does not offer an estimate of the offset needed by
Dominican producers.



Embassy officers have been in regular contact with the chair
of the Senate committee reviewing the issue of compensation
for Dominican industry related to CAFTA, but have not seen
andy bargaining numbers. In a political environment where
members of congress and various administration officials have
commented that fiscal reform should wait until after May 2006
elections, the Fernandez administration faces touch choices
and the even tougher requirement to start making those