WORLD TRADE WT/TPR/S/207/Rev.

1
3 March 2009
ORGANIZATION
(09-1083)

Trade Policy Review Body

TRADE POLICY REVIEW

Report by the Secretariat

THE DOMINICAN REPUBLIC

Revision

This report, prepared for the third 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
Dominican Republic on its trade policies and practices.

Any technical questions arising from this report may be addressed to:
Mrs Martha Lara (Tel.: 022 739 6033), and Mr Karsten Steinfatt (Tel.:
022 739 6759) or Mr Raymundo Valdés (Tel.: 022 739 5346).

Document WT/TPR/G/207 contains the policy statement submitted by the

Dominican Republic.
The Dominican Republic WT/TPR/S/207/Rev.1
Page iii

CONTENTS

Page

SUMMARY OBSERVATIONS vii

(1) ECONOMIC ENVIRONMENT vii
(2) TRADE POLICY AND INVESTMENT FRAMEWORK viii
(3) MARKET ACCESS FOR GOODS viii
(4) MEASURES AFFECTING EXPORTS ix
(5) OTHER MEASURES AFFECTING TRADE ix
(6) SECTORAL POLICIES x

I. ECONOMIC ENVIRONMENT 1
(1) OVERVIEW 1
(2) MACROECONOMIC TRENDS 1
(i) Growth, structure and employment 1
(ii) Fiscal policy 4
(iii) Monetary and exchange-rate policy 7
(iv) Balance of payments 9
(3) DEVELOPMENTS IN TRADE AND INVESTMENT FLOWS 12
(i) Trade in goods 12
(ii) Trade in services 13
(iii) Foreign direct investment 14
(4) PROSPECTS 15

II. TRADE AND INVESTMENT REGIME 16

(1) OVERVIEW 16
(2) TRADE POLICY AND INVESTMENT FRAMEWORK 16
(i) General legal and institutional framework 16
(ii) Trade policy formulation and objectives 17
(3) FOREIGN INVESTMENT REGIME 18
(4) INTERNATIONAL TRADE RELATIONS 21
(i) World Trade Organization 21
(ii) Free trade agreements 22

III. TRADE POLICIES BY MEASURE 27

(1) OVERVIEW 27
(2) MEASURES DIRECTLY AFFECTING IMPORTS 27
(i) Procedures, documentation and registration 27
(ii) Customs valuation 30
(iii) Rules of origin 31
(iv) Tariffs 33
(v) Other charges affecting imports 36
(vi) Import prohibitions, restrictions and licensing 38
(vii) Contingency measures 39
(viii) Standards and technical regulations 40
WT/TPR/S/207/Rev.1 Trade Policy Review
Page iv

Page

(ix) Sanitary and phytosanitary measures 45

(3) MEASURES DIRECTLY AFFECTING EXPORTS 49
(i) Procedures, documentation and registration 49
(ii) Export taxes and duties 50
(iii) Export prohibitions and restrictions and licensing regime 51
(iv) Tariff and tax concessions 52
(v) Export financing, insurance, guarantees and promotion 56
(4) OTHER MEASURES AFFECTING PRODUCTION AND TRADE 57
(i) Establishment and taxation of enterprises 57
(ii) Competition policy and pricing 59
(iii) Incentives 62
(iv) State-owned enterprises and privatization 65
(v) Government procurement 66
(vi) Protection of intellectual property 69

IV. TRADE POLICIES BY SECTOR 75

(1) INTRODUCTION 75
(2) AGRICULTURAL SECTOR 75
(i) General characteristics 75
(ii) Support policy and indicators 76
(iii) Policy instruments 76
(3) ENERGY 81
(i) Electricity 81
(ii) Other energy 84
(4) MANUFACTURING 86
(i) Sector outside the free zone regime 86
(ii) Free zones 86
(5) SERVICES 88
(i) Multilateral and preferential commitments 88
(ii) Telecommunications 89
(iii) Financial services 92
(iv) Air transport and airports 97
(v) Maritime transport and ports 99
(vi) Professional services 101
(vii) Tourism 103

REFERENCES 107
APPENDIX TABLES 111
The Dominican Republic WT/TPR/S/207/Rev.1
Page v

TABLES

Page

I. ECONOMIC ENVIRONMENT
I.1 Main economic indicators, 2002-2008 2
I.2 Structure of GDP by expenditure, 2002-2008 3
I.3 Central Government fiscal balance, 2002-2008 5
I.4 Main monetary indicators, 2002-2008 8
I.5 Balance of payments, 2002-2008 10
I.6 Foreign direct investment (FDI) by sector, 2002-2008 14
I.7 Foreign direct investment (FDI) by country of origin, 2002-2008 14

II. TRADE AND INVESTMENT REGIME

II.1 Restrictions on foreign investment contained in sectoral laws 19

III. TRADE POLICIES BY MEASURE

III.1 Structure of MFN tariffs, 2002 and 2008 34

III.2 Customs service fees 36
III.3 Products subject to import licences 39
III.4 Principal taxes applicable to companies and natural persons engaged in
commercial and industrial activities 59
III.5 Thresholds for determining the method of awarding contracts, 2008 68
III.6 Participation by the Dominican Republic in WIPO-administered international treaties 71
III.7 Overview of the protection of intellectual property rights in the
Dominican Republic, 2008 72

IV. TRADE POLICIES BY SECTOR

IV.1 Products included in MFN tariff quotas, 2007 78

IV.2 Value added in the manufacturing sector (excluding free zones), 2001-2007 86
IV.3 Principal indicators relating to free zones, 2001-2007 87
IV.4 Tourism sector indicators, 2001-2007 103
WT/TPR/S/207/Rev.1 Trade Policy Review
Page vi

APPENDIX TABLES

Page

I. ECONOMIC ENVIRONMENT

AI.1 Domestic merchandise exports (f.o.b.) by product, 2002-2006 113

AI.2 Domestic merchandise imports (f.o.b.) by product, 2002-2006 115
AI.3 Domestic merchandise exports (f.o.b.) by trading partner, 2002-2006 117
AI.4 Domestic merchandise imports (f.o.b.) by trading partner, 2002-2006 118
AI.5 Total merchandise exports (f.o.b.) by product, 2002-2006 119
AI.6 Total merchandise exports (f.o.b.) by trading partner, 2002-2006 121

II. TRADE AND INVESTMENT REGIME

AII.1 Selected notifications to the WTO, August 2008 122

III. TRADE POLICIES BY MEASURE

AIII.1 Summary of MFN tariffs, 2008 125

AIII.2 Summary of preferential tariffs, 2007 127

IV. TRADE POLICIES BY SECTOR

AIV.1 Summary of the Dominican Republic's commitments under the GATS 129
The Dominican Republic
SUMMARY OBSERVATIONS
1. Since its previous trade policy review
in 2002, the Dominican Republic has
continued with the liberalization of its trade
regime. Among other measures, customs
procedures were streamlined, tariffs reduced,
import surcharges and export taxes eliminated,
and new legislation adopted on government
procurement, competition policy and
intellectual property rights. Participation in
the global economy has remained intense, with
trade in goods and services, investment flows
and family remittances making key
contributions to the economy. As such, the
Dominican Republic has continued to give
priority to its participation in the multilateral
trade agenda, while also seeking to further its
integration into the global economy through
preferential agreements.
2. As in earlier periods, economic
growth has been significant but distinctly
cyclical. Disparities have continued to
characterize the incentives framework, which
still favours some groups to the detriment of
others. In particular, most exporters of goods
are exempt from the general trade and fiscal
regimes so as to offset the anti-export bias of
these regimes. As noted in the Dominican
Republic's previous review, this narrowly
focused strategy, and persistent inefficiencies
in sectors like electricity, may well have
become obstacles for sustained improvements
in living standards. These would be best
supported by taking additional steps to
enhance competition in the domestic market
and rationalizing the fiscal incentive
programmes in order to discourage rent-
seeking behaviour, improve economic
efficiency, and strengthen the fiscal situation
to help smooth out economic cycles.
(1) ECONOMIC ENVIRONMENT
3. During the period 2002-2007, the
Dominican Republic's economy grew at an
average annual real rate of 5.8 per cent, albeit
with marked fluctuations. After having
experienced an acute crisis in 2003-2004, the
economy recovered rapidly boosted by strong
WT/TPR/S/207/Rev.1
Page vii
4. growth in private consumption and
investment, with GDP growth peaking at
10.7 per cent in 2006. This was followed by a
decline in the rate of growth, which fell to
6.2 per cent in the first quarter of 2008 (year
on year). Per capita income has increased to
US$4,406 in 2007 but some 30 per cent of the
population still lives under the poverty line.
5. A fiscal adjustment policy allowed for
the gradual improvement of public finances,
with the overall balance of the Non Financial
Public Sector decreasing from -4.9 per cent of
GDP in 2003 to a zero balance in 2007. In
July 2008, however, the authorities had to
adopt an austerity plan to curtail public
spending. Monetary policy has helped to keep
the nominal exchange rate relatively stable and
inflation has been contained to single digits,
although there are growing inflationary
pressures. The economic upturn has led to a
strong increase in imports, and since 2005 the
balance-of-payments current account has
shown a deficit despite the increase in revenue
from tourism and family remittances, which
accounted for 17 per cent of GDP in 2007.
The deficit in the current account has mainly
been financed through increased flows of
foreign investment, in particular from the
United States.
6. Between 2002 and 2007, total exports
showed moderate growth. Although exports
from free zones continue to account for most
of the Dominican Republic's merchandise
exports, they stagnated during this period,
confirming the downward trend in their
contribution to economic growth. The
composition and geographical distribution of
the Dominican Republic's trade has remained
fairly stable. Manufactures are still the major
imports and exports. Even though the share of
trade with Europe and Asia has risen,
especially in the case of imports from China,
the United States continues to be the
Dominican Republic's leading trade partner,
accounting for a third of Dominican national
trade (i.e., excluding free trade zones). The
Dominican Republic has made important
efforts to improve its trade statistics, but gaps
remain.
WT/TPR/S/207/Rev.1
Page viii
(2) TRADE POLICY AND INVESTMENT
FRAMEWORK
7. The Dominican Republic's trade
policy objectives are to boost the economy's
efficiency by lowering the level of protection,
counteracting any anti-export bias in the tariff
structure and fostering regional economic
cooperation. The Dominican Republic
attaches priority to the multilateral trade
agenda. It is a founding Member of the WTO
and plays an active role in the Doha Round.
The Dominican Republic has submitted many
notifications to the WTO, but some are still
outstanding. It has been a defendant in three
dispute settlement cases at the WTO and a
third party in three others; it has not been a
complainant in any case.
8. The Dominican Republic has
liberalized its trade regime selectively through
preferential agreements. In addition to the
agreements it had in force in 2002 with the
Central American Common Market and
CARICOM, during the period under review
the Dominican Republic finalized negotiations
on the Partial Scope Agreement with Panama,
the Free Trade Agreement among the
Dominican Republic, Central America and the
United States (DR-CAFTA) and the Economic
Partnership Agreement between the European
Union and CARIFORUM. By September
2008, the latter had not yet entered into force.
The DR-CAFTA is especially important
inasmuch as the majority of the Dominican
Republic's overall trade in goods is carried out
with the parties to this agreement.
9. The Dominican Republic's investment
regime allows foreigners to invest in most
sectors of the economy. Exceptions include
activities that affect public health and the
environment, as well as the restrictions
imposed by laws and regulations governing
particular sectors. There are limits on the
share of foreign private investment in air
transport and broadcasting, and foreign state-
owned companies may not invest in mining
and oil exploration and extraction.
Trade Policy Review
(3) MARKET ACCESS FOR GOODS
10. Since 2002, the Dominican Republic
has adopted a number of measures to
streamline customs procedures, including the
elimination of consular invoices, the
introduction of a single customs declaration
and the reduction of the statutory time limit for
customs clearance. The use of minimum
prices for customs valuation was terminated in
2003, although a system of reference values is
still employed for assessing the value of used
goods. The Dominican Republic issues
binding advance rulings on customs valuation
criteria for trade under the DR-CAFTA and
plans to extend these to all its trade.
11. The average applied MFN tariff rate
has decreased from 8.6 per cent in 2002 to
7.5 per cent in 2008. The share of duty-free
tariff lines increased markedly during the same
period, from around 13 per cent to almost
55 per cent. This reflects the elimination of
tariffs applied on many inputs and capital
goods not produced domestically. On the
other hand, tariff dispersion has increased, and
thus certain products could be benefiting from
higher effective protection. The Dominican
Republic has bound its entire tariff schedule,
mostly at 40 per cent; reducing the average
gap of around 28 percentage points between
bound and applied rates would further enhance
the predictability of the Dominican Republic's
trade regime.
12. During the period under review, the
Dominican Republic maintained a surcharge
on imports, first at a rate of 10 per cent,
subsequently increased to 13 per cent. It also
introduced a transitional import tax at a rate of
2 per cent. While in force, these surcharges
substantially increased the taxes collected
exclusively on imports. A WTO panel found
the two surcharges to be inconsistent with
multilateral rules. The Dominican Republic
abolished both measures during the reference
period.
13. The Dominican Republic has not
adopted anti-dumping, countervailing or
The Dominican Republic
14. safeguard measures, although it is
establishing the institutional framework for
their application and intends to start
consideration of requests for protection as
soon as the necessary elements and resources
are in place.
15. The Dominican Republic has a legal
and institutional framework for the elaboration
and application of technical regulations; most
are based on international standards. It is
reviewing the legal framework governing
sanitary and phytosanitary measures. During
the period under review, it has submitted
51 notifications to the TBT Committee, but
only five to the SPS Committee; the
authorities are making efforts to build up
institutional capacity so as to notify both types
of measure within the periods agreed
multilaterally. It would also be important to
devote more resources to strengthening the
Dominican Republic's capacity to implement
TBT and SPS measures, to the benefit of both
consumers and producers.
(4) MEASURES AFFECTING EXPORTS
16. Exports of certain goods (agricultural,
chemical and mineral) are subject to an
authorization, licence or certificate issued by
several bodies. Between August 2003 and
June 2004, a transitional tax of 5 per cent was
applied to the export of all goods and services.
17. The Dominican Republic has notified
the WTO of the export subsidies provided by
its free-trade zone (FTZ) regime, and
requested an extension until 2007 to eliminate
practices inconsistent with its multilateral
commitments. In 2007, it requested the
continuation of the extension, and agreed to
eliminate these export subsidies by 2015 at the
latest. In 2007, companies in FTZs were
allowed to export products of the textile,
clothing and footwear industries to the
national market. That same year, some of the
tax benefits given in FTZs were extended to
companies in the said industries located
outside FTZs. Other earlier fiscal concessions
granted to exporters outside FTZs in order to
eliminate the anti-export bias created by the
WT/TPR/S/207/Rev.1
Page ix
tax regime are still in force but seem to have
had little use in practice.
18. Exports are also supported through
government programmes for financing and
promotion.
(5) OTHER MEASURES AFFECTING TRADE
19. In addition to export promotion
programmes, the Dominican Republic
maintains various other incentive schemes. In
2007, the Dominican Republic introduced new
fiscal incentives to promote the
competitiveness of its domestic industry and to
bring them into line with the incentives given
under the export promotion regimes. There
are as well programmes to help small and
medium-sized enterprises, technological
innovation and regional development, mainly
consisting of tax incentives, financing on
preferential terms, technical assistance and
support for research.
20. Some of the incentive programmes in
force during the period under review,
including export-related schemes, appear to
have been formulated in order to provide
support for special interest groups or to
respond to short-term difficulties. It would
thus be important to assess the net long-term
benefits of these programmes for the country
at large, with a view to their possible
rationalization in order to minimize their fiscal
cost and prevent distortions in the allocation of
resources.
21. Following a decade of debate in
Congress, the General Law on Competition
was adopted in 2007 and it is expected to enter
into force in 2009 after the implementing
authority has been set up. This could represent
an important step forward in promoting the
efficiency of the Dominican market given its
high level of concentration. The Dominican
Republic applies price controls on electricity
and certain agricultural products; the price of
hydrocarbons is set on the basis of a formula
and varies according to fluctuations on the
international market.
WT/TPR/S/207/Rev.1
Page x
22. The Dominican Republic is not a
signatory to the WTO's Agreement on
Government Procurement. In 2006, new
legislation was adopted to regulate most public
procurement of goods, services, works and
State concessions. The law does not
discriminate between products, services or
suppliers according to nationality, but the
participation of foreigners in the procurement
of public works is only allowed through
partnerships with local suppliers. There are no
official statistics on the contracts awarded
under different procurement methods,
although available data indicate that, prior to
the entry into force of the current legislation,
contracts were frequently awarded directly.
23. The Dominican Republic has adopted
new laws to improve the protection and
enforcement of intellectual property rights
since 2002, in part reflecting the entry into
force of the DR-CAFTA. In some instances
the domestic statutes go beyond the standards
established by the TRIPS Agreement. Parallel
imports are allowed for patents and marks, but
not for copyrights.
(6) SECTORAL POLICIES
24. Agriculture receives support through
measures like higher-than-average applied
tariffs, direct payments, and marketing and
price control programmes. The quota volumes
announced for the importation of rice have
been below WTO-bound levels; the volume of
chicken actually imported has also been below
the WTO-bound level. A quantitative
restriction is applied to sugar imports, which
are only permitted if there is a shortfall in
domestic production. The assistance granted
to certain agricultural activities may warrant
revision in order to enhance its transparency
and minimize its impact on consumers and
taxpayers.
25. The electricity sector is still in a deep
crisis, and solving it continues to be one of the
Dominican Republic's main economic
challenges. Steps have been taken to reduce
electricity theft, and the State is seeking to
renegotiate the contracts signed between
Trade Policy Review
electricity distributors and generators.
However, the consumption of some types of
energy is highly subsidized, undermining
public finances and rational energy use. Some
incentives granted under a 2007 law that aim
to increase domestic energy production from
alternative sources are contingent on the use of
domestic inputs. The law also prohibits
biofuel imports when domestic production
meets demand.
26. The manufacturing sector has a
marked dual character: one segment
comprising firms geared to supply the
domestic market, and another consisting of
firms producing under the FTZ regime. The
second still account for most of the Dominican
Republic's merchandise exports but its main
industry, textiles and clothing, has contracted
under the pressure of a more competitive
global environment. This is a sign of the
limitations inherent in trying to offset internal
competitiveness problems, such as the high
cost and poor quality of energy supply and
some services, through fiscal concessions and
other support targeted at specific activities.
27. The Dominican Republic made
specific commitments in 60 of the 160 sectors
covered by the General Agreement on Trade in
Services (GATS). It also signed the GATS
Protocols on financial services and
telecommunications. There is a significant
difference between the Dominican Republic's
multilateral commitments and its applied
regime, which as a result of reforms
undertaken in recent years has progressively
become more open. Thus, the Dominican
Republic could further enhance the
predictability of its services regime by
expanding its multilateral commitments; this
would also narrow the large gap between such
commitments and those under DR-CAFTA.
28. The telecommunications sector is one
of the most dynamic in the Dominican
economy and receives large flows of foreign
investment. There are no restrictions on
foreign investment except in the case of public
broadcasting services, where at least 51 per
cent of the capital must be of Dominican
The Dominican Republic
origin. There are a relatively large number of
operators on the market, but the major
operator has around three-quarters of the fixed
telephony and Internet markets and almost half
of the mobile telephony market.
29. The financial sector has recovered
from a serious crisis that took place during
2003-04. Prudential indicators have improved
markedly, largely because of measures to
strengthen the supervisory framework.
However, the difference between lending and
deposit rates, at nearly nine percentage points,
is still high, as is the cost of credit (the average
nominal lending rate was 15.7 per cent in
2007). This partly reflects banks' high
operating costs and reserve requirements, and
limited competition. Foreign insurance
companies cannot set up a branch in the
Dominican Republic, a restriction which is
scheduled to be abolished in 2011 under DR-
CAFTA. Neither may foreign insurance
companies operate in the Dominican Republic
if their country of origin does not allow
Dominican firms to operate.
30. In 2006, the Dominican Republic
modernized its legal framework on air
transport. There are 31 bilateral air transport
instruments, many of which grant the right to
carry passengers between the counterpart
country and a third country on flights whose
origin or destination is the Dominican
Republic (fifth freedom). Air cabotage
services can only be provided by companies
with 51 per cent domestic capital and under
the "effective control" of Dominican citizens.
Foreign participation in domestic companies
WT/TPR/S/207/Rev.1
Page xi
providing international air services is limited
to 65 per cent.
31. Maritime transport plays an essential
role in the Dominican Republic's international
trade. International maritime transport
services are supplied by foreign operators.
Although in principle maritime cabotage
services are limited to domestic flag vessels,
foreign flag vessels may provide this service
on a provisional basis.
32. The Dominican Republic imposes
restrictions on professional practice by
foreigners in certain areas of accounting, legal
services, and architecture and engineering. In
order to practice professionally in activities
considered as involving risks, both Dominican
and foreign professionals must obtain a permit
(exequatur); professionals holding foreign
diplomas must have them validated. Foreign
architects and engineers hired on a temporary
basis do not need to fulfil these requirements.
33. The economic importance of the
tourism sector is significant, and the sector has
recovered from its downturn in the early
2000s. There are no restrictions to foreign
investment in this sector. However, in
principle, no licences are granted to foreign
tourist guides, and casino employees must be
Dominican citizens. Foreign travel agencies
and tour operators may not provide cross-
border services unless they have a local agent.
Investors in certain tourism projects are
granted incentives, including import and
income tax exemptions; such incentives are
conditioned on employing Dominican
professionals.
The Dominican Republic WT/TPR/S/207/Rev.1
Page i