The United States, the Dominican Republic, and five Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua), signed the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) in August 2004. The Agreement went into effect in Guatemala on July 1, 2006, after the country completed all the commitments necessary for implementation.

CAFTA-DR liberalizes bilateral trade between the United States and the region and promotes regional integration. It also requires the Central American countries to undertake needed reforms to alleviate systemic problems in areas such as customs administration, protection of intellectual property rights, services, investment, financial services, market access, and government procurement, as well as sanitary and phytosanitary and other non-tariff barriers.

Under CAFTA-DR, 100 percent of U.S. consumer and industrial goods enter the CAFTA-DR countries duty free (for goods that meet the country-of-origin requirements). Approximately 80 percent of these products entered duty-free following when CAFTA-DR first went into effect in 2006 (for the countries that implemented at that time).  The remaining 20 percent of consumer and industrial goods were on a 5 or 10-year phased tariff reduction schedule.

Under CAFTA-DR, 95 percent of U.S. agricultural exports enter Guatemala duty free. Guatemala will eliminate its remaining tariffs on virtually all U.S. agricultural products by 2020 (a few product categories will be eliminated over subsequent years - e.g., rice and dairy products).  In 2017, Guatemala eliminated its out-of-quota tariff for chicken leg quarters, five years early.  For certain agricultural products, tariff-rate quotas (TRQs) will permit some duty-free access for specified quantities during the tariff phase-out period, with the duty-free amount expanding during that period.

In addition to CAFTA-DR, Guatemala has signed bilateral or regional free trade agreements with Chile, Mexico, Colombia, Taiwan, Panama, the European Union, Peru, and theEuropean Free Trade Association (EFTA) countries and is currently negotiating free trade agreements with South Korea, the United Kingdom, and Canada.  Guatemala has also signed partial scope agreements, which cover a reduced number of products and do not include chapters beyond trade, with Belize, Ecuador, Cuba, Trinidad and Tobago, and Venezuela, while also currently negotiating partial-scope agreements with Israel and Bolivia. Central America established a common external tariff schedule in 1998.  Six Central American countries signed a revised protocol for economic integration and macroeconomic coordination in October 1993.  The integration protocol allows Central American countries to advance at varying rates toward more open trade. The “Northern Triangle” countries (Guatemala, El Salvador, and Honduras) have moved the most rapidly to eliminate trade barriers among themselves.  In January 2009, the presidents of Guatemala and El Salvador signed an amendment to the framework agreement that facilitates the establishment of a customs union between the two countries.  Honduras joined the agreement in May 2009.  Guatemala ratified the amendment to the framework agreement inFebruary 2011, but it was not ratified by El Salvador and Honduras.

In February 2015, as part of the Plan for the Alliance for Prosperity of the Northern Triangle countries, the presidents of Guatemala and Honduras signed a general framework agreement to establish a customs union between the two countries. In January 2016, the Guatemalan Congress approved the protocol to enable a customs union with Honduras, which will allow for the free movement of people and goods between the two countries. Guatemala’s protocol to enable the customs union with Honduras went into force in May 2016.   After completing regulatory, technical, and administrative procedures, the two countries implemented the first stage of the customs union process in June 2017.  El Salvador began negotiations to join the customs union between Guatemala and Honduras in October 2017 and deposited its instrument of adhesion to the customs union between Honduras and Guatemala with the General Secretariat of the Central American Integration System (SICA) in August 2018.  El Salvador signed a resolution to join the customs union process on legal and administrative aspects with Guatemala and Honduras in November 2018.

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