Free Trade Agreement between China and Dominican Republic

The economic relationship between China and the Dominican Republic has significantly evolved over the past few years, driven by mutual interests in trade, investment, and cooperation across various sectors. Since establishing formal diplomatic relations in 2018, the two nations have seen rapid growth in trade, with China now being the Dominican Republic’s second-largest trading partner. Meanwhile, the Dominican Republic exports a variety of goods to China, including medical instruments, copper waste, and scrap. On the global scale, China’s largest trading partners include the United States and the European Union, but China’s growing interest in Latin American and Caribbean markets is shaping its strategic partnerships in the region. In the absence of a formal Free Trade Agreement (FTA), the relationship is anchored in multiple bilateral agreements aimed at boosting economic collaboration.

Free Trade Agreement Between China and the Dominican Republic

As of now, there is no formal Free Trade Agreement (FTA) between China and the Dominican Republic. However, since the establishment of diplomatic relations in 2018, several bilateral agreements have been signed to enhance economic cooperation. These agreements touch upon investment, trade facilitation, technology, and infrastructure development, laying the foundation for potential future negotiations on a formal FTA.

Key Agreements Between China and the Dominican Republic

While there is no FTA, the following bilateral agreements have significantly shaped the economic relationship between the two nations:

1. Agreement on Diplomatic Relations

• Signed Date: May 1, 2018
• Effective Date: Immediate
• Scope: Establishment of formal diplomatic relations between the two countries
• Key Provisions:
  • Mutual recognition and establishment of diplomatic missions in each country.
  • Commitment to strengthen economic, cultural, and political ties.
  • Provisions for the future signing of additional economic cooperation agreements.
• Other Members: None

2. Framework Agreement on Economic Cooperation

• Signed Date: October 2018
• Effective Date: 2019
• Scope: Expanding trade, investment, and technical cooperation between China and the Dominican Republic.
• Key Provisions:
  • Support for infrastructure projects in the Dominican Republic.
  • Chinese investments in key sectors such as manufacturing, energy, and telecommunications.
  • Facilitation of trade through reduced non-tariff barriers.
  • Exchange of expertise and training in areas like agriculture and technology.
• Other Members: None

3. Bilateral Investment Treaty

• Signed Date: November 2018
• Effective Date: 2019
• Scope: Protection and promotion of investments between China and the Dominican Republic.
• Key Provisions:
  • Protection of Chinese investments in the Dominican Republic and vice versa.
  • Facilitation of direct investments by establishing clear rules and regulations.
  • Dispute resolution mechanisms to protect investors.
• Other Members: None

4. Memorandum of Understanding (MoU) on Belt and Road Initiative (BRI) Cooperation

• Signed Date: November 2018
• Effective Date: Immediate
• Scope: Inclusion of the Dominican Republic in China’s Belt and Road Initiative (BRI), aimed at infrastructure and connectivity projects.
• Key Provisions:
  • Investment in infrastructure, including roads, ports, and telecommunications.
  • Promotion of tourism and people-to-people exchanges.
  • Facilitation of trade and investment through enhanced connectivity.
  • Potential financing for projects through Chinese banks and institutions.
• Other Members: Over 140 countries are part of the BRI globally.

Scope of Cooperation

The cooperation between China and the Dominican Republic covers several strategic areas, including trade, investment, infrastructure development, and education. These areas of collaboration have created economic opportunities for both nations and laid the groundwork for future trade expansion.

1. Trade Facilitation

• Expansion of exports from the Dominican Republic to China, particularly in agricultural products, minerals, and medical equipment.
• Importation of Chinese goods, such as electronics, textiles, and machinery, which are critical to the Dominican Republic’s economy.

2. Investment in Infrastructure

• Chinese investments in key infrastructure projects, including roads, bridges, ports, and telecommunications.
• Focus on improving connectivity to boost trade and tourism.
• Development of renewable energy projects, especially in solar and wind power.

3. Education and Technology Transfer

• Scholarships and educational exchange programs for Dominican students to study in China.
• Chinese technical assistance in various sectors, such as agriculture, technology, and health.
• Training programs aimed at enhancing the technical skills of Dominican professionals in key industries.

4. Tourism Promotion

• Joint efforts to promote the Dominican Republic as a tourist destination for Chinese travelers.
• Infrastructure development aimed at supporting tourism growth, including the construction of hotels, resorts, and transportation facilities.
• Initiatives to boost cultural exchanges between the two nations, including tourism fairs and cultural events.

Other Forms of Economic Cooperation

Beyond the formal agreements, the economic relationship between China and the Dominican Republic is further enhanced through multilateral forums and regional partnerships.

China-CELAC Forum

The Dominican Republic is part of the China-CELAC Forum (Community of Latin American and Caribbean States), a platform that fosters dialogue and cooperation between China and Latin American countries.

• Signed Date: Established in 2014, with ongoing annual meetings.
• Effective Date: Ongoing
• Scope: Economic cooperation, trade promotion, investment, and political dialogue.
• Key Provisions:
  • Promotion of trade and investment between China and CELAC member states.
  • Infrastructure investment, especially in transportation and energy sectors.
  • Cultural exchanges and educational cooperation.
• Other Members: Includes 33 Latin American and Caribbean nations, such as Mexico, Brazil, and Argentina.

Belt and Road Initiative (BRI)

As part of China’s Belt and Road Initiative, the Dominican Republic benefits from infrastructure investments, financing, and development projects aimed at improving trade connectivity.

• Signed Date: 2018 (MoU)
• Effective Date: Ongoing
• Scope: Infrastructure investment, trade promotion, and connectivity improvement.
• Key Provisions:
  • Financing for major infrastructure projects, such as roads, ports, and airports.
  • Integration into global trade routes, boosting export opportunities for Dominican products.
  • Expansion of Chinese tourism and investment in the Dominican Republic.

Economic Impact of These Agreements

The economic impact of China’s engagement with the Dominican Republic has been significant, as reflected in the growth of trade, investment, and infrastructure development.

1. Trade Growth

• China is the second-largest trading partner of the Dominican Republic, with trade volumes reaching approximately $3 billion in recent years.
• The Dominican Republic exports a variety of products to China, including medical instruments, tobacco, copper waste, and raw materials. On the other hand, it imports a wide range of goods from China, such as electronics, machinery, textiles, and consumer products.
• The removal of non-tariff barriers has facilitated smoother trade between the two countries, making Chinese goods more accessible in the Dominican market while opening new export opportunities for Dominican businesses.

2. Investment in Infrastructure

• Chinese investments have played a critical role in the development of Dominican infrastructure. Projects such as road and port construction, telecommunications, and energy initiatives have greatly enhanced the country’s economic competitiveness.
• Chinese companies have been actively involved in building and financing infrastructure that supports trade, tourism, and logistics, enabling the Dominican Republic to attract more foreign investment.
• Investments in renewable energy, particularly solar and wind, have also diversified the country’s energy sources, contributing to its sustainability goals.

3. Tourism Sector Expansion

• The Dominican Republic is a major tourist destination in the Caribbean, and its partnership with China has led to increased visibility in the Chinese market. Chinese tourists are gradually becoming a growing segment, though still modest in numbers.
• Investments in tourism infrastructure, such as hotels, resorts, and airports, have made the Dominican Republic more attractive to Chinese and international travelers.
• Collaborative efforts to promote cultural tourism have further strengthened ties, with Chinese tourists gaining exposure to the Caribbean’s rich cultural heritage.

4. Technological and Educational Benefits

• China’s technical expertise has helped advance key industries in the Dominican Republic, including agriculture, health, and manufacturing.
• Educational exchanges and scholarships have allowed many Dominican students to study in China, gaining valuable skills and knowledge in science, engineering, and business.
• Technology transfer initiatives, such as those in agriculture and healthcare, have improved productivity and service delivery in the Dominican Republic.

5. Job Creation and Skills Development

• Chinese infrastructure projects have contributed to job creation in the Dominican Republic, particularly in construction and related sectors. While some of these jobs have been filled by Chinese workers, local employment has benefited from new opportunities.
• Skills development programs associated with these projects have helped Dominican workers acquire expertise in modern technologies and practices.

Economic Challenges

Despite the benefits, the relationship between China and the Dominican Republic has also presented some challenges, particularly in the areas of trade balance, economic dependency, and labor issues.

1. Trade Imbalance

• The Dominican Republic imports far more from China than it exports, leading to a trade deficit that has raised concerns about economic sustainability.
• Efforts to diversify Dominican exports and reduce the deficit have been ongoing, but the trade imbalance remains a challenge.

2. Economic Dependency

• The increasing reliance on Chinese investment has raised concerns about economic dependency. Critics argue that overreliance on Chinese capital could limit the Dominican Republic’s ability to diversify its international partnerships.
• The terms of Chinese loans for infrastructure projects have also led to concerns about debt sustainability, as seen in other countries that have partnered with China.

3. Labor and Employment Issues

• Many of the infrastructure projects funded by China have involved Chinese companies and labor, limiting the extent to which local workers benefit from job creation.
• Efforts to increase local employment in these projects have been met with varying success, and there is a growing demand for greater local content in future contracts.