Trade Effects Of The DR-CAFTA On The Dominican Republic’s Exports: An Empirical Approach

This study attempts to analyze the trade effects of the Dominican Republic – Central America – United States Free Trade Agreement(DR-CAFTA) on the Dominican Republic’s Exports from 2007 to 2013. Using a Gravity Model to estimate trade flows for countries within a trading block and others outside the trading block. This helps us to achieve the objective of this paper, which is to determine whether the implementation of the DR-CAFTA has created new trade between the member countries and/ or has provoked diversion on the among of trade between Dominican Republic and the rest of the world. Two quite controversial results were obtained; first result is that DR-CAFTA has no created new trade among the member countries for the Dominican Republic. The second result shows that the preferential agreement between the DR and DR-CAFTA members has no provoked trade diversion between non-member countries.