Background

The Office of the U.S. Trade Representative launched Dec. 10 a Section 301 investigation to determine whether Nicaragua’s acts, policies, and practices related to labor rights, human rights, and the rule of law are unreasonable or discriminatory and burden or restrict U.S. commerce. This investigation could lead to the imposition of tariffs on imports from Nicaragua or the suspension of benefits under the CAFTA-DR free trade agreement.

USTR states that the Nicaraguan government’s “increasing and pervasive labor and human rights violations and dismantling of the rule of law may, directly or indirectly, impact U.S. workers and companies, including through the exploitation of workers, harming both Nicaraguans directly and U.S. workers and businesses indirectly through unfair competition; by negatively impacting the Nicaraguan economy and market, with lost sales and exports for U.S. enterprises; and by lost investment and business opportunities for U.S. workers and companies, including through the creation of a high-risk environment to invest or conduct business.”

USTR’s investigation will initially focus on a wide range of issues laid out in this notice, but the agency is accepting input on similar acts, policies, and practices as well. USTR states that it has already requested consultations with the government of Nicaragua regarding the issues raised.

If USTR concludes that Nicaragua’s alleged conduct is unfair or violates U.S. rights under a trade agreement, it may pursue the following enforcement measures: (1) imposing tariffs or other import restrictions, (2) suspending or withdrawing concessions under CAFTA-DR, or (3) entering into a binding agreement with the Nicaraguan government to either eliminate the conduct in question (or the burden to U.S. commerce) or compensate the U.S. with satisfactory trade benefits. The Section 301 law directs that any retaliatory measures affect goods and services of Nicaragua in an amount equivalent in value to the burden or restriction imposed by Nicaragua on U.S. commerce.

ST&R anticipates that in this case, provided a violation is found, USTR is more likely to suspend or withdraw CAFTA-DR concessions. This could impact not only CAFTA-DR goods produced in Nicaragua but also goods produced in other CAFTA-DR countries incorporating raw materials from Nicaragua to meet the agreement’s requirements.

USTR will hold a public hearing on this investigation Jan. 16. Comments and requests to appear at the hearing are due by Jan. 8, and post-hearing rebuttal comments are due by Jan. 23. The investigation will likely take at least several months, with any trade actions taken in response likely following shortly thereafter.

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