AWPA Wireline - June 2003

There are so many free trade agreements being pursued by the Administration that it is becoming quite difficult to keep them straight. Here's a summary of what has been happening.

Australia FTA
In a joint press conference with Australian Prime Minister John Howard, President Bush said the US hoped to conclude negotiations on a free trade agreement with Australia by the end of 2003. The original target for completion was sometime in 2004, so it will be an ambitious undertaking to complete the agreement this year.

USTR Ambassador Robert Zoellick testified during a congressional hearing that the Bush Administration intends to proceed with negotiations on the Australian free trade agreement without pursuing an agreement with New Zealand on the same timetable. Zoellick added that US officials will continue to talk with the New Zealand government about an agreement.

Chile FTA
USTR Zoellick and Chilean Foreign Minister Soledad Alvear signed the US-Chile Free Trade Agreement on June 6 in Miami. This represents the first-ever free trade agreement with a South American nation. It is likely that the Congress will consider and vote on the FTA later this summer or early in the fall.

This agreement includes a chapter on maintaining environmental protections and improving environmental conditions through a cooperative approach between the two nations. It also sets up an environmental affairs council that will meet every year to discuss environmental issues and seek solutions to mutual environmental problems.

Middle East FTA
As part of an effort to increase economic growth and opportunity in the Middle East, President Bush proposed the establishment of a US-Middle East Free Trade Area (FTA) within a decade. The effort will be kicked off with a visit by Secretary of State Powell and USTR Zoellick to Jordan where they will meet with regional leaders. Initial information indicated that one huge negotiation is not envisioned, rather a set of building blocks that could include interim steps. Individual FTAs might be negotiated as countries became ready, and these could then be fused together at the end of the process.

The Administration is also starting free-trade negotiations with Bahrain, a small Persian Gulf kingdom as a step toward creating a Middle East Free Trade Area. A US-Bahrain free-trade agreement could serve as a regional anchor for the Gulf, facilitating greater economic integration and reforms, and leading toward the eventual goal of a regional FTA.

Bahrain and Egypt have been considered the leading candidates for a free-trade deal, while other nations in the Middle are economically or politically too isolated to join to WTO or negotiate a detailed trade pact with the US. Currently the US has free-trade agreements with Israel and Jordan, and plans to complete negotiations with Morocco are set for the end of this year.

Singapore FTA
President Bush and Singapore's Prime Minister Goh signed the US-Singapore Free Trade Agreement. Described as the "gold standard" for free trade agreements, the FTA will drop tariffs on American exports to zero immediately. Singapore is the 12^thlargest trading partner of the US, with total trade of over $30 billion. The FTA still requires the approval of Congress, expected later this year for implementation by January 1, 2004.

Before sending the Agreement to Congress, the White House must wait for the completion of a study by the International Trade Commission (ITC) of the effects of the agreement on the US economy. In that vein, the ITC held a hearing to assess the impacts of the FTA. The Commission is considering impacts on the US economy as a whole and on sectors most likely to be significantly affected by the FTA provisions. The ITC will prepare a report to the President on the cumulative effects of the FTA tariff and non-tariff barrier reductions on the US economy by examining the impacts on Gross Domestic Product (GDP), export-import balance and aggregate employment. Moreover, effects on production levels, employment and comparative advantage of companies in pertinent sectors will be investigated.

Taiwan FTA
Rep. Jim Ramstad (R-MN) introduced a resolution stating that the US should launch negotiations for a free trade agreement with Taiwan. Taiwan is our eighth largest trading partner with $50 billion of two-way trade in 2003. On January 1, 2002, Taiwan became a member of the World Trade Organization under the name of Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (TPKM). The proposed resolution was referred to the House Ways and Means Committee and had 20 co-sponsors.

And Then There's Congress

On the legislative front, a pair of Senate and House Democrats prominent on trade issues has called for an investigation into the Bush Administration's process for selecting countries for negotiating trade agreements.

Senate Finance Committee ranking Democrat Max Baucus (MT) and Rep. Calvin Dooley (CA), a leader of the New Democrat Coalition, called for an investigation by the General Accounting Office (GAO).

A trigger for the investigation was the Administration's recent announcement of its intent to pursue a negotiation with Bahrain, a nation of approximately 650,000 people. Critics suggested that the agreement is aimed more at foreign policy than benefiting US industries.

The GAO investigation, due for completion in the fall, is one part of their effort to understand and shape the criteria that should guide the selection of future FTAs. It also will be used to measure how much influence Congress and the private sector should have in the decisionmaking process.

FTA Criteria Issued by US

USTR Zoellick highlighted 13 criteria his office employs in deciding with which countries to negotiate bilateral free trade agreements. The criteria are:

1. Congressional guidance;

2. US business and agricultural interests;

3. US special product sensitivities;

4. Level of seriousness of the country to undertake a comprehensive, pro-reform FTA, including highest-level government involvement to product follow-through on negotiated commitments, the country's micro- and macro-economic reform record prior to negotiations, and the level of skill of the negotiating team (most important);

5. Level of cooperation with US goals and adoption of a problem-solving approach in WTO and FTAA;

6. Ability of the FTA to stimulate regional integration;

7. Ability of country to employ the FTA negotiations to catalyze its own economic reform and development program;

8. Role of FTA in supporting civil society via its labor and environmental provisions and its effect on human rights and the level of openness in society;