AWPA Wireline - March 2003

There have been some positive developments on various Free Trade Agreements. First, USTR Ambassador Robert Zoellick recently outlined the US proposals for the Free Trade Area of the Americas (FTAA) as those countries try to wrap up talks by 2015. An agreement would create a trade zone with about 800 million people and $13 trillion in combined economic output. However, these proposals are not without controversy.

The Bush Administration has proposed a broad offer that would eliminate import duties on most industrial and agricultural products at the moment the FTAA takes effect and duty-free status for textiles and apparel exports from the region after five years. Immediate elimination of tariffs would include steel products.

Brazil is not too pleased with this proposal. Currently Brazil's average applied tariff is more than 12%, while US tariffs average 2-3%, nor are US textile manufacturers eagerly embracing the proposal.

On the Asian front, the Bush Administration announced it had cleared the last hurdle to a free trade agreement with Singapore. The deal with this country would wipe out tariffs and other trade barriers on about $33 billion in merchandise trade between the two nations.

The US and Chile announced that they have sealed a free trade agreement as well. Under the agreement, more than 85% of bilateral trade in consumer and industrial products becomes duty free immediately, with most remaining tariffs eliminated within four years. The agreement also enforces commercial, environmental and labor provisions through a system of monetary penalties.

The small size of Chile's economy (the US economy is more than 70 times larger) means that greater access to the Chilean market will have little noticeable impact on the US as a whole. The Administration's purpose in signing a free trade deal with Chile is to provide leverage for faster progress in its broader effort to open markets throughout Latin America. Trade between the US and Chile reached $6.6 billion in 2001. Chile is currently the sixth largest market for US exports in Latin American, while the US is the largest export market for Chilean products.

A congressional vote on both of these agreements is expected in the spring. However, according to the Senate Finance Committee Chairman Charles Grassley (R-IA), the implementing legislation for these agreements will be considered separately because the Chile FTA contains many more agricultural provisions.

Finally, trade negotiators from the US and Morocco completed their first round of talks toward a comprehensive free trade agreement, laying the conceptual groundwork for sessions to come. The next round will be held March 24 in Morocco. The agreement would eliminate tariffs and other barriers to trade in goods, agriculture, services and investment between the two countries. US exports to Morocco currently face tariffs averaging 20%, while Moroccan exports to the US are subject to tariffs of 4%, on average. A deal is expected to be completed by the end of 2003.