Advisory. Client. Free Trade Agreement Update.

Transcription

1 Client Advisory Free Trade Agreement Update No one could ever accuse United States Trade Representative (USTR) Robert B. Zoellick of being lazy. In the nearly four years of the Bush Administration s reign, Ambassador Zoellick has crisscrossed the globe, negotiating bilateral and regional free trade agreements (FTAs) with a zeal unprecedented by his USTR predecessors. He has concluded FTAs with Bahrain, Chile, Morocco, Singapore, Australia, the Dominican Republic, and the countries of Central America. He has also initiated FTA negotiations with Colombia, Peru, Ecuador, Bolivia the Andean Nations and Botswana, Lesotho, Namibia, South Africa and Swaziland the members of the South Africa Customs Union. Further, the USTR has taken measures to cultivate an eventual U.S. Middle East FTA, and has set up a framework for negotiating bilateral FTAs with the members of the Association of South East Asian Nations (ASEAN). Finally, Zoellick s initiatives with respect to the Free Trade Area of the Americas (FTAA) demonstrates that the Bush Administration remains firmly committed to ultimately establishing a hemisphere-wide FTA. The following discussion identifies the status of FTAs for which negotiations have recently been concluded, and highlights the progress, or lack thereof, of ongoing FTA negotiations. BILATERAL FTAS Andean Countries On November 18, 2003, USTR Zoellick formally notified Congress, on behalf of President Bush, of the Administration s intent to initiate negotiations for a free trade agreement with Columbia, Peru, Ecuador, and Bolivia. The four countries combined have a population of about 93 million people and a gross domestic product of about $463 billion on a purchasing power parity basis. As a destination for U.S. exports, the Andeans collectively represented a market of $7 billion in 2002, while the U.S. imported $9.8 billion from the region. The stock of U.S. foreign direct investment in the four countries was $4.5 billion in The Administration considers this agreement the next logical step in its effort to promote competitive liberalization in the Hemisphere. On March 23, 2004, following meetings between President Bush and Colombian President Alvaro Uribe, the U.S. and Colombia announced that free trade negotiations between the two countries were to begin May The participation of other Andean countries at that time was not certain. On May 5, 2004, the U.S. announced that Peru and Ecuador were to join with Colombia in the May negotiations. USTR stated that Bolivia is to be included at a later stage. On May 18, 2004 negotiations between the U.S., Colombia, Peru, and Ecuador began in Cartagena, Colombia. An agreement has not yet been concluded. Bahrain On January 26, 2004, the USTR announced that it was launching negotiations with Bahrain to establish an FTA.

2 Page 2 The effort is being undertaken pursuant to President Bush s initiative to advance economic reforms in the Middle East and the Persian Gulf and to establish a Middle East Free Trade Area (MEFTA) by The U.S. Bahrain bilateral Trade and Investment Framework Agreement (TIFA), signed in June 2002, provided for the economic dialogue between the two nations, culminating in the agreement to enter into FTA negotiations. The negotiations concluded and the agreement was signed May 5, The agreement has not yet been approved by Congress. Under the Trade Act of 2002, the Administration must notify Congress at least 90 days before signing the agreement. On June 19, 2004, President Bush gave formal notification to Congress of his intention to sign the U.S. Bahrain Free Trade Agreement within three months. The USTR also submitted that day reports from 27 trade advisory committees. The Advisory Committee for Trade Policy and Negotiations (ACTPN), which is appointed by the President and is the most senior committee, unanimously said, the U.S. Bahrain FTA fully meets the negotiating principles laid out in the Trade Act of 2002 and {ACTPN}believes the FTA is strongly in the interest of the United States. The FTA was also supported by the Trade and Environment Policy Advisory Committee, the agricultural advisory committees, and committees representing sectors such as services, consumer goods, intellectual property, and finance. The Labor Advisory Committee objected to the agreement on grounds similar to its opposition to all other free trade agreements negotiated under the Trade Act of 2002 with both developed and developing countries, claiming insufficient protection of workers rights. Chile On June 6, 2003, the United States signed a free trade agreement with Chile, its first FTA with a South American country. The Agreement was approved in the House of Representatives on July 23, 2003, by a vote of 270 to 156. The Senate approved the Agreement one week later, 66 to 31. President Bush signed the bill into law September 3, 2003, and the Agreement came into effect January 1, Upon implementation of the Agreement, over 85 percent of bilateral trade in consumer and industrial products became tariff-free immediately, with most remaining tariffs to be eliminated within four years. With respect to agricultural products, about 75 percent of both U.S. and Chilean farm products are to become tariff-free within four years, with all tariffs to be phased out within 12 years. Important U.S. agricultural products such as pork and pork products, beef and beef products, soybeans and soybean meal, durum wheat, feed grains, potatoes, and processed food products such as French fries, pasta, distilled spirits, and breakfast cereals are to gain duty-free treatment within four years. The Agreement provides new access for U.S. banks, insurance companies, telecommunications companies, securities firms, express delivery companies, and professionals. The Agreement also strengthens protection of U.S. patents and provides a legal framework for U.S. investors in Chile. The Agreement contains no additional provisions pertaining to labor and environmental laws. Each side merely committed to enforcing its domestic laws with respect to these areas. On June 3, 2004, USTR Zoellick and Chilean Foreign Minister Alvear conducted the first

3 Page 3 U.S. Chile Free Trade Commission meeting. The U.S. Chile FTA calls for periodic meetings of the Commission to oversee the implementation of the Agreement. The Commission reported that, during the first quarter of 2004, Chilean exports to the U.S. grew by 11 percent, reaching a total of US$ million. The Commission also reported that, as of January 1, 2004, tariffs on 90 percent of U.S. exports to Chile and 95 percent of Chilean exports to the U.S. were reduced to zero immediately. Morocco The United States and Morocco entered negotiations January 21, 2003, and reached agreement on a comprehensive FTA on March 2, President Bush thereafter notified Congress of his intent to sign, and the Agreement was signed after the expiration of 90 days, as required by the Trade Act of 2002, on June 15, The House of Representatives approved the Agreement 323 to 99; the Senate approved the Agreement by a vote of 85 to 13, on July 22, The Agreement is expected to go into effect as of January 1, The Agreement was supported by the Advisory Committee for Trade Policy and Negotiations, the Trade and Environment Policy Advisory Committee, advisory committees on services, goods, and intellectual property, and agricultural advisory committees. The Agreement was rejected by the Labor Advisory Committee (LAC), which urged Congress not to adopt the Agreement, alleging deficiencies in local labor laws. Upon implementation, 95 percent of twoway trade in industrial and consumer products becomes duty-free. There is to be some opening up of Morocco s agricultural sector, particularly in grains and meat products. Morocco has also made commitments to open its service sector to U.S. banks, insurance companies, telecommunications, and technology companies. Singapore The first round of negotiations to establish the U.S. Singapore FTA began in December, 2000 and the negotiations were concluded January 15, On February 28, 2003, 31 officially chartered advisory committees reported to the President and Congress on the Singapore FTA. Virtually all of the committees expressed their support for the Agreement. The Labor advisory committee, as usual, had some reservations concerning the Agreement. The House of Representatives approved the U.S. Singapore FTA by a vote of 272 to 155 and the Senate approved the Agreement 66 to 32. President Bush signed the Agreement on September 4, 2003, and it came into effect January 1, The Agreement makes two-way trade in all goods duty-free as of January 1, The FTA also provides for increased liberalization in Singapore s service sector. Australia Negotiations for the Australia U.S. FTA began in March Those negotiations were concluded on February 8, On February 13, 2004, the President notified Congress of his intent to sign the Agreement. He did so May 18, The Agreement was approved in the House 314 to 109, and in the Senate 80 to 16 on July 15, Theoretically, the Agreement should go into effect January 1, However, there have been some problems with Australia s implementing bill (the bill in the Australian parliament) which may

4 Page 4 jeopardize the start date. In particular, a Labor party amendment pertaining to pharmaceutical patents has caused some controversy. Additionally, the Australian recording and motion picture industry has pointed out what they feel are some inadequacies with respect to copyright protection.[1] In 2003, Australia was America s 14th largest export market for goods. Two-way goods and services trade is nearly $29 billion, a 53 percent increase since Two-way foreign direct investment is about $61 billion. Australia purchases more goods from the U.S. than it does from any other foreign country. Australia is an important export market for key U.S. manufacturing sectors such as aircraft, autos and auto parts, machinery, computers and electronic products, chemicals, and wood and paper products. REGIONAL FTAS Dominican Republic Central American Free Trade Agreement President Bush notified Congress of his intent to enter into the Central American Free Trade Agreement (CAFTA) on February 20, USTR Zoellick and ministers of five Central American countries Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua signed the Central American Free Trade Agreement on May 28, Negotiations to include the Dominican Republic in CAFTA began in January 2004 and concluded on March 15, President Bush formally notified Congress of his intent to sign the FTA with the Dominican Republic on March 25, The Agreement was signed August 5, The DR-CAFTA Agreement will be sent to Congress as a single legislative package. At this time, the Agreement has not been ratified by Congress. Combined total goods trade between the U.S. and the original five CAFTA countries was $23.6 billion in The addition of the Dominican Republic represents an additional $8.7 billion in annual two-way trade, for a combined total relationship of approximately $32 billion. Eighty percent of DR-CAFTA imports already enter the U.S. duty-free under the Caribbean Basin Initiative, Generalized System of Preferences, and Most Favored Nation Programs; the DR-CAFTA Agreement will provide reciprocal access for U.S. products and services. The region is an important export market for many U.S. manufacturing sectors such as information technology products, agricultural and construction equipment, paper products, chemicals, and medical and scientific equipment. All of these products will become duty-free immediately upon implementation. More than half of current U.S. farm exports to the Dominican Republic and Central America will become duty-free immediately, including high quality cuts of beef, cotton, wheat, soybeans, key fruits and vegetables, processed food products, and wine. The Free Trade Area of the Americas The effort to unite the economies of the Americas into a single free trade area began at the Summit of the Americas in Miami, Florida, in December, The Heads of State and Governments of the 34 countries in the region agreed to construct the Free Trade Area of the Americas (FTAA) with a goal to progressively eliminating barriers to trade and investment. During the preparatory phase ( ), the 34 ministers responsible for trade established 12 working groups to identify and

5 Page 5 examine existing trade-related measures in each area, with a view to identifying possible approaches and negotiations. Four ministerial meetings took place during this preparatory phase: Denver, Colorado, 1995; Cartagena, Colombia, 1996; Belo Horizonte, Brazil, 1997; San Jose, Costa Rica, The FTAA negotiations were formally launched in April 1998 at the Second Summit of the Americas, in Santiago, Chile. There, the various Heads of State agreed that the FTAA will be balanced, comprehensive, WTO-consistent, and will constitute a single undertaking. Since then, there have been five FTAA negotiating rounds: the fifth ministerial meeting in Toronto, Canada, 1999; the sixth ministerial meeting in Buenos Aires, Argentina, in April 2001; the third Summit of the Americas in Quebec City, Quebec, on April 20-22, 2001; the seventh ministerial meeting in Quito, Ecuador in 2002; and the eighth ministerial meeting in Miami, Florida, At the Third Summit of the Americas, deadlines were fixed for the conclusion and implementation of the FTAA. Negotiations are to be concluded no later than January 2005; entry into force will be sought as soon as possible thereafter but is supposed to be no later than Informal consultations of the various working groups are ongoing. Most recently, the co- Chairs of the Trade Negotiations Committee held consultations in Washington, D.C. on May 21, 2004, on guidance for developing a common and balanced set of rights obligations to be provided to the negotiators. U.S. Middle East Free Trade Area On May 9, 2003, President Bush proposed the establishment of a U.S.-Middle East Free Trade Area (MEFTA) within a decade. Building on U.S. FTAs with Israel and Jordan, the U.S. plans to take a series of graduating steps, which include: Helping reforming countries become members of the WTO; Negotiating Bilateral Investment Treaties and Trade and Investment Framework Agreements (TIFA) with Middle Eastern governments. Several TIFAs have recently been signed: Kuwait, on February 6, 2004; Yemen, on February 7, 2004; United Arab Emirates, on March 15, 2004; and Oman, on July 7, 2004.; Completing bilateral FTAs with Middle Eastern governments, such as that completed with Morocco and passed by the Senate on July 22, 2004, and with Bahrain, which was concluded May 5, 2004, but which has yet to be ratified by the Senate. Providing assistance to build trade capacity and expansion. African Nations Passed in 2000, the African Growth and Opportunity Act (AGOA) grants duty-free access to the U.S. market for substantially all products of eligible countries and provides for investment opportunities in Africa for U.S. companies. On June 24, 2004, the Senate passed the AGOA Acceleration Act which promises to extend the benefits of AGOA. On January 13, 2003 the United States and five South African Nations Botswana, Lesotho, Namibia, South Africa, and Swaziland, all members of the South African Customs Union (SACU) agreed on a roadmap for negotiating an FTA. This would be the United States first FTA in sub-saharan Africa. No progress on this FTA has recently been reported.

6 Page 6 Enterprise For ASEAN Initiative (EAI) Under the EAI, the United States offers the prospect of bilateral free trade agreements with ASEAN countries that are committed to economic reforms and openness inherent in an FTA with the United States. Any potential FTA partner must be a WTO member and have a TIFA with the United States. The United States now has TIFAs with Indonesia, the Philippines, Thailand, Brunei Darussalam, and Malaysia. USTR s stated goal is to create a network of bilateral FTAs with ASEAN countries. ABOUT THE INTERNATIONAL TRADE & CUSTOMS PRACTICE As one of the largest and most highly regarded international trade and customs practices in the United States, Kelley Drye Collier Shannon assists clients with a full range of importing and exporting activities. We are experts in protecting domestic manufacturers against unfairly traded goods and helping companies overcome barriers to entry in foreign markets. FOR MORE INFORMATION To learn more about Kelley Drye Collier Shannon, please visit:. New York Washington, DC Tysons Corner Chicago Stamford Parsippany Brussels AFFILIATE OFFICE Mumbai