American Free Trade Agenda

US free trade won the debate in each round, albeit sometimes by only a narrow margin. These successes are providing greater economic opportunity to Americans and allowing the United States to maintain its role as a leader in the international economic community.

Bilateral and Regional Free Trade Agreements

Congress has approved free trade agreements (FTAs) with Israel; Canada and Mexico (NAFTA); Jordan; Singapore; Chile; Australia; and Morocco. Most recently, it approved DR–CAFTA, which includes the Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. The gains to American families and business from these agreements have been significant.

  • In the first year of the U.S.–Singapore FTA, America’s trade surplus with Singapore more than tripled, growing to $4.3 billion.
  • Just four months after the U.S.–Australia FTA was implemented, America’s trade surplus with Australia grew by almost 32% to more than $2 billion.
  • Exports to Chile and Singapore expanded by $4 billion in the first year after implementing FTAs with these countries.

America’s consumers now pay less for groceries and other consumer goods, allowing them to stretch their dollars into additional consumption or savings. U.S. firms have lower operating costs as a result of cheaper imported components for their products and face a brighter investment climate. Consequently, FTAs increase the potential for the creation of better, higher paying American jobs.

The U.S. signed an FTA with Bahrain on Septem­ber 14, 2004, and recently concluded negotiations with Oman. It is currently negotiating FTAs with Thailand, Panama, and the United Arab Emirates. The U.S. is also pursuing regional agreements with the countries of the Southern African Customs Union, Andean countries, and 34 nations across the Western Hemisphere to create a greater Free Trade Area of the Americas.

FTAs and the WTO

Ideally, free trade should be achieved through multilateral trade negotiations across a large group of countries. However, the pace of such negotia­tions is slow, and consensus is hard to achieve. FTAs negotiated by smaller groups of countries are the next best thing to promote global trade lib­realization. .

Free trade agreements between countries can exist in harmony with the WTO. Legally, preferential trade agreements are permitted under the multilateral auspices of the WTO provided that:

  1. They do not result in higher overall trade barri­ers for WTO members outside the agreement,
  2. They eliminate duties and other trade barriers on a substantial amount of products originating in participating countries, and
  3. The trade barriers are eliminated within a rea­sonable amount of time.

Along with the European Union and NAFTA, some 215 FTAs and customs unions are in force. Over 145 regional trade areas have been reported to the WTO since 1995 alone.

FTAs with Small Economies

Finally, free trade agreements can assist developing countries to lock in and implement economic and political reforms effectively, to spur regional integration, and to enhance prospects for investment and economic growth. While some U.S. trade partners may be small now, over time they will mature into larger, more sophisticated markets more closely integrated with the U.S. economy. As these economies develop, they will demand more and more U.S. products. As the data demonstrate, America has experienced growth in exports to all of the countries with which it has formalized free trade agreements.

Thus, a country’s economic might is not the sole reason for attracting America’s interest in forming a closer trade relationship through an FTA. A 2004 General study reported that the process of assessing potential FTA partners is based on six criteria:

  • A country’s readiness in terms of trade capabil­ities, the maturity of its political and legal sys­tems, and the will to implement economic reforms;
  • The economic benefit to the U.S.;
  • The country’s support of U.S. goals in liberaliz­ing trade;
  • The country’s support of U.S. foreign and eco­nomic policy interests;
  • Congressional or private-sector support; and
  • Constraints on U.S. government resources.

The FTA with Bahrain is an important step toward the Pres­ident’s goal of creating a larger Middle East FTA by 2013. By forging stronger economic ties with U.S. allies in the Middle East, America strengthens its strategic position vis-ŕ-vis countries in this important but turbulent region while promoting economic prosperity and opportunity.

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