In 2009, the Obama Administration will be faced with the need to
decide the fate of three pending trade agreements the U.S. has
signed with Colombia, Panama, and South Korea. While the status of
these agreements will be but one facet of the President-elect's
overall trade policy agenda, the choice he makes will have a
tangible impact on America's bilateral relations and on the role
the U.S. plays in international markets. A decision to delay,
renegotiate, or shelve the agreements as part of an isolationist
strategy to make U.S. trade policy "fairer" for special interest
groups will have a different result than one based on a commitment
to open markets. By establishing a firm public commitment to free
trade, the President-elect can be a champion for all, rather than
just the privileged few.
Trade liberalization has opened markets around the world to U.S.
goods and services and has created a level of competition that
leads to innovation, better and less expensive products,
higher-paying jobs for Americans, and the investment needed for
long-term economic recovery, growth, and continued prosperity. The
best approach to ensuring that America continues to reap the
benefits of international commerce is one that is based on a solid
commitment to advancing trade liberalization--a goal that would be
advanced with the passing and implementation of pending trade
If enacted, the agreements with Colombia and Panama will result
in significant new market access and lower tariffs for America's
businesses and farmers; most Colombian and Panamanian products
already enter the U.S. duty-free under various preference programs.
Because these countries already have preferential access to U.S.
markets, any impact on U.S. jobs has already occurred. Instead,
these agreements will result in new economic opportunity for
America's exporters and the U.S. businesses that support them,
opportunity that will grow over time as these countries continue to
develop through trade and mature into larger, more sophisticated
markets more closely integrated with the U.S. economy.
Similarly, America stands to gain more from expanding what is
already a rich trade relationship through an FTA with South Korea
than without one. The agreement resolves many of the problems
currently thwarting the full economic potential of U.S.-South Korea
bilateral trade and establishes formal channels through which
ongoing trade concerns can be addressed.
The U.S.-Colombia Trade Promotion Agreement was signed in
November 2006 and later amended to include provisions stemming from
the Bipartisan Agreement on Trade. While more than 90 percent of
Colombian exports enter duty-free into the U.S. under the Andean
Trade Preference Act (ATPA) and the Generalized System of
Preferences (GSP), U.S. agriculture, manufacturing, and services
exports to Colombia face tariffs and other barriers to trade. The
U.S.-Colombia Free Trade Agreement will promote a more balanced
economic relationship: Over 80 percent of U.S. manufacturing
exports to Colombia will enter duty-free immediately upon entry
into force of the agreement. An additional 7 percent will be
duty-free within five years, and all remaining tariffs will be
eliminated within 10 years.
U.S. agricultural exports will benefit from the agreement as
well: More than half of current U.S. farm exports to Colombia will
become duty-free immediately, and remaining tariffs will be phased
out within 15 years. Fully implementing the agreement would
boost U.S. exports overall by an estimated $1.1 billion. The
agreement would help lock in Colombia's continued economic reform
and promote investment, developments essential for the
U.S.-Colombia relationship to reach its economic potential.
Moreover, by forging stronger economic ties with U.S. allies in
Latin America, America strengthens its strategic position
vis-à-vis countries in this important but turbulent region
while promoting economic prosperity and opportunity.
The U.S.-Panama Trade Promotion Agreement (TPA) was signed in
June 2007. Like Colombia, Panama also enjoys preferential access to
U.S. markets via the Caribbean Basin Initiative and GSP, with
approximately 96 percent of Panama's exports entering the U.S.
duty-free. The U.S.-Panama TPA would open Panamanian
markets to U.S. firms and farmers: More than 88 percent of U.S.
manufacturing exports will be duty-free immediately upon entry into
force of the agreement, with remaining tariffs phased out over 10
years. More than 60 percent of current U.S.
agricultural exports to Panama will receive duty-free treatment,
and remaining tariffs will phase out within 15 years.
Approval of the U.S.-Panama trade deal would also support further
improvements to Panama's economic development and help keep the
momentum behind economic reforms high. Panama is yet another
important U.S. ally in the Americas, one more than worthy of a
trade deal that strengthens its relationship with the U.S.
The United States-Korea Free Trade Agreement (KORUS FTA) was
signed in June 2007. Given the significant levels of trade and
foreign investment already occurring between the U.S. and South
Korea, a bilateral trade agreement is a natural and logical step to
further strengthen economic and political relations between the two
countries. The U.S. International Trade Commission has estimated
that the impact of the trade agreement would result in U.S. GDP
increasing by $10-11.9 billion as well as a significant expansion
of two-way manufacturing, agriculture, and services trade.
In general, U.S. exports to Korea face higher tariffs and tariff
rate quotas than Korean exports to the U.S. The agreement will
eliminate all industrial tariffs between the United States and
Korea within 15 years of implementation, with most tariffs phased
out within 10 years. More than 80 percent of U.S. industrial
exports by value to Korea will receive duty-free treatment
immediately upon implementation of the agreement. U.S. agriculture
exports will also benefit: Almost two-thirds of Korean imports of
U.S. farm products will become duty-free immediately upon entry
into force of the agreement. Such a trade pact would generate
significant economic gains and would be the second largest free
trade area for the United States, in terms of dollar value, after
By formalizing bilateral economic ties with South Korea through
an FTA, America also solidifies its ties to northeast Asia through
international trade, thereby providing a counterbalance to China's
economic influence in the region. The FTA would reinforce the
strong and mutually beneficial economic and strategic relationship
that exists between the U.S. and South Korea and ultimately serve
both countries' national interests.
In addition to winning lower tariffs on American agriculture,
manufacturing, and services, U.S. free trade agreements often
provide several other important benefits. For instance:
- By law, FTAs include provisions that safeguard investors from
discrimination, increase regulatory transparency, combat corrupt
practices, and protect and enforce intellectual property
- The U.S. Trade Representative has negotiated agreements that
include transparent dispute resolution and arbitration mechanisms
to guarantee that the agreements are upheld along with the rights
of U.S. firms and consumers.
- The May 2007 Bipartisan Agreement on Trade Policy was designed
to win congressional support for pending agreements with Colombia,
Panama, and South Korea by accommodating demands for more
restrictive labor and environmental standards in U.S. FTAs. While
the Bipartisan Agreement reduces the overall extent of
comprehensive liberalization, these FTAs still generally strengthen
the transparent and efficient flow of goods, services, and
investments between member countries.
- FTAs open markets, protect investors, and increase economic
opportunity and prosperity.
In short, free trade agreements serve to promote U.S. interests,
not to weaken them or to place an unfair burden on American workers
FTAs: Key to Weathering the Current
Without the lower barriers to trade that U.S. trade agreements
and the more than six decades of multilateral trade liberalization
has brought to bear on the world's markets, America's ability to
weather the current economic storm will be weakened.
A new Administration keen on promoting America's economic
well-being should turn away from trade policies that protect the
few that fear competition at the expense of the consumers and
businesses working hard to not only survive today's market
downturn, but to prosper in the future. A trade agenda that
includes timely ratification of the pending trade agreements with
Colombia, Panama, and South Korea would demonstrate a solid
economic and strategic commitment to America's allies and, more
importantly, to America's families.
Daniella Markheim is
Jay Van Andel Senior Trade Policy Analyst in the Center for
International Trade and Economics at The Heritage Foundation.
U.S. International Trade Commission, "U.S-Colombia Trade Promotion
Agreement: Potential Economy-wide and Selected Sectoral Effects,"
Investigation No. TA-2104-023, USITC Publication 3896, December
U.S. International Trade Commission, "U.S.-Korea Free Trade
Agreement: Potential Economy-wide and Selected Sectoral Effects,"
Investigation No. TA-2104-24, USITC Publication 3949, September,