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Congress Passes 3 Free Trade Agreements : IMT Industry Market Trends

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Published on Friday, 14 October 2011 Written by Super User

The United States Congress yesterday approved free trade agreements (FTAs) with South Korea, Colombia and Panama that are expected to boost exports by $13 billion a year, increase U.S. gross domestic product (GDP) by more than $15 billion and help create tens of thousands of American jobs.

The trade pacts, the first to pass Congress since the FTA completed with Peru in 2007, will lower or eliminate tariffs that American exporters face in the three countries. They also take steps to better protect intellectual property and improve access for American investors in those countries.

With rare bipartisan support, yesterday's vote "will significantly boost exports that bear the proud label 'Made in America,' support tens of thousands of good-paying American jobs and protect labor rights, the environment and intellectual property," President Obama said in a statement. "American automakers, farmers, ranchers and manufacturers, including many small businesses, will be able to compete and win in new markets."

The biggest gains are expected from the pact with South Korea, a longtime U.S. ally and a $1 trillion economy in a region dominated by China.

"While the deals with Colombia and Panama are likely to have limited economic impact, the agreement with South Korea is designed to break down barriers between the U.S. and the world's 15th-largest economy," the Washington Post explains. "The South Korea deal is widely hailed as the most consequential trade pact since the North American Free Trade Agreement was ratified in 1994."

While the U.S. was once South Korea's largest trading partner, it is now the fourth-largest. The U.S.-Korea FTA is expected to boost U.S. exports to South Korea by one-third and cut the bilateral trade deficit in half, giving American exporters the opportunity to recover lost market share. Manufacturing exports are expected to increase by nearly $10 billion, and services exports should also see sizable gains. U.S. agricultural exports like beef, poultry and pork could rise by as much as $4 billion due to decreased tariffs, while also contributing to job creation.

Among South American countries, Colombia is the third-largest destination for U.S. exports and the second-largest market for U.S. agricultural exports. Most Colombian goods typically receive duty-free treatment in the U.S. market, so the FTA will level the playing field for U.S. exporters by removing Colombia's tariffs on U.S. goods. More than 80 percent of U.S. exports will immediately gain duty-free access, and the remaining tariffs will be phased out over the next 10 years. In addition to boosting manufactured and agricultural exports, the FTA will also provide new access for U.S. service suppliers to Colombia's $166 billion services market.

The U.S.-Colombia FTA is expected to increase U.S. exports by more than $1 billion each year and raise U.S. GDP by $2.5 billion, creating thousands of new jobs in the U.S.

Panama has one of the highest growth rates among Latin American nations, and the U.S. is currently its largest supplier of imports. Most goods brought into the U.S. from Panama already receive duty-free access, and the FTA will level the playing field for U.S. exporters by removing Panama's tariffs on U.S. goods.

The U.S.-Panama FTA will guarantee access to Panama's $20.6 billion services market and could increase U.S. access to more than $15 billion in infrastructure projects in Panama, providing new opportunities for machinery and equipment manufacturers. Moreover, as much as 87 percent of U.S. consumer and industrial exports to Panama will become duty-free immediately, and the remaining tariffs will be eliminated within the next 15 years.

Business groups, trade associations and global companies, led by the U.S. Chamber of Commerce, were nearly unanimous in support of the trade accords.

"Limits on international trade have been allowed to hold back our nation's economy for far too long, and tearing down those barriers is one of the keys to economic recovery," the National Retail Federation said in a statement.

According to Dow Chemical Company, the FTAs are "a key element in an advanced manufacturing strategy that supports U.S. corporate engagement in the global market while enabling companies to create jobs and sponsor new investments in America."

Jim McNerney, chairman of the Business Roundtable and chairman, president and CEO of the Boeing Co., also praised the approval of the FTAs, saying, "These three trade agreements will help keep U.S. manufacturers, service providers, farmers and workers competitive in Asia and Latin America."

The FTAs have been a top trade priority of the National Association of Manufacturers (NAM) for four years.

"Passage of these agreements puts us back on the road to faster export growth and boosts our ability to compete," NAM President and CEO Jay Timmons said in a statement this week. "They will help create quality manufacturing jobs at a critical time in our economic recovery, especially as we've seen evidence of a slowdown in recent months."

Despite overwhelming support, some prominent labor unions oppose the deals, arguing that they will help U.S. companies without bringing much benefit to U.S. workers, particularly if increased imports lead to widespread layoffs. Some also argue that the agreements serve to reward two countries, Panama and Colombia, that have been hostile to organized labor and international environmental standards.

"These flawed trade deals — with South Korea, Colombia and Panama — are the wrong medicine at the wrong time. Working people know what too many politicians apparently do not: these deals will be bad for jobs, workers' rights and our economy," AFL-CIO President Richard Trumka said in a statement. "Instead of passing more flawed trade deals, Congress and the White House should act quickly on China currency and focus on creating the millions of good jobs that we desperately need."

In moving the pacts through legislation, Obama required that Congress renew Trade Adjustment Assistance, a program that provides training and support for American workers displaced by globalization. It is designed to help workers, firms, farmers and fishermen transition to alternative employment.


Resources

Congress Passes Trade Agreements and Trade Adjustment Assistance
Office of the U.S. Trade Representative, Oct. 12, 2011

Baucus Leads Senate Passage of Colombia, Panama, South Korea FTAs
U.S. Senate Committee on Finance, Oct. 12, 2011

Statement by the President on the Passage of Trade Agreements and Trade Adjustment Assistance
The White House, Oct. 12, 2011

Obama Gets Win as Congress Passes Free-Trade Agreements
by Zachary A. Goldfarb and Lori Montgomery
The Washington Post, Oct. 12, 2011

U.S.-South Korea Trade Agreement
Office of the U.S. Trade Representative

U.S.-Colombia Trade Agreement
Office of the U.S. Trade Representative

U.S.-Panama Trade Agreement
Office of the U.S. Trade Representative

Statements Regarding the Congressional Approval of the Korea, Colombia, and Panama Trade Agreements
Office of the U.S. Trade Representative, Oct. 13, 2011

U.S. Chamber Hails Submission of Trade Accords to Congress
U.S. Chamber of Commerce, Oct. 3, 2011

NRF Welcomes Votes on Free Trade Agreement Legislation
National Retail Federation, Oct. 12, 2011

Dow Congratulates U.S. Congress for Approving FTAs
Dow Chemical, Oct. 13, 2011

Business Roundtable Praises House and Senate Approval of Trade Agreements and TAA Legislation
Business Roundtable, Oct. 12, 2011

Manufacturers Welcome Strong Vote on Trade Agreements to Create Jobs
National Association of Manufacturers, Oct. 12, 2011

Statement by AFL-CIO President Richard Trumka on Rejecting Flawed Trade Deals
American Federation of Labor and Congress of Industrial Organizations, Oct. 12, 2011

Obama Shifts Away From Jobs Message to Promote Bush-Signed Trade Pacts...
Global Trade Watch (Public Citizen), Oct. 11, 2011

Congress OKs Korea, Panama, Colombia Trade Deals
by Doug Palmer
Reuters, Oct. 12, 2011

Congress Approves Trade Pacts (subscription required)
by Elizabeth Williamson and Tom Barkley
The Wall Street Journal, Oct. 12, 2011

Congress Ends 5-Year Standoff on Trade Deals in Rare Accord
by Binyamin Appelbaum and Jennifer Steinhauer
The New York Times, Oct. 12, 2011

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