Order Code IB10123
CRS Issue Brief for Congress
Received through the CRS Web
Trade Negotiations in the 108th Congress
Updated July 17, 2003
Ian F. Fergusson
Foreign Affairs, Defense, and Trade Division
Lenore M. Sek
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
U.S. Negotiating Strategy
Notification and Implementing Bills
Notification Requirements
Before the Start of Negotiations
During Negotiations
Before Signing the Agreement
Entering Into the Agreement
Implementing Bill
Submission of Draft Implementing Bill
“Trade Authorities” or “Fast-Track” Procedures
Status of Agreements and Negotiations
Multilateral Trade Negotiations
Regional Negotiations
Free Trade Area of the Americas
U.S.-Central American FTA
U.S.-Southern African Customs Union FTA
Bilateral Negotiations and Agreements
U.S.- Chile FTA
U.S.- Singapore FTA
U.S.-Moroccan FTA
U.S.-Australian FTA
Other Potential Trade Agreements
Middle East - North African Free Trade Agreement
Bahrain
Enterprise for ASEAN
Egypt
Taiwan
New Zealand
LEGISLATION
CHRONOLOGY
FOR ADDITIONAL READING
CRS Products
Other Reading

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Trade Negotiations in the 108th Congress
SUMMARY
On June 6, 2003, the United States sign-
agreements are among at least eight trade
ed a bilateral free-trade agreement (FTA) with
initiatives underway. The broadest initiative
Chile. A month earlier, the United States had
is the multilateral trade negotiations in the
signed a bilateral FTA with Singapore. On
World Trade Organization (WTO). In No-
July 15, 2003, implementing bills for the
vember 2001, trade ministers from 142 mem-
FTAs (Chile–H.R. 2738/S. 1416; Singa-
ber countries of the WTO agreed to launch a
pore–H.R. 2739/S. 1417) were introduced in
new round of trade talks covering market
the House and Senate.
access,
WTO
institutional
rules,
and
developing-country issues. Their next meet-
The Bush Administration is making these
ing will be in Cancun, Mexico on September
and other bilateral and regional FTAs more
10-14, 2003. The deadline for a final agree-
important elements of U.S. trade policy, a
ment is January 1, 2005.
strategy known as “competitive liberaliza-
tion.” This strategy is designed to push for-
Another major initiative is the Free Trade
ward trade liberalization simultaneously on
Area of the Americas.
In April 1998, 34
bilateral, regional and multilateral fronts. It is
Western Hemisphere nations formally initi-
meant to spur trade negotiations by liberaliz-
ated negotiations to tariffs and nontariff trade
ing trade with countries willing to join FTAs,
barriers in the hemisphere. Negotiators have
and to pressure other countries to negotiate
released two drafts of an agreement-in-prog-
multilaterally. Some argue, however, that the
ress. Trade ministers will meet again in Mi-
accent on regional and bilateral negotiations
ami on November 20-21, 2003. The dead-line
undermines the multilateral forum and in-
for a final agreement is January 2005.
creases the risk of trade diversion away from
competitive countries that are not in the trade
The United States is also participating in
bloc.
regional free-trade negotiations with the
Central American Common Market (CACM)
Most of the current trade negotiations
and with the Southern African Customs Union
began after trade promotion authority (fast-
(SACU). The U.S.-CACM talks began on
track authority) legislation was enacted in
January 8, 2003, and both sides have said the
2002. Under that legislation, if the President
talks can be completed by year-end. The U.S.-
meets notification requirements and other
SACU negotiations began on June 3, 2003. In
conditions, Congress will consider a bill to
addition to the Chile and Singapore FTAs, the
implement a trade agreement under an expe-
Administration is negotiating on FTAs with -
dited procedure (no amendment, deadlines for
Morocco and with Australia. The Morocco
votes). The notification requirements include
talks began on January 21, 2003, and the
a minimum 90-day notice before starting
Australia talks began on March 17, 2003.
negotiations and a minimum 180-day notice
There are several other trade initiatives under
(90 days for Chile and Singapore) before
discussion but not underway. These include a
signing a trade agreement.
U.S. -Middle East FTA, FTAs with countries
in southeast Asia, and bilateral FTAs with
The Chile and Singapore free-trade
Bahrain, Egypt, Taiwan, and New Zealand.
Congressional Research Service
˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
! On July 15, 2003, implementing bills for the Chile (H.R. 2738/S. 1416) and
Singapore (H.R. 2739/S. 1417) FTAs were introduced in the House and in
the Senate.
! On July 10, 2003, the House Ways and Means Committee and Senate
Finance Committees held informal hearings or “mock markups” on the
implementing legislation for the Chile and Singapore FTAs. In addition, the
House Judiciary Committee conducted a review of the temporary entry
provisions of the legislation on July 10, and the Senate Judiciary Committee
held a similar review on July 14, 2003.
! On June 21-22, 2003, trade ministers from 31 WTO countries held a mini-
ministerial in Sharm El-Sheikh, Egypt.
! On June 16-20, 2003, the fifth round of talks were held in the U.S.-Central
American Free Trade Agreement (CAFTA) negotiations in Tegucigalpa,
Honduras.
! On June 12-13, 2003, trade ministers from 14 countries negotiating the Free
Trade Area of the Americas (FTAA) met for a”mini-ministerial” at the Wye
Oak Conference Center in Maryland.
! On June 6, 2003, the United States and Chile signed a bilateral free trade
agreement in Miami, Florida.
! On June 2, 2003, the United States began formal negotiations with the
Southern African Customs Union (SACU) on a free trade agreement.
! On May 9, 2003, President Bush proposed the negotiation of a free trade
area between the United States and the nations of the Middle East by 2013.
The proposal envisions negotiating with countries as they join the WTO and
engage in trade liberalization and economic reform.
! On May 6, 2003, the United States and Singapore signed a bilateral free
trade agreement at a ceremony at the White House.
BACKGROUND AND ANALYSIS
For over 50 years, U.S. trade officials have negotiated multilateral trade agreements to
achieve lower trade barriers and rules to cover international trade. In the past two decades,
U.S. officials also negotiated four free-trade agreements with neighboring countries or
strategic partners.1 Currently, the Bush Administration is making bilateral and regional free-
1 The four agreements are the U.S.-Israel Free Trade Agreement (effective 1985), the Canada-U.S.
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trade agreements more important elements of its trade policy. The multilateral arena is no
longer the only means, or perhaps even the principal means, by which the United States is
pursuing the benefits of trade.2
U.S. Negotiating Strategy
U.S. negotiating strategy is based on a concept known as “competitive liberalization.”
As explained by the Administration, this strategy is designed to push forward trade
liberalization on multiple fronts: bilateral, regional and multilateral. It is meant to further
trade negotiations by liberalizing trade with countries willing to join free trade agreements,
and to put pressure on other countries to negotiate in the WTO. As United States Trade
Representative (USTR) Robert B. Zoellick has written,
we want to strengthen the hand of the coalition pressing for freer trade. It would be fatal
to give the initiative to naysayers abroad and protectionists at home. As we have seen in
the League of Nations, the UN, the IMF and the World Bank, international organizations
need leaders to prod them into action.3
However, others argue that the accent on regional and bilateral negotiations will
undermine the World Trade Organization (WTO) and increase the risk of trade diversion.
Trade diversion occurs when the lower tariffs under a trade agreement cause trade to be
diverted away from a more efficient producer outside the trading bloc to a producer inside
the bloc. What results from the plethora of negotiated FTAs, according to one recent article,
“is a ‘spaghetti bowl’ of rules, arbitrary definitions of which products come from where, and
a multiplicity of tariffs depending on source.”4
The manner in which the Administration chooses potential partners has been the subject
of scrutiny by some Members of Congress. Traditionally, regional and bilateral trade
agreements have been negotiated for a mixture of economic, political, and development
reasons. The U.S.-Canada Free-Trade Agreement (FTA) was primarily economic in nature:
recognizing the largest bilateral trade relationship in the world between two countries at a
similar stage of development. The partnership with Mexico to create NAFTA brought in a
country at a different stage of development and gave attention to trade as a lever to encourage
economic advancement. It also had a geopolitical rationale of encouraging stability in the
U.S. neighbor to the south.
The FTA with Israel is seen as an affirmation of U.S.
commitment to the Jewish state, while the FTA with Jordan can be seen as a reward for
Jordan’s cooperation in the Middle East peace process.
1 (...continued)
Free Trade Agreement (effective 1989), the North American Free Trade Agreement (effective 1994)
and the U.S.-Jordan Free Trade Agreement (effective 2001).
2 For further information, see CRS Report RL31356, Free Trade Agreements: Impact on U.S. Trade
and Implications for U.S. Trade Policy, by William H. Cooper.
3 Robert B. Zoellick, “Unleashing the Trade Winds,” The Economist, December 7, 2002, p.29.
4 Jagdish Bhagwati and Arvind Panagariya, “Bilateral Trade Treaties Are a Sham,” Financial Times,
July 14, 2003.
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USTR Zoellick recently enumerated several criteria prerequisite for negotiating trade
agreements with the United States. In a speech to the Institute of International Economics,
he referred to several criteria he used to make a determination of a country’s worthiness to
negotiate an FTA with the United States. However, he said there were no formal rules or
procedures to make the determination. According to USTR Zoellick, the Administration
sought countries that cooperate with the United States in its foreign and security policies.
Other considerations enunciated by the USTR include country support for U.S. positions in
the Free-Trade Area of the Americas (FTAA) and the WTO; the ability of a trade agreement
to spur internal economic or political reform in the target country or region; the ability to
counteract FTAs among other countries or trading blocs that disadvantage American firms;
the presence of congressional interest or opposition to an FTA; support among U.S. business
and agricultural interests; the ability of a country to anchor broader trade agreements to spur
regional integration; the willingness of a partner to negotiate a comprehensive agreement
covering all economic sectors; and the capacity constraints of the Office of the USTR.5
Some Members of Congress have questioned the manner in which potential FTA
partners are chosen. Representative Calvin Dooley has called for the establishment of a
“strategic roadmap” to help define potential FTA partners that would advance the U.S.
economic, geopolitical, and multilateral agenda, given the limited resources of the Office of
the USTR.6 Senator Baucus and Representative Dooley have requested a study from the
General Accounting Office on the selection progress for FTA partners. In addition, some
business groups have expressed a desire to concentrate more on the multilateral negotiations
of the WTO, which potentially could yield greater commercial gains.7
The Administration has also equated the concept of free trade with national security. It
cites the negotiation of free trade agreements in multilateral, regional, and bilateral settings
as an integral part of its strategy to enhance prosperity and freedom for the rest of the world.
In the September 2002 National Security Strategy, the Administration elevated the concept
of ‘free trade’ to a moral principle, “the freedom for a person or a nation to make a living.”
According to this document, free-market economic and trade policies, more than
development assistance, provides nations with the ability to lift themselves out of poverty
and to insure stability.8
While the Administration is pursuing trade agreements on multiple fronts, some
question whether the United States should be negotiating the trade agreements at all. They
charge that jobs are lost because of cheaper imports, and that relocation of U.S. production
to other countries has been facilitated by trade agreements.
Some argue that trade
agreements do not adequately address the problem of countries with lower labor and
5 “Following the Bilateral Route?, Washington Trade Daily, May 9, 2003; “Zoellick Says FTA
Candidates Must Support U.S. Foreign Policy,” Inside U.S. Trade, May 16, 2003.
6 “Business Treads Carefully in Assessment of Administration Trade Policy,” Inside U.S. Trade,
June 20, 2003.
7 “Filling Up with Appetizers,” Congress Daily AM, June 11, 2003.
8 National Security Council, National Security Strategy of the United States, September 2002,
[http://www.whitehouse.gov/nsc/nss.pdf], pp. 17-21.
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environmental standards that are able to produce at lower cost. Some critics believe that the
U.S. economy will be harmed by the Administration’s pursuit of free-trade agreements.
The result of the competitive liberalization strategy is that the United States is involved
in an unprecedented number of trade negotiations. Multilaterally, the United States and over
140 countries are participating in the Doha Development Agenda under the auspices of the
World Trade Organization. Regionally, the United States is meeting with 33 other countries
in the western hemisphere to create a Free Trade Area of the Americas, and is beginning
free-trade negotiations with countries in central America and in southern Africa. Bilaterally,
it is seeking FTAs with Australia, Bahrain, and Morocco, and concluded agreements with
Singapore and Chile. Furthermore, the President has recently proposed initiatives that could
lead to free-trade agreements with the countries of southeastern Asia and the Middle East.
Notification and Implementing Bills
The next section discusses these trade proposals in more detail. Since the next section,
however, includes references to formal notifications by the Administration, it might be
helpful to first explain more about what those notifications mean and when they are given.
Congress approved notification requirements in the trade promotion authority (TPA)
legislation passed in 2002 (Title XXI, P.L. 100-210). These requirements apply to trade
agreements entered into (signed) before June 30, 2005 (or June 30, 2007, if a two-year
extension is allowed). If the Administration meets these notification requirements, consults
as required, and satisfies other conditions in the TPA legislation, Congress will consider
implementing legislation for a trade agreement under expedited (“trade authorities” or “fast-
track”) procedures, which prohibit amendments and set deadlines for committee and floor
action. Since most trade agreements, including those in the next section, are nontariff trade
agreements, this section discusses the notification requirements for those agreements (and
excludes tariff agreements).
The following is in two parts: (1) the notification and consultation requirements of the
TPA legislation; and (2) the TPA/fast-track procedures for an implementing bill.
Notification Requirements
Before the Start of Negotiations. Before starting negotiations, the Administration
must notify Congress at least 90 calendar days in advance. (This requirement is waived for
certain negotiations that were underway before enactment of the TPA legislation.) Before
and after submitting this notice, the Administration must consult with the relevant
congressional committees and the Congressional Oversight Group (COG).9
The
9 Members of the COG are the chairman and ranking member of the House Ways and Means
Committee and the Senate Finance Committee, three other members from each of those committees
(no more than two from the same party), and the chairman and ranking member from any other
committees with jurisdiction. COG members are official advisers to the U.S. delegation in trade
negotiations. They consult with and provide advice to the USTR on the formulation of objectives,
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Administration must comply with certain additional consultation and assessment
requirements for agricultural, textile and apparel, and fish and shellfish negotiations.
During Negotiations. In the course of negotiations, the USTR must consult closely
and on a timely basis with the COG and all committees of jurisdiction. Guidelines developed
by the USTR, in consultation with the House Ways and Means Committee and the Senate
Finance Committee (the revenue committees), cover briefings of the COG, access by COG
members and staff to documents, and coordination between the USTR and the COG at
critical periods of the negotiations.
Before Signing the Agreement. At least 180 calendar days before signing a trade
agreement (at least 90 calendar days for an agreement with Chile or with Singapore), the
President must report to the revenue committees on proposals that might require amendments
to U.S. trade remedy laws. At least 90 calendar days before entering into a trade agreement,
the President must notify Congress of the intention to enter into the agreement. No later than
30 days after this notification, the private sector advisory committees must submit their
reports on the agreement to Congress, the President, and the USTR. Also at least 90 calendar
days before entering into a trade agreement, the President must provide the International
Trade Commission (ITC) with the details of the agreement and request an assessment.
The USTR must consult closely and on a timely basis (including immediately before
initialing an agreement) with the revenue committees, the COG, and other congressional
advisers, and with the agriculture committees in the case of an agreement relating to
agricultural trade.
Entering Into the Agreement. Within 60 days of entering into the agreement, the
President must submit a list of required changes to U.S. law that likely would be necessary
to bring the United States into compliance with the agreement. Not later than 90 calendar
days after the President enters into an agreement, the ITC must report to the President and
to Congress on the likely impact of the agreement on the U.S. economy and on specific
industrial sectors.
Implementing Bill
Submission of Draft Implementing Bill. There is no deadline for submission of
a bill to implement a trade agreement. The TPA legislation requires that after entering into
a trade agreement, the President must submit to the Congress a copy of the final legal text
of the agreement, a draft of an implementing bill, a statement of any administrative action
proposed to implement the trade agreement, and other supporting information. Expedited
procedures for consideration of an implementing bill are set out in Section 151 of the Trade
Act of 1974 (19 U.S.C. 2191). (The TPA legislation provides for withdrawal of expedited
procedures if the House and Senate, within 60 days of each other, agree to resolutions stating
that the President did not meet notification and consultation requirements.)
9 (...continued)
negotiating strategies, and other trade matters.
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“Trade Authorities” or “Fast-Track” Procedures. Any implementing bill
submitted by the President is to be introduced by the majority leader of each house or their
designees. The bill is then referred jointly to the committees of jurisdiction.
Each committee has up to 45 days after introduction to report the measure or be
automatically discharged. Committee amendments are prohibited. If the implementing bill
is a revenue measure (which is usually the case because of tariff changes), Senate committees
have an additional 15 days, since a revenue measure must originate in the House.
The bill is to be called up in each chamber under a non-debatable, highly privileged
motion. Floor amendments are prohibited. Floor debate in each chamber is limited to no
more than 20 hours, equally divided. A vote on final passage must be taken in each chamber
on or before the 15th day of session after the bill is reported or discharged from the
committees of jurisdiction. Given these deadlines, the implementing bill could be in the
House up to 60 days of session, and if the House takes that full period, the bill could be in
the Senate up to 90 days of session. There would be no conference to resolve differences,
because the identical bill is introduced in each chamber and no amendments are allowed.
Status of Agreements and Negotiations
Multilateral Trade Negotiations
At the 4th Ministerial meeting of the World Trade Organization (WTO) in Doha, Qatar
on November 9-14, 2001, trade ministers from 142 member countries of the World Trade
Organization agreed to launch a new round of multilateral trade negotiations called the Doha
Development Agenda. The title reflects the importance placed by the members of making
the world trading system more responsive to the needs of the lesser and least developed
countries. These countries, now the largest bloc of members in the WTO, demanded greater
attention to their development agenda as a condition for a new round. This agenda includes
greater attention to tariffs and subsidies (especially in agriculture) that inhibit competitive
exports from developing countries. It also includes an emphasis on trade capacity building
to assist developing countries in obtaining the resources to implement existing agreements.
WTO members account for over 95% of worldwide trade. In 2002, more than $1.7 trillion
(97%) of total U.S. trade was with WTO member countries. (All trade data are from the
International Trade Commission data web page at [http://dataweb.usitc.gov/].)
The work program set out in the Doha declaration incorporated the “built-in agenda”
(ongoing negotiations on agriculture and services liberalization) with negotiations on non-
agricultural market access (tariffs), WTO rules concerning subsidies and countervailing
measures, the WTO dispute settlement understanding, implementation concerns, access to
medicines, geographical indications and biological diversity aspects of the Trade Related
Aspects of Intellectual Property Agreement (TRIPS), the relationship of the WTO
agreements to multilateral environmental agreements and trade capacity building.
In addition, negotiators continue to discuss the so-called Singapore issues. Following
the Singapore ministerial in 1996, four topics were added to the work of the WTO:
investment, competition, transparency in government procurement, and trade facilitation
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(e.g., customs procedures). Some member countries have wanted to develop more extensive
rules for these issues within the framework of the WTO. At the Doha ministerial, a decision
on these issues was delayed. Countries decided at that meeting that further clarification
would be taken on all four issues and negotiations would take place after the fifth ministerial
on the basis of a decision by consensus. So far, a consensus is not apparent. The European
Union is the lead supporter of further negotiations, while India is a strong opponent. The
United States has favored further negotiations on government procurement and trade
facilitation.
The United States was successful in having market access, especially in agriculture,
included in the work program; however, because WTO members have such different
positions, an agriculture agreement is expected to be difficult to reach. The United States
was unsuccessful in keeping out language on the domestically sensitive issue of additional
disciplines in the use trade remedies such antidumping and countervailing duty proceedings.
Developing countries, who have an increasingly important role in the negotiations, are
insisting on concessions in agriculture, textiles and apparel, and pharmaceuticals.
WTO members agreed on a negotiating structure in early 2002. An important deadline
was missed on March 31, 2003, when negotiators failed to agree on “modalities” for
commitments on agriculture (e.g., formulas for reducing barriers). Negotiators also missed
the May 31, 2003 deadline for agreement on negotiating modalities for industrial market
access Trade ministers will take stock of progress and make further decisions at their next
meeting in Cancun, Mexico scheduled for September 10-14, 2003. WTO members set a
deadline of January 1, 2005 for reaching final agreement in the round.
Regional Negotiations
Free Trade Area of the Americas. In April 1998, at the second Summit of the
Americas in Santiago, Chile, 34 Western Hemisphere nations formally initiated negotiations
to create a Free Trade Area of the Americas (FTAA).10 The United States traded $686 billion
worth of goods with the FTAA countries in 2002: $274.5 billion in exports and $411.5
billion in imports.
The United States has focused on reducing overall tariff rates as the primary negotiating
goal in market access discussions. Latin American countries, by contrast, are focusing on
other issues, specifically U.S. trade remedy laws, U.S. domestic agricultural support, and
peak tariff rates. Brazil in particular, a major player in the negotiations, is interested in
opening U.S. markets in agriculture, steel, and textiles.
In April 2001, negotiators met in Québec City and unveiled the first draft of the
agreement. In November 2002, they met in Quito and released the second draft of the
heavily bracketed text. They also decided at the Quito meeting that Brazil and the United
States would co-chair the Trade Negotiating Committee through the completion of the
negotiations. The Trade Negotiating Committee is scheduled to meet three times in 2003;
the first meeting was held in Trinidad and Tobago in April 2003. The next meeting of trade
10 For further information, see CRS Report RS20864, A Free Trade Area of the Americas: Status of
Negotiations and Major Policy Issues, by J. F. Hornbeck.
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ministers is scheduled for November 20-21, 2003 in Miami.
The deadline for final
agreements is January 2005. Negotiations have recently centered around which issue areas
are likely candidates for agreement by the 2005 deadline. The United States has maintained
that certain sensitive issues such as agricultural support and U.S. trade remedy laws should
be negotiated in the WTO. However, Brazil and other Mercosur nations have indicated that
negotiations over service provisions, intellectual property and government procurement,
issues of interest to the United States, could not take place with discussion of agricultural
support and trade remedies.11
U.S.-Central American FTA. On January 8, 2003, negotiations formally began on
an FTA between the United States and the five nations composing the Central American
Common Market (CACM) – Costa Rica, El Salvador, Guatemala, Honduras, and
Nicaragua.12 Both sides have expressed optimism that an agreement can be concluded by
year-end. Three months earlier, on October 1, 2002, the Administration had given notice to
Congress of the intent to begin the negotiations. For CACM countries, an FTA potentially
would permit greater access to the U.S. market, make permanent current tariff preferences
provided by the Caribbean Basin Initiative, and provide an environment more conducive to
foreign investment. For the United States, proponents of the agreement see it supporting
U.S. exports and providing less expensive imports, advancing the movement toward an
FTAA agreement, and solidifying deeper regional political and economic reforms that
strengthen democracy and promote stability. However, critics of a potential CAFTA point
to labor conditions and workers’ rights in the CACM as a major problem. U.S. trade with the
region totaled $21.2 billion in 2002. The United States imported $11.8 billion (primarily
apparel items, bananas, coffee, and assembled electronic equipment) and exported $9.4
billion (led by apparel, textiles, electrical generating equipment, and electrical components
for assembly).
U.S.-Southern African Customs Union FTA. On November 4, 2002, the USTR
notified Congress that talks to negotiate an FTA would begin with the Southern African
Customs Union (SACU).13 The first round of negotiations began in Johannesburg on June
3, 2003. SACU is a customs union composed of South Africa, Botswana, Lesotho,
Namibia, and Swaziland. A large degree of economic integration exists among the SACU
states, with South Africa the dominant economic power. U.S. exports to SACU totaled $2.5
billion in 2002, led by aircraft, vehicles, construction and agricultural equipment, and
computers. U.S. imports from SACU totaled $4.8 billion, composed of minerals such as
platinum, diamonds, and titanium, textiles and apparel, vehicles, and automotive parts.
Potential problems relating to an FTA with SACU include competition issues related to the
South African telecommunications industry and government procurement, U.S. textile tariffs
and quotas, and intellectual property rights especially with regard to access to HIV/AIDS
medicines. While all the SACU states are eligible for the tariff preferences under the Africa
11 “U.S., Brazilian Divisions Emerge Over Agenda for FTAA Mini-Ministerial,” Inside U.S. Trade,
June 6, 2003. The Mercosur countries are Argentina, Brazil, Paraguay and Uruguay.
12 For further information, see CRS Report RL31870, The U.S.-Central America Free Trade
Agreement (CAFTA): Challenges for Sub-Regional Integration, by J.F. Hornbeck.
13
For further information, see: CRS Report RS21387, United States-Southern African Customs
Union (SACU) Free Trade Agreement Negotiations: Background and Potential Issues, by Ian F.
Fergusson.
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Growth and Opportunity Act (Title I, P.L. 106-200), the negotiation of an FTA would “lock-
in” and potentially expand such tariff advantages.
Bilateral Negotiations and Agreements
U.S.- Chile FTA. The United States and Chile commenced formal negotiations on a
bilateral FTA on December 6-7, 2000 in Washington, D.C.14 These talks began before
Congress approved trade promotion authority, so early-stage notification was not required
nor made. After two years of negotiations, an agreement was announced in Washington on
December 11, 2002. On January 30, 2003, President Bush notified Congress of his intent
to sign the agreement. The Agreement was signed on June 6, 2003 in Miami, after a delay
some attribute to the Administration’s irritation over Chile’s refusal to support U.S.-
sponsored resolutions on Iraq in the United Nations earlier this year.
Negotiations with Chile, viewed in Washington as a model open-market developing
economy, have been seen by some observers as a template for the CAFTA negotiations and
an FTAA agreement. Total trade between the United States and Chile was approximately
$5.9 billion in 2002; imports accounted for $3.6 billion, and exports totaled $2.3 billion.
Leading U.S. imports from Chile are fish, grapes, wine, copper, and wood products, and
significant U.S. exports to Chile are mining equipment and machinery, aircraft, computers,
and telecommunications equipment.
The agreement, described by USTR Zoellick as a “win-win, state-of-the-art FTA for the
modern economy,”15 features comprehensive liberalization of service trade, protections for
intellectual property rights, labor and environmental protection provisions similar to those
of the Jordan FTA, and new transparent procedures for customs and investor-state disputes.
It also gives Chile certain ‘flexibilities’ over the imposition of capital controls, while
restricting their use overall. If approved by Congress, 87% of two-way trade will become
tariff-free immediately, with the remainder phased out over four years or, mostly in the case
of sensitive agricultural products, over 12 years.
U.S.- Singapore FTA. The United States and Singapore launched negotiations on
a bilateral FTA in December 2000.16 The agreement was completed on January 15, 2003
after the two parties resolved outstanding differences related to capital controls. On May 6,
2003, President Bush signed the agreement with Singapore’s Prime Minister Goh Chok
Tong at the White House . Singapore and the United States are major trading partners, and
the USTR has indicated an FTA with Singapore would facilitate further Pacific regional
integration. The agreement would phase-in tariff elimination on all goods, cover trade in
services, and protect intellectual property rights. Two-way trade between the two nations
totaled $28.8 billion in 2002. U.S. exports to Singapore totaled $14.7 billion and were
comprised of aircraft, computers, integrated circuits telecommunications equipment and
14 For further information, see CRS Report RL31144, A U.S.-Chile Free Trade Agreement:
Economic and Trade Policy Issues, by J. F. Hornbeck.
15 Office of the U.S. Trade Representative. “U.S. and Chile Conclude Historic Free Trade
Agreement. Press Release,” December 11, 2002.
16 For further information, see CRS Report RL31789, Singapore-U.S. Free Trade Agreement, by
Dick K. Nanto.
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petroleum; imports of $14.1 billion included computer equipment and circuitry, radio and
televisions receivers, and medical equipment.
U.S.-Moroccan FTA. On January 21, 2003, negotiations formally began on a U.S.-
Morocco FTA17. Earlier, on October 1, 2002, the Bush Administration had notified Congress
of its intent to negotiate the FTA. The notification letter stated that the proposed agreement
would “support this Administration’s commitment to promote more tolerant, open, and
prosperous Muslim societies.” While proposed with a strong national security and foreign
policy rationale, the FTA would also seek to support U.S. economic objectives. These
include allowing U.S. agricultural products to compete more effectively against those of the
European Union, which currently benefit from preferential access.
From Morocco’s
perspective, the FTA could lead to an increase in U.S. foreign direct investment and provide
preferences for textile and apparel exports to the United States. U.S.-Morocco trade totaled
$970 million in 2002, composed of $560 million in U.S. exports and $410 million in imports.
Leading U.S. exports are corn, wheat, soybeans, aircraft parts, and coal; leading imports
include electrical equipment, apparel, calcium and chalk phosphates, mineral oil, processed
fish, and processed vegetables.
U.S.-Australian FTA. On November 13, 2002, the Bush Administration notified the
Congress of the intent to begin FTA negotiations with Australia.18 Formal talks began in
Canberra on March 18, 2003. While the U.S. business community strongly supports the
negotiations, the American agricultural community has expressed concern about Australian
sanitary and phytosanitary standards that it believes act as a barrier to U.S. exports. For its
part, Australia has called for greater agricultural liberalization in the U.S. market. It has
denounced the recent U.S. farm bill and recently imposed U.S. import restrictions on lamb.
A desire to cement the U.S.-Australian strategic relationship, and Australia’s cooperation in
the war against terrorism, may also influence these negotiations. Two way trade between the
United States and Australia totaled $18.7 billion in 2002. Livestock, wine, minerals,
vehicles, and vehicle parts were leading imports from Australia, which totaled $6.4 billion
in 2002. U.S. exports amounted to $12.3 billion, led by computer equipment, aircraft,
vehicles, heavy machinery, and medical equipment.
Other Potential Trade Agreements
Middle East - North African Free Trade Agreement. On May 9, 2003, President
Bush announced an initiative to create a U.S.- Middle East Free Trade Agreement by 2013.
According to reports, this initiative would begin a multi-stage process to prepare countries
in the region for an FTA with the United States. Countries would begin the process by
negotiating accession to the World Trade Organization19 and subsequently concluding
Bilateral Investment Treaties (BIT) and Trade and Investment Framework Agreements
17 For further information, see CRS Report RS21464, Morocco- U.S. Free Trade Agreement, by
Raymond L. Ahearn.
18 For further information, see CRS Report RS21476, U.S.- Australia FTA Negotiations, by William
H. Cooper.
19 In the Middle East region, Afghanistan, Algeria, Iran, Iraq, Libya, Lebanon, Saudi Arabia, Syria,
and Yemen remain outside the WTO.
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(TIFA) with the United States.20 As domestic reforms progress, countries would then
negotiate FTAs with the United States, possibly linking to other existing or planned FTAs,
such as with Jordan, or potentially with Morocco or Bahrain.
The Administration’s rationale for this regional FTA is to provide the incentive for the
transformation of the economies of the Middle East and their integration into the world
economy. One study reports that, since 1980, the share of world exports emanating from
middle eastern countries has dropped from 13.5% to 4%, and that per capita income has
fallen by 25% in the Arab world.21
On May 22, 2003, the Middle East Trade and Engagement Act (S. 1121-Baucus/H.R.
2267- Smith) was introduced to provide duty-free access for import-sensitive goods that are
currently excluded from the U.S. Generalized System of Preferences (GSP). According to
Senator Baucus, this legislation would be modeled on the existing African Growth and
Opportunity Act (AGOA) and Andean Trade Preference Act, and that the legislation could
serve as an interim step before these countries join FTAs with the United States.22 The
proposal includes a declaration by Congress that bilateral free trade agreements should be
negotiated, where feasible, with interested countries or political entities in the greater Middle
East, in order to increase U.S. trade with the region and increase private sector investment
in the region. The Administration has not taken a position on the legislation.
Bahrain. On May 21, 2003, the USTR announced its intention to negotiate an FTA
beginning in 2004. The Administration has praised the economic and commercial
environment of the sheikhdom. The proposed FTA is touted by the Administration as a first
step in the creation of the Middle East Free Trade Area by 2013 and foresees the possibility
that other nations in the gulf region could link in to this agreement as they reform their
economies and develop their trade potential. Bahrain is a kingdom of 640,000 persons, 40%
of whom are guest workers, with a GDP of $8.6 billion in 2000. Bahrain was a founding
member of the WTO in 1994 and signed a Bilateral Investment Treaty (BIT) with the United
States in 2001 and a Trade and Investment Framework Agreement (TIFA) in 2002. The
nation has diversified its economy away from dependence on petroleum and has created a
services hub for information technology, telecommunications and health care. U.S.
merchandise trade with Bahrain totaled $802.6 million in 2002: imports of $395.1 million
included apparel, textiles, fertilizers, chemicals, and aluminum and exports of $407.5
million were led by aircraft and aircraft parts, military equipment, passenger vehicles,
machinery, and, not surprisingly, air conditioning equipment.
Enterprise for ASEAN. This initiative, announced by President Bush on October 26,
2002, provides the impetus for the negotiation of bilateral FTAs with individual countries
of the Association of Southeast Asian Nations, or ASEAN (Brunei, Cambodia, Indonesia,
Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam). The first stage
of this process is expected to be the negotiation of a region-wide trade and investment
20 “President Bush Lays Out Broad Plan for Regional FTA with Middle East by 2013,” International
Trade Reporter, May 15, 2003.
21
Edward Gresser, “Blank Spot on the Map: How Trade Policy Is Working Against the War on
Terror,” Progressive Policy Institute Policy Report, February 2003.
22 Remarks of Senator Baucus, Congressional Record, May 22, 2003, S.7005.
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framework agreement (TIFA), which is seen as the first step in the process of negotiating
individual FTAs with ASEAN member states. Malaysia and Thailand are seen as likely
candidates for FTAs under this program. As stated by the Administration, the principal
benefits to the United States of FTAs with ASEAN member states are the potential to reduce
high tariffs on agricultural products and to eliminate restrictive tariff-rate quotas on other
U.S. exports, while the major benefit to ASEAN countries would be improved access to the
U.S. market. The initiative is also seen as a way of countering growing Chinese influence
in the region. Two-way trade with ASEAN reached $116.4 billion in 2002, with exports of
$38.8 billion and imports of $77.6 billion.
Egypt. Egypt is the 45th largest trading partner of the United States with U.S. exports
of $2.8 billion, imports of $1.3 billion, and two-way trade totaling $4.1 billion. Major export
to
Egypt
include cereals,
aircraft
and
parts,
machinery,
vehicles
and
parts,
telecommunications equipment, and arms; imports include textiles, apparel, carpets,
petroleum, and iron and steel. With a population of 65.3 million, Egypt is the largest country
in the Middle East. Egypt has been a member of the World Trade Organization since 1995,
and it has concluded a TIFA with the United States. Egypt’s central position in the Arab
world has recently led to speculation that the United States would seek to launch FTA
negotiations. On June 5, 2003, 27 Senators wrote to President Bush advocating the
commencement of FTA negotiations with Egypt. Recently, however, USTR Zoellick
commented on the need for Egypt to pursue further reforms, especially in the area of customs
modernization, before FTA negotiations would be considered.23
In addition, the
Administration reportedly has frozen FTA discussions due to Egypt’s decision not to join
a WTO complaint over European policy towards genetically modified organisms (GMO).24
Taiwan. A free trade agreement with the Republic of China on Taiwan has been
advanced by proponents in the last several years. In the 108th Congress, H.Con.Res. 98
(Ramstad) has been introduced calling for a free trade agreement with Taiwan, and House
Majority Leader Delay lent support to an FTA with Taiwan in a speech to the American
Enterprise Institute on June 2, 2003.25 Taiwan is the 8th largest trading partner of the United
States with total two-way trade in 2002 equal to $48.8 billion in 2002; the United States is
Taiwan’s largest trading partner. The U.S. imported $32 billion in merchandise from
Taiwan
with
computers,
circuitry,
vehicle
parts,
television
transmission,
and
telecommunications equipment leading. U.S. exports to Taiwan, which totaled $16.8 billion,
include integrated electronic circuits, electrical machinery, aircraft parts, corn, and soybeans.
While the Bush administration has indicated support for the concept of a U.S.-Taiwan FTA,
several outstanding trade disputes remain including Taiwan’s enforcement of intellectual
property rights, the imposition of excessive standards, testing, certification and labeling
requirements, and the Taiwanese rice import quotas.26 In addition, the negotiation of an FTA
with Taiwan likely would encounter the ire of the mainland Chinese government, which
23 “Zoellick Criticism Sets Back Egypt Hopes on Free Trade Deal,” Financial Times, June 24, 2003.
24 “U.S. and Egypt Beginning to See 'Eye-to-Eye' On Need for FTA but No Talks Scheduled Yet,”
International Trade Reporter, July 3, 2003.
25 Available at [http://www.aei.org/include/news_print.asp?newsID=17544].
26 U.S. Trade Representative, 2003 National Trade Estimate Report on Foreign Trade Barriers,
p. 358.
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considers Taiwan to be a province of China. Taiwan acceded to the WTO on January 1, 2002
and signed a Trade and Investment Framework Agreement with the United States in 1994.
New Zealand. Another potential FTA partner in which Congress has expressed
interest is New Zealand. New Zealand is the 46th largest trading partner of the United States
with two-way trade of nearly $4.0 billion, comprising of $2.3 billion in imports and $1.7
billion in exports. Imports consist of meat, dairy products, seafood, fruits and nuts, starches,
glues, and enzymes, and machinery. Leading U.S. exports consist of gas turbines, computer
equipment, aircraft and parts, telecommunications equipment, vehicles and plastics. The
United States also engaged in a substantial services trade with New Zealand, with imports
of private commercial services of $1.3 billion, and exports of $1.2 billion. New Zealand
embarked on a far-reaching economic reform program in the 1980s, and consequently has
one of the world’s most liberalized economies. Its economy is also deeply integrated with
that of Australia, a country with which the United States is negotiating an FTA. According
to some, however, New Zealand has engendered antipathy within the Administration for its
public criticism of the Iraq war, and its continuing refusal to allow nuclear powered vessels
to enter its ports.
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Current U.S. Negotiations on Trade Agreements
Agreement
U.S.
Status
Sensitive
Total
Areas
Trade*
($ bill.)
Free Trade
$686.0
Formal negotiations began in 1998. The first
Agriculture,
Area of the
draft of the agreement was adopted in Québec
antidumping,
Americas
in April 2001; the second was adopted at
textiles and
Quito in Nov. 2002. Trade ministers will
apparel,
meet in Miami in late 2003. A final
worker rights
agreement is due by Jan. 2005.
Doha
$1,738
A work program was produced at the trade
Agriculture,
Development
ministerial meeting in Doha in Nov. 2001.
antidumping,
Agenda of the
Trade ministers agreed to take stock of
pharma-
WTO
negotiations at their next meeting (Cancun,
ceuticals
Sept. 2003) and have set Jan. 1, 2005 as the
deadline for final agreement.
U.S.-Chile FTA
$5.9
Negotiations began in Dec. 2000. An
Capital flows,
agreement was announced on Dec. 11, 2002.
agriculture
President Bush signed the agreement on June
6, 2003.
U.S.-Singapore
$28.8
Negotiations began in Dec. 2000 and were
Capital flows
FTA
completed on Jan. 15, 2003. President Bush
signed agreement on May 6, 2003.
U.S.-Central
$21.2
The Administration gave notice of intent to
Textiles and
America FTA
begin negotiations on Oct. 1, 2002. Talks
apparel, rules
were formally launched on Jan. 8, 2003.
of origin,
Officials anticipate negotiations will conclude
capital flows,
by the end of 2003.
worker rights
U.S.-Morocco
$0.97
On Oct. 1, 2002, the Administration gave
Agriculture
FTA
Congress notice of intent to begin
negotiations. Talks formally began on Jan.
21, 2003. Officials anticipate negotiations
will conclude by the end of 2003.
U.S.-Southern
$7.3
The Administration gave Congress notice of
Telecommuni-
African
intent to begin negotiations on Nov. 4, 2002.
cations,
Customs Union
Talks began on June 3, 2003.
textiles, phar-
FTA
maceuticals
U.S.-Australia
$18.7
On Nov. 13, 2002, the Administration gave
Agriculture,
FTA
Congress notice of intent to begin
investment,
negotiations. Talks began in March 2003.
telecommuni-
cations
* Domestic exports (Fas value) plus imports for consumption (Customs value) with countries of the proposed
agreement in 2002.
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LEGISLATION
H.Con.Res. 98 (Ramstad, et. al.)
Expressing the sense of Congress relating to a free trade agreement between the United
States and Taiwan. Introduced Mar. 18, 2003. Referred to Committee on Ways and Means,
Subcommittee on Trade, March 20, 2003.
H.R. 2267 (A. Smith)/S. 1121 (Baucus, et. al.)
Middle East Trade and Engagement Act of 2003. To extend certain trade benefits to
countries of the greater Middle East. H.R. 2267 introduced May 22, 2003; referred to House
Committee on Ways and Means. S. 2212 introduced May 22, 2003; referred to Senate
Committee on Finance.
H.R. 2738 (DeLay, by request)/S. 1416 (Grassley, et. al.)
United States-Chile Free Trade Agreement Implementation Act. To implement the
United States-Chile Free Trade Agreement. Bills introduced July 15, 2003; H.R. 2738
referred to House Ways and Means Committee and to House Judiciary Committee; S. 1416
referred to Senate Finance Committee and to Senate Judiciary Committee.
H.R. 2739 (DeLay, by request)/S. 1417 (Grassley, et. al.)
United States-Singapore Trade Agreement Implementation Act. To implement the
United States-Singapore Free Trade Agreement. Bills introduced July 15, 2003; H.R. 2739
referred to House Ways and means Committee and to House Judiciary Committee; S. 1416
referred to Senate Finance Committee and to Senate Judiciary Committee.
CHRONOLOGY
04/19/98 –
Leaders from 34 countries in the Western Hemisphere meet in Santiago,
Chile and agree to launch negotiations on a Free Trade Area of the Americas.
12/04/00 –
Negotiations begin on a U.S.-Singapore FTA.
12/06/00 –
Negotiations begin on a U.S.-Chile FTA.
12/17/01 –
The U.S.-Jordan FTA enters into force.
11/14/01 –
Trade ministers from WTO member countries agree at the end of their
meeting in Doha, Qatar to start a new round of multilateral trade negotiations.
08/06/02 –
President Bush signs the Trade Act of 2002 (P.L. 107-210), which includes
expedited legislative procedures for bills implementing trade agreements
(“fast-track authority” or “trade promotion authority”).
01/08/03 –
Negotiations begin on a U.S.-Central America FTA.
01/21/03 –
Negotiations begin on a U.S.-Morocco FTA.
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03/17/03 –
Negotiations begin on a U.S.-Australia FTA.
05/06/03 –
President Bush signs the U.S.-Singapore FTA.
06/03/03 –
Negotiations begin on a U.S.-SACU (Southern African Customs Union)
FTA.
06/06/03 –
President Bush signs the U.S.-Chile FTA.
07/15/03 –
Implementing bills for the Chile (H.R. 2738/S. 1416) and Singapore (H.R.
2739/S. 1417) FTAs were introduced in the House and in the Senate.
FOR ADDITIONAL READING
CRS Products
CRS Report RL30935: Agricultural Trade in the Free Trade Area of the Americas, by Remy
Jurenas.
CRS Report RS21085: Agriculture in WTO Negotiations, by Charles E. Hanrahan.
CRS Report RS21554. Free Trade Agreements, Developing Country Preferences and the
WTO, by Jeanne J. Grimmett.
CRS Report RS20864. A Free Trade Area of the Americas: Status of Negotiations and
Major Policy Issues, by J. F. Hornbeck.
CRS Report RL31974. Trade Agreements: Requirements for Presidential Consultations,
Notices, and Reports to Congress Regarding Negotiations, by Vladimir N. Pregelj.
CRS Report RS21464. Morocco - U.S. Free Trade Agreement, by Raymond J. Ahearn.
CRS Report RL31932. Trade Agreements: Impact on the U.S. Economy, by James K.
Jackson.
CRS Report RL31844.
Trade Promotion Authority (Fast-Track Authority for Trade
Agreements): Background and Developments in the 107th Congress, by Lenore Sek.
CRS Report RS21387. United States - Southern African Customs Union (SACU) Free Trade
Agreements Negotiations: Background and Potential Issues, by Ian F. Fergusson.
CRS Report RL31870.
The U.S.-Central America Free Trade Agreement (CAFTA):
Challenges for Sub-Regional Integration, by J. F. Hornbeck.
CRS Report RL31144. The U.S.-Chile Free Trade Agreement: Economic and Trade Policy
Issues, by J. F. Hornbeck.
CRS Report RL30652. U.S.-Jordan Free Trade Agreement, by Mary Jane Bolle.
CRS Report RL31789. The U.S.-Singapore Free Trade Agreement, by Dick K. Nanto.
Other Reading
Norton, Stephen J. Clock Starts on Congressional Approval of Chile and Singapore Free
Trade Agreements. CQ Today. July 15, 2003. Available at [http://www.cq.com].
U.S. International Trade Commission.
U.S.-Chile Free Trade Agreement: Potential
Economywide and Selected Sectoral Effects. Publication 3605. June 2003.
—— U.S.-Singapore Free Trade Agreement: Potential Economywide and Selected Sectoral
Effects. Publication 3603. June 2003.
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