Order Code IB10123
CRS Issue Brief for Congress
Received through the CRS Web
Trade Negotiations in the 108th Congress
Updated April 6, 2004
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

---

CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
U.S. Negotiating Strategy
Notification and Consultation Requirements
Before the Start of Negotiations
During Negotiations
Before Signing the Agreement
Entering Into the Agreement
Agreements Concluded and In Effect
Bilateral Trade Agreements
U.S.-Chile FTA
U.S.- Singapore FTA
Agreements Concluded Only
U.S.-Central American FTA (CAFTA)
U.S.-Australia FTA
U.S.-Morocco FTA
Agreements Under Negotiation or With Announced Intent to Negotiate
Multilateral Trade Negotiations
Regional Negotiations
Free Trade Area of the Americas
U.S.-Southern African Customs Union FTA
U.S. - Andean FTA
Bilateral Negotiations
U.S.- Bahrain FTA
U.S.-Thailand FTA
U.S. - Panama FTA
Other Potential Trade Agreements
Middle East - North African Free Trade Agreement
Enterprise for ASEAN
New Zealand
Taiwan
FOR ADDITIONAL READING

---

IB10123
04-06-04
Trade Negotiations in the 108th Congress
SUMMARY
The Bush Administration has made
The United States also participated or is
bilateral and regional free-trade agreements
participating in several regional or bilateral
(FTAs) more important elements of U.S. trade
trade negotiations. Two agreements — FTAs
policy, a strategy known as “competitive liber-
with Chile and with Singapore — were con-
alization.” This strategy is designed to push
cluded during the 108th Congress and are now
forward trade liberalization simultaneously on
in effect. An FTA with four countries of the
bilateral, regional and multilateral fronts. It is
Central American Common Market (CACM)
meant to spur trade negotiations by liberaliz-
was reached in December 2003, and a fifth
ing trade with countries willing to join FTAs,
country joined that agreement in January
and to pressure other countries to negotiate
2004. An agreement to integrate the Domini-
multilaterally. Some argue, however, that the
can Republic into this agreement was con-
accent on regional and bilateral negotiations
cluded in March 2004. Bilateral FTAs were
undermines the multilateral forum and in-
concluded with Australia in February 2004
creases the risk of trade diversion away from
and with Morocco in March 2004. Negotia-
competitive countries not in the trade bloc.
tions are underway with the Southern African
Customs Union (SACU). The Administration
The broadest trade initiative being nego-
is also negotiating a bilateral FTA with Bah-
tiated during the 108th Congress is the multi-
rain and plans to begin negotiations with
lateral trade negotiations in the World Trade
Thailand and with Panama. The United States
Organization (WTO). In November 2001,
and Colombia announced that bilateral talks
trade ministers from 142 WTO member coun-
on an FTA will begin in May 2004, and these
tries agreed to launch a new round of trade
talks might include other Andean countries.
talks covering market access, WTO institu-
Several other trade initiatives are under dis-
tional rules, and developing-country issues. A
cussion, including a U.S.-Middle East FTA
meeting of trade ministers at Cancún, Mexico
and an FTA with countries in southeast Asia.
in September 2003 ended without agreement
on a negotiating framework and cast doubt on
Most of the current trade negotiations
the January 1, 2005 deadline.
began after trade promotion authority (fast-

track authority) legislation was enacted in
Another major initiative is the Free Trade
2002. That legislation covers agreements
Area of the Americas. In April 1998, 34
signed before June 30, 2005, although a two-
Western Hemisphere nations formally initi-
year extension is possible. Under the legisla-
ated negotiations on tariffs and nontariff trade
tion, if the President meets notification re-
barriers in the hemisphere. Negotiators have
quirements and other conditions, Congress
released drafts of an agreement-in-progress.
will consider a bill to implement a trade agree-
Trade ministers met in Miami in November
ment under an expedited procedure (no
2003 and announced a blueprint for negotia-
amendment, deadlines for votes). The notifi-
tions which reaffirms the January 2005 dead-
cation requirements include minimum 90-day
line for a final agreement.
notices before starting negotiations and before
signing a trade agreement.
Congressional Research Service ˜ The Library of Congress

---

---

IB10123
04-06-04
MOST RECENT DEVELOPMENTS
! On April 2, 2004, the Office of the U.S. Trade Representative (USTR)
released the text of the U.S.-Morocco free-trade agreement (FTA).
! On April 1, 2004, following an informal meeting of FTAA countries, Trade
Negotiations Committee (TNC) co-chairs Brazil and the United States
issued a text postponing the next meeting of the TNC. The text said that
more consultation was needed on a framework. The TNC had been
scheduled to meet April 22-23, 2004; no new date has been set.
! On March 31, 2004, an Assistant USTR announced that the United States
and Thailand would begin negotiations on an FTA on June 28, 2004.
! On March 26, 2004, the Office of the USTR announced that the United
States and Panama would begin negotiations on an FTA on April 26, 2004.
! On March 25, 2004, the President notified Congress of his intent to sign an
FTA with the Dominican Republic.
! On March 23, 2004, the United States and Colombia announced that FTA
negotiations between the two countries, and possibly with other Andean
countries, will begin May 18-19, 2004.
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-
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
1 The four agreements are the U.S.-Israel Free Trade Agreement (effective 1985), the Canada-U.S.
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.
CRS-1

---

IB10123
04-06-04
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 Nonetheless, in the aftermath of the failure
of the WTO Ministerial meeting in Cancún, Mexico, USTR Zoellick indicated that the
United States would more aggressively pursue bilateral and regional free trade agreements.
“We are going to keep trying to open markets one way or the other,” he said.5
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.
In May 2003, USTR Zoellick enumerated several factors to evaluate countries seeking
to negotiate trade agreements with the United States, but he said there were no formal rules
or procedures to make the determination.6 A GAO study released in January 2004 reports
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.
5 “U.S. Plans to Accelerate Own Trade Agreements Talks,” Congress Daily, September 14, 2003.
6 These considerations included cooperation with the United States in its foreign and security
policies; 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
(continued...)
CRS-2

---

IB10123
04-06-04
that an interagency process has been established to assess FTA partners using 6 factors.
These factors include a country’s readiness in terms of trade capabilities, the maturity of its
political and legal system, and the will to implement reforms; the economic benefit to the
United States; the country’s support of U.S. trade liberalization goals; a partner’s
compatibility with U.S. foreign and economic policy interests; Congressional or private
sector support, and U.S. government resource constraints.7
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.8 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.9
In the aftermath of the failed WTO Cancun Ministerial in September 2003, some
legislators have urged reconsideration of FTAs currently under negotiation for allegedly
obstructing the progress of WTO negotiations. The focus of the talk of retaliation has
centered on the ‘G-21 countries’ a negotiating bloc whose demands centered on deep
reductions in developed country agricultural subsidies, but who reportedly resisted opening
their own markets. The United States currently is conducting FTA negotiations with G-21
countries such as South Africa, Guatemala, and Costa Rica. Potential FTAA partners
Argentina, Bolivia, Brazil, Colombia, Ecuador, Paraguay, Peru, and Venezuela also signed
on to G-21 negotiating positions, and the United States has FTAs with two other G-21
participants, Chile and Mexico.
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.10
6 (...continued)
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. “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.
7 GAO Report 04-233, International Trade: Intensifying Free Trade Negotiating Agenda Calls for
Better Allocation of Staff and Resources, January 2004, pp 9-10, 12.
8 “Business Treads Carefully in Assessment of Administration Trade Policy,” Inside U.S. Trade,
June 20, 2003.
9 “Filling Up with Appetizers,” Congress Daily AM, June 11, 2003.
10 National Security Council, National Security Strategy of the United States, September 2002,
(continued...)
CRS-3

---

IB10123
04-06-04
While the Administration is pursuing trade agreements on multiple fronts, some
question whether the United States should be negotiating 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
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 Consultation Requirements
Later sections of this Issue Brief might refer to formal notifications by the
Administration to Congress. Under trade promotion authority (TPA) legislation passed in
2002 (Title XXI, P.L. 107-210), the President must notify Congress before starting
negotiation of a trade agreement and before signing a completed agreement. TPA legislation
applies to trade agreements signed before June 30, 2005, with a possible two-year extension.
If the Administration meets the notification requirements, consults as required, and satisfies
the other conditions in the TPA legislation, Congress will consider implementing legislation
for a trade agreement under expedited (“trade authorities” or “fast-track”) procedures.11 The
following briefly reviews the notification and consultation requirements.
Before the Start of Negotiations. Before starting negotiations, the Administration
must notify Congress at least 90 calendar days in advance. (This requirement was 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).12 The
10 (...continued)
[http://www.whitehouse.gov/nsc/nss.pdf], pp. 17-21.
11 For further information, see CRS Report RL31974, Trade Agreements: Requirements for
Presidential Consultation, Notices, and Reports to Congress Regarding Negotiations, by Vladimir
N. Pregelj, and CRS Report RL32011, Trade Agreements: Procedure for Congressional Approval
and Implementation, by Vladimir N. Pregelj.
12 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
(continued...)
CRS-4

---

IB10123
04-06-04
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 when an agreement relates 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. There is no deadline for submission of an implementing bill.
Agreements Concluded and In Effect
Bilateral Trade Agreements
U.S.-Chile FTA. The U.S.-Chile FTA went into effect January 1, 2004. The United
States and Chile commenced formal negotiations on December 6-7, 2000.13 After two years
of negotiations, an agreement was announced 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, after a delay some attributed to the Administration’s irritation over
12 (...continued)
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,
negotiating strategies, and other trade matters.
13 For further information, see CRS Report RL31144, A U.S.-Chile Free Trade Agreement:
Economic and Trade Policy Issues, by J. F. Hornbeck.
CRS-5

---

IB10123
04-06-04
Chile’s refusal to support U.S.- sponsored resolutions on Iraq in the United Nations earlier
in the year. Implementing legislation (H.R. 2738) was passed by the House on July 24, 2003
by 270-156 and by the Senate on July 31, 2003 by 66-31. On September 3, 2003, President
Bush signed the U.S.-Chile Free Trade Agreement Implementation Act (P.L. 108-77).
Negotiation with Chile was offered by USTR Zoellick as a template for negotiations with the
Central American countries and for a Free Trade Area of the Americas. Debate on the Chile
FTA focused on the future use of the agreement’s labor and environmental provisions,
capital controls, and immigration.
U.S.- Singapore FTA. The U.S.-Singapore FTA went into effect on January 1, 2004.
The United States and Singapore launched negotiations on a bilateral FTA in December
2000.14 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.
Implementing legislation (H.R. 2739) was passed by the House on July 24 by 272-155 and
by the Senate on July 31 by 66-32. On September 3, 2003, President Bush signed the U.S.-
Singapore Free Trade Agreement Implementation Act (P.L. 108-78) in Washington D.C.
Debate centered around the future use of the agreement’s labor and environmental provisions
as a template for other FTAs and some members’ dissatisfaction with the immigration
provisions of the legislation.
Agreements Concluded Only
U.S.-Central American FTA (CAFTA). 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.15 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).
On December 17, 2003, the United States concluded negotiations on a U.S.-Central
America Free Trade Agreement (CAFTA) with four of the five CACM countries
(Guatemala, Honduras, El Salvador, and Nicaragua). Costa Rica eventually agreed to
CAFTA on January 25, 2004, after resolving market access issues with the United States in
the areas of telecommunications, insurance, and agriculture. The draft text was released on
January 25, 2004.
Under CAFTA, more than 80% of U.S. consumer and industrial exports would become
duty-free immediately, with all tariffs removed within 10 years. Tariffs would go to zero on
information technology products, agricultural and construction equipment, paper products,
14 For further information, see CRS Report RL31789, Singapore-U.S. Free Trade Agreement, by
Dick K. Nanto.
15 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.
CRS-6

---

IB10123
04-06-04
chemicals, and medical/scientific equipment, among others. Over half of current U.S. farm
exports to Central America would become duty-free immediately, including “high quality”
cuts of beef, cotton, wheat, soybeans, certain fruits, and vegetables, processed food products,
and wine. At the same time, the U.S. conceded to slight increases in sugar quotas for the
Central American countries. Advances were also made in other areas important to the United
States, including services trade, intellectual property rights, investment, and government
procurement. For Central American parties, benefits received under the Caribbean Basin
Trade Partnership Act (CBTPA) would become permanent.
CAFTA, however, may still evolve and faces political uncertainty. In the United States,
opposition has formed against liberalizing trade rules for Central America’s major exports,
apparel and agricultural goods. There is also considerable resistence to the agreement from
labor groups, although many industry groups have come out in favor of the agreement.
U.S.-Dominican Republic FTA. On August 4, 2003, the Administration notified
Congress of its intent to begin negotiations for an FTA with the Dominican Republic. An
FTA was concluded on March 15, 2004, and on March 25, 2004, the President notified
Congress of his intent to sign the FTA. The FTA would integrate the Dominican Republic
into the CAFTA. The Dominican Republic is the 32nd largest trading partner of the United
States. Two-way trade was valued at $8.6 billion in 2003, with $4.6 billion in imports and
$4.0 billion in exports. Leading exports include electrical circuitry, ignition and generating
parts, computers, heavy construction equipment, cotton, and apparel. Leading imports are
apparel, medical instruments, circuit breakers, electrical equipment, and jewelry. Since
1985, the Dominican Republic has received preferential access for many goods under the
Caribbean Basin Initiative. The Dominican Republic is the largest economy in the Caribbean
with a population of 8.7 million and a GDP of $21.6 billion (2001 $).
U.S.-Australia FTA. Formal talks began on March 18, 2003.16 The United States and
Australia reached agreement on a bilateral free trade agreement on February 8, 2004. On
February 12, 2004, the President notified Congress of the intent to sign the agreement. Two-
way goods trade between the United States and Australia totaled $18.9 billion in 2003.
Livestock, wine, minerals, vehicles, and vehicle parts were leading imports from Australia,
which totaled $6.5 billion in 2003. U.S. exports amounted to $12.4 billion, led by computer
equipment, aircraft, vehicles, heavy machinery, and medical equipment. A desire to cement
the U.S.-Australian strategic relationship, and Australia’s cooperation in the war against
terrorism, may have also underpinned these negotiations.
Under the agreement, tariffs will be eliminated on nearly all manufactured goods.
However, the United States was able to maintain protection of several agricultural areas.
Australia’s sugar quota in the U.S. market will remain unchanged at 78,000 tons. The
agreement provides a gradual increase in Australian beef and dairy quotas, and a gradual
reduction of the above-quota tariff on beef and dairy. After 18 years, tariffs and quotas are
lifted for Australian beef imports. U.S. negotiators were unable to negotiate the removal of
the successor to the Australian Wheat Board and other monopoly export groups. The
agreement does not provide for an investor-state dispute mechanism, which Australia
16 For further information, see CRS Report RS21476, U.S.- Australia FTA Negotiations, by William
H. Cooper.
CRS-7

---

IB10123
04-06-04
opposed, nor does it provide for changes to cultural content policies for Australian television,
film, and new media. Australia was also unwilling to modify its Pharmaceutical Benefits
Scheme (PBS), which sets and controls drug prices; however, the agreement provides for
greater transparency in PBS decision-making.
U.S.-Morocco FTA. On January 21, 2003, negotiations formally began on a U.S.-
Morocco FTA17. These negotiations culminated in an agreement announced on March 2,
2004. On March 8, 2004, the President notified Congress of his intention to sign the trade
agreement, and on April 2, 2004, the text was released. While proposed with a strong
national security and foreign policy rationale, the announced FTA also seeks to support U.S.
economic objectives. These objectives 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 $859 million in 2003, composed of $463 million
in U.S. exports and $396 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. The most sensitive
issue is wheat, where Morocco traditionally has protected its large population of subsistence
farmers with high tariffs. Morocco has refused to eliminate tariffs or to establish tariff-rate
quotas on wheat, fearing social disruption if its subsistence farmers are driven out of business
and into the cities. For their part, U.S. wheat farmers question the value of an agreement to
the United States that excludes a major U.S. agricultural export.
Agreements Under Negotiation or With Announced
Intent to Negotiate
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 over 140 member countries of the World
Trade Organization agreed to launch a new round of multilateral trade negotiations.18 The
negotiations became known as the Doha Development Agenda, because of the possibility of
increased participation of developing-country members, which now account for about four-
fifths of the WTO members.
The work program combined on-going negotiations on agriculture and services
liberalization with new negotiations on trade barriers for industrial products, WTO rules on
dumping and subsidies, several topics that developing countries had sought such as easier
access to medicines under the existing WTO Agreement on Trade-Related Aspects of
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 RL32060, World Trade Organization Negotiations: The
Doha Development Agenda, by Lenore Sek.
CRS-8

---

IB10123
04-06-04
Intellectual Property Rights (TRIPS), and so-called “Singapore issues”(investment,
competition, transparency in government procurement, and trade facilitation).
Negotiators have missed virtually all major deadlines. The 5th Ministerial, which was
held September 10-14, 2003 in Cancún Mexico, was intended to take stock of progress mid-
way through the negotiations and provide a framework for the remaining negotiations.
However, that meeting ended without agreement on a framework, principally because of a
rift between developed and developing countries on agriculture and the Singapore issues.
Trade ministers at the 2001 Doha meeting set a deadline for a multilateral agreement
of December 31, 2004. Given the lack of progress at Cancún and other difficulties, it is
uncertain whether this deadline can be met. At a December 15, 2003 meeting of the WTO
General Council, the Council Chairman noted that there had been progress in getting the
round back on track, but there was still much to do. In a January 11, 2004 letter, the U.S.
Trade Representative (USTR) offered proposals on how to move the round forward and
suggested that the next Ministerial be held in Hong Kong before the end of 2004. The
responses to the USTR’s proposals for moving forward were generally positive. At a
February 11, 2004 meeting of the WTO General Council, member countries approved new
chairpersons for the negotiating groups, but they made no decision on the next Ministerial.
Negotiations have restarted, with no major progress thus far.
Regional Negotiations
Free Trade Area of the Americas. The Free Trade Area of the Americas (FTAA)
is a regional trade proposal among 34 nations of the Western Hemisphere that would
promote economic integration by creating, as originally conceived, a comprehensive
(presumably WTO-plus) framework for reducing tariff and nontariff barriers to trade and
investment.19 The United States traded $715.5 billion worth of goods with the FTAA
countries in 2003: 277.7$ billion in exports and $437.8 billion in imports.
Formal negotiations commenced in 1998, and the process so far has led to three draft
texts, the last released at the 8th trade ministerial meeting that took place November 17-21,
2003 in Miami. The negotiating schedule calls for a final agreement by January 2005, with
its entry into force to occur no later than year-end. The FTAA negotiations, however, are at
a crossroads, with Brazil and the United States, the co-chairs of the Trade Negotiations
Committee (TNC) that oversees the process, at odds over how to proceed.
Brazil took strong exception to the U.S. approach to the FTAA, and responded with its
own “Three Track Proposal.” To avoid an impasse, the United States and Brazil jointly
authored the Ministerial Declaration of the 8th ministerial meeting, which defined how the
FTAA negotiations will proceed. Although the Declaration reaffirms the commitment to
complete a “comprehensive and balanced” agreement by January 2005, it does so in the
context of a rather unorthodox compromise. It states that “countries may assume different
levels of commitments...[with a] common set of rights and obligations applicable to all
countries...[and may also] choose, within the FTAA, to agree to additional obligations and
19 For more information, see: CRS Report RS20864, A Free Trade Area of the Americas: Status of
Negotiations and Major Policy Issues, by J. F. Hornbeck
CRS-9

---

IB10123
04-06-04
benefits.” The additional obligations may be defined in plurilateral negotiations, with a
country’s benefits being linked to the obligations it undertakes. Although no negotiating area
will be left out of the agreement, because countries may take on varying obligations within
the FTAA structure, it is a very different notion from the broad “single undertaking” premise
that had been envisioned at the start.
On April 1, 2004, following an informal meeting of nine FTAA countries, Trade
Negotiations Committee (TNC) co-chairs Brazil and the United States issued a text
postponing the next meeting of the TNC. The text said that more consultation was needed
on a framework. The TNC had been scheduled to meet April 22-23, 2004; no new date has
been set.
Depending on one’s viewpoint, this resolution may be considered a success or a
disappointment. In any case, a middle ground has emerged that was not initially
contemplated, largely because of tension that arose between Brazil and the United States.
Both countries are pursuing, and in some cases competing for, parallel bilateral negotiations
with select Latin American countries. Brazil is not a big trading partner of the United States,
and although an FTAA might be viewed as a way to change this, the Lula administration is
focused on industrial policy and trade with Latin America and the European Union, both of
which can be pursued outside the FTAA. Thus, there is some reason to question whether
there is sufficient momentum to produce a “comprehensive” FTAA by January 2005.
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).20 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 led by South Africa, the dominant economic power. U.S. exports to SACU totaled
$2.8 billion in 2003, led by aircraft, vehicles, construction and agricultural equipment, and
computers. U.S. imports from SACU totaled $5.6 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
Growth and Opportunity Act (Title I, P.L. 106-200), the negotiation of an FTA would
“lock-in” and potentially expand such tariff advantages. The third round of talks was held
in Namibia in February 2004.
U.S. - Andean FTA. On November 18, 2003, the Administration formally notified
Congress of the intent to initiate negotiations for an FTA with Colombia, Peru, Ecuador, and
Bolivia. On March 23, 2004, the United States and Colombia announced that “...free trade
negotiations between the two countries, and possibly other Andean countries, will begin May
20 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.
CRS-10

---

IB10123
04-06-04
18-19.”21 In 2003, the United States imported $11.6 billion from the four Andean countries
and exported $6.5 billion, for a total of $18.1 billion in trade. Colombia and Peru accounted
for 71% of that total. Leading U.S. imports in 2003 from the four countries were crude and
refined petroleum oils (about one-third of all imports), which were primarily from Colombia
and Ecuador; bananas; copper; coffee; and cut flowers. About 10% of U.S. imports from the
region came in under existing Andean trade preferences. Leading U.S. exports were
machinery parts, data processing machines, corn, wheat, and telecommunications
transmission apparatus such as cell phones.
Bilateral Negotiations
U.S.-Bahrain FTA. On August 4, 2003, the USTR notified Congress of the intention
to negotiate an FTA with Bahrain beginning in 2004. Formal negotiations began on January
26, 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 $7.9 billion in 2001 (2001, current $). Bahrain was a founding
member of the WTO in 1995 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 $875 million in 2003: imports of $378 million
included apparel, textiles, fertilizers, chemicals, and aluminum and exports of $497 million
were led by aircraft and aircraft parts, military equipment, passenger vehicles, machinery,
and, not surprisingly, air conditioning equipment.
U.S.-Thailand FTA. On February 12, 2004, the Administration officially notified
Congress of its intent to negotiate an FTA with Thailand. On March 31, 2004, a high-level
U.S. trade official announced that FTA negotiations will begin on June 28, 2004. The White
House sees potential benefits as: (1) promotion of U.S. exports, notably benefitting U.S.
farmers and the auto and auto parts industries; (2) protection of U.S. investment; and (3)
advancement of the Enterprise for ASEAN Initiative (mentioned later in this issue brief) and
the U.S.-Singapore FTA.22 It also emphasized Thailand’s importance on military, security
and political issues. Thailand is the 18th largest U.S. trading partner. Two-way trade in 2003
was $20.5 billion — $15.1 billion in U.S. imports, $5.4 billion in U.S. exports. Leading U.S.
imports were computers and parts, television receivers, and jewelry, and leading exports
were integrated circuits, semiconductors, computers and computer parts .
U.S.-Panama FTA. During the FTAA summit in Miami on November 18, 2003,
USTR Zoellick announced that the Administration had formally notified Congress of its
intent to begin negotiations for an FTA with Panama. On March 26, 2004, the Office of the
USTR announced that FTA talks will begin on April 26, 2004. In announcing the proposed
FTA, the USTR cited Panama’s return to democracy, its position as a regional financial and
21 USTR. Press Release, March 23, 2004 [http://www.ustr.gov/releases/2004/03/04-25.pdf].
22 The White House. Fact Sheet on Free Trade and Thailand. October 19, 2003.
CRS-11

---

IB10123
04-06-04
commercial center, and its assistance with counternarcotics, antiterrorism, and anti-money
laundering efforts.23 Panama was the 63rd largest trading partners of the United States in
2003 with imports of $290 million, lead by shrimp, fresh fish, precious or semi-precious
metals, refined petroleum, and sugar, exports of $1.7 billion, comprised of refined petroleum,
aircraft, medicaments, corn, computer parts and accessories and telecommunications
equipment. Total two-way trade (exports + imports) amounted to nearly $2 billion. The
stock of U.S. direct investment in Panama was approximately $20 billion in 2002. In the
negotiations, the United States will seek to address high tariff levels on some agricultural
products, restrictive licensing practices, and the lack of regulatory transparency. Panama will
seek greater access to its largest market, the United States, which was the destination for 47%
of its exports in 2002. Owing to the similarities between the Panama and Singapore
economies as major transhipment centers, the United States may seek to incorporate in an
FTA with Panama certain customs and intellectual property provisions contained in the U.S.-
Singapore FTA.
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 Organization24 and subsequently concluding
Bilateral Investment Treaties (BIT) and Trade and Investment Framework Agreements
(TIFA) with the United States.25 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, 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.26
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
23 Press Conference of USTR Zoellick and President Moscono of Panama, November 18, 2003.
24 In the Middle East region, Afghanistan, Algeria, Iran, Iraq, Libya, Lebanon, Saudi Arabia, Syria,
and Yemen remain outside the WTO.
25 “President Bush Lays Out Broad Plan for Regional FTA with Middle East by 2013,” International
Trade Reporter, May 15, 2003.
26 Edward Gresser, “Blank Spot on the Map: How Trade Policy Is Working Against the War on
Terror,” Progressive Policy Institute Policy Report, February 2003.
CRS-12

---

IB10123
04-06-04
serve as an interim step before these countries join FTAs with the United States.27 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.
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
framework agreement (TIFA), which is seen as the first step in the process of negotiating
individual FTAs with ASEAN member states. Thailand is the first candidate for an FTA
under this initiative. 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 $122.5 billion in 2003, with exports of $41.9 billion
and imports of $80.6 billion.
New Zealand. During the 108th Congress, there has been Congressional interest in
launching FTA negotiations with New Zealand. Fifty House members wrote to President
Bush in January 2003 advocating the initiation of negotiations, as did 19 Senators in March
2003. Proponents claim an FTA with New Zealand would be a natural complement to
ongoing U.S. FTA negotiations with Australia due to the high degree of integration of the
Australian and New Zealand economies. However, Administration officials have enumerated
several political and security impediments to a potential FTA, including New Zealand’s
longstanding refusal to allow nuclear powered ships into its harbors and its refusal to support
the United States in the Iraq war.28 An FTA with New Zealand may also entail tough
negotiations on sensitive U.S. agriculture sectors such as beef, lamb, and sugar, although
many of these issues are currently being negotiated with Australia. For its part, New Zealand
fears that a solo U.S.-Australian FTA would reorient U.S. trade and investment away from
New Zealand towards Australia. New Zealand was the 46th largest trading partner of the
United States in 2002 with two-way trade slightly greater than $4 billion. U.S. exports of
$1.7 billion were led by machinery, aircraft and parts, electronic equipment and vehicles;
U.S. imports of $2.3 billion were led by meat, dairy products, wood products, and machinery.
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) called 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
27 Remarks of Senator Baucus, Congressional Record, May 22, 2003, S. 7005.
28 “Zoellick Says Relationship with New Zealand Makes FTA a Challenge,” Inside U.S. Trade, May
23, 2003.
CRS-13

---

IB10123
04-06-04
2, 2003.29 Taiwan is the 8th largest trading partner of the United States with total two-way
trade in 2003 equal to $47.6 billion in 2003; the United States is now Taiwan’s second
largest trading partner after mainland China. The U.S. imported $31.5 billion in
merchandise from Taiwan with computers, circuitry, vehicle parts, television transmission,
and telecommunications equipment leading. U.S. exports to Taiwan, which totaled $16.1
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, the Administration cites several outstanding trade disputes remain including
Taiwan’s enforcement of intellectual property rights, the imposition of excessive standards,
testing, certification and labeling requirements, and Taiwanese rice import quotas.30 In
addition, the negotiation of an FTA with Taiwan likely would encounter the ire of the
mainland Chinese government, which 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.
FOR ADDITIONAL READING
The WTO
CRS Report RL32053. Agriculture in WTO Negotiations, by Charles E. Hanrahan.
CRS Report RL32060. The World Trade Organization: The Doha Development Agenda, by
Lenore M. Sek.
CRS Report RS20448. Foreign Investment Issues in the WTO, by James K. Jackson.
CRS Report RS21492. Services Negotiations at the WTO: An Overview of the U.S. Offer,
by James K. Jackson.
CRS Report RS21569. Geographical Indications and WTO Negotiations, by Charles E.
Hanrahan.
CRS Report RS21609. The WTO, Intellectual Property Rights, and the Access to Medicines
Controversy, by Ian F. Fergusson.
CRS Report RS21610. WTO: Trade Remedies in the Doha Round, by Vivian C. Jones.
CRS Report RS21664. The WTO Cancún Ministerial, by Ian F. Fergusson
Free Trade Area of the Americas
CRS Report RL30935. Agricultural Trade in the Free Trade Area of the Americas, by Remy
Jurenas.
CRS Report RS20864. A Free Trade Area of the Americas: Status of Negotiations and
Major Policy Issues, by J. F. Hornbeck.
29 Available at [http://www.aei.org/include/news_print.asp?newsID=17544].
30 U.S. Trade Representative, 2003 National Trade Estimate Report on Foreign Trade Barriers,
p. 358.
CRS-14

---

IB10123
04-06-04
Proposed Regional and Bilateral FTAs
CRS Report RL32110. Agricultural Trade in a U.S.-Central American Free Trade
Agreement (CAFTA), by Remy Jurenas.
CRS Report RS21464. Morocco - U.S. Free Trade Agreement, by Raymond J. Ahearn.
CRS Report RS21387. United States - Southern African Customs Union (SACU) Free Trade
Agreements Negotiations: Background and Potential Issues, by Ian F. Fergusson.
CRS Report RS21476. U.S.-Australian FTA Negotiations, by William H. Cooper
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.
General
CRS Report RS21554. Free Trade Agreements, Developing Country Preferences and the
WTO, by Jeanne J. Grimmett.
CRS Report RL31356. Free Trade Agreements: Impact on U.S. Trade and Implications for
U.S. Trade Policy, by William H. Cooper.
CRS Report RL31974. Trade Agreements: Requirements for Presidential Consultations,
Notices, and Reports to Congress Regarding Negotiations, by Vladimir N. Pregelj.
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-15

---

IB10123
04-06-04
Negotiations on Trade Agreements During the 108th Congress
(Agreements Concluded and Implemented are in Bold; Agreements Concluded Only are in Italics)
U.S. Total
Agreement
Status
Sensitive Areas
Trade* ($ bill.)
Doha Development
$1,842
A work program was produced at the trade ministerial
Agriculture, trade
Agenda of the
meeting in Doha in Nov. 2001. In September 2003, trade
remedies, “Singapore
WTO
ministers at the Cancún Ministerial failed to agree on the
issues”, industrial
future course of negotiations. The Jan. 1, 2005 deadline for
market access
final agreement is in doubt.
Free Trade Area of
$715.5
Formal negotiations began in 1998. Trade ministers met in
Agriculture,
the Americas
Miami on November 20-21, 2003, and reaffirmed a Jan.
antidumping, textiles
2005 deadline. The next meeting of the Trade Negotiations
and apparel, worker
Committee has been postponed until an indefinite date.
rights
U.S.-Andean FTA
$37.5
On November 18, 2003, the Administration notified
IPR, agriculture,
Congress of intent to begin negotiations with Colombia,
investment
Peru, Ecuador, Bolivia. On March 23, 2004, the United
States and Colombia announced FTA talks between the two
countries, and possibly other Andean countries, would begin
May 18-19, 2004.
U.S.-Singapore
$29.2
President Bush signed agreement on May 6, 2003.
Capital flows
FTA
President Bush signed the Implementing legislation (P.L.
108-78) on September 3, 2003. Effective January 1, 2004.
U.S.-Central
$22.7
Talks were formally launched on Jan. 8, 2003. An
Textiles and apparel,
America FTA
agreement was reached among the U.S. and four Central
rules of origin,
American (CA) countries on Dec. 17, 2003. A fifth CA
worker rights,
country joined the agreement, and the text was released, on
agriculture,
Jan. 25, 2004. The President notified Congress of his intent
environment.
to sign the agreement on February 20, 2004.
U.S.-Thailand FTA
$20.5
The Administration officially notified Congress of its intent
Agriculture, trucks,
to negotiate an FTA on February 12, 2004. A high-level U.S.
telecommunications
trade official said talks will begin June 28, 2004.
U.S.-Australia FTA
$18.9
Talks began in March 2003. An agreement was announced
Agriculture,
on February 8, 2004. The President notified Congress of his
investment,
intent to sign the agreement on February 13, 2004.
pharmaceuticals
U.S.-Dominican
$8.5
Talks formally began Jan. 12, 2004. An agreement was
Agriculture, IPR,
Republic FTA
concluded on March 15, 2004. On March 25, 2004, the
textiles and apparel
President notified Congress of the intent to sign the pact.
U.S.-SACU FTA
$8.4
Talks began on June 3, 2003 and are expected to conclude in
Telecom, textiles,
2004.
pharmaceuticals
U.S.-Chile FTA
$6.4
President Bush signed the agreement on June 6, 2003.
Capital flows,
President Bush signed the Implementing legislation (P.L.
agriculture
108-77) on September 3, 2003. Effective January 1, 2004.
U.S.- Panama
$2.0
On November 18, 2003, the Administration formally notified
Agriculture,
Congress of intent to begin negotiations with Panama. Talks
transparency,
are scheduled to begin April 26, 2004.
transhipment
U.S.-Morocco FTA
$0.86
Talks formally began on Jan. 21, 2003. An agreement was
Agriculture, textiles
announced on March 2, 2004. On March 8, 2004, the
& apparel
President notified Congress of the intent to sign the accord.
On April 2, 2004, the text was released.
U.S.-Bahrain FTA
$0.88
On August 4, 2003, the Administration gave Congress notice
Serve as hub for
of intent to begin negotiations. Talks began on Jan. 26,
Middle East FTA
2004. Negotiations are expected to conclude by mid- to late
2004.
* Domestic exports (Fas value) plus imports for consumption (Customs value) with countries of the proposed
agreement in 2003.
CRS-16

---