Order Code IB10123
CRS Issue Brief for Congress
Received through the CRS Web
Trade Negotiations in the 108th Congress
Updated October 12, 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

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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 Signed or Concluded
U.S.-Dominican Republic-Central American FTA (DR-CAFTA)
U.S.-Australia FTA
U.S.-Morocco FTA
U.S.-Bahrain FTA
Agreements Under Negotiation
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.-Panama FTA
U.S.-Thailand FTA
Other Potential Trade Agreements
Middle East - North African Free Trade Agreement
Enterprise for ASEAN
New Zealand
Taiwan
FOR ADDITIONAL READING

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Trade Negotiations in the 108th Congress
SUMMARY
The Bush Administration has made
tions, but the talks have now stalled.
bilateral and regional free-trade agreements
(FTAs) more important elements of U.S. trade
The United States also participated or is
policy, a strategy known as “competitive liber-
participating in several regional or bilateral
alization.” This strategy is designed to push
trade negotiations. Two agreements — FTAs
forward trade liberalization simultaneously on
with Chile and with Singapore — were con-
bilateral, regional and multilateral fronts. It is
cluded during the 108th Congress and are now
meant to spur trade negotiations by liberaliz-
in effect. In August 2004, President Bush
ing trade with countries willing to join FTAs,
signed implementing legislation for the Aus-
and to pressure other countries to negotiate
tralian and Moroccan FTAs. FTAs have been
multilaterally. Some argue, however, that the
signed with the five countries of the Central
accent on regional and bilateral negotiations
American Common Market (CACM) and the
undermines the multilateral forum and in-
Dominican Republic and with Bahrain. Nego-
creases the risk of trade diversion away from
tiations are underway with the Southern Afri-
competitive countries not in the trade bloc.
can Customs Union (SACU), Panama, and
Thailand. Talks with the Andean nations of
The broadest trade initiative being nego-
Colombia, Peru, and Ecuador began in May
tiated during the 108th Congress is the multi-
2004. Several other trade initiatives are under
lateral trade negotiations in the World Trade
discussion, including a U.S.-Middle East FTA
Organization (WTO). In November 2001,
and an FTA with countries in southeast Asia.
trade ministers from 142 WTO member coun-
tries agreed to launch a new round of trade
Most of the current trade negotiations
talks covering market access, WTO institu-
began after trade promotion authority (fast-
tional rules, and developing-country issues. A
track authority) legislation was enacted in
framework agreement on future negotiations
2002. That legislation covers agreements
was concluded in Geneva on August 1, 2004,
signed before June 30, 2005, although a two-
but a new deadline must be set for the talks.
year extension is possible. Under the legisla-

tion, if the President meets notification re-
Another major initiative is the Free Trade
quirements and other conditions, Congress
Area of the Americas. In April 1998, 34
will consider a bill to implement a trade agree-
Western Hemisphere nations formally initi-
ment under an expedited procedure (no
ated negotiations on tariffs and nontariff trade
amendment, deadlines for votes). The notifi-
barriers in the hemisphere. Negotiators have
cation requirements include minimum 90-day
released drafts of an agreement-in-progress.
notices before starting negotiations and before
Trade ministers met in Miami in November
signing a trade agreement.
2003 and announced a blueprint for negotia-
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
! In an address on October 7, 2004, the U.S. Trade Representative said that
the following week he would be visiting the United Arab Emirates and
Oman to prepare for beginning possible additional free-trade agreements
(FTAs).
! At an October 6, 2004 hearing by the House International Relations
Committee, Subcommittee on the Western Hemisphere, Administration
officials said that trade disputes with Ecuador, and to a lesser extent with
Peru, might endanger FTAs with those countries.
! On September 14, 2004, the United States and Bahrain signed an FTA.
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. Before the 108th Congress,
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
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
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.
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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
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
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
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.
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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 urged reconsideration of FTAs currently under negotiation. The focus of the talk
of retaliation 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 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. 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
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.
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,
[http://www.whitehouse.gov/nsc/nss.pdf], pp. 17-21.
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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 entered into before June 1, 2005, with a possible two-year
extension. If the Administration meets the 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 promotion” 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
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.
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
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.
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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, private sector advisory committees must submit reports on the
trade 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 trade 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
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
13 For further information, see CRS Report RL31144, A U.S.-Chile Free Trade Agreement:
Economic and Trade Policy Issues, by J. F. Hornbeck.
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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 Signed or Concluded
U.S.-Dominican Republic-Central American FTA (DR-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 $22.7
billion in 2003. The United States imported $12.4 billion (primarily apparel items, bananas,
coffee, and integrated circuits) and exported $10.3 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. President Bush notified his
intent to enter into the agreement on February 20, 2004. The parties signed CAFTA on May
28, 2004, at a ceremony at the Organization of American States in Washington, D.C.
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,
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.
Just as negotiations on CAFTA were completed, the United States began negotiating
an FTA with the Dominican Republic that would integrate the Dominican Republic into the
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.
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FTA with the Central American countries. The Dominican Republic is the largest economy
in the Caribbean. Two-way trade between the United States and the Dominican Republic
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.
Negotiations between the United States and the Dominican Republic began on January
12, 2004, and concluded on March 15, 2004. On March 25, 2004, the President notified
Congress of his intent to sign the FTA with the Dominican Republic. The Agreement was
signed by the parties in Washington, D.C., on August 5. As negotiated between the United
States and the Dominican Republic, the Dominican Republic would have its own market
access provisions, but would accept the CAFTA framework already negotiated.
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. Further, U.S. officials say that a tax on beverages containing high-
fructose syrup, which the Dominican Republic’s legislature just passed, endangers an FTA
with that country.
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. On
March 3, 2004, the USTR released the draft text of the FTA, and the agreement was signed
on May 18, 2004. On June 23, 2004, the House Ways and Means approved draft legislation
to implement the U.S.-Australia free-trade agreement without amendment. The next day, the
Senate Finance Committee disapproved the legislation as amended in Committee to include
a controversial provision on beef safeguards. This tactical maneuver insured that the
respective bills reaching the floor would be identical, thus avoiding the need for conference.
The House approved its implementing bill (H.R. 4759) on July 14, 2004, by a vote of 314-
109. A day later, the Senate passed its version of H.R. 4759 by an 80-16 margin. Language
in the agreement concerning prescription drug re-importation proved to be controversial in
the lead-up to the vote. President Bush signed H.R. 4759 into law on August 3, 2004 (P.L.
108-286). It passed the Australian Senate on August 13 with amendments that would fine
pharmaceutical firms for frivolous patent extensions. Because the amendments were not
included in the FTA as signed, the USTR must certify that they do not violate the provisions
of the FTA before the agreement goes into effect as planned on January 1, 2005. The USTR
has not yet made such a certification.
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
16 For further information, see CRS Report RL32375, The U.S.-Australia Free Trade Agreement:
Provisions and Implications, by William H. Cooper.
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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 would 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
opposed, nor does it provide for changes to cultural content policies for Australian television,
film, and new media. Australia was also unwilling to modify the PBS, which sets and
controls drug prices; however, the agreement provides for greater transparency in PBS
decision-making. The ITC released its report mandated by TPA in May 2004; it concluded
that the proposed FTA likely would have a marginal impact on U.S.-Australian trade,
production, and employment with the total volume of trade between the two nations
increasing only slightly.17
U.S.-Morocco FTA. On January 21, 2003, negotiations formally began on a U.S.-
Morocco FTA.18 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 draft text was released. On June 15, 2004, the two
countries signed an agreement. On July 22, 2004, the House and the Senate passed
implementing legislation (H.R. 4842) by votes of 323-99 and 85-13 respectively. The
President signed the legislation on August 17, 2004 (P.L. 108-302).
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 in the negotiations was agriculture,
and particularly wheat, where Morocco traditionally protected its large population of
subsistence farmers with high tariffs.
17 U.S.-Australia Free Trade Agreement: Potential Economywide and Selected Sectoral Effects,
Investigation No. TA-2104-11 (Publication 3697; May 2004).
18 For further information, see CRS Report RS21464, Morocco- U.S. Free Trade Agreement, by
Raymond L. Ahearn.
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U.S.-Bahrain FTA. On January 26, 2004, formal negotiations began on a U.S.-
Bahrain FTA. Talks concluded after three rounds on May 27, 2004.19 On September 14,
2004, the two countries signed an agreement. Implementing legislation has not yet been
submitted.
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. 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.
Agreements Under Negotiation
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.20 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
Intellectual Property Rights (TRIPS), and so-called “Singapore issues” (investment,
competition, transparency in government procurement, and trade facilitation).
On August 1, 2004, negotiators in Geneva reached agreement on a framework for the
conduct of future negotiations. This framework was the goal of the unsuccessful Cancún
Ministerial, which was held in September 2003. The framework provides a blueprint for
19 For further information, see CRS Report RS21846, Proposed U.S.-Bahrain Free Trade Agreement,
by Martin A. Weiss.
20 For further information, see CRS Report RL32060, World Trade Organization Negotiations: The
Doha Development Agenda, by Lenore Sek and CRS Report RS21905, The Agricultural Framework
Agreement in the Doha Round Negotiations, by Charles Hanrahan.
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future negotiations on agriculture, non-agricultural market access, and services. Ministers
also agreed to begin negotiations on trade facilitation, however the other so-called Singapore
issues of government procurement, investment, and trade and competition policy were
dropped from the Doha round negotiations. Members acknowledged that the December 31,
2004 deadline for completion of the round would not be met, and the framework set no new
deadline. Negotiators announced that the 6th Ministerial would occur in December 2005 in
Hong Kong.
Regional Negotiations
Free Trade Area of the Americas. In 1994, 34 Western Hemisphere nations met
at the first Summit of the Americas, envisioning a plan for a Free Trade Area of the Americas
(FTAA) by January 2005. The 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.21 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 five years later, the third draft text of the
agreement was presented at the Miami trade ministerial held November 20-21, 2003. 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. Deep differences remain unresolved as reflected in the Ministerial
Declaration, and have taken the FTAA in a new direction. It calls for a two-tier framework
comprising a set of “common rights and obligations” for all countries, augmented by
voluntary plurilateral arrangements with country benefits related to commitments. A follow-
up meeting in Puebla, Mexico, was unable to clarify the details of this arrangement and
subsequent efforts have been inconclusive, leaving the future of the FTAA unclear.
Progress on the FTAA itself, including setting a date for the 2004 ministerial, still rests
with Brazil and the United States agreeing on the common set of obligations and defining
parameters for plurilateral arrangements. This goal remains elusive, despite ongoing
communications between their trade representatives. In the meantime, the trade dynamics
of the region are changing, with much of the region heading toward bilateral agreements with
the United States. Brazil and other Mercosur countries may have to evaluate the welfare
tradeoffs of entering a deeper versus a shallower two-tier FTAA, or no FTAA at all given the
agreements forming around them. This picture is still unclear and how it develops may
depend on whether the U.S. Congress passes implementing legislation for the DR-CAFTA,
Panama, and Andean agreements, as well as whether progress on agriculture issues outlined
in the Doha Work Programme (framework agreement) adopted by the WTO on August 1,
2004, changes Brazil’s negotiating position in the FTAA.
U.S.-Southern African Customs Union FTA. On November 4, 2002, the USTR
notified Congress of the intent to negotiate an FTA with the Southern African Customs
21 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.
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Union (SACU).22 The first round of talks 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 include competition
issues concerning 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.
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. The negotiations began on May 18-19 between Colombia, Peru, and Ecuador in
Cartagena, Colombia, and four rounds have been held so far. Negotiators anticipate an
agreement by early 2005. 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, 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.-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. Those bilateral negotiations began
formally on April 25, 2004, in Panama City, Panama. The negotiations have progressed
quickly in part because they have relied on the text of the DR-CAFTA agreement as an
overall framework for discussion. In announcing the proposed FTA, the USTR cited
Panama’s return to democracy, its position as a regional financial and commercial center, and
its assistance with counternarcotics, antiterrorism, and anti-money laundering efforts.
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 trade
(exports + imports) amounted to nearly $2 billion. 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 purchased 47% of its exports in 2002. Given the similarities
22 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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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 in the U.S.-Singapore FTA.
U.S.-Thailand FTA. On February 12, 2004, the Administration officially notified
Congress of its intent to negotiate an FTA with Thailand. Negotiations began formally on
June 28, 2004 in Hawaii.23 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.24 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.
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.
This initiative reportedly 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 Organization25 and subsequently concluding Bilateral
Investment Treaties (BIT) and Trade and Investment Framework Agreements (TIFA) with
the United States.26 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. At a September 2004 meeting of the Congressional Oversight
Committee, USTR Zoellick identified the United Arab Emirates and Oman as the next likely
countries for FTA negotiations. Qatar also has been mentioned as a candidate.
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.27
23 For further information, see CRS Report RL32314. U.S.-Thailand Free Trade Agreement
Negotiations, by Raymond J. Ahearn and Wayne M. Morrison.
24 The White House. Fact Sheet on Free Trade and Thailand. October 19, 2003.
25 In the Middle East region, Afghanistan, Algeria, Iran, Iraq, Libya, Lebanon, Saudi Arabia, Syria,
and Yemen are not members of the WTO.
26 “President Bush Lays Out Broad Plan for Regional FTA with Middle East by 2013,” International
Trade Reporter, May 15, 2003.
27 Edward Gresser, “Blank Spot on the Map: How Trade Policy Is Working Against the War on
Terror,” Progressive Policy Institute Policy Report, February 2003.
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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.28 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 (see earlier section on Thailand). 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.29 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.
28 Remarks of Senator Baucus, Congressional Record, May 22, 2003, S. 7005.
29 “Zoellick Says Relationship with New Zealand Makes FTA a Challenge,” Inside U.S. Trade, May
23, 2003.
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Taiwan. An FTA 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) calls
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, 2003.30 Taiwan
is the 8th largest U.S. trading partner 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, it cites several outstanding trade
disputes, including Taiwan’s enforcement of intellectual property rights, the imposition of
excessive standards, testing, certification and labeling requirements, and Taiwanese rice
import quotas.31 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
CRS Report RS21905, The Agricultural Framework Agreement in the Doha Round
Negotiations, by Charles Hanrahan
Free Trade Area of the Americas
CRS Report RL30935. Agricultural Trade in the Free Trade Area of the Americas, by Remy
Jurenas.
30 Available at [http://www.aei.org/include/news_print.asp?newsID=17544].
31 U.S. Trade Representative, 2003 National Trade Estimate Report on Foreign Trade Barriers,
p. 358.
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10-12-04
CRS Report RS20864. A Free Trade Area of the Americas: Status of Negotiations and
Major Policy Issues, by J. F. Hornbeck.
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 RL32322. Central America and the Dominican Republic in the Context of the
U.S.-Central America Free Trade Agreement (CAFTA), coordinated by K. Larry Storrs.
CRS Report RS21464. Morocco - U.S. Free Trade Agreement, by Raymond J. Ahearn.
CRS Report RL32375. The Proposed U.S.-Australia Free Trade Agreement: Provisions and
Implications, by William H. Cooper.
CRS Report RS21846. Proposed U.S.-Bahrain Free Trade Agreement, by Martin A. Weiss.
CRS Report RL32540. The Proposed U.S.-Panama Free Trade Agreement, by J. F.
Hornbeck.
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 RS21868. U.S.-Dominican Republic Free-Trade Agreement, by Lenore Sek.
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.
CRS Report RL32314. U.S.-Thailand Free Trade Agreement Negotiations, by Raymond J.
Ahearn and Wayne M. Morrison.
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.
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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, industrial
Agenda of the
meeting in Doha in Nov. 2001. On August 1, 2004,
market access, trade
WTO
negotiators reached a framework agreement on the conduct
facilitation, services,
of future negotiations. Ministers also put off the December
development issues
31, 2004 deadline to complete the round.
Free Trade Area of
$715.5
Formal negotiations began in 1998. Trade ministers met in
Agriculture,
the Americas
Miami on November 20-21, 2003, where the third draft text
antidumping, textiles
of the agreement was presented. Talks are at a crossroads,
and apparel, worker
with no date for the next ministerial meeting.
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 May 18-19, the United States
began FTA talks with Colombia, Peru, and Ecuador.
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 agreement was signed on May 28, 2004.
environment.
U.S.-Thailand FTA
$20.5
The Administration officially notified Congress of its intent
Agriculture, trucks,
to negotiate an FTA on February 12, 2004. Negotiations
telecommunications,
formally began on June 28, 2004.
IPR
U.S.-Australia FTA
$18.9
Talks began in March 2003. The Agreement was signed on
Agriculture,
May 18, 2004. Implementing legislation was signed by the
investment,
President on August 3, 2004 (P.L. 108-286).
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,
and the parties signed the agreement on August 5, 2004.
U.S.-SACU FTA
$8.4
Talks began on June 3, 2003. It is not clear whether an
Telecom, textiles,
agreement will be reached by the end of 2004 as planned.
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,
began formally on April 25, 2004.
transhipment
U.S.-Bahrain FTA
$0.88
Talks began on Jan. 26, 2004. An agreement was
Serve as hub for
announced on May 27, 2004, and signed on Sept. 14, 2004.
Middle East FTA
U.S.-Morocco FTA
$0.86
Talks formally began on Jan. 21, 2003. An agreement was
Agriculture, textiles
signed on June 15, 2004. Implementing legislation was
& apparel, part of
signed by the President on August 17, 2004 (P.L. 108-302).
Middle East FTA
* Domestic exports (Fas value) plus imports for consumption (Customs value) with countries of the proposed
agreement in 2003.
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