Order Code RS21373
Updated March 21, 2003
CRS Report for Congress
Received through the CRS Web
Trade Negotiations During the 108th
Congress: An Overview
Ian Fergusson
Analyst in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Lenore Sek
Specialist in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Summary
During the 108th Congress, the United States will be involved in a number of trade
negotiations at the multilateral, regional, and bilateral levels. This report tracks those
trade negotiations, as well as trade agreements that the 108th Congress might consider
for approval. It will be updated periodically. For additional information on specific
trade negotiations and trade agreements, see the CRS Electronic Briefing Book on Trade
at [http://www.congress.gov/brbk/html/ebtra1.shtml].
For over 50 years, U.S. trade officials have negotiated multilateral trade agreements
to achieve lower trade barriers and rules to cover trade. In the past two decades, 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 U.S. 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
During the 108th Congress, the United States will be 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 about to begin
free-trade negotiations with countries in Central America and in southern Africa.
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.
Congressional Research Service ˜
The Library of Congress
CRS-2
Bilaterally, it is seeking free-trade agreements (FTAs) with Singapore, Morocco, and
Australia and just concluded negotiations with Chile. Furthermore, the President recently
proposed an initiative that could lead to free-trade agreements with the countries of
southeastern Asia.
The 108th Congress is likely to be involved in on-going negotiations through
consultation and oversight. Trade promotion authority legislation passed in 2002 (P.L.
107-210) requires that, for expedited procedures to apply to an implementing bill, the
Administration must consult with Congress and notify Congress at major stages of
negotiation. For example, the Administration must notify Congress at least 90 days
before beginning negotiations and at least 90 days before entering into an agreement. In
addition to consultation and oversight, Congress also decides whether or not to approve
any legislation implementing trade agreements entered into. Such bills concerning the
FTAs with Chile and with Singapore are expected to be considered by Congress in 2003.
To assist in these legislative activities, this report tracks trade negotiations underway and
completed trade agreements that Congress might consider for approval.
Status of Agreements and Negotiations
Multilateral Trade Negotiations
At their meeting in Doha, Qatar from November 9-14, 2001, trade ministers from
142 member countries of the World Trade Organization agreed to launch a new round of
multilateral trade negotiations called the Doha Development Agenda. WTO members
account for over 95% of worldwide trade. In 2002, more than $1.7 trillion (97%) of total
U.S. trade was with WTO member countries.
The United States was successful in having market access, especially in agriculture,
included in the work program; however, because WTO members have such different
positions, an agriculture agreement is expected to be difficult to reach. The United States
was unsuccessful in keeping out language on the domestically sensitive issue of
antidumping. Developing countries, who will have an important role in the negotiations,
are insisting on concessions in agriculture, textiles and apparel, and pharmaceuticals.
WTO members agreed on a negotiating structure in early 2002. An important
deadline is March 31, 2003, when negotiators are to agree on “modalities” for
commitments on agriculture (e.g., formulas for reducing barriers). Trade ministers will
take stock of progress and make further decisions at their next meeting in Cancun,
Mexico in September 2003. WTO members set a deadline of January 1, 2005 for reaching
final agreement in the round.
Regional Negotiations
Free Trade Area of the Americas. In April 1998, at the second Summit of the
Americas in Santiago, Chile, 34 Western Hemisphere nations formally initiated
CRS-3
negotiations to create a Free Trade Area of the Americas (FTAA).3 The United States
traded $686 billion worth of goods with the FTAA countries in 2002.
The United States has focused on reducing overall tariff rates as the primary
negotiating goal in market access discussions. Latin American countries, by contrast, are
focusing on other issues, specifically U.S. trade remedy laws, U.S. domestic agricultural
support, and peak tariff rates. Brazil in particular, a major player in the negotiations, is
interested in opening U.S. markets in agriculture, steel, and textiles.
In April 2001, negotiators met in Québec City and unveiled the first draft of the
agreement. In November 2002, they met in Quito and released the second draft of the
heavily bracketed text. They also decided at the Quito meeting that Brazil and the United
States would co-chair the Trade Negotiating Committee through the completion of the
negotiations. The Trade Negotiating Committee is scheduled to meet three times in 2003,
with the next meeting set for April in Trinidad and Tobago. The next meeting of trade
ministers is scheduled for November 20-21, 2003 in Miami. The deadline for final
agreements is January 2005.
U.S.-Central American FTA. On January 8, 2003, negotiations formally began
on an FTA between the United States and the five nations composing the Central
American Common Market (CACM) – Costa Rica, El Salvador, Guatemala, Honduras,
and Nicaragua. Both sides have expressed optimism that an agreement can be concluded
by year-end. Three months earlier, on October 1, 2002, the Administration had given
notice to Congress of the intent to begin the negotiations. For CACM countries, an FTA
potentially would permit greater access to the U.S. market, make permanent current tariff
preferences provided by the Caribbean Basin Initiative, and provide an environment more
conducive to U.S. foreign investment. For the United States, proponents of the agreement
see it supporting U.S. exports and providing less expensive imports, advancing the
movement toward a Free Trade Area of the Americas (FTAA), and solidifying deeper
regional political and economic reforms that strengthen democracy and promote stability.
U.S. trade with the region totaled $21.2 billion in 2002. The United States imported
$11.8 billion (primarily apparel items, bananas, coffee, and assembled electronic
equipment) and exported $9.4 billion (led by apparel, textiles, electrical generating
equipment, and electrical components for assembly).
U.S.-South African Customs Union FTA. On November 4, 2002, the United
States Trade Representative (USTR) notified Congress that talks to negotiate an FTA
with the Southern African Customs Union (SACU) would begin in 2003.4 SACU is a
customs union composed of South Africa, Botswana, Lesotho, Namibia, and Swaziland.
A large degree of economic integration exists among the SACU states, with South Africa
the dominant economic power. U.S. exports to SACU totaled $2.5 billion in 2002, led
by aircraft, vehicles, construction and agricultural equipment, and computers. U.S.
imports from SACU totaled $4.8 billion, composed of minerals such as platinum,
3 For further information, see CRS Report RS20864,
A Free Trade Area of the Americas: Status
of Negotiations and Major Policy Issues, by J. F. Hornbeck.
4 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-4
diamonds, and titanium, textiles and apparel, vehicles, and automotive parts. Potential
obstacles 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, the negotiation of an FTA would “lock-in” and potentially expand
such tariff advantages.
Bilateral Negotiations and Agreements
U.S.- Chile FTA. The United States and Chile commenced formal negotiations on
a bilateral FTA on December 6-7, 2000 in Washington, D.C.5 These talks began before
Congress approved trade promotion authority, so early-stage notification was not required
nor made. After two years of negotiations, an agreement was announced in Washington
on December 11, 2002. On January 30, 2003, President Bush notified Congress of his
intent to sign the agreement. Negotiations with Chile, viewed in Washington as a model
open-market developing economy, have been seen as a template for the Central American
Free Trade Agreement negotiations and the Free Trade Area of the Americas agreement.
Total trade between the United States and Chile was approximately $5.9 billion in 2002;
imports accounted for $3.6 billion, and exports totaled $2.3 billion. Leading U.S. imports
from Chile are fish, grapes, wine, copper, and wood products, and significant U.S. exports
to Chile are mining equipment and machinery, aircraft, computers, and
telecommunications equipment.
The agreement, described by USTR Zoellick as a “win-win, state-of-the-art FTA for
the modern economy”,6 features a comprehensive liberalization of service trade,
protections for intellectual property rights, labor and environmental protection provisions
similar to those of the Jordan FTA, and new transparent procedures for customs and
investor-state disputes. It also gives Chile certain ‘flexibilities’ over the imposition of
capital controls, while overall restricting their use. Eighty-seven percent of two-way
trade will become tariff-free immediately, with the remainder phased out over four years
or, mostly in the case of sensitive agricultural products, over 12 years.
U.S.- Singapore FTA. The United States and Singapore launched negotiations
on a bilateral FTA in December 2000.7 The agreement was completed on January 15,
2003 after the two parties resolved outstanding differences related to capital controls. On
January 30, 2003, President Bush notified Congress of his intent to sign the agreement.
Singapore and the United States are major trading partners, and the USTR has indicated
an FTA with Singapore would facilitate further Pacific regional integration. The
agreement phases-in tariff elimination on all goods, covers trade in services, and protects
intellectual property rights. Two-way trade between the two nations totaled $28.8 billion
5 For further information, see CRS Report RL31144,
A U.S.-Chile Free Trade Agreement:
Economic and Trade Policy Issues, by J. F. Hornbeck.
6 Office of the U.S. Trade Representative. “U.S. and Chile Conclude Historic Free Trade
Agreement. Press Release,” December 11, 2002.
7 For further information, see CRS Report RS20755,
Singapore-U.S. Free Trade Agreement, by
Dick K. Nanto.
CRS-5
in 2002. U.S. exports to Singapore totaled $14.7 billion and comprised of aircraft,
computers, integrated circuits telecommunications equipment and petroleum; imports of
$14.1 billion included computer equipment and circuitry, radio and televisions receivers,
and medical equipment.
U.S.-Moroccan FTA. On January 21, 2003, negotiations formally began on a
U.S.-Morocco FTA. Earlier, on October 1, 2002, the Bush Administration had notified
Congress of its intent to negotiate the FTA. The notification letter stated that the
proposed agreement would “support this Administration’s commitment to promote more
tolerant, open, and prosperous Muslim societies.” While the proposal has a strong
national security and foreign policy rationale, the FTA would also seek to support U.S.
economic objectives. These include allowing U.S. agricultural products to compete more
effectively against European agricultural products, which currently benefit from
preferential access. From Morocco’s perspective, the FTA could lead to an increase in
U.S. foreign direct investment and provide preferences for textile and apparel exports to
the United States. U.S.-Morocco trade totaled $970 million in 2002, composed of $560
million in U.S. exports and $410 million in imports. Leading U.S. exports are corn,
wheat, soybeans, aircraft parts, and coal; leading imports include electrical equipment,
apparel, calcium and chalk phosphates, mineral oil, processed fish, and processed
vegetables.
U.S.-Australian FTA. On November 13, 2002, the Bush Administration notified
the Congress of the intent to begin FTA negotiations with Australia. Formal talks began
in Canberra on March 18, 2003. While the U.S. business community strongly supports
the negotiations, the American agricultural community has expressed concern about
Australian sanitary and phytosanitary standards that act as a barrier to U.S. exports. For
its part, Australia has called for greater agricultural liberalization in the U.S. market and
has denounced the recent U.S. farm bill and recently imposed import restrictions on lamb.
A desire to cement the U.S.-Australian strategic relationship, and Australia’s cooperation
in the war against terrorism, may also influence these negotiations. Two way trade
between the United States and Australia totaled $18.7 billion in 2002. Livestock, wine,
minerals, vehicles, and vehicle parts were leading imports from Australia, which totaled
6.4 billion in 2002. U.S. exports amounted to $12.3 billion, led by computer equipment,
aircraft, vehicles, heavy machinery, and medical equipment.
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 (ASEAN) countries (Brunei,
Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand,
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. Malaysia and
Thailand are seen as likely candidates for FTAs under this program. The principal
benefits to the United States of FTAs with ASEAN member states are the potential to
reduce high tariffs on agricultural products and restrictive tariff-rate quotas on other U.S.
exports, while the major benefit to ASEAN countries is improved access to the U.S.
market. The initiative is also seen as a way of countering growing Chinese influence in
the region. Two-way trade with ASEAN reached $116.4 billion in 2002, with exports of
$38.8 billion and imports of $77.6 billion.
CRS-6
Current and Proposed U.S. Negotiations on Trade Agreements
Agreement
U.S.
Status
Sensitive
Total
Areas
Trade*
($ bill.)
Free Trade
$686.0
Formal negotiations began in 1998. The
Agriculture,
Area of the
first draft of the agreement was adopted in
antidumping,
Americas
Québec in April 2001; the second was
textiles and
adopted at Quito in Nov. 2002. Trade
apparel,
ministers will meet in Miami in late 2003.
worker rights
A final agreement is due by Jan. 2005.
Doha
$1,738
A work program was produced at the trade
Agriculture,
Development
ministerial meeting in Doha in Nov. 2001.
antidumping,
Agenda of
Trade ministers agreed to take stock of
pharma-
the WTO
negotiations at their next meeting (Cancun,
ceuticals
Sept. 2003) and have set Jan. 1, 2005 as the
deadline for final agreement.
U.S.-Chile
$5.9
Negotiations began in Dec. 2000. An
Capital flows,
FTA
agreement was announced on Dec. 11, 2002.
agriculture
On Jan. 30, 2003, the Administration gave
notice of its intent to sign the agreement.
U.S.-
$28.8
Negotiations began in Dec. 2000 and were
Capital flows
Singapore
completed on Jan. 15, 2003. On Jan. 30,
FTA
2003, the Administration gave notice of its
intent to sign the agreement.
U.S.-Central
$21.2
The Administration gave notice of intent to
Textiles and
America
begin negotiations on Oct. 1, 2002. Talks
apparel, rules
FTA
were formally launched on Jan. 8, 2003.
of origin,
Officials anticipate negotiations will
capital flows,
conclude by the end of 2003.
worker rights
U.S.-
$0.97
On Oct. 1, 2002, the Administration gave
Agriculture
Morocco
Congress notice of intent to begin
FTA
negotiations. Talks began formally on Jan.
21, 2003. Officials anticipate negotiations
will conclude by the end of 2003.
U.S.-South
$7.3
The Administration gave Congress notice of
Telecommuni-
African
intent to begin negotiations on Nov. 4, 2002.
cations,
Customs
Talks are expected to formally begin in
textiles, phar-
Union FTA
April 2003.
maceuticals
U.S.-
$18.7
On Nov. 13, 2002, the Administration gave
Agriculture,
Australia
Congress notice of intent to begin
investment,
FTA
negotiations. Formal talks are expected to
telecommuni-
begin on March 17, 2003.
cations
* Domestic exports (Fas value) plus imports for consumption (Customs value) with countries of the
proposed agreement in 2002.