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Institute for Workplace Studies----------------- Professor Samuel B. Bacharach

School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies

Cornell University

16 East 34th Street, 4th floor---------------------- Stuart Basefsky

New York, NY 10016 -------------------------------Director, IWS News Bureau

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Congressional Research Service (CRS)

 

Free Trade Agreements: Impact on U.S. Trade and Implications for U.S. Trade Policy

William H. Cooper,  Specialist in International Trade and Finance

February 26, 2014

http://www.fas.org/sgp/crs/row/RL31356.pdf

[full-text, 18 pages]

 

Summary

Free trade areas (FTAs) are arrangements among two or more countries under which they agree to

eliminate tariffs and nontariff barriers on trade in goods among themselves. However, each

country maintains its own policies, including tariffs, on trade outside the region.

 

In the last few years, the United States has engaged or has proposed to engage in negotiations to

establish bilateral and regional free trade arrangements with a number of trading partners. Such

arrangements are not new in U.S. trade policy. The United States has had a free trade arrangement

with Israel since 1985 and with Canada since 1989, which was expanded to include Mexico and

became the North American Free Trade Agreement (NAFTA) effective in January 1994.

U.S. interest in bilateral and regional free trade arrangements surged, and the Bush

Administration accelerated the pace of negotiations after the enactment of the Trade Promotion

Authority in August 2002. U.S. participation in free trade agreements can occur only with the

concurrence of Congress. In addition, FTAs affect the U.S. economy, with the impact varying

across sectors.

 

The 112th Congress and the Obama Administration faced the question of whether and when to act

on three FTAs pending from the Bush Administration—with Colombia, Panama, and South

Korea. Although the Bush Administration signed these agreements, it and the leaders of the 110th

Congress could not reach agreement on proceeding to enact them. No action was taken during the

111th Congress either.

 

After discussion with congressional leaders and negotiations with the governments of Colombia,

Panama, and South Korea to assuage congressional concerns regarding treatment of union

officials (Colombia), taxation regimes (Panama), and trade in autos (South Korea), President

Obama submitted draft implementing legislation to Congress on October 3, 2011. The 112th

Congress approved each of the bills in successive votes on October 12, along with legislation to

renew an aspect of the Trade Adjustment Assistance (TAA) program. President Obama signed the

bills into law on October 21, 2011.

 

In the meantime, on November 14, 2009, President Obama committed to work with the current

and prospective partners in the negotiations to form a Trans-Pacific Partnership (TPP) Agreement.

The TPP is a free trade agreement that includes nations on both sides of the Pacific. The TPP

negotiations emerged from an FTA that included Brunei, Chile, New Zealand, and Singapore and

that entered into force in 2006. Besides the United States, Australia, Canada, Japan, Malaysia,

Mexico, Peru, and Vietnam have joined the negotiations. Furthermore, the United States has been

negotiating with the 28-member European Union to form the Transatlantic Trade and Investment

Partnership (TTIP).

 

FTAs raise some important policy issues: Do FTAs serve or impede U.S. long-term national

interests and trade policy objectives? Which type of an FTA arrangement meets U.S. national

interests? What should U.S. criteria be in choosing FTA partners? Are FTAs a substitute for or a

complement to U.S. commitments and interests in promoting a multilateral trading system via the

World Trade Organization (WTO))? What effect will the expiration of TPA have on the future of

FTAs as a trade policy strategy?

 

Contents

What Are Free Trade Areas? ............................................................................................................ 2

Why Countries Form FTAs .............................................................................................................. 3

FTAs in the Context of U.S. Trade Policy ....................................................................................... 3

Obama Administration Policy and Recent Developments ............................................................... 5

Economic Impact of FTAs ............................................................................................................... 8

FTAs and the WTO ........................................................................................................................ 10

The Debate Over FTAs .................................................................................................................. 11

Conclusions and Implications for Congress .................................................................................. 14

 

Tables

Table 1. U.S. Free Trade Agreements .............................................................................................. 7

 

Contacts

Author Contact Information........................................................................................................... 15

 

 

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