NEWSLETTER - SMALL BUSINESS

Busy Free Trade Agenda in 2003

by John M. Kolmer, NAFTA Trade Specialist
Spring 2003

The Bush administration's focus on expanding market access for American exporters continues. In December and January, the United States completed free trade agreements with Chile and Singapore. In 2003, negotiations are expected to begin with Australia, five Central American countries, Morocco, and the South African Customs Union (SACU- South Africa, Namibia, Lesotho, Swaziland and Botswana) on establishing the terms of free trade agreements.

During each of these negotiations, the Bush administration will press for guarantees of market access for manufactured and agricultural goods; elimination of barriers in services, including e-commerce; increased protection of intellectual property and for investors; increased transparency in government regulation and procurement; strengthened capacity to protect workers and the environment; and meaningful dispute settlement mechanisms.

Each of these agreements is aimed at improving the terms of trade for American exporters, who for too long have been put at a competitive disadvantage relative to exporters from other parts of the world due to free trade agreements put in place by competing industrialized nations. Free trade agreements will benefit American companies and workers by leveling the playing field:

. In Chile, U.S. companies currently operate at a significant disadvantage, as competitors such as Canada, Mexico and the European Union each have signed free-trade agreements with Chile. Without a free trade agreement, a U.S.-made 140 horsepower Caterpillar motor grader sold in Chile pays $13,090 in tariffs. The same tractor made in Canada enters Chile duty-free.

. Currently, U.S. products entering Morocco face an average tariff of over 20 percent, while Moroccan products are subject to an average tariff of only 4 percent as they enter the United States. A free trade agreement with Morocco that substantially reduces this 20% tariff could bring with it sharply increased demand for American products.

. U.S. exporters face very strong competition in Central America, as the region has been very active in negotiating free trade agreements that do not include the United States. More than 20 trade agreements grant preferences in Central America to products from Mexico, Canada, Chile, and several South American nations. For example, the $4 million in U.S. apples exported to Costa Rica last year paid a 15% import tariff, while Canadian apples enter Costa Rica duty-free.

. Free trade with the SACU countries will benefit U.S. businesses and workers by providing preferential access to our largest export market in sub-Saharan Africa. Here as well, a free trade agreement will give U.S. exporters the same advantages that European Union exporters have enjoyed as a result of the EU's free trade agreement with South Africa.

The conclusion of these negotiations in 2003 will unquestionably improve the business climate for American exporters and allow the United States to reassert its leadership in the trade arena.