Current and Pending Trade Agreements: The 2020 U.S. Trade Agenda

BY JOHN T. HYATT

1. Israel FTA became effective August 19, 1985

2. The North America Free Trade Agreement (NAFTA) with Canada and Mexico became effective January 1, 1994

The agreement is to be replaced by the United States-Mexico-Canada Agreement (USMCA) which is expected to pass Congress the 1st quarter of 2020. There are six major updates: • U.S. Auto Manufacturing Boosted • Higher Enforcement of Labor Laws • U.S. Dairy Farmers Gain Additional Access • Update NAFTA for the Digital Era • Environmental Protections • Congress to Have Control Over Biologic Drugs

3. Jordan FTA became effective October 24, 2000

4. Chile FTA became effective January 1, 2004

5. Singapore FTA became effective January 1, 2004

6. Morocco FTA became effective June 15, 2004

7. Australia FTA became effective January 1, 2005

These cutting-edge agreements eliminate tariffs, tackle non-tariff barriers, open services markets, strengthen the intellectual property protections for our knowledge industries, and enhance labor and environmental protections. They level the playing field for U.S. businesses, increase choice and value for American consumers, and provide fresh momentum for open markets.

8. DR-CAFTA (Dominican Republic-Central America FTA)

The agreement was signed May 29, 2004 and passed by both Houses of the U.S. Congress on July 27, 2005. Accession did not begin until each country changed its domestic laws to conform to the agreement. Countries were admitted into the agreement during the early months of 2006 in the following order: El Salvador, Honduras, Nicaragua, Guatemala and the Dominican Republic.

Costa Rica’s participation was affirmed after an October 2007 countrywide plebiscite; and a further extension granted in order to finalize certain laws relating to monopolies in telecommunications and insurance before the U.S. Trade Representative could certify Costa Rica to the President. Such was accomplished in late 2008 and Costa Rica entered into DR-CAFTA as of January 1, 2009.

9. Bahrain FTA became effective January 11, 2006 10. Oman FTA became effective January 1, 2009 11. Peru FTA became effective February 1, 2009 12. Korea FTA became effective March 15, 2012

13. Colombia FTA became effective May 15, 2012 14. Panama FTA became effective October 1, 2012

More than 70 percent of the world’s purchasing power and nearly 95 percent of its consumers are located outside the United States. Businesses that export grow faster and are 8 percent less likely to declare bankruptcy than those that do not, according to the Institute for International Economics. Expanding exports can accelerate economic growth and hiring: every $1 billion of exports supports nearly 6,000 jobs. Free trade agreements (FTAs) can open up new markets to exports. FTAs reduce trade barriers while also establishing common standards and protections for U.S. interests and laws. The U.S. has 14 FTAs with 20 countries, which accounted for over 45 percent of the country’s exports last year.

Previously, the Obama Administration was negotiating two broad trade agreements: the Transatlantic Trade

and Investment Partnership (T-TIP) with members of the European Union and the Trans-Pacific Partnership (TPP) with countries in the Asia-Pacific region. The Trump Administration has established a bi-lateral, as opposed to a multi-lateral, trade negotiating position. So, consequently these two agreements have become still-born.

15. U.S-Japan Trade Agreement – entered into force January 1, 2020. Over 90 percent of U.S. food and agricultural products imported into Japan will either be duty free or receive preferential tariff access. Under the agreement, Japan will

• Reduce tariffs on products such as fresh and frozen beef and pork.

• Provide a country-specific quota for wheat and wheat products.

• Reduce the mark-up on imported U.S. wheat and barley.

• Immediately eliminate tariffs for almonds, walnuts, blueberries, cranberries, sweet corn, grain sorghum, broccoli, and more.

• Provide staged tariff elimination for products such as cheeses, processed pork, poultry, beef offal, ethanol, wine, frozen potatoes, oranges, fresh cherries, egg products, and tomato paste.

REAUTHORIZING TRADE PROMOTION AUTHORITY

The most recent previous renewal of TPA covered agreements reached between December 2002 and the end of June 2007. Current legislation would apply to agreements reached before July 1, 2018, with a possible extension to July 1, 2021. Legislation to reauthorize TPA was introduced, but not considered, in the 113th Congress.

For successful negotiations, TPA allows the President to enter into reciprocal trade agreements and requires that legislation for implementing the agreement be considered on a defined timeline without amendments. In return, the President must keep Congress informed throughout the negotiations and abide by certain notification and consulting requirements. It improves the Administration’s position in the negotiations by ensuring the agreed-upon terms will be binding. Congress first gave the President the authority to enter into trade agreements in the 1970s.

RETROACTIVE RENEWAL- GENERALIZED SYSTEM OF PREFERENCES GSP

The program extends duty-free treatment to several thousand products imported into the United States from more than two-thirds of the world’s countries. GSP is an important way American companies keep costs down. Large and small businesses import products duty-free under GSP. THE MISCELLANEOUS TARIFF BILL (MTB)

An annual piece of legislation that is passed by the US Congress to temporarily reduce or suspend tariffs on certain imported products and make technical corrections to US tariff laws. The legislation boosts the competitiveness of U.S. manufacturers by lowering the cost of imported inputs (some 600 tariff lines) without harming domestic firms that produce competing products. In addition, in the case of finished goods, MTBs similarly reduce costs for consumers where there is no domestic production and thus no impact on domestic firms. Overall, the tariff relief contained in MTBs is designed both to be broadly available to any entity that imports and pays duties pursuant to the specified tariff heading and to benefit downstream producers, purchasers, and consumers. The current MTB of 2017-2020 expires; and the application period for the next MTB 2021-2024 ended 12/10/19. At this point ITC/USDOC/ USCBP will vet applications and present a report to Congress. This would, no doubt become incorporated into the 2020 Lame Duck Congress’ Omnibus “must pass” legislation.

SOME POINTS TO CONSIDER WITH FTA S/TPA S • The U.S. currently has in place free trade agreements with 20 countries. Although the U.S. trade deficit is continually cited as a reason to throttle back on FTAs/TPAs, in fact, exports to these countries in manufactured goods, agricultural products and financial services have increased three fold, resulting in a healthy trade surplus, per U.S. Department of Commerce statistics. • Prior to implementation of the Dominican Republic-Central America Free Trade Agreement (DR-CAFTA), the U.S. was running an annual $1.7 billion trade deficit with the region. That has now morphed into a $1.8 billion trade surplus. • Under the NAFTA, if energy imports from Canada and Mexico are taken out of the equation (80% of the trade,) the U.S. is running a trade surplus with both countries in manufactured goods. It should be remembered that protectionism serves no one’s interests. The Tariff Act of 1930 (otherwise known as the Smoot-Hawley Tariff), was signed into law on June 17, 1930 by President Herbert Hoover with the flourish of six gold pens, despite protests by over 1,000 economists (and noticed as a headline on the front page of the May 5, 1930 issue of the The New York Times). It raised U.S. tariffs on over 20,000 imported goods to record levels. The overall tariff levels were the secondhighest in U.S. history, and the ensuing retaliatory tariffs by U.S. trading partners, reduced American exports and imports by more than half.