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

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 the Congress. In addition, FTAs affect the U.S. economy, with the impact varying across sectors. The 111th Congress and the Obama Administration face the question of whether and when to act on three pending FTAs--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. In addition, the Trade Promotion Authority TPA expired on July 1, 2007, meaning that any new FTAs agreed to would not likely receive expedited legislative consideration, unless the authority is renewed. While expressing some support for the agreements, President Obama and his Administration have indicated that outstanding issues remain for each of them which need to be addressed before he would send implementing legislation to Congress. The Administration had not indicated a timeline for this process.