The List: Deals Without Wheels
Is free trade doomed? U.S. President George W. Bush’s trade negotiating authority is soon to expire, Congress is on the warpath, and global trade talks are imploding. In this List, FP looks at the U.S. trade deals whose futures are now anything but certain.
Chung Sung-Jun/Getty Images
Chung Sung-Jun/Getty Images
The scale: Huge. South Korea is the United States seventh-largest trading partner for goods, with two-way trade for goods and services totaling $86 billion in 2005.
The deal: The largest U.S. trade accord since the North American Free Trade Agreement (NAFTA). Nearly 95 percent of trade between the United States and Korea would become duty free within three years.
The logic: American farmers would get freer access to the Korean market. U.S. consumers would see cheaper textiles and electronics. And U.S. companies would get a stronger foothold in Asia, where competition from Japanese and Chinese firms is fierce. For Korea, the prize is a boost in exports going out and U.S. investment coming in.
Deal-breakers: Cars, beef, and rice. Detroit wants Korea to admit more of its products: In 2006, Korean firms sold 800,000 automobiles in the United States, while just 5,000 U.S. cars were sold in Korea. Cattle ranchers want an ironclad commitment that Korea will admit U.S. beef, while rice farmers fear their exclusion would set a bad precedent. And many Democrats in Congress oppose the inclusion of goods from Kaesong, a special economic zone in North Korea.
Chances of passage: Unexpectedly, domestic opposition is growing. Negotiators hope to finalize the details before June 30, when both sides may have to sign an incomplete deal to take advantage of President Bushs expiring trade-promotion authority.
U.S.-Peru and U.S.-Panama
The scale: Miniscule. Two-way trade between the United States and Panama reached just $2.5 billion in 2005, while annual U.S. exports to Peru barely surpassed $2 billion. Yet its not the size that matters: Nearly a quarter of Perus and about half of Panamas exports wind up on U.S. shores.
The deal: For the United States, over 80 percent of commercial and industrial exports to each country would immediately become duty free. For Peru and Panama, the deals would promote investment and make permanent the broad access both countries already enjoy in the U.S. market due to prior trade agreements.
The logic: The agreements will help combat anti-Americanism in Latin America, advocates say. U.S. policymakers also want to counter the Chinese, a growing presence in the United States backyard.
Deal-breakers: Few remain. Activists fear greater illegal harvesting of Peruvian mahogany, while some human rights groups fret that patent protections will make prescription drugs unaffordable to Perus low-income population. Panamas deal stalled temporarily in the ninth round of negotiations when the country refused to accept a U.S. sanitary control system for goods and animals entering the United States.
Chances of passage: Likely. When Congress and the Bush administration agreed in May on a new template for future trade agreementseach must now include certain labor and environmental protectionsDemocrats and labor unions dropped their opposition.
SAUL LOEB/AFP/Getty Images
The scale: In 2005, the United States was Colombias largest trading partner, and two-way trade totaled $14.3 billion.
The deal: Eighty percent of U.S. exports to Colombiabeef, cotton, wheat, soybeans and soy meal, fruits and vegetables, and some processed foodswould become duty free immediately. Colombia already has significant access to U.S. markets through the Andean Trade Promotion and Drug Eradication Act (ATPDEA).
The logic: It will bolster Colombian President Alvaro Uribe, an antidrug warrior and a staunch opponent of Venezuelas Hugo Chvez, supporters argue. More accurately, it will save him. The ATPDEA is due to expire on June 30. If it isnt extended, the Colombian economy will be in big trouble.
Deal-breakers: Democrats and their labor backers decry Colombias disregard for union organizers. Of the 236 labor murders during the past six years, convictions have been reached in only two or three. Although some say the situation is improving, Uribes office acknowledged a 50 percent increase in labor murders from 2005 to 2006. A scandal over Uribes alleged paramilitary ties hasnt helped. Desperate to salvage the deal, Uribe visited Washington in May and hired a lobbying firm.
Chances of passage: Not good. Democrats want to see more than just rhetoric from Uribe before they can move forward.
PORNCHAI KITTIWONGSAKUL/AFP/Getty Images
The scale: The United States is Thailands top market for exports. Accordingly, the two-way trade in goods of around $30 billion per year greatly favors the Thais.
The deal: Nothing has been finalized.
The logic: The White House says a deal would benefit American farmers and the auto and auto-parts sectors, which face high tariffs in Thailand. An agreement would also advance President Bushs Enterprise for ASEAN Initiative, which strives to cement a network of bilateral agreements in the area. (So far, only Singapore is on board). Without the deal, the United States warns, Thai exporters could lose their comparative advantage to fierce competition from regional trade players such as China.
Deal-breakers: After the 2006 coup, the United States announced that it would not continue negotiations until an elected government is put in place. But negotiations had already been in trouble. HIV/AIDS activists oppose the free-trade agreement because they say it would limit access to generic antiretroviral drugs. In May, Thailand was placed on the U.S. trade representatives Priority Watch List for intellectual property rights shortcomings.
Chances of passage: Poor. There is no momentum toward revival of negotiations on either side.
HASSAN AMMAR/AFP/Getty Images
The scale: Two-way trade in goods between the United States and countries in the region reached $111 billion in 2006, much of it from oil. But in 2003, the European Unions imports and exports from Arab countries were, respectively, 4.6 and 3.7 times larger than those from the United States.
The deal: The Bush administration aims to merge existing free-trade agreements with Bahrain, Israel, Jordan, Morocco, and Oman to create the Middle East Free Trade Area by 2013. The administration has also signed interim deals, known as Trade and Investment Framework Agreements, with nearly everyone else expect Syria, Libya, and Iran.
The logic: Free trade will foster growth, peace, reform, and stability in the Middle East, supporters argue, and show that U.S. involvement in the region is more than just military.
Deal-breakers: Last years Dubai Ports World frenzy in the United States stalled negotiations with the United Arab Emirates, as has U.S. insistence that the UAE allow full foreign ownership in certain sectors. Across the region, labor provisions are problematic, as many Middle Eastern countries rely heavily on foreign workers and are hostile toward unions. Arab leaders, meanwhile, are loath to identify themselves with the country their populations often blame for the regions woes.
Chances of passage: Slim. The UAE is preparing a law that would open the economy to greater foreign ownership, but thats about the extent of the action on this front. It will be years before other countries in the region are ready for full-blown trade agreements.
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