On October 21, 2011, President Barack Obama signed legislation implementing three long-pending free trade agreements approved by Congress on October 12, 2011: (1) the United States-Colombia Trade Promotion Agreement (the “Colombia TPA”); (2) the United States-Panama Trade Promotion Agreement (the “Panama TPA”) and (3) the United States-South Korea Free Trade Agreement (the “Korea FTA”) (collectively, the “FTAs”).1 In particular, the Korea FTA is the largest trade deal for the United States since the North American Free Trade Agreement with Mexico and Canada (“NAFTA”) in 1994.
Although it may take several months to complete the formalities related to the FTAs before they enter into force, key provisions of interest are set forth below.
The Colombia TPA
Colombia is the third-largest South American destination for U.S. exports and the second-largest South American market for U.S. agricultural exports.
Once the Colombia TPA enters into force, the following benefits will be available to U.S. businesses:
- tariffs on over 80 percent of U.S. consumer and industrial exports to Colombia will be eliminated immediately, with remaining tariffs being phased out over ten years;
- key U.S. exports will gain immediate duty-free access to Colombia, including almost all products in sectors involving agriculture and construction equipment, aircrafts and parts, auto parts, fertilizers and agro-chemicals, information technology equipment, medical and scientific equipment and wood; and
- U.S. service providers will have greater access to Colombia’s $134 billion services market.
The Panama TPA
Panama is one of the fastest growing economies in Latin America, and its strategic location as a major shipping route highlights the importance of the Panama TPA. Approximately two-thirds of the Panama Canal’s annual transits are bound to or from U.S. ports.
Upon entry into force of the Panama TPA, the following benefits will be available to U.S. businesses:
tariffs on over 87 percent of U.S. exports of consumer and industrial goods to Panama and on more than 50 percent of U.S. exports of agricultural goods to Panama will be eliminated immediately, with most remaining tariffs being phased out over ten years;
- U.S. products that will gain immediate duty-free access to Panama will include certain information technology equipment, agricultural and construction equipment, aircrafts and parts, medical and scientific equipment, environmental products, pharmaceuticals, fertilizers and agro-chemicals; and
- U.S. service providers will have greater access to Panama’s $20.6 billion services market, including in priority areas such as financial, telecommunications, computer, distribution, express delivery, energy, environmental and professional services.
- Furthermore, under the Panama TPA, U.S. firms will be able to participate on a competitive basis in the ongoing $5.25 billion Panama Canal expansion project. U.S. firms will also have access to almost $10 billion in other significant infrastructure projects in Panama.
The Korea FTA
The United States was once South Korea’s largest trading partner; it is now the fourth-largest. The Korea FTA is expected to increase U.S. exports to South Korea by one-third and cut the bilateral trade deficit in half, thereby advancing American exporters’ recovery of lost market share.
Once the Korea FTA enters into force, the following benefits will be available to U.S. businesses:
- tariffs on over 95 percent of U.S. exports of industrial and consumer goods to South Korea will be eliminated within the first five years, with most remaining tariffs being phased out within ten years;
- almost two-thirds (by value) of current U.S. agricultural exports will enter South Korea duty-free immediately;
- U.S. auto companies will have greater access to South Korea’s auto market;
- U.S. firms will have access to South Korea’s $100 billion government procurement market; and
- South Korea’s $560 billion services market will be open to competitive U.S. companies in sectors ranging from energy and environmental services to financial services and distribution.