Both the Senate and the House of Representatives approved implementing bills for US Free Trade Agreements (“FTA”s) with Colombia, Panama, and South Korea on October 12, and President Obama signed all three into law on October 21. All three FTAs originally were negotiated over four years ago by the Bush Administration. The Obama Administration renegotiated certain portions of each agreement, including those relating to beef and automobiles with Korea, the exchange of tax information with Panama, and labor rights with Colombia. Korea’s National Assembly is currently considering the US-Korea Agreement while Colombia’s and Panama’s legislatures have already ratified their respective agreements. Before each agreement enters into effect, President Obama must first certify that the trading partner has taken steps to come into compliance with the terms of the agreement as renegotiated. Entry into effect for all three agreements is likely to occur soon, although perhaps not until early 2012.
Though the agreements will lead to a lowering of tariff barriers for U.S. manufacturers, there is also great concern in some quarters of the manufacturing and labor community that they will have a long term negative effect. Experience with prior free trade agreements has shown a likely deterioration in the trade balance and an increased flight of manufacturing plants off-shore.
US-South Korea FTA
Provisions in the agreement will facilitate trade in manufactured products by lowering and eliminating both tariffs and non-tariff barriers, establishing new ways in which Korean safety and environmental standards have restricted U.S. exports. A special motor vehicle safeguard was negotiated in order to protect the American industry from harmful surges in Korean auto imports as a result of this agreement.
Other provisions of particular interest to U.S. manufacturers include:
- Provisions for improved market access on a non-discriminatory basis for medicines and medical devices.
- Intellectual property provisions that cover all types of intellectual property, include requirements to join multilateral IPR agreements and strong enforcement provisions.
- Investment provisions that provide enforceable investors’ rights while ensuring that federal, state, and local governments can continue to regulate in the public interest.
- Provisions granting exporters from both countries improved access to each other’s government procurement markets.
- Provisions for improved access for goods and services in the telecommunications sector. (Korea is the fifth largest telecommunications market in the world).
- Provisions on electronic commerce that prohibit discriminatory treatment and eliminate duties on digital products.
This agreement will immediately eliminate import duties on over 80 percent of U.S. exports of consumer and industrial products to Colombia, with remaining tariffs phased out over 10 years. With average Colombian tariffs on U.S. industrial exports ranging from 7.4 to 14.6 percent, these tariff eliminations have the potential to substantially increase U.S. exports.
Provisions of particular interest to U.S. manufacturers include:
- Provisions to eliminate immediately tariffs on almost all products in sectors including construction equipment, aircraft and parts, auto parts, fertilizers and agro-chemicals, information technology equipment, and medical and scientific equipment.
- Provisions to develop a framework to address current and future non-tariff barriers.
- Provisions to improve access to government procurement markets.
- Provisions to improve access for goods and services in the telecommunications sector.
- Provisions to lower textile duties while also strengthening rules of origin and enforcement against possible customs circumvention.
- Intellectual property provisions that span all types of intellectual property, include requirements to join multilateral IPR agreements strong enforcement provisions.
- Specific commitments by Colombia on labor and environmental issues.
This agreement improves market access for American manufacturers by eliminating Panamanian import tariffs on U.S. exports and establishing a framework to address other barriers to U.S. exports as they arise in the future. The Panama FTA will immediately eliminate duties on over 87 percent of U.S. exports of consumer and industrial products to Panama, with remaining tariffs phased out over ten years. The agreement should facilitate an increase in U.S. exports of construction and infrastructure equipment to Panama. In addition to the ongoing $5.25 billion Panama Canal expansion project, the Government of Panama has identified almost $10 billion in other significant infrastructure projects. Construction equipment and infrastructure machinery used in such projects accounted for $280 million in U.S. exports to Panama in 2010. Tariffs for this sector average 5 percent; almost all of these will be eliminated upon entry into force of the Agreement.
Provisions of particular interest to the U.S. manufacturing sector include:
- Provisions providing immediate duty-free access for U.S. exports of information technology equipment, agricultural and construction equipment, aircraft and parts, medical and scientific equipment, environmental products, pharmaceuticals, fertilizers, and agro-chemicals.
• Provisions for improved access to government procurement markets.
• Provisions for improved access for goods and services in the telecommunications sector.
• Provisions to ensure effective enforcement of Panama’s labor and environmental laws.