International Trade Daily | September 28, 2001
The proposed Free Trade Area of the Americas could have wide-ranging effects on trade and investment between the United States and other Western Hemisphere nations, including improving the footing of U.S. exporters relative to their competitors in FTAA markets and increasing import competition for protected sectors such as sugar and citrus, the General Accounting Office said in a report. "While the FTAA should provide benefits, it may also adversely affect certain sectors. In addition, some labor and environmental groups are concerned that potential FTAA provisions may reduce the ability of countries to set and enforce high standards for health, safety, and the environment," the GAO said.
The report, Free Trade Area of the Americas: Negotiators Move Toward Agreement That Will Have Benefits, Costs to U.S. Economy, was released Sept. 26. Sen. Charles Grassley (R-Iowa), ranking member of the Senate Finance Committee, requested the study.
The 34 Western Hemisphere democracies are taking part in negotiations to reach an FTAA by 2005. Nine negotiating groups have been established by the FTAA countries in the areas of market access, agriculture, services, investment, government procurement, intellectual property rights, subsidies/antidumping and countervailing duties, dispute settlement, and competition policy.
In this phase of negotiations, FTAA countries must agree on how to conduct the market-opening portion of the talks by April 1, 2002, start these negotiations no later than May 15, 2002, and produce a new FTAA draft text by August 2002.
On the plus side, elimination of tariff and nontariff barriers by the FTAA countries will improve U.S. market access. While FTAA nations have significantly cut tariff barriers in the last decade, the average tariff rate still is over 10 percent for many countries, the GAO said.
Because the United States is the world's largest services exporter as well as a major creator of software and pharmaceuticals, it could "benefit substantially" by FTAA commitments in these areas, the GAO said. However, protected U.S. sectors--such as textiles, apparel, sugar, and citrus-could run into more import competition and declines in production if barriers are lowered, the report said.
Grassley, in a statement, said that the FTAA talks are perhaps the most important regional negotiations that the United States has ever pursued. The complexities inherent in the talks underscore the need of securing trade promotion authority this year, he added. "Without trade promotion authority, the president will be hard-pressed to conclude these critically important talks in a satisfactory manner," Grassley said. TPA, which used to be called fast track, is a procedural device shielding legislation implementing trade agreements from congressional amendment.
According to the GAO, the five negotiating groups pursuing trade and investment liberalization face both short-term and long-term challenges. The five groups--market access, agriculture, investment, services, and government procurement--need to resolve a number of short-term practical issues to start negotiations on market access schedules no later than the agreed upon date of May 15, 2002 and to prepare revised chapters by August 2002. "For example, how countries should identify which service sectors to include in terms of the agreement must first be resolved before negotiations to liberalize services can begin. Over the long-term, these market-opening groups face fundamental questions about how much and how fast to liberalize," the report said.
Narrowing remaining differences could prove difficult for the other four groups as some face "fundamental differences," the report said. GAO pointed to widely disparate proposals on antidumping measures and key differences on details of the FTAA dispute settlement process such as how to address compliance and whether to have appeals.
The cross-cutting areas of civil society and smaller economies have also been controversial, the report said.
The GAO report (GAO-01-1027) may be accessed on the GAO's Internet site at http://www.gao.gov.
Copyright c 2001 by The Bureau of National Affairs, Inc., Washington D.C.International Trade Daily:
