Trade Liberalization

The United States and other countries in the Western Hemisphere have been making progress in efforts to liberalize trade. Almost all countries in the hemisphere, including the United States, are proceeding with discussions aimed a creating a Free Trade Area of the Americas. At the same time, various subregional agreements and arrangements have been formed. The report related to this testimony (GAO/NSIAD-97-119): (1) describes the principal existing subregional trade arrangements in the Western Hemisphere, (2) outlines the current status of discussions over the free trade area, and (3) identifies recent developments in regional trade liberalization outside the free trade area process since "fast track" authority lapsed in December 1994 and the implications of these developments for the United States.

GAO noted that: (1) while trade agreements in the Western Hemisphere are not new, they have recently been revitalized as more countries in the region have committed to liberalizing their trade regimes; (2) almost all countries in the region participate in at least one subregional trade grouping, and many have concluded numerous bilateral agreements; (3) there are now six major subregional multilateral trade groupings in the Western Hemisphere; (4) among these trade blocs, the two most significant are the North American Free Trade Agreement (NAFTA) and the Common Market of the South, known as Mercosur; (5) the FTAA, which was called for at the 1994 Miami Summit of the Americas, represents the most ambitious effort in regional trade liberalization to date; (6) at the Miami Summit regional leaders agreed to establish a free trade agreement encompassing the entire Western Hemisphere by the year 2005; (7) in the last 2 1/2 years, countries have taken numerous steps to prepare for formal negotiations; (8) trade ministers from participating countries have met three times and have established a number of working groups to address substantive issues, such as market access, services, and investment; (9) the United States has been active in all FTAA meetings and working groups, and chairs the Working Group on Government Procurement; (10) substantial agreement has been reached on several key issues in preparation for formal FTAA negotiations; (11) consensus has also been reached on the right of countries to negotiate independently or, if members of subregional trade groupings, as a unit; (12) the United States and most other countries favor immediate negotiations on all issues beginning in 1998; (13) disagreement remains, however, regarding the pace and direction of negotiations; (14) since the Mexican financial crisis, which surfaced only days after the Miami Summit, the United States has not actively pursued further trade liberalization efforts in the hemisphere; (15) at the same time, other countries have moved forward with a wide range of new free trade initiatives; (16) U.S. exporters' access to markets in the region is starting to be adversely affected by these new trade agreements; (17) their impact is starting to be felt by U.S. firms in various sectors, such as agriculture, telecommunications, and the pharmaceutical industry; and (18) whether or not the United States participates in shaping future trade liberalization efforts, representatives of several countries in the hemisphere generally agree that their countries will continue to advance their own regional free trade initiatives.