International Trade
Intensifying Free Trade Negotiating Agenda Calls for Better Allocation of Staff and Resources Gao ID: GAO-04-233 January 12, 2004Free trade agreements (FTA) involve trade liberalization between the United States and selected countries or regions and are also expected to provide economic and other benefits. GAO was asked to review how potential FTA partners are selected, in view of the increased number of FTAs and their growing importance to U.S. policy. Specifically, GAO (1) provided information about the factors influencing the selection of FTA partners, (2) analyzed the interagency process for selecting FTA partners, and (3) assessed how the executive branch makes decisions about the availability and allocation of resources to FTAs.
The Trade Representative used 13 factors in selecting four potential FTA partners in 2002 (Australia; the Central American Free Trade Area, a subregional group of five Central American countries; the Southern Africa Customs Union of five countries; and Morocco). Subsequently, selected executive branch agencies decided to use six broad factors--country readiness, economic/commercial benefit, benefits to the broader trade liberalization strategy, compatibility with U.S. interests, congressional/private-sector support, and U.S. government resource constraints. These decisions are not mechanical, and the factors cited most often regarding the selected FTA partners primarily reflect U.S. trade strategy, foreign policy, and foreign economic development goals. The interagency process for selecting FTA partners now involves four interagency groups that use decision papers to assess potential FTA partners and make recommendations that eventually go to the president. This new process is more systematic and inclusive than the process previously used. The Office of the U.S. Trade Representative (USTR) reports that it routinely considers the Congress's views in making selections. Decisions about FTA partners are made with little systematic data or planning regarding trade-offs with other trade priorities, even though FTAs are resource intensive. USTR staff and travel funds are heavily committed to FTAs, and USTR relies on specialists at other agencies as well. As more FTAs are contemplated, existing mechanisms may prove inadequate to the task of aggressively pursuing a bilateral FTA agenda while remaining engaged in regional and multilateral forums.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-04-233, International Trade: Intensifying Free Trade Negotiating Agenda Calls for Better Allocation of Staff and Resources
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Report to Congressional Requesters:
January 2004:
INTERNATIONAL TRADE:
Intensifying Free Trade Negotiating Agenda Calls for Better Allocation
of Staff and Resources:
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-233]:
GAO Highlights:
Highlights of GAO-04-233, a report to congressional requesters
Why GAO Did This Study:
Free trade agreements (FTA) involve trade liberalization between the
United States and selected countries or regions and are also expected
to provide economic and other benefits. GAO was asked to review how
potential FTA partners are selected, in view of the increased number
of FTAs and their growing importance to U.S. policy. Specifically, GAO
(1) provided information about the factors influencing the selection
of FTA partners, (2) analyzed the interagency process for selecting
FTA partners, and (3) assessed how the executive branch makes
decisions about the availability and allocation of resources to FTAs.
What GAO Found:
The Trade Representative used 13 factors in selecting four potential
FTA partners in 2002 (Australia; the Central American Free Trade Area,
a subregional group of five Central American countries; the Southern
Africa Customs Union of five countries; and Morocco). Subsequently,
selected executive branch agencies decided to use six broad factors”
country readiness, economic/commercial benefit, benefits to the
broader trade liberalization strategy, compatibility with U.S.
interests, congressional/private-sector support, and U.S. government
resource constraints. These decisions are not mechanical, and the
factors cited most often regarding the selected FTA partners primarily
reflect U.S. trade strategy, foreign policy, and foreign economic
development goals.
The interagency process for selecting FTA partners now involves four
interagency groups that use decision papers to assess potential FTA
partners and make recommendations that eventually go to the president.
This new process is more systematic and inclusive than the process
previously used. The Office of the U.S. Trade Representative (USTR)
reports that it routinely considers the Congress‘s views in making
selections.
Decisions about FTA partners are made with little systematic data or
planning regarding trade-offs with other trade priorities, even though
FTAs are resource intensive. USTR staff and travel funds are heavily
committed to FTAs, and USTR relies on specialists at other agencies as
well. As more FTAs are contemplated, existing mechanisms may prove
inadequate to the task of aggressively pursuing a bilateral FTA agenda
while remaining engaged in regional and multilateral forums.
What GAO Recommends:
GAO recommends that USTR work with other key trade agencies to develop
more systematic data and plans for allocating staff and resources
across the full U.S. trade agenda, including FTAs and other
negotiating priorities.
The Trade Representative agreed that the intensifying trade
negotiation agenda requires management improvements, but he disagreed
with our specific recommendation. He attributes the main cause of
strain at USTR to the amount of resources. We believe that better data
and plans will promote the flexibility needed to respond to USTR‘s
demanding multilateral, hemispheric, and bilateral FTA negotiations.
www.gao.gov/cgi-bin/getrpt?GAO-04-233.
To view the full product, including the scope and methodology, click
on the link above. For more information, contact Loren Yager at (202)
512-4347 or yagerl@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Early FTA Selections Were Based Primarily on the Trade Representative's
Evaluation; New Interagency Process Uses Six Factors:
The Administration Has Enhanced Its Interagency Process for Assessing
Potential FTA Partners:
Ambitious FTA Agenda Calls for Better Resource Management:
Conclusions:
Recommendation for Executive Action:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: European Union and United States Free Trade Agreements, by
Region:
Appendix III: U.S. Trade with Potential and Existing FTA Partners:
Appendix IV: Selected U.S. Free Trade Agreement Partner Profiles:
U.S.-Australia FTA:
U.S.-Bahrain FTA:
U.S.-Chile FTA:
U.S.-Dominican Republic FTA:
U.S.-Morocco FTA:
U.S.-Singapore FTA:
U.S.-CAFTA FTA:
U.S.-SACU FTA:
Appendix V: Comments from the Office of the U.S. Trade Representative:
GAO Comments:
Appendix VI: GAO Contacts and Staff Acknowledgment:
GAO Contacts:
Staff Acknowledgments:
Tables:
Table 1: Fiscal Year 2003 USTR Nonstaff Costs for Negotiating FTAs:
Table 2: Estimated Agency Staff on U.S. Negotiating Teams for Completed
Rounds of FTA Negotiations, as of October 2003:
Table 3: International Trade Administration Free Trade Agreement
Resource Allocation, Fiscal Year 2003:
Table 4: U.S. Trade with Potential and Existing FTA Partners, 2002:
Figures:
Figure 1: FTA Time Line, 1985-2003:
Figure 2: Interagency Process for FTA Partner Selection and Notification
to the Congress:
Figure 3: Selected Milestones for U.S. Trade Agreement Negotiations,
2000-05:
Figure 4: USTR Sequences FTAs in Four Regions to Negotiate Ambitious FTA
Agenda:
Abbreviations:
AGOA: African Growth and Opportunity Act:
APEC: Asia-Pacific Economic Cooperation:
ASEAN: Association of Southeast Asian Nations:
CAFTA: Central American Free Trade Agreement:
CARICOM: Caribbean Community:
FTA: Free Trade Agreement:
FTAA: Free Trade Area of the Americas:
GCC: Gulf Cooperation Council:
GSP: Generalized System of Preferences:
MEFTA: Middle East Free Trade Area:
NAFTA: North American Free Trade Agreement:
NEC: National Economic Council:
NSC: National Security Council:
SACU: Southern African Customs Union:
TPA: Trade Promotion Authority:
TPRG: Trade Policy Review Group:
TPSC: Trade Policy Staff Committee:
USTR: Office of the U.S. Trade Representative:
WTO: World Trade Organization:
Letter January 12, 2004:
The Honorable Max Baucus:
Ranking Minority Member, Committee on Finance:
United States Senate:
The Honorable Calvin Dooley:
House of Representatives:
Free trade agreements (FTA) have recently been the subject of much
attention as the United States undertakes negotiations with multiple
negotiating partners. FTAs involve liberalization of trade between the
United States and selected countries or regions and are also expected
to provide economic and other benefits. The passage of trade promotion
authority legislation in 2002 has positioned the United States to
pursue more FTAs, because this authority has streamlined the agreement
approval process through the U.S. Congress. Because FTA negotiations
call upon many experts from the Office of the U.S. Trade Representative
(USTR) and other agencies, they are resource intensive. The recent
collapse of the World Trade Organization (WTO) trade talks at a
September 2003 meeting in Cancun, Mexico, is expected to make FTAs a
more important vehicle for accomplishing U.S. trade goals.
As a result of this increase in the number of FTAs and their growing
importance to U.S. trade policy, you asked us to review how potential
FTA partners are selected. More specifically, you asked us to (1)
provide information about the factors that influence the selection of
FTA partners and how these factors have been applied; (2) analyze the
interagency process for selecting FTA partners, including how USTR
coordinates the views of key trade agencies and consults with the
Congress, and business and public interest groups; and (3) assess how
the administration makes decisions regarding the availability and
allocation of resources to FTAs and other trade priorities, such as the
regional Free Trade Area of the Americas (FTAA) and multilateral talks
at the WTO.
To meet these objectives, we reviewed documents from the key U.S.
agencies involved in the process of selecting FTA partners, including
USTR, and the departments of State, Commerce, Agriculture, and the
Treasury. In addition, we interviewed key executive branch officials,
including the U.S. Trade Representative. (App. I provides detailed
information on our objectives, scope, and methodology.):
Results in Brief:
Various factors influence FTA partner selections. Four FTA partners
were selected in 2002, primarily on the basis of the Trade
Representative's own evaluation of 13 factors related to U.S.
political, economic, and trade strategy goals. After the four
selections in 2002, the key trade agencies decided to use six broad
factors to guide their future discussions on potential FTA partners.
These factors are (1) country readiness, (2) economic and commercial
benefits, (3) benefits to the broader trade liberalization strategy,
(4) compatibility with U.S. interests, (5) congressional and private-
sector support, and (6) U.S. government resource constraints. Senior
trade officials with whom we spoke stressed that FTA partner decisions
are not mechanical and take into consideration the President's goal of
making significant progress in liberalizing global trade within and
across geographic regions. The factors cited most often regarding the
FTA partners that were selected to date primarily reflect U.S.
strategic, foreign policy, and foreign economic development goals.
The interagency process for selecting FTA partners has become more
systematic since 2002 and routinely considers input from the Congress
and the private sector. Up through 2002, only a cabinet-level group,
composed of the Trade Representative and some counterparts in key trade
agencies, assessed potential FTA partners. Some high-level agency
officials told us that they provided input to these deliberations, but
others said the process had been ad hoc and exclusive. Subsequently, in
May 2003, the National Security Council advanced guidelines to improve
the process of assessing potential partners by, among other things,
expanding the number of interagency groups involved in the assessments.
Agencies used this new process for assessing the Dominican Republic as
a potential FTA partner. U.S. officials with whom we spoke expressed
satisfaction with the new process because it allows wider interagency
participation and uses decision papers to guide deliberations. USTR
officials said that they keep the Congress apprised of the countries
under consideration as FTA partners, and that they regularly receive
input from the Congress and from business and nongovernmental groups on
potential FTA partners as part of the process.
The administration's overall trade liberalization strategy has driven
decisions about deploying resources to advance the U.S.'s ambitious FTA
negotiating agenda. However, decisions to pursue FTAs have been made
with little systematic planning regarding trade-offs with other trade
priorities, even though FTAs are resource intensive. USTR staff and
travel funds are heavily committed to FTAs. For example, FTA-related
travel accounted for 37 percent of USTR's travel budget in fiscal year
2003. USTR also relies on specialists at other agencies to assist with
negotiations and analysis. USTR is taking steps, such as sequencing
negotiations, to address these constraints. Because of concerns over
the resources required to accomplish the growing FTA negotiating
agenda, the consideration of resource constraints has now been included
as one of the factors used for selecting FTA partners. However,
decisions to pursue FTAs still come without systematic data or planning
for the actual resources that USTR or other agencies require. As more
FTAs are contemplated in the wake of the failed Cancun WTO talks,
existing mechanisms may prove inadequate to the task of aggressively
pursuing a bilateral FTA agenda while remaining engaged in regional and
multilateral forums.
In this report, we are recommending that USTR work with other key trade
agencies to develop more systematic data and plans for allocating staff
and resources across the full U.S. trade agenda, including FTAs and
other negotiating priorities.
Background:
Under its constitutional authority to regulate commerce with foreign
nations, the Congress has enacted laws authorizing the President to
enter into trade agreements with other countries to reduce tariff and
nontariff barriers.[Footnote 1] One major recent law to provide this
authority is the Bipartisan Trade Promotion Authority Act of 2002
(TPA).[Footnote 2] The TPA legislation sets forth U.S. trade
negotiating objectives that apply to negotiating FTAs.[Footnote 3]
However, the TPA legislation does not impose any specific criteria on
the President for choosing FTA partners, except that the President must
take into account the extent to which the negotiating partner has
implemented or has accelerated implementation of its WTO
obligations.[Footnote 4]
Other trade legislation encourages pursuit of FTA negotiations. For
example, in the 2000 African Growth and Opportunity Act,[Footnote 5]
the Congress declared that FTAs should be negotiated with interested
sub-Saharan African countries. Furthermore, in the United States-
Caribbean Basin Trade Partnership Act, the Congress declared that it
was the policy of the United States to seek the participation of
Caribbean Basin beneficiary countries in the FTAA or another FTA, with
the goal of achieving full participation in any such agreement by
2005.[Footnote 6]
USTR, the President's principal trade policy advisor and coordinator,
has the lead responsibility for the formulation and coordination of
trade policy; the negotiation of trade agreements, including FTAs; and
the enforcement of trade agreements. Under the Trade Expansion Act of
1962, President John F. Kennedy established an interagency trade policy
organization to be chaired by USTR to assist with these and other trade
responsibilities.[Footnote 7] Currently, this organization consists of
three tiers of committees, which from the lowest tier to the highest
tier are the Trade Policy Staff Committee (TPSC), the Trade Policy
Review Group (TPRG), and the National Security Council/National
Economic Council (NSC/NEC). Within this framework, USTR coordinates
with Commerce, Agriculture, State, and Treasury and other U.S. agencies
as issues needing their expertise arise.
The United States currently has five FTAs with six nations: Israel
(1985), Canada (1989), Mexico (1994),[Footnote 8] Jordan (2001),
Singapore (2003), and Chile (2003). The United States has already begun
negotiating four more bilateral or subregional FTAs with Central
America, the Southern Africa Customs Union (SACU), Australia, and
Morocco. USTR has announced that it plans to negotiate FTAs with the
Dominican Republic; Bahrain; Panama; and the Andean countries of
Colombia, Peru, Ecuador, and Bolivia. In addition, in October 2003, the
President announced the U.S.'s intent to negotiate an FTA with
Thailand. Other countries are under consideration as FTA partners. For
a general time line of U.S. FTAs since 1985, see figure 1.
Figure 1: FTA Time Line, 1985-2003:
[See PDF for image]
[End of figure]
Early FTA Selections Were Based Primarily on the Trade Representative's
Evaluation; New Interagency Process Uses Six Factors:
The factors used since the 2002 selection of FTA negotiating partners
have evolved. According to the Trade Representative and other U.S.
officials, the Trade Representative chose the first four FTA partners
on the basis of his own evaluation of factors and after he had
consulted the President and certain other high-level officials in
several other agencies. Subsequently, the NSC coordinated the views of
key trade agencies, which decided to use six factors in a revised
interagency process to recommend proposed FTA partners to the
President.
The Trade Representative Used 13 Factors for Early Selections:
The Trade Representative told us that his early FTA proposals emerged
from his evaluation of 13 factors he developed over time--the same
factors that the Trade Representative and other USTR officials continue
to use. However, he cautioned that these factors "carry no
coefficients"--that is, they do not have relative weights. The Trade
Representative described the factors in some detail, with examples.
* Congressional guidance. According to the Trade Representative, his
office consults with the Congress before and after FTA selection to
ensure support and eventual congressional approval. USTR officials also
examine public support, including the ethnic components of such
support.
* Business and agricultural interest. The Trade Representative
considers the views of business and agriculture and evaluates both
current and future economic benefits of a potential FTA.
* Special product sensitivities. The Trade Representative assesses how
an FTA will adversely affect certain sectors and products, such as
textiles and sugar.
* Serious political will of the prospective partner to undertake needed
trade reforms. The Trade Representative considers the political will in
the foreign country to enact and implement trade reforms. He also
assesses the country's trade capabilities and the candidate's track
record in meeting current trade obligations.
* Willingness to implement other reforms. The Trade Representative
stated that FTAs are a development tool that may help promote other
economic reforms. The United States views these reforms as links to
market-oriented economic development and future growth. Prospective FTA
partners are expected to show serious intention in this regard to
ensure that they understand (1) how important it is to make this
commitment to reform and (2) the extent of the obligations that a
comprehensive FTA with the United States involves.
* Commitment to WTO and other trade agreements. USTR considers a
potential FTA partner's commitment to the trade disciplines in the WTO
and the commitments being discussed at the ongoing FTAA negotiations.
* Contribution to regional integration. The United States has put in
place initiatives to advance U.S. goals on a regional basis and foster
regional economic integration. The Trade Representative told us that
the Central American Free Trade Agreement (CAFTA)--Costa Rica, El
Salvador, Guatemala, Honduras, and Nicaragua--and Chile FTAs have the
potential to help integrate the whole region by helping to enact and
implement the FTAA. Similarly, the SACU FTA may also help the
integration of these five African countries (South Africa, Botswana,
Lesotho, Namibia, and Swaziland).
* Support of civil society groups. The Trade Representative highlighted
the views of labor and environmental groups as important components of
FTA selections because these views affect prospects of congressional
passage.
* Cooperation in security and foreign policy. The Trade Representative
considers the extent to which potential partners are willing to support
U.S. security and foreign policy objectives. For example, Jordan,
Morocco, and Bahrain support U.S. objectives in the Middle East, and
the CAFTA nations supported U.S. objectives in Iraq.
* Need to counter FTAs that place U.S. commercial interests at a
disadvantage. The Trade Representative is interested in negotiating
FTAs that will offer U.S. commercial interests opportunities on a par
with other countries that already have FTAs. (See app. II for a list of
European Union and U.S. FTAs.):
* Need to do FTAs in each of the world's major regions. The Trade
Representative prefers to negotiate FTAs in each of the major regions
of the world: Asia (Singapore, Australia, and Thailand); the Middle
East (Jordan, Morocco, and Bahrain); Africa (SACU); and the Americas
(CAFTA and the Dominican Republic).
* Need to ensure a mix of developed and developing countries. The Trade
Representative also seeks FTAs with both developed and developing
countries--for example, Australia and SACU. Developing countries are a
key to trade growth because they account for a significant share of the
world's population and represent an important negotiating bloc in the
WTO.[Footnote 9]
* Demand on USTR resources. The Trade Representative recognizes that
the resources needed for FTA negotiations are not unlimited.
Agencies Now Consider Six Factors:
As a result of discussions among relevant agencies, six factors now
guide the discussions in selecting future FTA partners.
* Country readiness. Country readiness involves the country's political
will, trade capabilities, and rule of law systems.[Footnote 10] U.S.
agencies involved in FTA partner selection discussions may interpret
this factor somewhat differently, since each agency filters the
information though the lens of its specific mission. For example, USTR
may review a prospective candidate's adherence to trade obligations and
its leaders' commitment to negotiating all trade issues that currently
comprise the comprehensive FTAs that the United States seeks to
negotiate. However, Treasury may look at the candidate's overall
macroeconomic stability and the strength of its financial and banking
system.
* Economic/Commercial benefit. According to U.S. officials, the
interagency group reviews the likely economic benefit to the United
States. It assesses macroeconomic benefits (trade and investment
potential) and the likely effects on specific products and sectors.
(See app. III for potential and existing FTA partners' share of total
U.S. trade.):
* Benefits to the broader trade liberalization strategy. This factor
relates to the prospective FTA partner's overall support for U.S. trade
goals. Other elements considered within this category are the potential
FTA partner's willingness to resolve trade problems through its
participation in a Trade and Investment Framework Agreement with the
United States, success in meeting its WTO obligations, and support of
key U.S. positions in FTAA and WTO negotiations.
* Compatibility with U.S. interests. A potential FTA partner is
examined for its compatibility with broad U.S. interests, including its
support for U.S. foreign policy positions. One USTR official stated
that sometimes a foreign leader's visit can prompt serious discussions
that lead to that country's consideration as a future FTA partner.
Likewise, the Trade Representative's foreign travels also are important
in bringing attention to a possible FTA with a particular country.
However, other requirements, including but not limited to WTO
membership and a Trade and Investment Framework Agreement, must still
be met.
* Congressional/Private-sector support. Agencies also review the extent
to which a particular FTA selection has garnered support from the
Congress, business groups, and civil society.
* U.S. government resource constraints. This factor focuses primarily
on constraints at USTR--what regional office is available to lead the
negotiation, what staff are available, and how the timing may affect
meeting postnegotiation TPA requirements. Other agencies' resources
also play a role in this discussion.
Selections Are Not Mechanical; Trade Strategy and Foreign Policy
Considerations Predominate:
In terms of how the six selection factors are applied, according to
officials that we interviewed, the broad factors guide the discussion,
but they are not hard-and-fast decision rules. Moreover, administration
decision makers have not set thresholds for eligibility determinations.
Key officials told us that USTR's views are central but that the now-
standard discussion of the factors permits each participating executive
agency to contribute its perspective, thus potentially adding to issues
that USTR needs to address in the future negotiations. For example,
other agencies may be aware that a prospective partner has engaged in
money laundering or human rights abuses or has been slow to resolve
intellectual property disputes.
As illustrated below, the FTA selections made to date in 2002-03
primarily reflect U.S. trade strategy, foreign policy, and foreign
economic goals. (See app. IV for more details on specific FTA
partners.) According to USTR, the administration is working
aggressively on its "competitive liberalization" strategy, because it
seeks to spur progress by creating a positive dynamic to liberalize
trade on multiple levels: bilaterally, regionally, and multilaterally.
USTR also reports that the U.S.'s willingness to pursue bilateral FTAs
has bolstered countries' interest and encouraged them to make the
changes necessary to enter into FTA negotiations with the United
States.
* Australia. This FTA negotiation represents the greatest immediate
commercial benefit of any single ongoing FTA, with 1.2 percent of total
U.S. trade in 2002. A U.S.-Australia FTA would add to the regional
distribution of FTAs for the United States and would strengthen U.S.
ties to a valued ally. The increased U.S. access to Australia's market
would likely increase trade in goods and services, enhance employment
opportunities, and encourage additional two-way investment.
* Bahrain. Although Bahrain represents a small share of U.S. trade, an
FTA with this U.S. ally and moderate Muslim nation would support U.S.
security and political goals by fostering prosperity in the region. As
a stepping-stone to an eventual Middle East Free Trade Area, Bahrain
could become the hub of a subregional block of countries with closer
trading relationships with the United States. An FTA with Bahrain might
be completed relatively quickly due to Bahrain's reform-minded outlook.
* Central American Free Trade Agreement. The commercial benefit of an
FTA with five Central American countries would be 0.95 percent of total
U.S. trade. In the United States-Caribbean Basin Trade Partnership Act,
the Congress declared that it was the policy of the United States to
seek the participation of Caribbean Basin beneficiary countries in the
FTAA or another FTA, with the goal of achieving full participation in
any such agreement by 2005.[Footnote 11] CAFTA would provide regional
balance among FTAs and add to the momentum for the hemispherewide FTAA,
a major U.S. trade priority. It would also help lock in and broaden
reforms such as anticorruption and government accountability measures,
support economic integration within the region, and enable the United
States to increase exports and gain U.S. access to more affordable
goods.
* Dominican Republic. If the Dominican Republic is added to the overall
CAFTA region, it would bring the CAFTA trade from 0.95 percent to 1.32
percent of total U.S. trade in 2002, slightly more than that of
Australia. The Dominican Republic had strong support in the Congress
for its addition to the CAFTA negotiations, in part because excluding
it from CAFTA could lead to adverse economic consequences in the
Dominican Republic. However, according to a key participant in the
discussion, the decision to add the Dominican Republic also included
careful consideration of U.S. concerns about its protection of
intellectual property rights and its status as one of the worst
offenders on human trafficking.
* Morocco. Although a U.S.-Morocco FTA would have minimal trade benefit
to the United States, one USTR official stated that this FTA would
further the administration's goal of promoting openness, tolerance, and
economic growth across the volatile Middle East. Morocco, a moderate
Muslim country, also signaled its readiness to enter into a
comprehensive FTA by demonstrating its willingness to liberalize its
economy and make domestic reforms.
* Southern Africa Customs Union.[Footnote 12] Responding to
congressional guidance in the 2000 African Growth and Opportunity Act,
USTR inititated FTA negotiations with SACU in November 2002. This FTA
contributes to the U.S.'s desire for regional balance among FTAs,
creates an opportunity for the United States to build trade capacity in
the region, and strengthens SACU's role as a negotiating partner in
other trade forums, such as the WTO. The commercial benefit of this FTA
represents 0.42 percent of total U.S. trade.
The Administration Has Enhanced Its Interagency Process for Assessing
Potential FTA Partners:
The selection of FTA partners has evolved from a limited high-level
consultation to a more systematic and deliberative process involving
more U.S. officials. USTR keeps the Congress apprised of potential FTA
partners and routinely considers the Congress's views in making
selections. Business and other nongovernmental groups have also
provided their views to USTR on potential FTA partners and FTA
negotiations.
Initially, the Trade Representative Consulted with Counterparts:
In February 2002, the Trade Representative made recommendations for
potential FTA partners to a cabinet-level interagency group under the
leadership of the NSC/NEC. According to agency officials, this
interagency group informally assessed the proposed countries and
offered a consensus recommendation to the President, who named the four
FTAs that are currently under negotiation (Australia, CAFTA, Morocco,
and SACU). We found no evidence that this group used decision papers on
the potential partners to guide its deliberations. Nevertheless, some
high-level U.S. officials we interviewed confirmed that they provided
USTR and other key trade agencies with input at the time and were on
board with the final selections. Other officials, however, expressed
concern that the discussions of the four FTAs had been ad hoc and that
they had not been able to provide important input.
Also, in February 2002, the cabinet-level interagency group directed
their deputies to make the process more systematic by formalizing the
factors that would be used for assessing future FTA partners. The
desire to have a more systematic interagency process for assessing
partners was largely driven by the expected growth in the number of
potential FTAs that would follow the enactment of the trade promotion
authority legislation.
Recently Enhanced Interagency Process Is More Deliberative and
Inclusive:
In May 2003, the NSC/NEC issued guidelines on assessing potential FTA
partners. In addition to identifying the factors to be used, the
guidelines make the interagency process more inclusive by supporting
the use of four standing interagency groups for in-depth
deliberations.[Footnote 13] Each group in turn is to use decision
papers to assess potential FTA partners and make recommendations for
consideration at the next level, all the way up to the President. After
the President selects an FTA partner, he is to notify the Congress,
through USTR, at least 90 days before he intends to start FTA
negotiations with the selected partner. USTR consults with the
Congressional Oversight Group before sending its notification letter
about a prospective FTA negotiation to the Congress.
As shown in figure 2, the selection process is initiated by USTR and
begins with the assessments of potential FTA partners by the TPSC and
the TPRG. The TPSC is composed of senior officials from more than 19
U.S. agencies and departments who bring specialized technical knowledge
on trade issues to the deliberations. The TPRG is composed of under
secretaries or assistant secretaries and other senior officials from
all of these U.S. agencies and departments who contribute policy
perspectives on trade to the discussions. Although USTR leads and
coordinates interagency discussions, other agencies are expected to
play an important role in developing pertinent information and
discussing the pros and cons of potential FTA partners.
The next level of the process consists of the Deputies Committee and
the Principals Committee, two interagency groups that the NSC/NEC lead
and coordinate.[Footnote 14] The Deputies Committee is composed of the
deputies from all the cabinet agencies involved in trade. The
Principals Committee is composed of the secretaries from all of these
agencies, such as the Trade Representative and the Secretaries of State
and the Treasury. Deputies and Principals meet and use decision papers
as needed to assess potential FTA partners before forwarding their
recommendations to the President.
Figure 2: Interagency Process for FTA Partner Selection and
Notification to the Congress:
[See PDF for image]
[End of figure]
USTR and other agencies used this new interagency process for the first
time in assessing the Dominican Republic as a potential FTA partner in
mid-2003. Agency officials with whom we spoke expressed satisfaction
that this process enabled their agencies to contribute to the
assessment of potential FTA partners and strengthen the content of the
decision papers. Nevertheless, because the process is new, it remains
to be seen how it will continue to perform.
Congress and Private Sector Provide Input into the Process:
Input from the Congress and the private sector is part of the process
of selecting potential FTA partners and negotiating FTAs, according to
USTR officials. Although the President is not specifically required to
consult with the Congress before selecting potential FTA partners, USTR
officials nevertheless stated that they keep the Congress apprised of
the FTA partners under consideration through formal and informal means.
According to these officials, the views of the Congress are very
important to their agency and are seriously considered in FTA partner
selections because the Congress must ultimately approve all FTAs. USTR
gave us an extensive list of pertinent contacts between the agency and
the Congress to confirm these discussions. As required by the TPA
legislation, USTR has notified and consulted with the Congress about
FTA negotiations. For instance, USTR has provided written notice to the
Congress at least 90 days before initiating FTA negotiations since the
passage of TPA.
Few Members of Congress have openly questioned choices of FTA partners
to date, and those Members that have raised questions still expressed
broad support for the "competitive liberalization strategy."
Nevertheless, certain Members of Congress have urged USTR to give
greater priority to economic and commercial conditions in selecting
future FTA partners.
Also, business and nongovernmental groups have given USTR their views
on potential FTA partners and FTA negotiations. In late 2002, for
instance, a major U.S. business group provided USTR with its views on
potential FTA partners and on the factors that USTR and other U.S.
agencies involved in trade should consider during the assessment of
potential partners. Also, nongovernmental groups have provided input on
FTA negotiations. However, representatives of some of these groups
indicated that they were not sure whether USTR had seriously considered
their comments.
Ambitious FTA Agenda Calls for Better Resource Management:
Despite the administration's ambitious and growing FTA agenda, USTR and
other agencies have made resource decisions without considering
resource trade-offs among FTAs and other trade priorities. FTAs are
resource intensive, and USTR has taken some measures to cope with
resource constraints. Nevertheless, the administration continues to
consider new FTAs. Present strategies for managing staff and other
resources mean that newly announced FTA partners will have to wait to
begin negotiations until other ongoing negotiations are concluded.
Although resource constraints are now one of the factors taken into
account when USTR and other agencies select FTA partners, these
interagency discussions still leave gaps because they are not based on
robust data and do not specify resource needs or commitments.
The Administration's Active FTA Agenda Drives Resource Deployment:
The administration's ambitious trade agenda has driven its resource
decisions about FTAs and other trade priorities. Since the enactment of
TPA in August 2002, the administration has stepped up its pursuit of
bilateral and subregional FTAs as part of its overall strategy of
competitive liberalization. As shown in figure 3, the United States now
has numerous, simultaneous FTA negotiations under way, with ambitious
target dates for completion. Although it took 2 years to negotiate two
FTAs with relatively advanced partners (Chile and Singapore), USTR
currently has FTAs under negotiation with four partners, three of which
(Australia, Morocco, and CAFTA) are slated to be completed within 1
year. Negotiations for the fourth partner (SACU) will be conducted
through 2004, as will negotiations for Bahrain. In addition, USTR
officials hope to complete negotiations with the Dominican Republic in
early 2004.
Figure 3: Selected Milestones for U.S. Trade Agreement Negotiations,
2000-05:
[See PDF for image]
Note: USTR has not specified ending dates for the Bahrain or Dominican
Republic negotiations or for the implementation of the potential CAFTA
agreement.
[End of figure]
The administration's decisions to pursue these FTAs have been made with
little formal consideration for potential resource trade-offs, even
though the WTO and FTAA negotiations are scheduled to finish by January
1, 2005. As a result, USTR has had to deploy its resources in a
reactive manner. According to agency officials, the four FTAs currently
being negotiated were selected before any explicit resource decisions
were made because USTR officials assumed that resources would be
identified afterward to carry out these priority negotiations.
According to USTR, in these cases the resources were "made to fit" the
priorities.
FTAs Are Resource Intensive:
FTA negotiations require intensive effort on the part of USTR and other
trade agencies such as Agriculture, Commerce, State, and Treasury. For
example, our analysis of the U.S. negotiating team suggests that on
average each of the six FTAs under negotiation in 2003 involved 11
percent of USTR's 209 full-time staff. In addition, USTR estimates
prepared for us show that the nonstaff costs of negotiating rounds in
fiscal year 2003 were $1.7 million, of which approximately 68 percent
were travel costs (see table 1). Moreover, FTA travel comprised 37
percent of USTR's total travel costs in fiscal year 2003, and USTR
estimates that it will constitute 42 percent of its total travel costs
in fiscal year 2004.
Table 1: Fiscal Year 2003 USTR Nonstaff Costs for Negotiating FTAs:
Dollars in thousands:
FTA: Chile;
Employee travel: $104;
Interpretation/Translation: $151;
Video-conferencing: $15;
Fiscal data[A]: $4;
Representation costs: $9;
Total cost: $283.
FTA: Singapore;
Employee travel: $162;
Interpretation/Translation: $0;
Video-conferencing: $4;
Fiscal data[A]: $5;
Representation costs: $1;
Total cost: $172.
FTA: CAFTA;
Employee travel: $258;
Interpretation/Translation: $80;
Video-conferencing: $0;
Fiscal data[A]: $3;
Representation costs: $0;
Total cost: $341.
FTA: Morocco;
Employee travel: $137;
Interpretation/Translation: $198;
Video-conferencing: $2;
Fiscal data[A]: $0;
Representation costs: $2;
Total cost: $339.
FTA: Australia;
Employee travel: $246;
Interpretation/Translation: $0;
Video-conferencing: $10;
Fiscal data[A]: $9;
Representation costs: $1;
Total cost: $266.
FTA: SACU;
Employee travel: $214;
Interpretation/Translation: $0;
Video- conferencing: $0;
Fiscal data[A]: $28;
Representation costs: $1;
Total cost: $243.
FTA: Middle East;
Employee travel: $63;
Interpretation/Translation: $1;
Video-conferencing: $3;
Fiscal data[A]: $23;
Representation costs: $1;
Total cost: $91.
Total;
Employee travel: $1,184;
Interpretation/Translation: $430;
Video-conferencing: $34;
Fiscal data[A]: $72;
Representation costs: $15;
Total cost: $1,735.
Source: USTR.
Note: Costs do not include staff time for working on negotiations.
[A] Cost refers to logistical support provided by the State Department
when USTR officials travel to countries.
[End of table]
Although USTR takes the lead for all negotiating groups except
financial services, it relies on other agencies, such as Agriculture,
Commerce, State, and Treasury, for analysis, expertise, and staff to
support its negotiations. For example, other trade agencies regularly
provide staff on a nonreimbursable "detail" (loan) basis to USTR. USTR
currently has more than 30 such detailees. In addition, of the 134 U.S.
officials present for the first five rounds of the Australia FTA
negotiations, 22 were from USTR and the rest (112) came from other
agencies. In fact, table 2 shows that other agencies comprised an
average of 76 percent of all members of U.S. FTA negotiating teams.
Table 2: Estimated Agency Staff on U.S. Negotiating Teams for Completed
Rounds of FTA Negotiations, as of October 2003:
Free Trade Agreement: Australia;
Number of negotiating rounds (as of 10/03): 5;
Number and percentage of staff: USTR: 22; (16%);
Number and percentage of staff: Commerce: 20; (15%);
Number and percentage of staff: Agriculture: 8; (6%);
Number and percentage of staff: Treasury: 16; (12%);
Number and percentage of staff: State: 23; (17%);
Number and percentage of staff: Other: 45; (34%);
Number and percentage of staff: Total for all agencies: 134; (100%).
Free Trade Agreement: CAFTA;
Number of negotiating rounds (as of 10/ 03): 7;
Number and percentage of staff: USTR: 20; (27%);
Number and percentage of staff: Commerce: 10; (13%);
Number and percentage of staff: Agriculture: 7; (9%);
Number and percentage of staff: Treasury: 3; (4%);
Number and percentage of staff: State: 12; (16%);
Number and percentage of staff: Other: 23; (31%);
Number and percentage of staff: Total for all agencies: 75; (100%).
Free Trade Agreement: Chile;
Number of negotiating rounds (as of 10/ 03): 14;
Number and percentage of staff: USTR: 25; (22%);
Number and percentage of staff: Commerce: 16; (14%);
Number and percentage of staff: Agriculture: 5; (4%);
Number and percentage of staff: Treasury: 8; (7%);
Number and percentage of staff: State: 10; (9%);
Number and percentage of staff: Other: 48; (43%);
Number and percentage of staff: Total for all agencies: 112; (100%).
Free Trade Agreement: Morocco;
Number of negotiating rounds (as of 10/ 03): 5;
Number and percentage of staff: USTR: 21; (16%);
Number and percentage of staff: Commerce: 19; (15%);
Number and percentage of staff: Agriculture: 7; (5%);
Number and percentage of staff: Treasury: 8; (6%);
Number and percentage of staff: State: 19; (15%);
Number and percentage of staff: Other: 56; (43%);
Number and percentage of staff: Total for all agencies: 130; (100%).
Free Trade Agreement: SACU;
Number of negotiating rounds (as of 10/03): 3;
Number and percentage of staff: USTR: 22; (47%);
Number and percentage of staff: Commerce: 6; (13%);
Number and percentage of staff: Agriculture: 2; (4%);
Number and percentage of staff: Treasury: 2; (4%);
Number and percentage of staff: State: 6; (13%);
Number and percentage of staff: Other: 9; (19%);
Number and percentage of staff: Total for all agencies: 47; (100%).
Free Trade Agreement: Singapore;
Number of negotiating rounds (as of 10/03): 11;
Number and percentage of staff: USTR: 26; (19%);
Number and percentage of staff: Commerce: 23; (17%);
Number and percentage of staff: Agriculture: 1; (1%);
Number and percentage of staff: Treasury: 16; (12%);
Number and percentage of staff: State: 22; (16%);
Number and percentage of staff: Other: 50; (36%);
Number and percentage of staff: Total for all agencies: 139; (100%).
Source: GAO analysis of USTR data.
Notes:
Morocco and SACU numbers were based on GAO analysis of the USTR
negotiating lists. SACU numbers were based on lists from two
negotiating rounds.
Percentages are rounded to the nearest percent.
[End of table]
However, while table 2 conveys the wide range of officials who are part
of an FTA negotiating team, it does not capture "staff effort" to
support the team because none of the agencies involved routinely tracks
staff time devoted to FTA negotiations, and only one agency was able to
produce estimates for us. According to USTR officials, nearly all USTR
staff are involved in each FTA before, during, or after negotiating
sessions. One USDA official said its delegates to the negotiating team
were just the tip of the iceberg because many other people at
Agriculture were involved in providing complex analyses during the
negotiations. Commerce data prepared for us (see table 3) show that a
large number of staff support FTAs, but their total staff hours
translate into fewer full-time equivalents.
Table 3: International Trade Administration Free Trade Agreement
Resource Allocation, Fiscal Year 2003:
Total number of staff involved;
FTAs in progress: Australia: 71;
FTAs in progress: Bahrain: 21;
FTAs in progress: CAFTA: 76;
FTAs in progress: Dominican Republic: 22;
FTAs in progress: Morocco: 61;
FTAs in progress: SACU: 55;
FTAs signed: Chile: 91;
FTAs signed: Singapore: 60.
Total number of full-time equivalents;
FTAs in progress: Australia: 4.16;
FTAs in progress: Bahrain: 0.53;
FTAs in progress: CAFTA: 7.24;
FTAs in progress: Dominican Republic: 0.6;
FTAs in progress: Morocco: 3.53;
FTAs in progress: SACU: 4.42;
FTAs signed: Chile: 8.51;
FTAs signed: Singapore: 3.5.
Total fiscal year 2003 travel expenditures;
FTAs in progress: Australia: $43,074;
FTAs in progress: Bahrain: $0;
FTAs in progress: CAFTA: $88,046;
FTAs in progress: Dominican Republic: $0;
FTAs in progress: Morocco: $17,626;
FTAs in progress: SACU: $48,515;
FTAs signed: Chile: $38,118;
FTAs signed: Singapore: $32,737.
Source: Commerce.
Note: The Chile and Singapore FTAs are complete; therefore, travel
expenditures and staff time were higher in previous years.
[End of table]
The conclusion of negotiations does not mean that the work is completed
on a given FTA. Additional demands, such as legal checks and
translation activities, continue. For example, USTR officials reported
that negotiations in the Americas have been slowed because of follow-up
work after the signing of the Chile FTA. The increase in the number of
FTAs is also likely to result in higher implementation-related needs,
such as monitoring, enforcement, and dispute resolution. Our prior work
has highlighted concerns about the increasing monitoring and
enforcement workload at trade agencies,[Footnote 15] and USTR estimates
that every three additional disputes require an additional legal
specialist.
USTR Is Taking Measures to Cope with Resource Constraints:
USTR's approach to dealing with resource constraints is sequencing one
set of negotiations per region at a given time in order to leverage the
expertise of its negotiators. As a result, as depicted in figure 4,
USTR's Office for the Americas will not start negotiating with the
Dominican Republic until after the CAFTA negotiations have been
completed.[Footnote 16] Similarly, although Bahrain was ready to begin
negotiating immediately with the United States, USTR's Office of Europe
and the Mediterranean will postpone those negotiations until the
completion of negotiations with Morocco. USTR has indicated that it
will continue to schedule negotiations in each region after the current
set of FTAs is completed. Thus, regional negotiators will remain fully
occupied, and the queue of countries waiting to negotiate with the
United States will likely grow.
Figure 4: USTR Sequences FTAs in Four Regions to Negotiate Ambitious
FTA Agenda:
[See PDF for image]
Note: Actual ending dates may differ from those shown in the figure.
[End of figure]
In addition, USTR officials reported that they are using past
agreements as a template for the ongoing negotiations.[Footnote 17]
This strategy has progressed to the point that USTR now believes it can
save resources by having countries accede to already negotiated FTAs.
This process, called "docking," means that negotiators will not have to
spend time renegotiating every area. For example, USTR officials stated
that the Dominican Republic will be integrated into the U.S.-CAFTA FTA
and that only market access issues should require separate, detailed
negotiations. Although CAFTA will require 1 year to complete, USTR
expects that docking the Dominican Republic onto the agreement will
take considerably less time. USTR is also considering how to integrate
separate FTAs as it works toward a U.S.-Middle East Free Trade Area.
USTR is taking other measures to save resources. For example, USTR
officials noted that they regularly combine various missions in one
trip abroad and that they use extensive teleconferencing. In addition,
USTR officials reported that they have cut costs by holding meetings in
a central location[Footnote 18] and conducting negotiations in English
when possible to avoid interpretation expenses. USTR is also improving
its system for tracking TPA requirements for each FTA. To facilitate
interagency collaboration, USTR developed a negotiations calendar
listing the various bilateral, regional, and multilateral negotiating
rounds so that negotiators may better identify competing demands.
Finally, concerns that the FTA agenda would continue to be busy led to
resource constraints' inclusion as a factor used for FTA partner
selection during the interagency process. This step represents an
improvement over the past situation, in which no formal discussion of
resource constraints or trade-offs preceded FTA partner selection even
though USTR and other trade agencies already faced human capital
challenges.[Footnote 19] As a result, resource constraints are now a
standard part of interagency FTA partner selection discussions. One
official welcomed this development because it has enabled assumptions
regarding resource allocations to be made ahead of time and for
consideration to be given to how resources are currently devoted to
ongoing bilateral and regional efforts.
Present Resource Management Efforts Leave Gaps:
Despite USTR's efforts to better manage resource constraints, important
gaps remain. For example, decisions about staffing and funds for FTA
negotiations lack formal data and systematic consideration of their
likely impact on other trade priorities. Moreover, USTR is continuing
to make specific requests for resources from other agencies on a case-
by-case basis, after FTA partners are selected, making it difficult for
these agencies to do their own resource planning for FTAs.
Resource Decisions Are Made with Limited Data and Planning:
USTR's resource data are not sufficiently robust for resource planning,
and this limits USTR's flexibility in meeting its resource needs. When
assigning resources for the current set of FTAs, USTR officials did not
have clear data on hand regarding what was needed and what resources
were available. We reported in 2002 that valid and reliable data are
critical to assessing an agency's workforce requirements and to
heighten an agency's ability to manage risk by allowing managers to (1)
spotlight areas for attention before crises develop and (2) identify
opportunities for enhancing agency results.[Footnote 20] In 2003, we
also noted the importance of considering human capital challenges by
relying on valid and current data and reported that the absence of such
data can seriously undermine efforts to respond to current and emerging
challenges.[Footnote 21] USTR has indicated that it is developing a new
system for tracking spending according to different trade priorities,
including FTAs, but this system is not yet operational. In addition,
although staff time is a major resource devoted to FTAs, USTR officials
informed us that they have no plans to track the time staff spend
working on FTAs.
The importance of systematic data and planning can be seen in the
constraint imposed by limited numbers of functional experts, who focus
on areas such as intellectual property rights, agriculture, and market
access. These experts are often needed to support multiple, concurrent
negotiations. However, the offices in which these staff work at USTR
average only eight people each, so they often represent a limiting
factor to completing FTA negotiations.
USTR officials reported that they make many resource management
decisions informally on an ongoing basis, in addition to those
decisions based on advance planning that took into account the U.S.'s
various trade priorities. For example, although regional assistant U.S.
trade representatives provide staff and travel estimates as part of the
annual budget cycle, they frequently bring specific resource requests
to USTR management throughout the year. USTR officials, who must
mediate among these often competing priorities, told us that they
looked at several factors--for example, negotiating deadlines and the
need for specific expertise--to make these resource decisions. If there
were competing demands for staffing for the Morocco and SACU
negotiations, for example, USTR management might consider that the need
would be more pressing for the Morocco negotiator because of that
negotiation's shorter deadline for completion (e.g., the end of 2003
versus the end of 2004 for SACU). If USTR managers identify a lack of
available staff to cover certain issues, they then turn to other
agencies to supplement their own staff. This informal, reactive
approach may no longer be adequate to meet the needs of increasing
numbers of negotiations, particularly if the U.S.'s trade strategy
shifts to an emphasis on bilateral agreements in the wake of the failed
Cancun ministerial of the WTO. Moreover, this approach also affects
resource management at other trade agencies.
USTR Makes Staffing Requests to Other Agencies on a Case-by-Case Basis:
The revised interagency process has not made requesting and securing
staff from other agencies more systematic because participants do not
address specific staffing needs or other cost estimates in detail in
the formal interagency meetings, such as the TPSC and the TPRG, that
are used to select FTA partners. Instead, the discussion of resource
constraints focuses more on matters like timing for multiple FTAs in
the same region, such as Morocco and Bahrain.
Specific requests for and commitments of resources by other agencies
still occur after FTA partners are selected. According to USTR, after
an FTA partner country is selected, the Trade Representative's office
asks the assistant U.S. trade representatives for a listing of
officials at USTR and other agencies they propose to constitute the
U.S. negotiating team. On the basis of these lists, USTR managers
report that they talk to their respective counterparts at other
agencies regarding USTR's needs. These discussions generally begin just
before USTR notifies the Congress about the FTA and are ongoing
thereafter as negotiations get under way. According to USTR, the ad hoc
nature of these requests is due in part to USTR's varying needs for
different agencies' involvement, depending on the topics being
negotiated and the changing requirements over time.
USTR's reactive method for requesting staff from other agencies makes
it difficult for their own resource planning. Commerce officials, for
example, noted that the department had much less notice about FTA
staffing needs than it did about the need for staff support during
NAFTA negotiations. Agencies report that they were generally able to
comply with USTR's requests but noted that the requests sometimes
strained their resources. At times it was necessary for agencies to
make trade-offs, if the same person was requested for concurrent
negotiations, agency officials told us. According to Treasury
officials, they have had to "perform triage" on some operations due to
the heavy FTA workload. Other agencies also noted the burden of travel
costs. Although agencies continue to respond to USTR's informal method
of requesting resources, it is unclear how well this system will
continue to function in light of the intensifying FTA agenda.
Conclusions:
After selecting the first several FTA partners with limited interagency
consultation, the administration has adopted a more rigorous and
inclusive process to implement its FTA agenda. This framework for
interagency discussions appears to be promoting fuller deliberations
and wider involvement in the FTA partner selections. However, other
management challenges remain. In particular, USTR and other agencies
have reported that FTA negotiations are already straining available
resources. Several steps have since been taken to deal with resource
constraints associated with FTAs. However, present mechanisms still
leave important gaps because they do not involve systematic data or
interagency resource planning. As the United States sets its sights on
more bilateral agreements, especially in light of the breakdown of the
September 2003 Cancun negotiations, the importance of managing trade
priorities at USTR and other trade agencies becomes increasingly
significant. Managing resources, especially across diverse agencies, is
paramount in meeting the competing demands of a complex and
intensifying U.S. trade agenda.
Recommendation for Executive Action:
In light of USTR's limited resources and management systems to track
those resources, we recommend that the Office of the U.S. Trade
Representative work with other key trade agencies to develop more
systematic data and plans for allocating staff and resources across the
full U.S. trade agenda, including FTAs and other negotiating
priorities.
Agency Comments and Our Evaluation:
We provided a draft of this report to the departments of State,
Commerce, Agriculture, and the Treasury. State and Treasury did not
provide comments. We received written comments on a draft of this
report from the U.S. Trade Representative (see app. V). USTR, Commerce,
and Agriculture also provided technical comments, which we incorporated
in the report as appropriate.
In his response to our draft report, the Trade Representative
emphasized the administration's competitive liberalization strategy
and the role of FTAs in the strategy. He laid out the steps his office
is taking to promote liberalized trade and described what the
administration is doing in several regions throughout the world. He
referred to resource pressures when he noted that his office is
pressing forward with global, hemispheric, and five subregional or
bilateral FTA negotiations simultaneously; while at the same time, USTR
litigation activities have soared, with WTO disputes doubling over the
last 5 years.
The Trade Representative agreed with us that the intensifying trade
agenda requires continual management improvements at USTR and
supporting agencies, and he acknowledged that increased pressures
demand "nothing less than a transformation of USTR." However, he did
not agree with our recommendation that USTR and other key trade
agencies develop more systematic data and plans for allocating staff
and resources across the full trade agenda. The Trade Representative
wrote that our emphasis on a better allocation of staff and resources
reflects an inaccurate assessment of how to allocate limited resources
most effectively and efficiently.
According to the Trade Representative, the main cause of strain at USTR
is the amount of available resources, not their allocation. The Trade
Representative maintained that USTR must be "agile, flexible and
adaptable--not bureaucratic." We believe that aligning goals and
resources promotes the flexibility needed to respond to evolving
circumstances. Our recommendation focuses on setting priorities among
the multilateral, hemispheric, and FTA negotiations that take into
account available staff. It also calls for coordinating those staff
allocations with other agencies whose resources USTR routinely calls
upon during the course of negotiations. Resource management
fundamentally involves taking a given (and limited) amount of resources
and deploying (allocating) it over program objectives aligned with the
agency's overall priorities. This approach frees managers to focus on
its core program, not on continually reacting to the daily fluctuations
of resource needs.
The resources that USTR requested in fiscal year 2004 appear to have
been justified based on its needs for completing the ongoing four FTAs
(Australia, Morocco, CAFTA, and SACU). Since then, negotiations with
the Dominican Republic, Bahrain, Panama, and the Andean countries have
been announced. This increasing workload with its related demand for
staff and travel can be better managed with (1) the collection of data
to help managers understand what resources are linked to accomplishing
agency objectives and (2) the use of these data in advance planning for
future resource allocation, which can help USTR managers coordinate
with other agencies whose own resources are affected by USTR
negotiations. The Trade Representative listed several steps that USTR
has taken to address its resource limitations. Although we recognize
and encourage the steps that USTR has already taken to make
improvements, we note that many of these efforts are already recognized
in this report and are not sufficient to address our concerns for
forward planning.
The Trade Representative pointed to the fact that we did not identify
any "misallocation of funds." Solid data would permit sound conclusions
about how federal funds are managed at USTR. The limited information
that USTR and Commerce finally provided us had to be specially
tabulated for this report because it is not routinely tracked. Our data
show that FTAs involved considerable resources at both USTR and other
agencies. Specifically, 37 percent of USTR travel funds were used for
FTA-related travel in 2003, and 11 percent of USTR's staff were
involved in each of the six FTAs completed or negotiated FTAs in 2003.
These data also show that other agencies account, on average, for more
than three-fourths of the members of U.S. FTA negotiating teams, which
averaged 106 members. Thus, USTR and other agencies commit significant
resources on trade initiatives that cover 8 percent of total U.S.
trade.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies to interested
congressional committees, the U.S. Trade Representative, the Secretary
of Commerce, the Secretary of the Treasury, the Secretary of State, and
the Secretary of Agriculture. Copies will also be made available to
others upon request. In addition, the report will be available at no
charge on the GAO Web site at [Hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me on (202) 512-4128. Other GAO contacts and staff
acknowledgments are listed in appendix VI.
Signed by:
Loren Yager:
Director, International Affairs and Trade:
[End of section]
Appendixes:
Appendix I: Objectives, Scope, and Methodology:
Senator Max Baucus, Ranking Minority Member of the Senate Finance
Committee, and Representative Calvin Dooley asked us to examine the
factors and process used to make decisions regarding the selection of
free trade agreement (FTA) negotiating partners and the allocation of
negotiating resources. In response, we (1) provided information about
the factors that influence the selection of FTA partners and described
how they were developed; (2) analyzed the interagency process for
selecting FTA partners, including how the Office of the U.S. Trade
Representative (USTR) coordinates the views of key agencies and
consults with the Congress and business and nongovernmental groups; and
(3) assessed how the executive branch makes decisions regarding the
availability and allocation of resources to FTAs and other trade
priorities, such as the regional talks of the Free Trade Area of the
Americas (FTAA) and the multilateral talks at the World Trade
Organization (WTO).
To provide information about the factors that influence the selection
of FTA partners and how they were developed, we reviewed pertinent
documentation from key U.S. agencies involved in assessing potential
FTA partners, such as USTR and the departments of State and Commerce.
For example, we reviewed pertinent USTR documentation from 2000 to 2003
on FTAs, including public speeches, articles, and agency documentation
on FTA partners. We also reviewed U.S. International Trade Commission
documents on FTAs and Congressional Research Service reports on U.S.
trade and FTAs. In addition, we interviewed knowledgeable officials at
the key agencies involved in the process of assessing potential FTA
partners. For instance, we interviewed the U.S. Trade Representative,
the Deputy U.S. Trade Representative, and several assistant U.S. Trade
Representatives; the Director of the Office of International Economics
at the National Security Council (NSC); the Under Secretary for
Economics, Business, and Agricultural Affairs at the Department of
State; the Assistant Secretary for International Affairs at the
Department of the Treasury; the Under Secretary of Farm and Foreign
Agricultural Services at the Department of Agriculture; and the Under
Secretary for International Trade at the Department of Commerce.
To analyze the interagency process for selecting FTA partners,
including how USTR coordinates the views of key trade agencies and
consults with the Congress and business and nongovernmental groups, we
reviewed pertinent documentation from key U.S. agencies involved in the
process of selecting FTA partners. For example, we reviewed USTR
documentation from 2000 to 2003 on FTAs, including public speeches,
articles, agency documents, records of contacts with the U.S. Congress,
records of public hearings, and papers on FTA partners prepared for the
consideration of the Trade Promotion Staff Committee and Trade
Promotion Review Group. Also, we interviewed officials at the key
agencies involved in the process of assessing potential FTA partners.
For example, we interviewed the U.S. Trade Representative, the Deputy
U.S. Trade Representative, and several assistant U.S. Trade
Representatives; the Director of the Office of International Economics
at the NSC; the Under Secretary for Economics, Business, and
Agricultural Affairs at the Department of State; the Assistant
Secretary for International Affairs at the Department of the Treasury;
the Under Secretary of Farm and Foreign Agricultural Services at the
Department of Agriculture; and the Under Secretary for International
Trade at the Department of Commerce. In addition, we obtained
information from business and nongovernmental organizations, including
the U.S. Chamber of Commerce, the Washington Office on Latin America,
Oxfam America, Public Citizen, World Vision, and the Center for
International Environmental Law.
To assess how decisions are made regarding the availability and
allocation of resources to FTAs and other trade priorities, we reviewed
pertinent documentation from key U.S. agencies involved in assessing
FTA partners, such as USTR and State and Commerce. For example, we
reviewed USTR documentation from 2000 to 2003 on FTAs, including papers
on potential FTA partners, lists of FTA negotiating teams, and budget
and personnel-related data. Because negotiating lists were not complete
for four of the negotiations, we asked USTR to provide summary numbers
of the participating agencies. For the other two negotiations, we did
our own analysis of agency staffing based on the negotiating lists
provided by USTR. As noted in the text, these data merely identify the
number of individuals involved and do not necessarily reflect staff
effort. We determined that USTR data were sufficiently reliable for
purposes of our assessment, even though, as our recommendation
indicates, we determined that these data are not sufficiently robust
for agency decision making and should be improved. Moreover, we
interviewed knowledgeable officials at the key agencies involved in the
process of assessing potential FTA partners. For instance, we
interviewed the U.S. Trade Representative, the Deputy U.S. Trade
Representative, and several assistant U.S. Trade Representatives; the
Director of the Office of International Economics at the NSC; the Under
Secretary for Economics, Business, and Agricultural Affairs at the
Department of State; the Assistant Secretary for International Affairs
at the Department of the Treasury; the Under Secretary of Farm and
Foreign Agricultural Services at the Department of Agriculture; and the
Under Secretary for International Trade at the Department of Commerce.
Despite repeated requests to the NSC, we were unable to obtain key
documents from the February 2002 and May 2003 meetings that provided
guidance to the interagency efforts to formalize the criteria and
enhance the process for developing recommendations to the President for
selecting potential FTA partners.
We conducted our review from June to November 2003 in accordance with
generally accepted government auditing standards.
[End of section]
Appendix II: European Union and United States Free Trade Agreements, by
Region:
[See PDF for image]
[End of figure]
[End of section]
Appendix III: U.S. Trade with Potential and Existing FTA Partners:
The following table presents trade data that describe the percentage
and amount of total U.S. trade with current and potential FTA partners,
as well as with non-FTA countries.
Table 4: U.S. Trade with Potential and Existing FTA Partners, 2002:
Dollars in millions.
Potential FTA Partners:
FTAA (excluding the North American Free Trade Agreement (NAFTA) and
Chile);
Percentage of total trade: 5.25;
Total trade (exports+imports): $119,135;
Total exports (goods+services): $53,119;
Total imports (goods+services): $66,017.
U.S. trading partners: Andean;
Percentage of total trade: 0.71;
Total trade (exports+imports): 16,075;
Total exports (goods+services): 6,464;
Total imports (goods+services): 9,611.
U.S. trading partners: Bolivia;
Percentage of total trade: 0.02;
Total trade (exports+imports): 342;
Total exports (goods+services): 182;
Total imports (goods+services): 160.
U.S. trading partners: Colombia;
Percentage of total trade: 0.38;
Total trade (exports+imports): 8,727;
Total exports (goods+services): 3,345;
Total imports (goods+services): 5,382.
U.S. trading partners: Ecuador;
Percentage of total trade: 0.16;
Total trade (exports+imports): 3,612;
Total exports (goods+services): 1,496;
Total imports (goods+services): 2,116.
U.S. trading partners: Peru;
Percentage of total trade: 0.15;
Total trade (exports+imports): 3,394;
Total exports (goods+services): 1,441;
Total imports (goods+services): 1,953.
U.S. trading partners: Central American Free Trade Agreement (CAFTA);
Percentage of total trade: 0.94;
Total trade (exports+imports): 21,269;
Total exports (goods+services): 9,423;
Total imports (goods+services): 11,846.
U.S. trading partners: Central American Free Trade Agreement (CAFTA):
Costa Rica;
Percentage of total trade: 0.27;
Total trade (exports+imports): 6,038;
Total exports (goods+services): 2,891;
Total imports (goods+services): 3,146.
U.S. trading partners: Central American Free Trade Agreement (CAFTA):
El Salvador;
Percentage of total trade: 0.16;
Total trade (exports+imports): 3,583;
Total exports (goods+services): 1,608;
Total imports (goods+services): 1,976.
U.S. trading partners: Central American Free Trade Agreement (CAFTA):
Guatemala;
Percentage of total trade: 0.21;
Total trade (exports+imports): 4,761;
Total exports (goods+services): 1,976;
Total imports (goods+services): 2,785.
U.S. trading partners: Central American Free Trade Agreement (CAFTA):
Honduras;
Percentage of total trade: 0.26;
Total trade (exports+imports): 5,786;
Total exports (goods+services): 2,524;
Total imports (goods+services): 3,262.
U.S. trading partners: Central American Free Trade Agreement (CAFTA):
Nicaragua;
Percentage of total trade: 0.05;
Total trade (exports+imports): 1,101;
Total exports (goods+services): 423;
Total imports (goods+services): 677.
U.S. trading partners: Dominican Republic;
Percentage of total trade: 0.36;
Total trade (exports+imports): 8,276;
Total exports (goods+services): 4,109;
Total imports (goods+services): 4,167.
U.S. trading partners: Panama;
Percentage of total trade: 0.07;
Total trade (exports+imports): 1,594;
Total exports (goods+services): 1,299;
Total imports (goods+services): 295.
U.S. trading partners: Remaining FTAA;
Percentage of total trade: 3.17;
Total trade (exports+imports): 71,921;
Total exports (goods+services): 31,825;
Total imports (goods+services): 40,097.
U.S. trading partners: Southern African Customs Union (SACU);
Percentage of total trade: 0.41;
Total trade (exports+imports): Potential FTA partners: 9,215;
Total exports (goods+services): Potential FTA partners: 3,674;
Total imports (goods+services): Potential FTA partners: 5,541.
U.S. trading partners: Southern African Customs Union (SACU): Botswana;
Percentage of total trade: 0.00;
Total trade (exports+imports): 61;
Total exports (goods+services): 32;
Total imports (goods+services): 30.
U.S. trading partners: Southern African Customs Union (SACU): Lesotho;
Percentage of total trade: 0.01;
Total trade (exports+imports): 323;
Total exports (goods+services): 2;
Total imports (goods+services): 321.
U.S. trading partners: Southern African Customs Union (SACU): Namibia;
Percentage of total trade: 0.00;
Total trade (exports+imports): 111;
Total exports (goods+services): 54;
Total imports (goods+services): 57.
U.S. trading partners: Southern African Customs Union (SACU): South
Africa;
Percentage of total trade: 0.38;
Total trade (exports+imports): 8,594;
Total exports (goods+services): 3,576;
Total imports (goods+services): 5,018.
U.S. trading partners: Southern African Customs Union (SACU):
Swaziland;
Percentage of total trade: 0.01;
Total trade (exports+imports): 126;
Total exports (goods+services): 11;
Total imports (goods+services): 114.
U.S. trading partners: Australia;
Percentage of total trade: 1.18;
Total trade (exports+imports): 26,830;
Total exports (goods+services): 17,496;
Total imports (goods+services): 9,334.
U.S. trading partners: Bahrain;
Percentage of total trade: 0.04;
Total trade (exports+imports): 803;
Total exports (goods+services): 407;
Total imports (goods+services): 395.
U.S. trading partners: Morocco;
Percentage of total trade: 0.04;
Total trade (exports+imports): 970;
Total exports (goods+services): 560;
Total imports (goods+services): 410.
U.S. trading partners: Thailand;
Percentage of total trade: 0.94;
Total trade (exports+imports): 21,221;
Total exports (goods+services): 5,615;
Total imports (goods+services): 15,606.
Subtotal;
Percentage of total trade: 7.85;
Total trade (exports+imports): $178,174;
Total exports (goods+services): $80,872;
Total imports (goods+services): $97,302.
Existing FTA partners:
U.S. trading partners: NAFTA;
Percentage of total trade: 28.33;
Total trade (exports+imports): $642,934;
Total exports (goods+services): $268,815;
Total imports (goods+services): $374,119.
U.S. trading partners: NAFTA: Canada;
Percentage of total trade: 17.44;
Total trade (exports+imports): 395,769;
Total exports (goods+services): 166,837;
Total imports (goods+services): 228,932.
U.S. trading partners: NAFTA: Mexico;
Percentage of total trade: 10.89;
Total trade (exports+imports): 247,165;
Total exports (goods+services): 101,978;
Total imports (goods+services): 145,187.
U.S. trading partners: Chile;
Percentage of total trade: 0.34;
Total trade (exports+imports): 7,777;
Total exports (goods+services): 3,499;
Total imports (goods+services): 4,278.
U.S. trading partners: Israel;
Percentage of total trade: 0.95;
Total trade (exports+imports): 21,587;
Total exports (goods+services): 7,567;
Total imports (goods+services): 14,020.
U.S. trading partners: Jordan;
Percentage of total trade: 0.04;
Total trade (exports+imports): 809;
Total exports (goods+services): 397;
Total imports (goods+services): 412.
U.S. trading partners: Singapore;
Percentage of total trade: 1.62;
Total trade (exports+imports): 36,670;
Total exports (goods+services): 20,484;
Total imports (goods+services): 16,186.
U.S. trading partners: Subtotal;
Percentage of total trade: 31.28;
Total trade (exports+imports): $709,777;
Total exports (goods+services): $300,762;
Total imports (goods+services): $409,015.
Trade with non-FTA countries;
Percentage of total trade: Potential FTA partners: 60.87;
Total trade (exports+imports): $1,381,187;
Total exports (goods+services): $527,460;
Total imports (goods+services): $853,728.
Total U.S. Trade (all countries);
Percentage of total trade: Potential FTA partners: 100.00;
Total trade (exports+imports): Potential FTA partners: $2,269,138;
Total exports (goods+services): Potential FTA partners: $909,094;
Total imports (goods+services): Potential FTA partners: $1,360,045.
Source: Commerce.
Notes:
Imports are imports for consumption at customs value; and exports are
domestic exports at free-alongside-value. Detailed 2002 services data
by country are available only for Argentina, Australia, Brazil, Canada,
Chile, Israel, Mexico, Venezuela, Singapore, South Africa, and
Thailand.
"Remaining FTAA countries" are Antigua and Barbuda, Argentina, the
Bahamas, Barbados, Belize, Brazil, Dominica, Grenada, Guyana, Haiti,
Jamaica, Paraguay, St. Kitts and Nevis, St. Lucia, St. Vincent and the
Grenadines, Suriname, Trinidad and Tobago, Uruguay, and Venezuela.
[End of table]
Excluding the FTAA negotiation, the current FTA negotiating partners
(CAFTA, SACU, Morocco, Australia, the Dominican Republic, Bahrain,
Thailand, Panama, and the Andean countries) collectively account for
about 4.7 percent of total U.S. trade. Of these nine partners,
Australia contributes almost 1.2 percent, or about 25 percent of their
combined trade. Chile and Singapore account for another 2.0 percent of
U.S. trade. In contrast, NAFTA brought together the U.S.'s top two
trading partners (Canada and Mexico), representing about 28 percent of
total U.S. trade. Completing the FTAA negotiations would bring an
additional 3.0 percent of total trade under FTA disciplines.
[End of section]
Appendix IV Selected U.S. Free Trade Agreement Partner Profiles:
In this appendix, we describe the background, considerations in FTA
partner selection, milestones, features, concerns, and FTA partner
participation for six countries with which the United States has or
intends to have FTAs. We also describe those components for two
regional entities--CAFTA and SACU.
U.S.-Australia FTA:
Background:
The United States and Australia are among the world's most open
economies. Both countries are prominent supporters of trade
liberalization and have maintained a stable commercial relationship,
having brought only a few dispute resolution cases against each other
in the WTO. In 2002, Australia accounted for more than $13 billion in
U.S. exports. Total two-way trade between the United States and
Australia was almost $20 billion in that year as well. The United
States and Australia have signed two bilateral agreements--the
settlement on leather products trade in 1996 and the understanding on
automotive leather subsidies in 2000. For several years, Australian
officials told U.S. policy makers about Australia's interest in an FTA
with the United States. The current Prime Minister also raised this
matter in meetings with President Bush. Until recently, though, the
Bush administration had expressed interest but had not committed to
begin negotiations. However, the FTA negotiations between the United
States and Australia are starting from a strong base, given the
similarity of the structure of their economies and the compatibility of
their trade policies.
Considerations in FTA Partner Selection in FTA Partner Selection:
USTR highlighted several reasons why Australia was selected as an FTA
partner in 2002. First, two-way trade between the United States and
Australia grew significantly in the past decade. In 2002, the United
States exported $13.1 billion to Australia, the 13TH largest
destination of U.S. exports. It also imported $6.5 billion from
Australia, the 28TH largest source of U.S. imports. Second, the
increased U.S. access to Australia's market made possible by an FTA
would further boost trade in both goods and services, enhancing
employment opportunities in both countries. Third, an FTA would
encourage additional foreign investment between the United States and
Australia, adding to the many jobs that the significant investment
flows between the two countries currently support. Fourth, an FTA would
result in greater business integration, especially in the information
technology sector, increasing efficiency and the competitiveness of the
U.S. industry. Overall, U.S. manufacturers and services providers
support these FTA negotiations. Finally, an FTA would address barriers
that U.S. exports to Australia face today, including Australia's use of
sanitary and phytosanitary measures as a means of restricting
agricultural trade.
FTA Milestones:
In November 2002, USTR notified the Congress that the United States
intended to enter into FTA negotiations with Australia in at least 90
days. In February 2003, the United States and Australia started the
first of six planned negotiating rounds. The United States and
Australia had intended to complete the negotiations by the end of 2003,
but negotiations will continue into 2004.
FTA Features:
The WTO requires that an FTA, at a minimum, substantially eliminate
tariffs and other restrictions on mutually traded goods and services.
However, the U.S.-Australia FTA is likely to be more comprehensive
given the broad negotiating objectives that the governments have
announced will cover agriculture, industry, and services issues. The
U.S.-Australia FTA will negotiate 20 broad, trade-related issues,
including market access for goods, agriculture, textiles, rules of
origin, customs administration, sanitary and phytosanitary measures,
technical barriers to trade, trade remedies, services, investment,
telecommunications, financial services, competition policy, government
procurement, electronic commerce, intellectual property, labor,
environment, transparency, and institutional arrangements and dispute
settlement. USTR leads the U.S. delegation with other delegation
members, including the NSC; the departments of State, Commerce,
Agriculture, Labor, Justice and the Treasury; the Environmental
Protection Agency; and the Federal Trade Commission.
FTA Concerns:
The United States and Australia have a firm trade relationship, and
their tariffs on most products are already very low. Therefore,
critical issues in the FTA negotiations will be nontariff barriers and
other issues. According to trade policy experts, agricultural issues
will be the greatest challenge during these negotiations. For example,
agriculture accounted for only 2.2 percent of U.S. exports to Australia
but for 29.2 percent of U.S. imports from Australia in 2002. Some in
the U.S. agricultural community oppose the negotiations. The most
recent round of negotiations took place in October 2003. Each side has
presented its own proposals and raised concerns regarding agricultural
issues.
Australia takes issue with U.S. tariff-rate quotas on dairy products,
sugar, beef, and many other products. Australia announced that it would
seek the removal of these quotas during the FTA negotiations.
Government-run commodity boards control Australian exports of wheat and
rice. Because these boards restrict U.S. exports, the United States has
targeted them for removal during the FTA negotiations. Separately, the
United States has also targeted specific Australian sanitary and
phytosanitary measures because they are highly restrictive and have
adversely affected U.S. exports of citrus, apples, pears, corn, stone
fruit, chicken, and pork. These bilateral discussions are proceeding on
a parallel track to resolve the sanitary and phytosanitary issues
between the United States and Australia.
Because all foreign investment in Australia is subject to government
screening and approval, the United States has noted Australia does not
conform to the principle of national treatment--that is, treating
foreign investors no less favorably than domestic investors. As a
result, the United States will seek the elimination or reduction of
these trade-distorting investment measures.
Even after resolving these irritants, U.S. officials are concerned
that, after the implementation of this FTA, the United States may face
many disputes on agricultural matters and other issues with Australia,
one of its closest allies.
FTA Partner Participation in Other Trade Agreements:
Australia is a WTO member and has had FTAs with New Zealand since 1966
and with Singapore since 2003. Australia and the United States are
founding members of the Asian-Pacific Economic Cooperation (APEC)
forum, an organization of 21 countries that has established the goal of
free trade and investment in that region by 2020.
U.S.-Bahrain FTA:
Background:
Bahrain is an emerging regional financial center in the Persian Gulf
region. The United States has been holding talks on economic policy
with the Gulf Cooperation Council (GCC), of which Bahrain is a member,
through the U.S.-GCC Economic Dialogue. In 2001, the United States and
Bahrain signed a bilateral investment treaty. On June 18, 2002, the two
countries signed a Trade and Investment Framework Agreement, which
enabled the United States to increase its engagement with Bahrain on
economic reforms and on bilateral trade and investment issues.
Considerations in FTA Partner Selection:
USTR emphasized several reasons for selecting Bahrain as an FTA
partner. First, an FTA with Bahrain would support U.S. security and
political goals by increasing prosperity and globalization in the
region. Second, the executive branch views the U.S.-Bahrain FTA as a
stepping-stone to an eventual Middle East Free Trade Area (MEFTA).
Bahrain could become the hub of a subregional block of countries that
might develop closer and more open trading relationships with the
United States. Third, Bahrain has been an important U.S. ally in the
region. Fourth, USTR emphasized Bahrain's readiness to undertake an FTA
with the United States, particularly in comparison with other states in
the Persian Gulf region. U.S. officials emphasized the commitment among
the highest levels of the Bahraini government to make strong economic
and political reforms to facilitate trade. Bahrain made economic
reforms in areas such as property rights and copyright laws and is an
emerging regional financial center. The country also made political
reforms, such as strengthening its parliament. According to USTR
officials, an FTA could be completed relatively quickly with Bahrain
because of its small size and reform-minded outlook. Finally, USTR
officials emphasized that an FTA with Bahrain would generate
opportunities for U.S. business.
FTA Milestones:
In January 2003, the King of Bahrain raised the idea of an FTA in a
meeting with President Bush. In May 2003, the USTR met with the
Bahraini Crown Prince and announced the executive branch's plans for
negotiating an FTA with Bahrain. On August 4, 2003, USTR notified the
Congress of the administration's intent to initiate negotiations for an
FTA with Bahrain. The target date for beginning negotiations is January
2004.
FTA Features:
The U.S.-Bahrain FTA is expected to be a key part of the U.S.-MEFTA
that the United States is supporting to address the related problems of
terrorism and poverty in the region. According to the World Bank,
unemployment in the Middle East is estimated conservatively at around
15 percent, and the labor force could expand by as much as 40 percent
in the next 10 years. In addition, USTR notes that the region has
extremely low rates of internal trade. The United States hopes that
MEFTA could encourage economic reforms that would spur investment and
increase opportunities in the region. In Jordan, for example, which
signed an FTA with the U.S. in 2001, exports to the United States grew
by 72 percent in 2002, and the United States is now Jordan's biggest
trading partner. USTR has outlined a step-by-step approach to building
a MEFTA that takes into account the different developmental and
economic levels of the countries in the region. These steps include
supporting the potential partner country's membership in the WTO;
expanding the Generalized System of Preferences (GSP) Program[Footnote
22] to increase U.S. trade with the Middle East; signing bilateral
investment treaties, trade and investment framework agreements, and
ultimately FTAs; and providing financial and technical assistance for
trade capacity-building. The President's Middle East Partnership
Initiative will help direct more than $1 billion per year from U.S.
government agencies to support trade in the Middle East.
FTA Concerns:
Despite Bahrain's and the U.S.'s interest in establishing an FTA, the
U.S. government officials with whom we spoke described regional
influences that may serve as potential obstacles to countries in the
Persian Gulf region that would like to make progress on trade with the
United States.
FTA Partner Participation in Other Trade Agreements:
Bahrain is a member of the GCC customs union, which is still developing
its trade rules. In 1989, the European Commission and the GCC signed a
Cooperative Agreement that contains a commitment from both sides to
enter into FTA negotiations. The two entities are now actively pursuing
FTA talks.
U.S.-Chile FTA:
Background:
Preceding the U.S.-Chile FTA negotiations, which began in December
2000, Chile undertook political and economic reforms. These reforms
positioned the country to implement a comprehensive trade agreement.
Before the negotiations, Chile deregulated and restructured its economy
and opened its trade ties to industrial countries. For example, in 1994
Chile reacted positively to the possibility of becoming a party to
NAFTA but negotiations ceased, due in part to the expiration of the
U.S. President's fast-track negotiating authority.[Footnote 23]
However, the Congress did not grant the President such authority for 8
years; with this delay, the accession of Chile to NAFTA did not occur.
Despite this delay, the U.S.-Chile Joint Commission on Trade and
Investment was founded on the occasion of President Clinton's visit to
Chile in 1998. The commission established a work program to address a
variety of bilateral trade and investment issues and facilitated the
exchange of trade information. Thus, both countries were prepared to
negotiate a comprehensive FTA when the negotiations began.
Considerations in FTA Partner Selection:
A variety of factors may have contributed to the U.S.'s decision to
initiate an FTA with Chile. First, U.S. exports faced a 6 percent
Chilean tariff, while exports from Chile's existing FTA partners
entered the Chilean market duty-free. Chile had therefore reduced its
purchases of U.S. exports by almost one-third from $4.38 billion in
1997 to $3.13 billion in 2001 in favor of relatively cheaper goods from
its FTA partners. An FTA with Chile provided the opportunity to reduce
this tariff that had disadvantaged U.S. exports. USTR noted that the
FTA would ensure that U.S. businesses and investors received treatment
equal to or better than Chile's other FTA partners. Second, Chile
adopted economic reforms, such as the elimination of price controls and
the privatization of state-owned enterprises, that signaled that Chile
was willing to implement a mutually beneficial FTA by solidifying these
reforms. Finally, through FTA negotiations, the United States hoped to
build Chile's support for important issues in the FTAA negotiations.
For example, the U.S.-Chile FTA negotiations better defined key
negotiating issues in areas such as labor and the environment and
demonstrated to other countries participating in the FTAA negotiations
the U.S.'s interest in furthering trade liberalization.
FTA Milestones:
On November 29, 2000, the Clinton administration announced its
intention to negotiate a comprehensive FTA with Chile. Negotiations
began on December 6, after U.S. and Chilean officials agreed on the
initial list of topics to be discussed and the organization of
negotiating groups. During the negotiations, and following the change
in U.S. administration, the U.S. and the Chilean presidents declared
their intention on April 16, 2001, to complete the agreement by the end
of that year with meetings scheduled to occur approximately once a
month through the end of 2001. However, due to the complexities of some
trade topics, the negotiations would require an additional year and
would include 14 negotiating rounds. Following the completion of these
negotiating rounds, on December 11, 2002, USTR announced that an
agreement had been reached. On June 6, 2003, USTR and the Chilean
Foreign Minister signed the agreement. USTR then submitted draft FTA
implementing bills to the Congress on July 15, 2003. The House of
Representatives and the Senate passed the U.S.-Chile Free Trade
Implementation Act on July 24 and July 31, 2003, respectively.
President Bush signed the act on September 3, 2003. USTR expects the
FTA to be implemented on or after January 1, 2004.
FTA Features:
The FTA is comprehensive in its treatment of industrial and
agricultural products and, according to USTR, provides a template to
demonstrate to other FTA partners the U.S.'s high expectations with
regard to the scope of FTAs. For example, the negotiations encompassed
trade in all goods, with approximately 85 percent of U.S.-Chilean trade
in industrial and commercial goods becoming duty-free upon the
agreement's implementation. In addition, 75 percent of trade in
agricultural products will become duty-free during the first 4 years
following implementation. The FTA will also increase each country's
market access to a wide range of services.
FTA Concerns:
Some Members of Congress and certain nongovernmental organizations have
expressed concern about the use of the U.S.-Chile FTA as a model for
negotiations with other FTA partners, particularly with regard to the
agreement's provisions concerning labor standards and the temporary
entry of professionals. For example, certain Members and labor
interests have argued that the FTA's labor provisions may be adequate
for countries, such as Chile, that maintain stringent labor standards
but such provisions may not be as appropriate for other countries that
have not maintained or enforced strong labor laws. In addition, certain
Members have raised concern with regard to the FTA's provisions
facilitating the entry of professionals, stating that such provisions
touch upon immigration laws that are within the purview of the Congress
and should not be amended through trade agreements.
FTA Partner Participation in Other Trade Agreements:
Successive Chilean governments have pursued trade liberalization
strategies and export-oriented development policies, resulting in FTAs
with Canada in 1997; Mexico in 1999; Central America and the European
Union in 2002; and South Korea in 2003. In addition, Chile signed
economic complementation agreements with Argentina in 1992; Venezuela,
Colombia, and Bolivia in 1993; Ecuador in 1994; and Peru in 1998. Chile
has also enacted an association agreement with the member countries of
the Southern Common Market in October 1996. Finally, Chile joined the
APEC organization in 1992 to boost commercial ties to Asian markets and
is currently involved in negotiations for an FTAA in the western
hemisphere.
U.S.-Dominican Republic FTA:
Background:
The Dominican Republic is the largest economy in the Caribbean Basin
region. The trading relationship between the United States and the
Dominican Republic has been shaped by the Caribbean Basin Initiative,
which is a series of U.S. laws and programs beginning in 1983 that
established unilateral U.S. trade preferences for goods from the
Dominican Republic and 23 other countries in the region. In October
2002, the two countries held their first meeting under the U.S.-
Dominican Republic Trade and Investment Council to deepen trade
relations. When the United States began pursuing an FTA with the five
Central American countries in 2002, the Dominican Republic expressed
concern that it would suffer adverse economic consequences if it were
not also included in the agreement. However, the United States did not
support the request, in part because it did not believe the Dominican
Republic had exhibited sufficient commitment to negotiate and implement
a comprehensive FTA with high-levels of commitment. In response, the
Dominican government took steps to address some problematic issues, and
aligned themselves more with the United States in multilateral trade
forums.
Considerations in FTA Partner Selection:
According to USTR officials, the Dominican Republic was the first FTA
partner that was selected under the new interagency process established
in May 2003. USTR has emphasized several reasons for the selection of
the Dominican Republic as an FTA partner. First, according to USTR, an
FTA with the Dominican Republic would help support the broader U.S.
trade strategy of competitive liberalization because the Dominican
Republic would continue to uphold U.S. positions in the WTO and FTAA
negotiations. Second, the FTA could bring economic and commercial
benefits to the United States by increasing market access and creating
more jobs. The Dominican Republic is the largest U.S. trading partner
in the Caribbean, and USTR has described the country as an economic
engine in the region. The combined markets of the Dominican Republic
and the CAFTA countries would be larger than Brazil and would become
the second-largest U.S. trading partner in Latin America. Third, the
Dominican Republic was selected because the FTA would support U.S.
efforts to strengthen democracy and the rule of law. For example, the
United States plans to push for the inclusion of strong anticorruption
and transparency requirements in the agreement. Fourth, the Congress
has instructed the executive branch through the Caribbean Basin
Initiative to enter into mutually advantageous FTAs with countries
included in this initiative.[Footnote 24] Fifth, there appears to be
broad bipartisan support in the Congress for this FTA. Sixth, the
Dominican Republic has made clear progress in terms of its readiness to
negotiate an FTA with the United States, according to USTR. For
example, the Dominican government familiarized itself with the U.S.-
Chile FTA and improved its protections of intellectual property rights,
including satellite broadcasts and antipiracy provisions, in response
to U.S. concerns. According to USTR, there is a clear willingness at
the highest levels of the Dominican government to meet U.S.
requirements for FTA partners. Seventh, there is strong support for an
FTA among U.S. industry and agricultural exporters, including from such
groups as the U.S. Chamber of Commerce.
FTA Milestones:
The Dominican President met with President Bush in July 2002 to request
an FTA with the United States. In a joint statement issued at a March
2003 meeting of the U.S.-Dominican Republic Trade and Investment
Council, the United States acknowledged the steps that the Dominican
Republic had taken so far to improve its trade policy and stated its
willingness to consider adding the Dominican Republic to CAFTA. On
August 4, 2003, following a meeting with the Congressional Oversight
Group, the Trade Representative formally notified the Congress of the
executive branch's intent to initiate FTA negotiations with the
Dominican Republic. The target date for starting negotiations is
January 2004. USTR hopes to conclude negotiations in March 2004.
FTA Features:
USTR plans to integrate the Dominican Republic into the FTA it is
already negotiating with five Central American countries. Officials
will propose that the Dominican Republic accede to the framework of
CAFTA as it is being discussed, after which the talks will focus on
market access issues. USTR hopes to present the Congress with one
agreement for CAFTA countries and the Dominican Republic.
FTA Concerns:
Given the short time frame, integrating the Dominican Republic may be
challenging. In fall 2003, USTR is to consult with the Dominicans about
the Chile and Singapore FTAs to explore the extent of Dominican support
in adopting provisions similar to those in these agreements.
Other concerns involve the State Department's identification of the
Dominican Republic as a country that does not fully comply with minimum
standards in the trafficking of persons.
FTA Partner Participation in Other Trade Agreements:
The Dominican Republic has FTAs with the Caribbean Community
(CARICOM)[Footnote 25] and the Central American countries.
U.S.-Morocco FTA:
Background:
Morocco is a U.S. ally in the war against terrorism and a long-time
democratic partner in the Arab world. The U.S.-Morocco Bilateral
Investment Treaty, signed in 1991, provided protections to U.S.
investors in Morocco. In 1995, the United States signed a trade and
investment framework agreement with Morocco to promote freer trade,
increased investment, and stronger economic ties between the two
countries. Moreover, the 2001 "open skies" agreement between the United
States and Morocco supported increased air passenger and cargo links
between the two countries. According to USTR, Moroccan supporters of an
FTA with the United States cited the benefits that Jordan attained
after it signed an FTA in 2001 as a reason for desiring a U.S.-Morocco
FTA.
Considerations in FTA Partner Selection:
USTR emphasized several reasons for selecting Morocco as an FTA
partner. First, USTR officials noted that a trade agreement with
Morocco would further the executive branch's goal of promoting
openness, tolerance, and economic growth across the Muslim world.
Second, Morocco has been a staunch ally in the war against terrorism.
Third, the agreement would ensure stronger Moroccan support for U.S.
positions in the WTO negotiations. Fourth, according to USTR, an FTA
with the United States would enable Morocco to strengthen its economic
and political reforms, such as its recent program to liberalize and
privatize key sectors, and help promote sustainable development and
environmental protection. The FTA would emphasize transparency, which
would help make Morocco's government institutions more accountable.
Fifth, the United States is expected to benefit economically from an
FTA with Morocco because the agreement would eliminate tariffs and
other unjustified barriers to trade between the two countries. Morocco
currently taxes U.S. products at an average of 20 percent, while the
United States only poses a 4 percent tariff on Moroccan products. A
U.S.-Morocco FTA would also help protect U.S. investments in Morocco
and level the playing field with the European Union, with which Morocco
has an association agreement. Growth prospects for U.S. products and
services, such as energy and tourism, also exist. Finally, USTR
officials noted that Moroccan negotiators were well prepared to
undertake FTA negotiations with the United States because they had
studied the U.S.-Jordan FTA.
FTA Milestones:
On April 23, 2002, President Bush and the Moroccan King announced that
their two countries would seek an FTA. USTR notified the Congress of
its intent to negotiate an FTA with Morocco on October 1, 2002. On
November 21, 2002, USTR convened a public hearing on the U.S.-Morocco
FTA. Negotiations started on January 21, 2003. On July 22, 2003, four
U.S. legislators announced the creation of the Moroccan Caucus, whose
purpose is to support increased trade and stronger ties between the
United States and Morocco. Because the target date for completing
negotiations of December 2003 was not met, negotiations will continue
in 2004.
FTA Features:
The executive branch views the U.S.-Morocco FTA as a key to
underpinning the President's broader Middle East trade strategy. The
agreement builds upon the FTAs with Jordan and Israel and might serve
as a model for other North African and Middle Eastern countries
interested in increased trade. U.S. executive branch officials hope
that Morocco will become a hub for subregional integration and in turn
serve as one of several subregional centers that could be built into a
MEFTA.
The U.S. Agency for International Development will provide assistance
for trade capacity-building programs to help Morocco meet the
obligations involved in signing and implementing an FTA with the United
States. The United States will also provide technical assistance in
areas such as agriculture sector reform, which are likely to be
sensitive. U.S. assistance will also focus on civil society and
business groups in order to strengthen public input to the negotiating
process and maximize the benefits of an FTA for Morocco. The U.S.
Agency for International Development estimates that these activities
will cost between $40 million and $48 million over 5 years.
FTA Concerns:
Morocco may face complex decisions in its agricultural sector, which
employs 40 percent of Morocco's workforce.
FTA Partner Participation in Other Trade Agreements:
Morocco signed the Euro-Mediterranean Association Agreement with the
European Union in 1996. As part of the Barcelona Process, which
envisions a free trade zone stretching across Europe and in North
Africa by 2010, Morocco has signed FTAs with several other North
African countries. According to USTR, agriculture was generally
excluded from the association agreement with the European Union, and
U.S. exporters could gain significant advantages under an FTA with
Morocco.
U.S.-Singapore FTA:
Background:
Singapore has been a long-time proponent of trade liberalization.
However, a U.S. trade official noted that the announcement of the
intention to negotiate a U.S.-Singapore FTA at the APEC conference in
November 2000 was unexpected, but the selection was based on the
Clinton administration's interest in completing an FTA with a
relatively large trading partner that maintained an open economy. In
addition, as Singapore's economy did not include many sectors sensitive
to U.S. producers, the Clinton administration hoped to conclude the FTA
quickly, while establishing a model for future FTAs.
Considerations in FTA Partner Selection:
The negotiation of a U.S.-Singapore FTA in 2000 may have been motivated
by various factors. First, an FTA with Singapore furthered the Clinton
administration's emphasis on access to big emerging markets. The year
negotiations began, Singapore was the 10th largest U.S. trading
partner, and the value of U.S.-Singapore trade had doubled since the
early 1990s, according to Commerce. In addition, many U.S. corporations
invest in Singapore as a regional base for exports and production,
thereby making the United States the largest foreign investor in
Singapore. Second, an FTA with Singapore is the first such agreement
between the United States and an Asian country, and this agreement
offered an opportunity to strengthen U.S. relations with a region
experiencing economic integration and expanding trade. For example, as
Singapore has undertaken efforts to liberalize trade and attract
multinational corporations, USTR noted that this FTA may serve as a
foundation for the Enterprise for ASEAN Initiative.[Footnote 26] Third,
both countries maintain mutual security interests, and since 1992 the
U.S. military has had access to facilities in Singapore, which
facilitates military deployments to strategic locations. In addition,
Singapore has supported the U.S. military's continued presence and
opposes any ASEAN defense arrangements that might withdraw U.S. armed
forces from Asia. Fourth, the Congress and the U.S. business community
undertook efforts to support an FTA with Singapore. For example, before
the negotiations, legislation was introduced in the Congress that would
have authorized the President to enter into an FTA with Singapore and
would have provided for expedited congressional consideration of the
agreement. Business support included a 1999 visit to Singapore by 22
U.S. business executives to discuss with the Singaporean Prime Minister
the possibility of establishing an FTA and strengthening U.S.-Singapore
ties.
FTA Milestones:
President Clinton and the Prime Minister of Singapore announced an
agreement to negotiate an FTA during the APEC conference in November
2000. Negotiations then began under the Clinton administration in
December 2000 and concluded under the Bush administration in November
2002. Following 11 rounds, USTR announced on January 15, 2003, that
agreement had been reached; on January 30, 2003, the executive branch
notified the Congress of its intent to sign the FTA. President Bush and
the Singaporean Prime Minister signed the agreement on May 6, 2003.
USTR sent the draft FTA implementing legislation to the Congress in
June 2003, and the House and Senate passed the legislation on July 24
and July 31, 2003, respectively. President Bush signed the FTA
implementing legislation on September 3, 2003. January 1, 2004, is the
scheduled date for the FTA's implementation.
FTA Features:
Preceding the FTA negotiations, the United States and Singapore had
signed a Trade and Investment Framework Agreement, and 99 percent of
U.S. exports already entered Singapore duty-free. In addition, both
countries have maintained relatively open investment regimes. Thus, the
FTA is expected to have relatively little impact on U.S. exports, and
the elimination of nontariff barriers will provide the majority of
benefits. However, USTR has commented that the FTA serves as a model
for future FTAs due to its comprehensive scope and the inclusion of
commitments not covered in earlier FTAs. For example, according to USTR
officials, the text of the U.S.-Singapore FTA has served as a template
to demonstrate to future FTA partners the comprehensive scope that the
United States expects in FTAs.
FTA Concerns:
Certain Members of Congress and some labor and environmental groups
have expressed concern over (1) the possible impact of the U.S.-
Singapore FTA and (2) the use of the FTA as a template for other
agreements. Specific concerns include the potential threat to U.S.
producers in import-competing sectors, such as U.S. manufacturers of
electronic equipment and other machinery, and the possible negative
environmental effects, such as increased pollution from
industrialization. In addition, certain Members have also expressed
concern about some of the agreement's provisions, including those
relating to the temporary entry of professionals, which they say
impinge on U.S. immigration law without congressional input, and the
agreement's Integrated Sourcing Initiative, which some Members claimed
expands trade benefits under the U.S.-Singapore FTA to territories
outside of Singapore, although these territories have not assumed key
obligations that the Congress has insisted should be included in
FTAs.[Footnote 27]
FTA Partner Participation in Other Trade Agreements:
Singapore is party to many preferential trade agreements, with the
majority of these agreements only recently implemented. For example,
while Singapore has been a member of the ASEAN Free Trade Area since
1992, only since January 2001 has Singapore entered into an FTA with
New Zealand. In addition, in January 2002, Singapore concluded an FTA
with Japan, which excludes agricultural products; effective January
2003, Singapore implemented an FTA with the European Free Trade
Association. In February 2003, Singapore signed an FTA with Australia
and has been negotiating FTAs with Mexico and Canada since 2000 and
2001, respectively. In addition, a study group was established in
November 2002 to explore a possible FTA between Singapore and South
Korea.
U.S.-CAFTA FTA:
Background:
Since the late 1980s, the countries of Central America have been moving
from civil conflict toward peace and democracy. The U.S.-Central
American trading relationship has been shaped by the Caribbean Basin
Initiative, which promotes economic growth in the region through a
series of unilateral U.S. trade preferences for 24 countries. President
Clinton stressed the commitment of the United States to expanding trade
between the United States and Central America at a 1997 summit with
leaders from Central America and the Dominican Republic. President Bush
has continued the push for increased free trade with Central America.
Considerations in FTA Partner Selection:
USTR emphasized several reasons why the CAFTA countries (Costa Rica, El
Salvador, Guatemala, Honduras, and Nicaragua) were selected as FTA
partners. First, CAFTA would help lock in and broaden the economic and
political reforms made in these countries throughout the 1990s. For
example, elements of the FTA that require increased transparency could
help counter corruption and support government accountability in the
CAFTA countries. Second, pursuing an FTA with the CAFTA countries would
complement U.S. goals in the FTAA and the WTO, particularly given the
support of CAFTA countries for U.S. negotiating positions. The
agreement would also support the ongoing economic integration of the
region. Third, an FTA would enable the United States to address market
access barriers in the CAFTA countries and thus promote U.S. exports to
the region and increase U.S. access to more affordable goods. Under the
Caribbean Basin Initiative, U.S. tariffs on Central American goods are
already low, with 74 percent of CAFTA country imports entering the
United States duty-free in 2002. An FTA would enable the United States
and the CAFTA countries to have reciprocal tariff levels and would
remove the requirement that Caribbean Basin Initiative preferences be
reviewed every year. A fourth reason for the selection is country
readiness. The CAFTA countries are familiar with U.S. approaches to
trade because they have concluded a NAFTA-like agreement with Mexico in
2000. Fifth, the Congress has instructed the executive branch through
the Caribbean Basin Initiative to enter into mutually advantageous FTAs
with Central American countries. Finally, the U.S. business community
is interested in the potential gains they could see from CAFTA. Some 40
percent of total goods imported by Latin America come from the United
States, thereby making the region an important market for some U.S.
sectors.
FTA Milestones:
In September 2001, the Bush administration held talks on free trade
with the CAFTA countries. In January 2002, Bush announced that the
United States would explore an FTA with these countries. Starting in
February 2002, USTR held seven workshops with the CAFTA countries to
ensure they would be able to develop and implement an FTA with the
United States. In October 2002, following a meeting of the
Congressional Oversight Group, President Bush formally notified the
Congress of his intention to begin FTA negotiations with the CAFTA
countries. USTR convened a public hearing on CAFTA in November 2002.
Working-level negotiations started in January 2003 and concluded in
December 2003, without Costa Rica. The United States hopes to sign the
agreement--which could include a component with the Dominican Republic-
-by spring 2004.
FTA Features:
There are five negotiating groups[Footnote 28] for the CAFTA
negotiations. The decision to establish only five negotiating groups
reflects the CAFTA countries' interest in consolidating the
negotiations, given their limited negotiating resources. In addition to
these five working groups, there is also a nonnegotiating, multiagency
effort responsible for trade capacity-building. This capacity-building
effort includes projects to increase citizen access to trade
negotiations, support the negotiating teams, strengthen food safety
inspection systems, and enhance the implementation of labor laws. As
part of these efforts, each country identified its needs in a National
Trade Capacity Building Strategy. Other agencies involved in trade
capacity-building include the U.S. Agency for International Development
and the Inter-American Development Bank. The executive branch made a
$47 million budget request for U.S. capacity-building assistance in the
region in 2003.
FTA Concerns:
Some civil society groups and Members of Congress are concerned that
the CAFTA agreement will not adequately address their labor and
environmental concerns in the CAFTA countries. There is concern that
USTR may support language of the U.S.-Chile FTA, which calls for
countries to enforce their domestic labor laws. Some civil society
groups and Members believe this approach is not appropriate for the
CAFTA countries because their labor laws are not as stringent as
Chile's laws. Similarly, some civil society groups claim that the
environmental commitments stemming from the FTA may not build upon
existing programs or preclude investor lawsuits that could undermine
environmental laws. Finally, there is concern that there has not been a
sufficient mechanism for public input.
Market access for agricultural goods and textiles is another potential
area of contention. Two Members have expressed concern that the CAFTA
countries are reluctant to lower tariffs on U.S. agricultural products.
The U.S. sugar industry and some U.S. textile and apparel producers
have also expressed concern about heightened competition from CAFTA
suppliers.
FTA Partner Participation in Other Trade Agreements:
The CAFTA countries are members of the Central American Common Market.
In addition, these countries have negotiated more than 20 FTAs with
such countries as Mexico, Canada, and several South American countries.
U.S.-SACU FTA:
Background:
The Southern African Customs Union, which is comprised of Botswana,
Lesotho, Namibia, South Africa, and Swaziland, accounted for almost
one-half of the gross domestic product in sub-Saharan Africa and for
$2.5 billion in U.S. exports to the region in 2002. Total two-way trade
between the United States and SACU was more than $7 billion that year.
South Africa has the largest economy among the SACU countries and the
United States and South Africa have had a trade and investment
framework agreement since 1999. The 2000 African Growth and Opportunity
Act (AGOA)[Footnote 29] declares that FTAs should be negotiated with
sub-Saharan African countries to serve as catalysts for trade and for
U.S. private-sector investment in the region. As a result, by moving
from one-way trade preferences to a reciprocal FTA with SACU, the
United States expects to build on the success of AGOA and to deepen
U.S. political and economic ties to sub-Saharan Africa. The United
States also hopes to lend momentum to U.S. development efforts in the
region by encouraging greater foreign direct investment and promoting
regional integration and economic growth.
Considerations in FTA Partner Selection:
USTR noted several reasons why the SACU countries were selected as FTA
partners. For instance, in pursuing an FTA with SACU, the executive
branch responded to Congress's direction to negotiate FTAs with sub-
Saharan countries, as expressed in AGOA. USTR emphasized that the SACU
countries are ready, individually and collectively, to be free trade
partners. An FTA with the SACU countries would strengthen growing
bilateral commercial ties between the United States and these countries
and address barriers in these countries to U.S. exports. These barriers
include high tariffs on certain goods, overly restrictive product
licensing measures, inadequate protection of intellectual property
rights, and restrictions the SACU governments impose that make it
difficult for U.S. service firms to do business in these countries. An
FTA would offer an opportunity to improve southern Africa's commercial
competitiveness and to better position the region for success in the
U.S market and the global economy. In addition, an FTA would help the
SACU countries attract much-needed new foreign direct investment
because international investors prefer access to a large and integrated
market. An FTA might also level the playing field in areas where U.S.
exporters are disadvantaged by the European Union's FTA with South
Africa. Finally, this FTA would reinforce the economic reforms that
have taken place in the SACU countries and might encourage additional
progress where needed.
FTA Milestones:
In November 2002, USTR notified the Congress that the United States
intended to enter into FTA negotiations with SACU in at least 90 days.
The United States and SACU intend to complete the negotiations by
December 2004.
FTA Features:
A U.S.-SACU FTA agreement is likely to be comprehensive because the
governments have announced broad negotiating objectives that cover
agriculture, industry, and services issues. The United States is
committed to providing the technical assistance necessary for SACU
countries to assume the responsibilities of full partnership and to
share in the benefits of free trade. The United States and SACU have
established a special cooperative group on trade capacity-building
specifically for these negotiations, with $2 million in initial funding
from the U.S. Agency for International Development. This group is to
meet regularly during the negotiations to identify needs and swiftly
direct technical assistance resources to help SACU countries better
prepare for and participate in negotiations, implement agreed-upon
commitments, and take advantage of free trade.
FTA Concerns:
Several groups representing U.S. retailers, food distributors, and
metal importers have supported the reduction of U.S. tariffs on SACU
goods. Groups representing service industries and recycled clothing
have favored removing tariff and nontariff barriers in the SACU market.
However, other groups have opposed the additional opening of U.S.
markets to SACU goods. Agriculture, steel, and the textile and apparel
industries are expected to monitor negotiations closely.
FTA Partner Participation in Other Trade Agreements:
The SACU countries are members of the WTO. South Africa has had an FTA
with the European Union since 2000.
[End of section]
Appendix V: Comments from the Office of the U.S. Trade Representative:
EXECUTIVE OFFICE OF THE PRESIDENT
THE UNITED STATES TRADE REPRESENTATIVE
WASHINGTON, D.C. 20508:
December 3, 2003:
Mr. David M. Walker
Comptroller of the United States
United States General Accounting Office
Washington, DC 20548:
Dear Mr. Walker:
Thank you for requesting our comments on the draft report entitled,
"International Trade: Intensifying Free Trade Negotiating Agenda Calls
for Better Allocation of Staff and Resources." I understand this report
follows a Congressional request that you review how potential partners
for U.S. free trade agreements (FTAs) are selected. In response, we
would like to provide our perspective on the FTA selection process as
well as some specific comments on the resource issues you identified.
Selecting FTA Partners:
When the Bush Administration set out to revitalize America's trade
agenda almost three years ago, we outlined our plans clearly and
openly: We would pursue a strategy of "competitive liberalization" to
advance free trade globally, regionally, and bilaterally. By moving
forward simultaneously on multiple fronts, the United States can:
overcome or bypass obstacles; exert maximum leverage for openness;
target the needs of developing countries, especially those most
committed to economic and political reforms; establish models of
success, especially in cutting-edge areas; strengthen America's ties
with all regions within a global economy; and create a fresh political
dynamic by putting free trade on the offensive.
Careful selection of FTA partners is a key part of this design --but as
a part, it must be understood in the context of the overall strategy.
As GAO rightly explains in its report, the selection process cannot be
a mechanical one in which we choose only the most eager, or the
largest, or the friendliest countries as partners. Rather, we need to
consider a range of factors, including how an FTA fits with our larger
goal of advancing free trade around the world. Your report outlines the
criteria we examine.
At its most basic level, the competitive liberalization strategy simply
means that America expands and strengthens its options. If free trade
progress becomes stalled globally --where any one of 148 economies in
the World Trade Organization (WTO) has veto power --then we can move
ahead regionally and bilaterally. If our hemispheric talks are
progressing stage-by-stage, we can point to more ambitious
possibilities through FTAs with individual countries and sub-regions.
Having a strong bilateral or sub-regional option helps spur progress
in the larger negotiations. The recent disappointment in Cancun
provides a case in point. A number of the "won't do" countries that
frustrated the "can do" spirit of Doha are now rethinking the
consequences as the United States vigorously advances FTAs around the
world.
Pathways to Greater Trade:
Competitive liberalization offers countries within regions a step-by-
step pathway to greater trade reforms and openness with the United
States. Both the President's Enterprise for ASEAN Initiative and his
plan to work toward a Middle East Free Trade Area start by helping non-
member countries to join the WTO, strengthening both the global rules-
based system and countries participating in it. For those more
advanced, we negotiate Trade and Investment Framework Agreements
(TIFAs) and Bilateral Investment Treaties (BITs). We employ these
customized arrangements to resolve trade and investment issues, improve
performance in areas such as protecting intellectual property rights
and strengthening customs operations, promote business ties, analyze
the possibilities for an FTA, and prepare the capacity to negotiate an
FTA. Finally, we may negotiate a wide-ranging, state-of-the-art FTA
that will help establish a model for a region and incentives for
neighbors. With this graduated, stepladder approach, we can engage
virtually every country interested in working with us, and more
importantly, we create a healthy dynamic in which countries compete to
become fuller members of the trading system and better partners of the
United States.
For example, the President launched the Enterprise for ASEAN Initiative
in October 2002. With our newly completed Singapore FTA serving as a
benchmark for what ASEAN nations may achieve, we are helping those
nations not part of the WTO to join. Cambodia recently acceded and
Vietnam is working toward WTO membership. We are using TIFAs with the
Philippines, Indonesia, Brunei, and Thailand to spur further progress.
We are working with private groups to help our respective publics
understand the value of improved trade and to lay the groundwork for
future agreements. As a result of these efforts, the President
announced our intention to initiate negotiations for a comprehensive,
state-of-the-art FTA with Thailand early in 2004.
Our Middle East Free Trade Area initiative offers a similar pathway for
the Mahgreb, Gulf states, and the lands near Israel. We are making
progress toward bringing Saudi Arabia into the WTO. We have TIFAs and
BITs throughout the region and several more in the works. We are
working to complete an FTA with Morocco this year, to complement our
FTAs with Israel and Jordan, and we will begin FTA negotiations with
Bahrain early in 2004. It is our aim that within ten years these
initiatives may be integrated to form a region-wide free trade area.
In Africa, the African Growth and Opportunity Act (AGOA) is creating
tangible incentives for commercial and economic reform as it provides
enhanced access to the U.S. market for products from 38 eligible sub-
Saharan nations. Our FTA negotiations with the five countries of the
Southern African Customs Union (Botswana, Lesotho,
Namibia, South Africa, and Swaziland) will create a first-of-its-kind
agreement with the continent, build on AGOA's success, and show other
Africans that the United States is committed to helping those who are
working toward reforms and open trade.
For Latin America, we are pursuing dual tracks. We are strongly
committed to creating a comprehensive and ambitious Free Trade Area of
the Americas (FTAA). At the same time, we are pursuing multiple FTAs
that will complement NAFTA and our new agreement with Chile. We are
aiming to complete the Central America FTA negotiations in December,
and we expect to integrate the Dominican Republic into that agreement
in 2004. We would then move forward with Panama, Colombia, Peru,
Ecuador, and Bolivia. Together, these agreements would open up over
two-thirds of the hemisphere's non-U.S. GDP to free trade across a
comprehensive, modern agenda. At the same time, our aim is to open the
markets of all the Americas, while assisting development and democracy
in places as different as Caribbean islands and the large economies of
Mercosur.
South Asia remains a challenge, but we are looking hard for
opportunities. In particular, Sri Lanka, with which we have a strong
TIFA and relationship in the WTO, may be a promising FTA candidate for
the near future.
Finally, our strategy seeks a mix of developing and developed nations.
Our negotiations with Australia will create a top-quality FTA with a
large industrial, service, and agricultural economy of growing promise
and set a strong standard for future agreements.
As part of our larger strategy, deeper trade and economic ties with our
FTA partners are producing substantial results in their own right:
* Our new and pending FTA partners, if considered together, would
constitute America's third largest export market and the sixth largest
economy in the world.
* Our current and pending FTA partners in the Americas encompass two-
thirds of Western Hemisphere's GDP (excluding the United States.).
* These FTAs are state-of-the-art, breaking new ground and setting high
standards. Unlike the many FTAs around the world, centered largely on
tariffs for goods and perhaps some agriculture, the U.S. agreements
address services, investment, intellectual property rights, public
transparency, government procurement, and labor and environment issues.
* Our FTAs enhance regional integration. When countries negotiate with
us as a group (e.g., in CAFTA and the Southern Africa FTA), they also
commit to free trade with each other to their great mutual advantage.
Botswana, for instance, is both a successful multiparty democracy and a
well-run economy, but it is hindered by its small size. As part of the
larger market formed by the Southern Africa FTA, Botswana will have far
better prospects for investment and becoming a hub for service
providers. The five small Central American democracies are:
more likely to attract investment, create jobs, and increase
competitiveness if they are integrated with one another and the United
States.
* Our free trade agreements encourage sectoral reforms and advance
development agendas. Morocco, for example, has been hindered by an
agricultural economy shaped by the economics of the Roman Empire. Its
FTA with the United States will help it adjust to a productive and
prosperous role in the modern world. Chile had labor laws dating to the
Pinochet era. During our FTA negotiations, those laws were completely
reformed. Bahrain will use its FTA with the United States to help
further its stature as a successful post-oil and gas economy in the
Persian Gulf.
In summary, our FTA selections are part of larger, multifaceted
strategy. Criteria can aid in making the selections of FTA partners,
but the execution of the strategy requires the careful judgment of
policymakers in close consultation with Congress and private sector
stakeholders. Ultimately, we need the support of Congress to pass these
agreements.
Your report notes that "certain Members of Congress have urged USTR to
give greater priority to economic and commercial considerations in
selecting future FTA partners." That is true, although in our
experience when Members of Congress or the private sector mention other
countries as FTA candidates, including large markets beyond Canada and
Mexico, we often find those countries are unwilling to enter into FTA
talks with us --usually because they want to continue to protect their
agriculture market. If one does not count the EU-25, Japan, and Korea -
-which have been unwilling to negotiate FTAs with us that open
agriculture markets --and China, which just entered the WTO, our
current and announced FTA negotiations total 73 percent of America's
remaining export markets and 69 percent of the United States' two-way
trade. In general, we agree with your assessment that "Few Members of
Congress have openly questioned choices of FTA partners to date, and
those that have still expressed broad support for the `competitive
liberalization strategy."':
Managing the Trade Agenda:
Advancing this multi-faceted free trade strategy has placed significant
demands on USTR, and we appreciate GAO considering the resource
challenge we face. In less than three years, we have moved from the
absence of a Congressional grant of comprehensive trade negotiating
authority to pressing forward with global, hemispheric, and five sub-
regional or bilateral FTA negotiations simultaneously. All tend to be
far more complex than trade talks in the past, encompassing not only
tariffs and customs, but all aspects of 21S` Century commerce. We are
also working closely with a number of other countries to prepare for
FTAs, with some to be launched in 2004. At the same time, our
litigation activities have soared as nations become more accustomed to
the WTO's dispute settlement process. Our WTO caseload has doubled in 5
years. And the more agreements we complete, the more our monitoring and
enforcement needs rise. All this demands nothing less than a
transformation of USTR --a transformation that is well underway.
GAO recognized that our agenda was "straining the available resources"
at USTR and recommended that USTR should develop "better allocation of
staff and resources." We believe this emphasis reflects a proper
assessment that USTR is aggressively promoting America's economic and
national interests on numerous fronts, but an inaccurate assessment of
how to allocate limited resources most effectively and efficiently. In
our view, the main cause of the strain at USTR has been the amount of
available resources, not their allocation. Indeed, GAO did not identify
any areas within USTR from which funds could be transferred to higher
priority functions. As lean as USTR is, most observers would have
trouble finding activities they would downgrade in priority.
Both the President and bipartisan trade supporters in the Congress
agree that USTR cannot carry out the post-TPA trade agenda with a pre-
TPA budget. That is why the President and Congress have supported
budget increases to bring USTR resources more in line with the
revitalized trade agenda. These increases will ease much of the strain
your report notes and prevent America's trade strategy from being
handicapped for lack of funds.
Under any cost-benefit analysis, USTR would fare extremely well. For
less than $40 million a year --a fraction of the budget of comparable
government agencies --USTR has played a leading role in creating jobs
and opportunities at home by opening markets and enforcing agreements
around the world. Many countries around the globe look to their trade
ties with the United States as their principal economic link with our
country.
Although GAO does not mention any actual misallocation of funds, it
nevertheless criticizes USTR's allocation process because it appears to
be "informal" and not based on "robust data." "For example," the report
notes, "although regional Assistant U.S. Trade Representatives provide
staff and travel estimates as part of the annual budget cycle, they
frequently bring resource requests to USTR management throughout the
year." This, GAO concludes, "is an informal, reactive approach.":
We believe this observation reflects a misunderstanding of how USTR can
function most effectively and flexibly. Management tools appropriate to
large organizations carrying out routinized tasks are not suitable for
a small agency pursuing fast-moving, dynamic trade negotiations in a
world where trade opportunities and disputes often emerge unexpectedly.
USTR's model, we believe, should be more like that of an
entrepreneurial small business in a rapidly changing international
environment than that of a large government bureaucracy.
In a sense, USTR's situation may be analogized to that of a
Congressional committee staff. It would hardly be productive at the
beginning of a Congressional session for a committee chair and staff
director to chart rigid staff time estimates involved in moving a
prescription drug bill, for instance. Nor would precise data on how
much staff time was devoted to last year's version of the bill be
especially useful. Too much would depend on a rapidly changing
legislative environment. Instead, the committee managers would
thoroughly consult with staff members, make a reasoned judgment of
priorities, and then be prepared to adjust as circumstances warrant.
USTR must be agile, flexible, and adaptable --not rigidly bureaucratic.
Only with these qualities can we carry out a complex, multi-dimensional
strategy to advance free trade.
The heart of USTR's budget is for personnel and travel. Therefore,
USTR's annual planning and budgetary process seeks to allocate human
and financial resources to offices based on projected goals and
demands. We seek to give the senior career staff --Assistant United
States Trade Representatives --flexibility to manage these funds and
people. Since many activities within USTR and the U.S. Government as a
whole necessitate "horizontal management," the Deputies and Chief of
Staff help supervise allocations and schedules across functions. We do
not believe that time-consuming and costly systems to account for time
would be helpful. USTR is better served by 21S' Century entrepreneurial
systems focused on results and outputs than early 20TH Century
"Taylorism" that would concentrate on time/cost inputs. Indeed, these
methods would lower productivity among the federal workers drawn to
USTR, who are willing to work hard and fast because of the results-
oriented culture.
We wholeheartedly agree, however, with GAO's general finding that the
intensifying trade agenda requires continual management improvements at
USTR and supporting agencies. For this reason, we have taken a number
of steps over the past two years. We have:
* Reorganized regional and issues-based offices to reflect negotiating
demands.
* Overhauled our financial system to allow us to track travel and other
expenses by negotiation.
* Established new program-based accounting codes that will capture
travel, interpretation, logistical support, and other categories of
spending by major trade initiative.
* Devised a management system to carefully monitor the dozens of new
legal requirements under the Trade Act of 2002.
* Established a system to ensure that hundreds of Congressional and
private sector consultations occur in a timely manner.
* Continually improved our scheduling of FTA negotiations to make the
best use of our available resources.
* Where possible, combined overseas trips to reduce the amount of
overseas travel.
* Increasingly used videoconferencing and teleconferencing as low-cost
alternatives to overseas travel, where possible.
* Accepted financial support for logistics from host city committees
sponsoring negotiating rounds consistent with USTR's statutory
authority.
* Sought out low-cost venues for negotiations, both in the U.S. and
abroad, typically using mid-point geographic sites as meeting
locations, thereby avoiding the added expense of travel to distant
locations of negotiations partners.
* Upgraded USTR's website to provide access to all key documents.
* Instituted daily staff leadership meetings to coordinate assignments.
* Accomplished these changes in an environment of heightened security.
Again, we appreciate having this opportunity to comment on GAO's
report, and we look forward to continuing to work closely with you in
the future.
Sincerely,
Signed by:
Robert B. Zoellick:
The following are GAO's comments on the U.S. Trade Representative's
letter dated December 3, 2003.
GAO Comments:
1. As the Trade Representative states, if the 43 percent of U.S. trade
that is accounted for by the EU-25, Japan, Korea, and China is
excluded, then current and announced FTA negotiations account for 69
percent (according to our calculation) of the remainder of total U.S.
trade. However, U.S. trade with existing FTA partners (Canada, Chile,
Jordan, Mexico, Israel, and Singapore) accounts for the majority of
this. The trade data can be segmented in several ways, but the data
show that trade partners with which the U.S. has begun or has announced
FTA negotiations account for $178 billion in two-way trade with the
United States, or about 8 percent of the $2.3 trillion total U.S.
trade.
2. We believe that given its admittedly limited available resources,
USTR needs to better manage its staffing and funds to implement its
growing and complex trade negotiating agenda. As discussed in this
report, USTR's main strategy for undertaking multiple FTA negotiations
appears to be working on one FTA per region at a time. Assistant USTRs
in four regional offices lead FTA negotiations in each of four regions.
With the announcement of three new FTA negotiations--the Dominican
Republic, the Andean countries, and Panama--in Latin America alone, it
is not clear how USTR will be able to meet its new and ongoing
negotiating demands in a timely fashion. We have noted in this report
that one factor that constrains negotiations is a limited number of
regional and functional specialists. To address these challenges, USTR
would do well to develop a resource strategy across its entire
negotiating agenda that is based on solid data and planning.
3. While we appreciate USTR's efforts in pursuing intensive trade
negotiations in an often unpredictable international environment, this
situation makes it all the more important to make staffing and resource
decisions based on valid and reliable data and planning. Relying on
informal, ad hoc decision making increases risk and reduces the chance
that the agency will accomplish its goals. The human capital model that
we developed calls for organizations, regardless of size, to use solid
data to determine the current and future human capital required to
support their mission and goals.
4. Just like other federal agencies, USTR is responsible for standard
accountability procedures to manage its program and federal funds. Our
recommendation calls for a result--not specific procedures or output
measures. Since its own and other agencies' expert staff are the most
substantial resources for FTA negotiations, improving upon the present
lack of systematic data would better position USTR and other agencies
to make decisions that involve staffing trade-offs among competing
priorities. In addition, travel is an important resource component and
must be programmed in advance. While we recognize and encourage the
steps that USTR has already taken to make improvements, we note that
these efforts are already recognized in this report and are not
sufficient to address our concerns for forward planning.
[End of section]
Appendix VI: GAO Contacts and Staff Acknowledgment:
GAO Contacts:
Kim Frankena, (202) 512-8124 Judy Knepper, (202) 512-8554:
Staff Acknowledgments:
In addition to those named above, Martin De Alteriis, Francisco
Enriquez, Bradley Hunt, Rona Mendelsohn, Juan Tapia-Videla, Timothy
Wedding, and Eve Weisberg made major contributions to this report.
(320208):
FOOTNOTES
[1] Nontariff barriers are those that are not related to tariff levels
but nevertheless impose obstacles to trade. Examples include
quantitative restrictions (quotas) on imports and requirements that
importers obtain licenses to import certain products.
[2] Pub. L. No. 107-210, §§ 2101-13, 116 Stat. 993-1022. This act was
part of larger legislation entitled the Trade Act of 2002, 116 Stat.
933. The trade promotion authority continues through June 1, 2005, or
June 1, 2007, if extended by the President without disapproval of the
Congress.
[3] The overall objectives set forth in TPA include obtaining greater
market access and reducing or eliminating trade barriers; enhancing
economic growth, raising living standards, and promoting full
employment in the United States; ensuring that trade and environmental
policies are mutually supportive; and promoting respect for worker
rights. The principal objectives include expanding competitive market
opportunities for U.S. exports, including agricultural products;
reducing or eliminating barriers to international trade in services and
foreign investment; enhancing intellectual property rights protection;
obtaining wider and broader application of transparency; seeking
provisions in trade agreements providing for effective dispute
resolution; and preserving the ability of the United States to
rigorously enforce its trade laws. Pub. L. No. 107-210, § 2102, 116
Stat. 994-1001.
[4] Id. § 2102(e), 116 Stat. 1004.
[5] Pub. L. No. 106-200, 114 Stat. 251-75.
[6] Id. §§ 202(b) and 213, 114 Stat. 276, 288. This legislation also
required the President to take necessary steps to convene a meeting
with the trade ministers of these countries to establish a schedule of
meetings on the likely timing for initiating negotiations for entering
into FTAs with the United States.
[7] See 19 U.S.C. § 1872.
[8] The U.S.-Canada FTA was suspended in 1994 and superseded by the
North American Free Trade Agreement.
[9] The World Bank classifies 105 WTO members, or approximately 73
percent, as developing countries.
[10] According to the U.S. Agency for International Development, the
rule of law embodies the basic principles of equal treatment of all
people before the law and is founded on a predictable and transparent
legal system with fair and effective judicial and law enforcement
institutions to protect citizens against the arbitrary use of state
authority and lawless acts.
[11] Pub. L. No. 106-200, §§ 202(b), 213, 114 Stat. 276, 288. This
legislation also required the President to take necessary steps to
convene a meeting with the trade ministers of these countries to
establish a schedule of meetings on the likely timing for initiating
negotiations for entering into FTAs with the United States.
[12] According to the WTO, a customs union is organized to permit the
free exchange of goods among its members and has a common external
tariff.
[13] In 1962, as noted in our Background section, the President
established these groups under USTR and the NSC/NEC, respectively, for
developing trade policy. Early during the present administration, these
groups were not used for assessing FTA partners. Instead, they were
only used during FTA negotiations, after partners had been selected.
[14] Not all of the 19 agencies that participate in the TPSC and the
TPRG are cabinet-level agencies, for example, the U.S. International
Trade Commission and the U.S. Agency for International Development.
[15] See U.S. General Accounting Office, International Trade: Strategy
Needed to Better Monitor and Enforce Trade Agreements, NSIAD-00-76
(Washington, D.C.: Mar. 14, 2000).
[16] This office is also working on the resource-intensive FTAA.
[17] For example, according to USTR officials, much of the CAFTA text
is similar to the Chile FTA.
[18] Several of the meetings for the Singapore negotiations were in
London, for example, and two of the negotiating rounds for the
Australia FTA were held in Hawaii.
[19] See GAO/NSIAD-00-76.
[20] See U.S. General Accounting Office, A Model of Strategic Human
Capital Management, GAO-02-373SP (Washington, D.C.: March 2002).
[21] See U.S. General Accounting Office, High Risk Series - Strategic
Human Capital Management, GAO-03-120 (Washington, D.C.: January 2003).
[22] The GSP program is a unilateral program that extends duty-free
entry of certain imports from developing countries.
[23] Although the Congress granted the President the authority to
negotiate trade agreements with expedited implementation procedures,
known as Fast Track, almost continuously since 1974, this authority
lapsed in 1994. Similar authority was reauthorized under the Trade Act
of 2002.
[24] The Caribbean Basin Initiative collectively refers to the
Caribbean Basin Economic Recovery Act of 1983, the Caribbean Basin
Economic Recovery Expansion Act of 1990, and the U.S.-Caribbean Basin
Trade Partnership Act of 2000. The countries include Antigua, Aruba,
the Bahamas, Barbados, Belize, British Virgin Islands, Costa Rica,
Dominica, the Dominican Republic, El Salvador, Grenada, Guatemala,
Guyana, Haiti, Honduras, Jamaica, Montserrat, Netherlands Antilles,
Nicaragua, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent and the
Grenadines, and Trinidad and Tobago.
[25] CARICOM members include Antigua and Barbuda, the Bahamas,
Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica,
Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the
Grenadines, Surinam, and Trinidad and Tobago.
[26] In October 2002, President Bush announced the Enterprise for ASEAN
Initiative, which is a new trade initiative to establish a network of
bilateral FTAs with those ASEAN member countries that are committed to
enacting economic reforms and maintaining openness.
[27] For a limited number of information technology products and
medical devices that already are duty-free in the United States and
Singapore, the Integrated Sourcing Initiative eliminates the
requirement that these products meet specific "rules of origin" when
shipped between the United States and Singapore. This customs procedure
is streamlined and the burden on the importer is reduced, with respect
to completing certification paperwork or paying merchandise processing
fees.
[28] The negotiating groups cover (1) market access, (2) investment and
services, (3) government procurement and intellectual property, (4)
labor and environment, and (5) institutional issues.
[29] Pub. L. No. 106-200, § 116, 114 Stat. 266-67.
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