SECTION II.2: MAJOR FREE TRADE AGREEMENT NEGOTIATIONS ECAT

ECAT member companies actively support the negotiation and implementation of comprehensive and trade-oriented bilateral, sub-regional and regional trade and investment agreements, in addition to the global World Trade Organization (WTO) negotiations discussed in section II.1. ECAT also strongly supports the continued trade-negotiating-authority framework – first established in the Trade Act of 1974 as “fast track” and most recently extended as so-called Trade Promotion Authority in the Trade Act of 2002. This framework creates an executive-congressional partnership that defines negotiating objectives, establishes consultation requirements and provides for an up-or-down vote in Congress within a time certain to approve and implement trade agreements.

In the 1990s, the United States led trade and investment liberalization efforts with the North American Free Trade Agreement (NAFTA), as well as several WTO agreements. That agenda was almost quiescent following the expiration of trade negotiating authority, until Congress approved Trade Promotion Authority in 2002. With that authority, the United States was able to accelerate and conclude ongoing negotiations and initiate several new ones. That authority was extended last year for agreements concluded before July 1, 2007.

Since its enactment in 2002, TPA procedures and authority have been used repeatedly to begin, pursue and conclude negotiations with numerous countries and sub-regional country groups, as well as to implement six U.S. free trade agreements – with Chile, Singapore, Australia, Morocco, Bahrain and the U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA). Most recently, the Administration has announced that it will soon begin FTA negotiations with two very large U.S. trading partners, Korea and Malaysia.

These agreements and negotiations are important not only for the trade and investment liberalization that they bring, but also in maintaining a level playing field, as many of the United States’ trading partners, particularly the European Union (EU), Canada and Mexico, have embarked on a series of bilateral, sub-regional and regional free trade agreements that provide special benefits to their farmers, manufacturers, service providers and workers, excluding the United States from these special benefits. While progress at the global level, i.e., the WTO, is the greatest prize, the United States’ bilateral, sub-regional and regional efforts have been helpful to spur those global negotiations forward by creating support for higher standard liberalization commitments by developed and developing country partners.

This section reviews the TPA process and its importance and then examines recently completed and ongoing bilateral, sub-regional and regional trade negotiations.

Trade Promotion Authority Framework

Almost 10 years after its expiration in 1994, Congress passed and the President signed into law trade promotion authority legislation as part of the Trade Act of 2002, Pub. L. 107-210. The Bipartisan Trade Promotion Authority Act of 2002 (TPA Act) revives and extends trade-negotiating-authority legislation (formerly called “fast track”), which was developed over three decades ago as part of the Trade Act of 1974.

TPA establishes negotiating authority for global, bilateral and regional trade negotiations, consultation requirements and congressional procedures guaranteeing an up-or-down vote, without amendments in a time certain for agreements meeting the requirements of TPA. Following the two-year renewal of TPA last year, TPA procedures govern agreements concluded before July 1, 2007.

TPA serves several purposes, including setting forth:

• Congress’ overall and principal negotiating objectives;
• procedures for Presidential consultation with Congress;
• procedures for Congressional consideration of legislation to implement a trade agreement; and
• procedures for extending TPA.

TPA is important to: (1) enhance U.S. leadership on trade and the President’s ability to conclude negotiations with foreign trading partners; (2) facilitate Congress’ consideration and implementation of such agreements; and (3) provide for greater Administration-Congressional consultations on issues where both the President and the Congress have overlapping constitutional prerogatives. As explained in greater detail below, the Administration is engaged in several important negotiations that will not be concluded before the July 1, 2007, deadline set in the TPA legislation.

Prior to the renewal of TPA in 2002, trade-negotiating-authority procedures were used by Congress to consider five different trade agreements, all of which were approved and implemented: the GATT Tokyo Round Agreements (implemented by the Trade Act of 1979), the U.S.-Israel Free Trade Agreement (1985), the U.S.-Canada Free Trade Agreement (1989), the North American Free Trade Agreement (NAFTA) (1993), and the Uruguay Round Agreements (1994). Trade-negotiating-authority legislation expired in 1994 and was not renewed until 2002 with the Trade Act of 2002.

Since the renewal of this authority in 2002, TPA procedures have been used by Congress to consider the following free trade agreements:

• the U.S.-Chile and the U.S.-Singapore FTAs, which were approved in July 2003 and entered into force in January 2004.
• the U.S.-Australia FTA, which was approved in July 2004 and entered into force on January 1, 2005.
• the U.S.-Morocco FTA, which was approved in July 2004 and entered into force in 2005.
• the CAFTA, which was approved in July 2005 and entered into force in March 2006 with respect to El Salvador and is expected to enter into force with the other CAFTA countries later this year.
• the U.S.-Bahrain FTA, which was approved in December 2005 and is expected to enter into force later in 2006.

The TPA procedures will also likely be used by Congress to implement the U.S.-Oman, U.S.-Peru and U.S.-Colombia FTAs, which have been negotiated, as well as other FTAs that are concluded prior to the expiration of TPA authority.

TPA in Action (2002-2005) TPA Procedures Promote Free Trade Agreement Negotiations with 25 Countries Since its enactment on August 6, 2002, TPA procedures have been used extensively by U.S. negotiators and the U.S. Congress: 2 on-going FTA negotiations were concluded (Chile and Singapore). 11 new sets of negotiations with a total of 21 countries were commenced; of which 8 negotiations (with a total of 13 countries) have been concluded. 7 new FTAs with a total of 12 countries have been signed. 6 FTAs have been approved by the U.S. Congress and signed into law, of which four have now entered into force creating important new opportunities for U.S. farmers, manufacturers, service providers and their workers and benefits for U.S. consumers.

Major Provisions of TPA

Duration: Provides TPA authority for free trade and tariff-only agreements entered into force before July 1, 2005, with potential two-year extension. TPA procedures are extended for two years if the President requests extension and neither House adopt an extension disapproval resolution (considered under expedited procedures) prior to July 1, 2005.

Negotiating Objectives: Provides the most extensive negotiating objectives ever included in a trade-negotiating-authority bill and specifically directs the Administration to seek agreements that:

• eliminate and reduce barriers to trade in manufacturing, services, electronic commerce, and agriculture;
• eliminate and reduce barriers to investment, while also providing strong protections for investments abroad;
• promote adequate and effective protection of intellectual property rights, reflecting a standard of protection similar to U.S. law;
• obtain wider and broader application of the principles of transparency and anti-corruption;
• achieve full implementation of WTO agreements and extend their coverage;
• achieve increased transparency and non-discrimination in foreign government regulation;
• promote the effective enforcement of a country’s labor and environmental laws; reduce or eliminate government practices that unduly threaten sustainable development and seek market access for U.S. environmental technologies, goods and services;
• seek effective and timely resolution of disputes with respect to all principal negotiating objectives, including the ability to use dispute settlement and the availability of equivalent procedures and equivalent remedies;
• preserve the ability of the United States to enforce rigorously its trade remedy laws, avoid agreements that lessen the effectiveness of such laws; and address and remedy market distortions that lead to dumping and subsidization;
• obtain a revision of WTO rules related to the treatment of border adjustments for internal taxes;
• obtain reciprocal market access for U.S. exports of textiles and apparel; and
• seek commitments to vigorously enforce a country’s laws prohibiting the worst forms of child labor.

Promotion of Other Priorities: Directs the President to pursue additional priorities, including to:

• seek greater cooperation between the WTO and the International Labor Organization (ILO);
• establish consultative mechanisms to strengthen the capacity of countries to promote respect for core labor standards and to implement standards to protect the environment and human health based on sound science;
• conduct labor and environmental reviews of future trade and investment agreements;
• take into account legitimate domestic objectives, including the protection of legitimate health, safety, essential security and consumer interests;
• provide technical assistance with respect to other countries’ labor laws;
• report to Congress on the labor rights of countries with which the United States is negotiating and on the extent to which a country has in effect laws governing exploitative child labor;
• promote consideration of multilateral environmental agreements;
• report to the House Ways and Means and Senate Finance Committees on the effectiveness of penalties or remedies imposed under a trade agreement; and
• seek to establish consultative mechanisms on unanticipated currency movements.

Progress Towards Negotiating Objectives: Provides that no trade agreement may qualify for expedited procedures (described below) unless it “makes progress” in meeting the applicable negotiating objectives and the President fulfills the consultations requirements. The President is also required to report to Congress on how the final agreement makes progress towards the bill’s objectives.

Expedited Procedures: Authorizes expedited procedures as contained in the original trade-negotiating -uthority legislation for implementing bills that contain provisions “necessary or appropriate” to implement the underlying trade agreement. Procedures require that 45 session days after an implementing bill is introduced, the relevant House committee(s) must report the implementing bill (without amendment) or be automatically discharged. The Senate committee(s) must report the bill (without amendment) or be automatically discharged 15 session days after its receipt from the House or 45 session days after its introduction, whichever is later. The implementing bill can be considered for up to 20 hours, without amendment on both the House and Senate floors. A chart showing the TPA timeline is provided below:

TPA TIMELINE Pre-Negotiations 90 calendar days before initiating negotiations - Notify Congress of intent to initiate FTA negotiations. Consult with Congressional Oversight Group (COG), Finance and Ways and Means and other committees before and after notification and meet with COG before initiating negotiations if majority of COG requests meeting. Additional consultations required if initiating agriculture, fishery or textile negotiations. Initiation of Negotiations Consult with COG, Finance and Ways and Means, Agriculture (if relevant) and other committees during negotiations, immediately before initialing agreement and before signing agreement. 180 calendar days before agreement signed – Administration must report to Finance and Ways and Means Committees on trade remedy law issues. 90 calendar days before agreement signed – President must notify Congress of intent to enter into the agreement and provide details of the agreement to the International Trade Commission (ITC) and request preparation of ITC assessment. 30 calendar days after notification – Advisory Committees to submit reports on the proposed agreement. After Agreement is Signed 60 calendar days after agreement signed – President must submit description of changes to existing laws required to bring United States into compliance with agreement. No later than 90 calendar days after agreement signed – ITC submits report of its assessment to the President and Congress. No deadline – President submits final text of agreement, draft implementing bill, statement of administrative action and supporting information on day when House and Senate are both in session. After Implementing Bill Introduced Implementing bill introduced in House and Senate on same day it is submitted by the President. 45 session days after implementing bill introduced – House committee(s) must report implementing bill or be automatically discharged. 15 session days after Senate’s receipt of the implementing bill from the House or 45 session days after its original introduction in the Senate, whichever is later – Senate Committee(s) must report out bill or be automatically discharged. 20 hours each of House and Senate floor debate, followed by final votes on the implementing bill.

Congressional Consultations: Provides extensive provisions for Congressional consultations beyond that included in prior trade-negotiating authority legislation, including the establishment of a permanent Congressional Oversight Group (COG) to provide ongoing oversight of negotiations. TPA Act provides that TPA procedures are not applicable if both Houses separately agree to procedural disapproval resolutions (under expedited floor procedures) for lack of notice or consultations within 60 days of each other.

ECAT Position: ECAT strongly supports the TPA framework to enable the United States to continue to negotiate and implement comprehensive, high-standard global, bilateral, sub-regional and regional trade agreements.

Completed Free Trade Agreements

Following enactment of TPA, the Bush Administration embarked on a very active agenda to negotiate free trade agreements on a bilateral, sub-regional and regional level. In 2003, agreements with Chile and Singapore were reached and approved by the U.S. Congress. In 2004, agreements with Australia and Morocco were concluded and also implemented by the U.S. Congress. In 2005, agreements with five countries in Central America and the Dominican Republic and with Bahrain were approved by Congress. The United States now has FTAs in force with nine countries, with several more expected to enter into force later this year.

COUNTRIES WITH AN FTA IN FORCE WITH THE UNITED STATES Entry into Force Israel 1985 Canada 1989/1994 Mexico 1994 Jordan 2001 Chile 2004 Singapore 2004 Australia 2005 Morocco 2005 El Salvador March 1, 2006 (CAFTA expected to enter into force with other countries in 2006) Bahrain Expected in 2006

U.S. trade with existing FTA partners has proven to be a significant benefit to the U.S. economy. U.S. trade with FTA partners accounts for approximately $925 billion or nearly 36 percent of total U.S. trade and 45 percent of U.S. exports.

U.S. exports to each of its major FTA partners have increased significantly after the FTA has entered into force. Consider the following growth in U.S. goods exports:

• U.S. goods exports to the NAFTA countries more than doubled between 1993 and 2005, from $142 billion to $332 billion, growing faster than U.S. exports to the rest of the world.
• U.S. goods exports to Chile almost doubled between 2003 and 2005, increasing from $2.7 billion to $5.2 billion in just two years.
• U.S. goods exports to Singapore increased by nearly 25 percent, from $16.6 billion in 2003 to $20.7 billion in 2005.
• U.S. goods exports to Australia increased 10.5 percent, from $14.3 billion in 2004 to $15.8 billion in 2005.

Overall, U.S. exports to FTA partners have grown 20 percent, faster than overall U.S. exports. U.S. services exports have also increased. In particular,

U.S. services exports to the NAFTA countries nearly doubled between 1993 and 2005, from $181 billion to $341 billion. As well, U.S. investment has expanded following the entry-into-force of FTAs with major trading partners, supporting greater economic growth, better paying jobs and greater productivity here in the United States. Imports from U.S. FTA partners have also increased significantly, expanding the variety and choice of products to U.S. consumers at competitive prices, lowering costs to U.S. manufacturers and dampening inflationary pressures.

Nor is there any basis for critics’ claims that FTAs produce significant trade deficits. Indeed the goods trade deficit with the eight countries with which the United States has FTAs in force, represents 15.9 percent of the total U.S. trade deficit.

U.S. Goods Trade Millions of U.S. dollars
	2005 Exports	2005 Imports	Deficit/Surplus	Percent of Total Deficit
Israel	9,732	16,875	-7,143,301	0.93%
Canada	211,421	287,870	-76,449,757	9.97%
Mexico	120,049	170,198	-50,148,970	6.54%
Jordan	643	1,267	-623,966	0.01%
Chile	5,198	6,666	9,105,055	0.19%
Singapore	20,646	15,118	5,528,673	0.72%
Australia	15,771	7,341	8,430,456	1.10%
Morocco	528	443	85,007	0.001%
Total FTA Partners	383,988	505,778	-121,790	15.9%
Total World	904,380	1,670,940	-766,561	100%

U.S.-Central America-Dominican Republic Free Trade Agreement

On December 17, 2003, the United States and El Salvador, Guatemala, Honduras and Nicaragua completed negotiations to create a U.S.-Central America FTA, less than one year after such negotiations were initiated on January 8, 2003. On January 25, 2004, the United States and Costa Rica completed negotiations to bring Costa Rica into the U.S.-Central America FTA. On March 15, 2004, the United States and the Dominican Republic completed negotiations to bring the Dominican Republic into the U.S.-Central America-Dominican Republic FTA. The United States signed an FTA with the five Central American nations on May 28, 2004. The Dominican Republic was formally added as an FTA partner on August 5, 2004.

After an extended period of review, Congress approved CAFTA in July 2005, by a vote of 217-to-215 in the House and a vote of 55-to-45 in the Senate. CAFTA entered into force between the United States and El Salvador on March 1, 2006. It will enter into force with respect to the Dominican Republic, Honduras, Guatemala and Nicaragua when the U.S. government has certified that these countries have implemented the terms of the CAFTA. Costa Rica’s legislature must first approve CAFTA and implement it before the United States will embark on the certification process with Costa Rica.

Major Provisions of the DR-CAFTA

The primary provisions of the CAFTA include the following:

• Agriculture: Provides that over half of U.S. agricultural products will enter Central America and the Dominican Republic duty-free immediately upon implementation of the FTA, with remaining duties on most products phased out over 15 years. Some of the most important U.S. exports that can be expected to gain significantly from the FTA include feed grains, wheat, rice, soybeans, poultry, pork, and beef.
• Manufactured Goods: Provides that more than 80 percent of U.S. industrial exports to Central America and the Dominican Republic will be duty-free upon entry into force of the agreement. All tariffs will be removed within 10 years. That is a substantial improvement over the 2001 zero-duty access level of 70 percent of U.S. industrial exports. Tariff elimination will represent a substantial advantage for U.S. exporters given that Central America’s average applied industrial tariffs are 30 to 100 percent higher than U.S. applied industrial rates.
• Textiles and Apparel: Expands access to the U.S. market through a more flexible and permanent rule of origin in a manner that will promote more vibrant partnerships between U.S. textile, cotton, yarn and other suppliers and Central American and Dominican Republic apparel producers.
• Services: Liberalizes services trade and investment in Central America and the Dominican Republic through a negative list approach with few exceptions (i.e., provides that all services will be liberalized, unless specifically exempted). Makes significant progress in opening up to competition Costa Rica’s telecommunications and insurance markets.
• Investment: Expands investment opportunities and incorporates generally strong protections, including an investor-state mechanism, for U.S. investment.
• Intellectual Property Rights: Includes strong protections for trademarks, patents, copyrights, and trade secrets, including stronger penalties, patent term restoration and data exclusivity.
• Dealer Protection: Incorporates for the first time ever in an FTA, innovative provisions limiting the barriers to distribution of U.S. goods and services resulting from dealer protection regimes.
• Information Technology: Provides that the Dominican Republic, Guatemala, Honduras and Nicaragua will join the WTO Information Technology Agreement (ITA), allowing U.S. high-tech exports to enter their markets duty-free. (Costa Rica and El Salvador already are parties to the ITA.) By joining and becoming a member of the ITA, parties agree to provide duty-free treatment to all IT products covered by the agreement, regardless of whether or not it originates in an FTA party, which is particularly important to U.S. companies that have global production networks. All parties committed to non-discrimination and national treatment of digital products, and they will not impose customs duties on products delivered electronically.
• Government procurement: Includes important new anti-corruption, transparency and non-discrimination rules for government contracting.
• Transparency: Includes state-of-the-art transparency standards, including in such important areas as customs and regulatory rulemaking (i.e., providing, for example, Internet publication of laws and regulations, advance rulings on tariff classification and other issues, expedited release procedures, and provisions for express shipments).
• Labor and environment: Includes commitments by each of the countries to enforce effectively their domestic labor and environmental laws. The parties reaffirmed their commitment to International Labor Organization principles and that it is inappropriate to weaken or reduce labor or environmental protections to encourage trade or investment. The parties also agreed to ensure that their environmental laws provide for high levels of environmental protection.
• Dispute settlement: Provides that obligations in commercial, labor and environment areas are enforceable through a strong and innovative dispute settlement system allowing for monetary fines and other penalties for the failure to meet commitments.

Opportunities Created

Collectively, CAFTA is the second largest U.S. export market in Latin America and the United States’ 20th largest export market worldwide in 2005. Two-way trade equaled nearly $35 billion in 2005. Once in force, the CAFTA will be the United States’ third largest FTA in terms of total trade flows after the NAFTA and the Singapore FTA.

U.S. products already account for about 50 percent of Central America’s imports. Central America and the Dominican Republic are already an important export market for American electrical machinery, high tech products, , motor vehicles, chemicals, energy, food, agricultural products, paper, textiles and fertilizer. U.S. services exports total more than $2 billion.

Through unilateral preference programs overwhelming approved by Congress from 1983 onward, 75 percent of CAFTA imports and 99 percent of CAFTA agricultural products already enter the United States duty-free. CAFTA locks in those benefits and expands on them. More importantly, CAFTA countries will open their markets to our farm and industrial goods and services, eliminating high tariffs, tariff rate quotas and non-tariff barriers.

The CAFTA countries are the United States’ largest market for U.S. apparel and yarn exports, and the second largest market for U.S. fabric exports. CAFTA is critical to sustain and expand existing partnerships and to give U.S.-CAFTA goods a competitive edge to help support the approximately 500,000 jobs in Central America and the Dominican Republic in the apparel sector and the 700,000 jobs in the U.S. yarn and textile industries.

The CAFTA is about much more than trade and investment. This agreement can help strengthen democracy and the rule of law in a region that was wrecked by civil war not that long ago. This agreement can help promote economic development and the reduction of poverty for these countries. While the FTA will not cure these problems, it represents a force for positive change by generating new economic opportunities, new investment and new hope for the region. Expanded commercial relations with the United States based on growing trade and investment flows may be the most effective way for the United States to help these countries raise their standard of living. This agreement also represents an example of how the United States can reach an FTA with six developing countries. It will build relationships that will be important not only as efforts at regional integration continue, but also for our interests at the WTO and our broader national interests. It will also promote new economic opportunities, allow greater access to innovative productivity equipment and provide needed alternatives to illegal narcotics activity, illegal immigration, gangs and arms trafficking.

Implementation Issues

CAFTA entered into force between the United States and El Salvador on March 1, 2006. Despite this extremely positive development, ECAT is very concerned by the administration of the staggered implementation process and, in particular, its impact on the textile and apparel commercial relationship between the United States and the six CAFTA countries. Textile and apparel production in this region is integrated and oftentimes one garment will have fabric from or manufacturing in several countries. Implementation of the CAFTA on a staggered basis may have several very adverse consequences given this co-production model. In particular, there is significant concern that certain products may receive neither the duty-free treatment they would currently receive under Caribbean Basin Trade Partnership Act (CBTPA) or under the CAFTA, contrary to the goals of both pieces of legislation. ECAT urges the Administration to correct this implementation issue as soon as possible so as not to cause negative commercial impacts in the United States or the CAFTA countries in a very vital industry.

ECAT Position: ECAT strongly supports the entry-into-force and full implementation of the DR-CAFTA. Given co-production and the interrelationship of commercial interests in the United States and the DR-CAFTA countries, particularly in the production of textiles and apparel, it is critical that the entry-into-force of the DR-CAFTA on a staggered basis improve, and not undermine, existing commercial activities. In particular, ECAT remains very concerned by implementation decisions that deny duty-free access to textile and apparel products from the DR-CAFTA countries that are provided for under the Caribbean Basin Trade Partnership Act and the DR-CAFTA because of the staggered entry-into-force. Implementation issues must be resolved in a manner that improves U.S. competitiveness and seeks to promote continued and expanded commercial interests in the region.

U.S.-Bahrain Free Trade Agreement

The United States launched FTA negotiations in January 2004 with Bahrain, which concluded on May 27, 2004. The FTA was signed on September 14, 2004, and was approved by Congress in December 2005, by a vote of 327-to-95 in the House and by unanimous consent in the Senate.

Major Provisions of the U.S.-Bahrain FTA

The primary provisions of the U.S.-Bahrain FTA include the following:

• Manufactured goods: Provides that 100 percent of bilateral trade in consumer and industrial goods will be duty-free upon entry into force, expanding opportunities in particular for exports of aircraft, high tech and information communication technology products, machinery, vehicles, and pharmaceutical goods. Tariffs on virtually all items on U.S. and Bahrain tariff schedules will also be eliminated immediately, with the rest eliminated over 10 years. Agriculture: Provides that 81 percent of U.S. agricultural exports will be duty free immediately upon entry into force, expanding opportunities in particular for meats, fruits and vegetables, cereals, and dairy products. Remaining tariffs will be eliminated over 10 years. Bahrain also agreed to adopt a science-based and transparent regime to address sanitary and phytosanitary barriers.
• Services: Provides that Bahrain will make significant openings in its services market through a negative list approach and includes strong disciplines on transparency. In particular, the FTA includes significant market access for financial and telecommunications services.
• Information Technology: Bahrain joined the WTO ITA prior to completing FTA negotiations, ensuring duty-free imports to Bahrain for many information technology products. In addition, Bahrain committed to non-discrimination and national treatment of e-commerce and digital products, and agreed not to impose customs duties on products delivered electronically.
• Textiles and apparel: Provides duty-free treatment immediately for qualifying textiles and apparel (based on a yarn-forward rule), with an additional allowance of 65 million square meters equivalent for the first 10 years for non-qualifying items.
• Government procurement: Includes important new non-discrimination, anti-corruption, and transparency rules for government contracting.
• Intellectual property rights: Includes state-of-the-art protections for trademarks, copyrights, patents, and trade secrets, including stronger penalties, patent term restoration, data exclusivity and disciplines to strengthen enforcement.
• Transparency: Includes state-of-the-art transparency standards, including in such areas as customs and regulatory rulemaking (i.e., providing, for example, Internet publication of laws and regulations, expedited release procedures, and provisions for express shipments).
• Labor and environment: Includes binding commitments to enforce effectively labor and environmental laws subject to dispute settlement. The parties reaffirmed their commitment to International Labor Organization principles and that it is inappropriate to weaken or reduce labor or environmental protection to encourage trade or investment. The parties also agreed to ensure that their environmental laws provide for high levels of environmental protection.
• Dispute settlement: Provides that obligations in commercial, labor and environment areas are enforceable through a strong and innovative dispute settlement system.

A separate investment chapter was not included since the United States and Bahrain already have a strong bilateral investment treaty in force.

Opportunities Created

Two-way trade between the United States and Bahrain equaled $782 million in 2005. In 2005, U.S. goods exports to Bahrain totaled $350 million, which included aircraft, vehicles, machinery, toys, sports equipment, and pharmaceutical products. Among the key U.S. agricultural commodity exports that will benefit from the U.S.-Bahrain FTA are meats, fruits and vegetables, cereals, and dairy products. An FTA with Bahrain will support its continued economic reform and openness to investment, as well as its commitment to openness, transparency, high-standard intellectual property protection that keeps pace with digital innovations and the rule of law. It also represents an important step towards a broader Middle East FTA that the Administration seeks to have established by 2013.

Next Steps

The U.S.-Bahrain FTA is expected to enter into force later in 2006.

ECAT Position: ECAT supports full implementation of the U.S.-Bahrain Free Trade Agreement.

Recently Negotiated Free Trade Agreements

The United States has completed several FTA negotiations that are awaiting signing and/or approval. They are:

	Negotiations Completed	Signing	Current Status
CAFTA-DR Costa Rica	Jan. 2004	May 28, 2004	Awaiting approval by Costa Rican legislature
Oman	Oct. 3, 2005	Jan. 19, 2006	Awaiting Congressional introduction and approval
Peru	Dec. 7, 2005	Not scheduled	Notified to Congress. Awaiting signing no earlier than April 6.
Colombia	Feb. 27, 2006 (undergoing legal scrub)	Not scheduled	Awaiting Congressional notification.

The Oman, Peru, and Colombia agreements are discussed below.

U.S.-Oman FTA

The United States and Oman concluded FTA negotiations in October 2005 and signed the agreement on January 19, 2006, less than one year after negotiations were launched. The agreement is expected to be presented to Congress for implementation later this year.

Major Provisions of the U.S.-Oman FTA

The primary provisions of the U.S.-Oman FTA include the following:

• Agriculture: Provides immediate duty-free treatment for current U.S. agricultural exports in 87 percent of the tariffs lines. Remaining tariffs will be phased out over 10 years.
• Manufactured Goods: 100 percent of current bilateral trade in consumer and industrial tariffs will be immediately duty-free, as will tariffs on most other products. Key products that will receive duty-free treatment include information technology products not already covered by the WTO ITA (which Oman joined in 2000) Remaining tariffs will be eliminated on all products within 10 years.
• Textiles and Apparel: Expands access to the U.S. market through duty-free treatment for apparel made with U.S. and/or Omani fabric or, for a temporary period, a limited amount of apparel made with fabric from third countries.
• Services: Liberalizes services trade and investment in Oman through a negative list approach with few exceptions and eliminates requirements to hire Omani workers in managerial positions.
• Information Technology: Oman expanded duty-free treatment for information technology products. Oman committed to non-discrimination and national treatment of e-commerce and digital products, and agreed not to impose customs duties on products delivered electronically.
• Investment: Expands investment opportunities and incorporates generally strong protections, including an investor-state mechanism, for U.S. investment.
• Intellectual Property Rights: Includes strong protections for trademarks, patents, copyrights, and trade secrets, including stronger penalties, patent term restoration and data exclusivity.
• Government procurement: Includes important new anti-corruption, transparency and non-discrimination rules for government contracting.
• Transparency: Includes state-of-the-art transparency standards, including in such important areas as customs and regulatory rulemaking (i.e., providing, for example, Internet publication of laws and regulations, advance rulings on tariff classifications and other issues, expedited release procedures, and provisions for express shipments).
• Labor and environment: Includes commitments by Oman to enforce effectively its domestic labor and environmental laws. The parties reaffirmed their commitment to International Labor Organization principles and that it is inappropriate to weaken or reduce labor or environmental protections to encourage trade or investment. The parties also agreed to ensure that their environmental laws provide for high levels of environmental protection.
• Dispute settlement: Provides that obligations in commercial, labor and environment areas are enforceable through a strong and innovative dispute settlement system

Opportunities Created

Two-way goods trade between the United States and Oman equaled $1.15 billion in 2005, a 30 percent increase over 2004 trade of $748 billion. Principal U.S. exports to Oman include aircraft, automobiles, nuclear machinery, and electrical machinery. Principal imports from Oman include fuel, precious stones and apparel.

An FTA with Oman will support its continued economic reform and openness to investment, as well as its commitment to openness, transparency, high-standard intellectual property protection that keeps pace with digital innovations and the rule of law. It also represents an important step towards a broader Middle East FTA.

ECAT Position: ECAT supports Congressional approval and the timely implementation of the U.S.-Oman FTA.

Andean Pact Agreements

The United States launched FTA negotiations with Colombia, Ecuador and Peru in May 2004, seeking to conclude a U.S.-Andean FTA. Negotiations with Peru were completed on December 7, 2005, and negotiations with Colombia were completed on February 27, 2006. Negotiations with Ecuador remain ongoing and negotiations with Bolivia have not been launched.

While the Peru agreement may be sent to Congress initially as a separate agreement, ECAT expects and strongly supports that the two agreements will be joined together as quickly as possible to ensure integrated liberalization between the United States and both countries. If Ecuador concludes its negotiation in a timely manner, Ecuador may also be included in an integrated Andean FTA.

Major Provisions of U.S.-Peru Trade Promotion Agreement

The primary provisions of the U.S.-Peru Trade Promotion Agreement include the following:

• Agriculture: Provides immediate duty-free treatment for more than two-thirds of U.S. agricultural exports to Peru, including important U.S. exports such as high quality beef, cotton, wheat, soybeans, soybean meal, crude soybean oil, key fruits and vegetables, and many processed foods products. Tariffs on most remaining products will be phased out within 15 years, with all tariffs eliminated within 17 years, providing improved access for pork, beef, corn, poultry, rice, fruits and vegetables, processed food and dairy products. The FTA also includes provisions to eliminate sanitary and phytosanitary barriers.
• Manufactured Goods: Eighty percent of U.S. consumer and industrial exports will receive immediate duty-free treatment, including key U.S. exports of auto parts, construction equipment, forest products, information technology products and medical and scientific equipment. Remaining tariffs will be eliminated on all products within ten years. Peru has agreed to allow trade in remanufactured products.
• Information Technology: Provides, via a side letter, that Peru will join and become a full participant in the WTO ITA. As a result, Peru will eliminate duties on all high-tech products (e.g., servers, personal computers, printers) covered by the Agreement and allow worldwide exports to enter their markets duty-free. In addition, Peru committed to non-discrimination and national treatment of e-commerce and digital products, and agreed not to impose customs duties on products delivered electronically.
• Textiles and Apparel: Expands access to the U.S. market through duty-free treatment for apparel made with U.S. and/or Peruvian fabric and, for a temporary period, a limited amount of apparel made with fabric from third countries. ECAT supported greater access for textile and apparel goods to promote co-production among U.S. and other regional suppliers.
• Services: Liberalizes services trade and investment in Peru through a negative list approach with few exceptions.
• Investment: Expands investment opportunities and incorporates generally strong protections, including an investor-state mechanism, for U.S. investment.
• Intellectual Property Rights: Includes strong protections for trademarks, patents, copyrights, and trade secrets, including stronger penalties, patent term restoration and data exclusivity.
• Government procurement: Includes important new anti-corruption, transparency and non-discrimination rules for government contracting.
• Transparency: Includes state-of-the-art transparency standards, including in such areas as customs and regulatory rulemaking (i.e., providing, for example, Internet publication of laws and regulations, expedited release procedures, and provisions for express shipments).
• Labor and environment: Includes commitments by Peru to enforce effectively its domestic labor and environmental laws. The parties reaffirmed their commitment to International Labor Organization principles and that it is inappropriate to weaken or reduce labor or environmental protections to encourage trade or investment. The parties also agreed to ensure that their environmental laws provide for high levels of environmental protection.
• Dispute settlement: Provides that obligations in commercial, labor and environment areas are enforceable through a strong and innovative dispute settlement system allowing for monetary fines and other penalties for the failure to meet commitments.

Major Provisions of U.S.-Colombia Free Trade Agreement

While the final text is currently undergoing a legal scrub, the primary provisions of the U.S.-Colombia FTA, based on U.S. government summaries, include the following:

• Agriculture: Provides immediate duty-free treatment for key U.S. agricultural exports to Colombia, including important U.S. exports such as high quality beef, cotton, wheat, soybeans, soybean meal, crude soybean oil, key fruits and vegetables, and many processed food products. The FTA includes provisions to allow imports of sugar into the U.S. market, but at lower thresholds than ECAT had sought. The FTA also includes provisions to eliminate sanitary and phytosanitary barriers.
• Manufactured Goods: Over 80 percent of U.S. exports of consumer and industrial tariffs will receive immediately duty-free treatment, including key U.S. exports of auto parts, agricultural and construction equipment, information technology products, medical and scientific equipment and wood. Remaining tariffs will be eliminated on all products within ten years. Colombia has also agreed to allow trade in remanufactured goods.
• Services: Liberalizes services trade and investment in Colombia through a negative list approach with few exceptions.
• Information Technology: Colombia agreed to join the WTO ITA. As a result, Colombia will eliminate duties on all high-tech products (e.g., servers, personal computers, printers) covered by the FTA and allow worldwide exports to enter their markets duty-free. In addition, Colombia committed to non-discrimination and national treatment of e-commerce and digital products, and agreed not to impose customs duties on products delivered electronically.
• Textiles and Apparel: Expands access to the U.S. market through duty-free treatment for apparel made with U.S. and/or Colombia fabric and, for a temporary period, a limited amount of apparel made with fabric from third countries. ECAT supported greater access for textile and apparel goods to promote co-production among U.S. and other regional suppliers.
• Investment: Expands investment opportunities and incorporates generally strong protections, including an investor-state mechanism, for U.S. investment.
• Intellectual Property Rights: Includes strong protections for trademarks, patents, copyrights, and trade secrets, including stronger penalties, patent term restoration and data exclusivity. ECAT expects that the patent harmonization provisions of the agreement will be enforced fully and effectively.
• Government procurement: Includes important new anti-corruption, transparency and non-discrimination rules for government contracting.
• Transparency: Includes state-of-the-art transparency standards, including in such areas as customs and regulatory rulemaking (i.e., providing, for example, Internet publication of laws and regulations, expedited release procedures, advance rulings on tariff classification, valuation and other key issues, and provisions for express shipments).
• Labor and environment: Includes commitments by Colombia to enforce effectively its domestic labor and environmental laws. The parties reaffirmed their commitment to International Labor Organization principles and that it is inappropriate to weaken or reduce labor or environmental protections to encourage trade or investment. The parties also agreed to ensure that their environmental laws provide for high levels of environmental protection.
• Dispute settlement: Provides that obligations in commercial, labor and environment areas are enforceable through a strong and innovative dispute settlement system allowing for monetary fines and other penalties for the failure to meet commitments.

Opportunities Created

U.S. trade with Peru and Colombia equaled $21.8 billion in 2005, with exports to Peru and Colombia accounting for $7.8 billion. U.S. exports to Peru equaled $2.3 billion in 2005, with significant exports of machinery, fuel, plastics and processed foods. U.S. imports from Peru totaled $5.1 billion in 2005, with major imports of precious stones, fuel, apparel and copper. U.S. exports to Colombia equaled $5.5 billion in 2005, with significant exports of machinery, chemicals and processed foods. U.S. imports from Colombia totaled $8.9 billion in 2005, with major imports of fuel, coffee, plants, precious stones and apparel. U.S. foreign direct investment in the Peru equaled $3.934 billion and in Colombia equaled $2.987 billion in 2004.

Most imports from Peru and Colombia (as well as the Andean Pact countries of Ecuador and Bolivia) already receive duty-free treatment under the Andean Trade Promotion and Drug Eradication Act (ATPDEA), which was enacted as part of the Trade Act of 2002. (Background on the ATPDEA and its predecessor legislation, the Andean Trade Preference Act, is found in section IV.3.) The Peru-Colombia agreements expand this duty-free treatment and make it permanent.

The U.S.-Peru-Colombia trade agreement will expand opportunities for U.S. producers by opening markets and eliminating key barriers. It will also make important improvements to investment protections, intellectual property rights, and transparency that will promote the rule of law. For Peru and Colombia, the trade agreement will expand opportunities and promote economic growth.

Given existing concerns over rule of law issues, including the enforcement of existing commitments, in Ecuador, ECAT strongly urges the Administration to continue to seek an FTA of the highest-possible standard with Ecuador and to incorporate each of the key investment provisions that guarantee protections to U.S. investors, including with respect to investor-state arbitration for breaches of investment agreements.

ECAT Position: ECAT supports Congressional approval and implementation of the U.S. Peru and U.S.-Colombia trade agreements as quickly as possible. ECAT also urges the Administration to ensure that existing Ecuadorian government commitments are upheld, particularly regarding investment, so that negotiations with Ecuador produce an enforceable and commercially meaningful FTA.

Ongoing Free Trade Agreement Negotiations

The Administration is engaged in or will soon begin the bilateral and sub-regional negotiations identified in the following table:

COUNTRIES/TRADING BLOCS WITH WHICH THE UNITED STATES IS CURRENTLY NEGOTIATING A FREE TRADE AGREEMENT
	Status
Andean Pact Ecuador Bolivia	Numerous negotiating rounds, could be completed in 2006 Negotiations not yet launched
Korea	Notified to Congress on February 2, 2006; Negotiations can begin by May 4, 2006
Malaysia	Notified to Congress on March 8, 2006; negotiations can begin by June 7th.
Panama	Numerous negotiating rounds; could be completed in 2006
Southern African Customs Union Botswana Lesotho Namibia South Africa Swaziland	Numerous negotiating rounds; current negotiations on hold
Thailand	Several negotiating rounds
United Arab Emirates	Several negotiating rounds
Western Hemisphere – FTAA (minus Cuba)	Efforts to reenergize negotiations taking place in 2006

U.S.-Korea FTA Negotiations

The United States and the Republic of South Korea announced on February 2, 2006 their intention to negotiate a bilateral free trade agreement. According to the TPA 90-day Congressional notification requirement, the United States may begin negotiations after May 4, 2006.

ECAT supports the negotiation of a comprehensive, high-standard and commercially meaningful FTA with Korea that creates concrete new trade and investment opportunities for U.S. companies, farmers, workers and their families. Such an agreement should promote liberalization throughout all key economic sectors, harmonization of our approach to regulatory matters affecting key sectors, effective protections for investment and intellectual property rights, strong and transparent government procurement rules, efficient dispute resolution procedures, and effective implementation.

Negotiation of a U.S.-Korea FTA has, of course, major challenges, particularly given the opaque nature of the Korean regulatory and market structure. U.S. negotiators will need to delve deeper than prior FTAs to address these major barriers to trade and investment. It is extremely important to include comprehensive and sector-specific approaches to address these barriers, particularly in industries that have experienced long-term and systemic market access restrictions, or where the non-tariff barriers are particularly severe or pervasive. ECAT welcomes the progress achieved by the Administration in addressing a few barriers, such as some cultural protection and agricultural issues, prior to the joint announcement of the intention to launch the negotiations. Yet, many other barriers exist that will need to be eliminated through the FTA. 63

The importance of concluding a comprehensive and commercially meaningful FTA with Korea is amplified by the strength of the existing trade and investment relationship. Korea is the United States’ seventh largest trading partner, with two-way goods trade in 2005 of $71 billion. U.S. goods exports to Korea totaled $27.7 billion in 2005, with significant exports in machinery, agricultural products, aircraft and chemicals. U.S. goods imports from Korea totaled $43.8 billion in 2005, with significant imports of automobiles, telecommunications and electrical equipment and machinery. U.S. cross-border services exports to Korea totaled $9.1 billion, and U.S. imports of services from Korea totaled $4.3 billion in 2004. U.S. foreign direct investment in Korea in 2004 reached approximately $17.3 billion, and Korean investment in the United States equaled $4.2 billion in 2004.

Key negotiating objectives sought by ECAT include the following:

Investment: Including a fully enforceable investment chapter in the U.S.-Korea FTA is extremely important to promote economic opportunities for U.S. investors and to strengthen the U.S. and Korean economies. Indeed, the United States and Korea have been in intensive negotiations over the past several years to achieve a bilateral investment treaty (BIT) that covers the same issues.

The investment chapter in the U.S.-Korea FTA should ensure high levels of market access, as well as protections for U.S. investors abroad, including protections related to national treatment and most-favored-nation treatment, expropriation, fair and equitable treatment, full protection and security, the free transfer of capital, no performance requirements, and full coverage for investment agreements. It is critical, as well, that the investment chapter include a strong investor-state dispute settlement mechanism, as developed in the Model BIT, to ensure objective and full resolution of investors’ individual disputes that are covered by the FTA. Furthermore, recent improvements in the investment text, incorporated into the U.S.-Uruguay Bilateral Investment Treaty (BIT) and the Model BIT, particularly with regard to investment agreements, should be incorporated into the investment chapter of a Korea FTA.

ECAT very much would like to see the elimination of the prudential carve-out contained in the financial services chapter that restricts access to dispute settlement for certain financial services issues. If that carve-out is repeated in the Korea FTA, ECAT would, at a minimum, strongly urge the inclusion of the additional explanatory text included in the U.S.-Uruguay BIT on this issue.

With regard to market access, it is critical that foreign equity limitations be reduced and eventually eliminated. An important example is the 49-percent cap on foreign investment in the telecommunication industry (fixed line and wireless). The restriction is a trade barrier and thwarts growth, undermining Korea’s desire to remain the forerunner in advanced telecommunications technology and become a regional financial hub. Access to broadband and wireless is near a saturation point and increased investment in the telecommunications sector is vital if the current growth is to be sustained, but the inability of foreign investors to further invest has depressed share prices and makes Korea telecom companies an unattractive investment even for domestic investors. In addition, this phenomenon has increased the cost of equity funding and hampers the ability to finance expansion or network upgrades and to develop and launch new services and products.

Similarly, the Korean Broadcast Company’s foreign investment restrictions, that limit ownership of Korea's broadcasting operations to less than half, should be addressed. In addition to limitations on ownership of cable television-related system operators, network operators, non-news channel program providers ("PPs") and satellite broadcasters, foreign companies are prohibited from investing at all in PPs providing comprehensive news channels.

Restrictive investment policies in major service and manufacturing sectors more broadly undermine Korea’s competitiveness and create an unlevel playing field for U.S. participation in the market.

Market Access for Consumer and Industrial Goods. The Korea FTA should eliminate all tariff and non-tariff barriers that impede U.S. access of consumer and industrial goods into the Korean market. A comprehensive elimination of tariffs would set an important example for future FTA partners, as well as the global Doha Development Agenda negotiations.

Of even greater importance is the need to eliminate non-tariff barriers to trade in the Korean economy, which can take many forms, including monopolies, licenses, labeling and certification requirements, lack of regulatory harmonization and consistency, anti-competitive pricing and reimbursement policies, costly customs valuation policies and cumbersome customs procedures -- all of which can limit full participation in Korea’s economy. Such barriers distort efficient trade flows of goods to the detriment of the United States. Their elimination would help spur U.S. exports and increase efficiency and rationality in the global marketplace.

Given the extensive and opaque nature of Korea’s regulatory and market environment, U.S. negotiators will need to develop new approaches, including sectoral frameworks, to address these barriers in an effective and comprehensive manner that results in concrete improvements in market access.

An area of particular interest for U.S. negotiators is the Korea automotive market. Despite several attempts to promote greater access for U.S. manufactured vehicles in Korea, including the 1995 and 1998 U.S.-Korea Memoranda of Understanding (MOUs) and a 2001 U.S.-Korea working group, significant market-access barriers remain and imports of U.S.-sourced vehicles into Korea continue to decline. A sector-specific approach may be required to address Korea’s long-standing auto import barriers that include tariffs, discriminatory taxes, unique regulatory requirements, and anti-import bias.

Another key area of interest for U.S. companies is Korea’s burdensome testing and certification processes in many areas and the adoption of mandatory technology requirements or standards. For example, redundant testing requirements for information communication technology (ICT) products represent a significant barrier and limit Korea’s own access to the highest quality ICT products that will support Korea’s own productivity and growth. ECAT strongly supports resolution of all key testing and certification issues with commitments to adopt common standards, such as the “One-Standard One-Test Shipper’s Declaration of Conformity” for the clearing of all high-tech products, or Mutual Recognition Agreements (MRA) where conformity in standards is not possible.

ECAT would also urge that technology standards development should be voluntary, industry-led, and consensus-based, and should respect intellectual property rights. As a general matter, the marketplace, rather than the government, should determine adoption of technology standards. Accordingly, government procurement should avoid mandating standards or technologies wherever possible, and any technical specifications in procurements should be based on performance and functional requirements rather than design or descriptive characteristics.

As well, despite significant negotiations and work with the Korean government, Korea maintains a host of non-tariff barriers that impede the introduction and availability of innovative medicines. These barriers will need to be addressed through the FTA negotiations.

ECAT also urges that the textile and apparel provisions permit cumulation. While Korea is not a substantial supplier of such products, it is very much in the United States’ interest to promote cumulation across all of our FTAs.

Agricultural Market Access. The elimination of tariff and non-tariff barriers in Korea’s agricultural market is also essential. Korea maintains significant barriers, from tariffs to import restrictions such as quotas and tariff rate quotas.

Key tariffs that should be eliminated through the FTA include Korea’s import duties on: high-fructose corn syrup and sugar, fruit juice, resin and milk powder, as well as food preparations classified in HTS 2106.90, mixtures used in the food and drink industry classified in HTS 3302.10, and certain chemical products classified in HTS 3824.90.

Non-tariff barriers in Korea’s agricultural sector that need to be addressed include:

• Unnecessarily extensive documentation requirements.
• Burdensome labeling requirements for genetically modified organisms (GMOs).
• Barriers to U.S. beef. While Korea took an important step to liberalize its beef market by allowing imports of boneless beef earlier this year, it is vital that Korea provide full access to both boneless and bone-in beef.
• Unscientific barriers to agricultural trade.

ECAT also urges that Korea agree to accept the "Food and Extract Manufacturers Association Generally Recognized as Safe" (or FEMA - GRAS) list of approved ingredients. Adoption of this list would accelerate and simplify trade between the United States and Korea.

Services. While Korea has made important strides in opening its services market, ECAT strongly supports a more fulsome and comprehensive market-access commitment in services as part of the Korea FTA. In particular, ECAT supports the negative list approach adopted in other recent U.S. FTAs and very limited non-conforming measures to ensure significant market opening throughout all key services sectors, as well as substantial commitments on the establishment and protection of foreign investment as discussed above. Dismantling barriers will have positive economic effects on the U.S. services sector, helping to stimulate growth in one of our most vibrant sectors and enhancing U.S. competitiveness and opportunities for U.S. companies and their workers.

Key objectives of the FTA services negotiations should include the following:

• Increased transparency in all regulated service sectors, including in particular financial services regulations, where there is a need to ensure equal access to regulatory information through standard notice and comment periods and the adoption of a negative list regulatory approach. ??

• Development of a more positive and pro-competitive regulatory environment, including through fostering greater recognition of pro-competitive and pro-consumer models and procedures to ensure that the private sector is permitted to design products, and expand the business and support systems in an environment where supervision is exercised by enhanced transparency and disclosure and regulation and rules are kept to the prudential minimum. Areas of particular focus include privacy of contract and protection of the private principal/agent relationship, bank assurance, data processing and protection, investment of assets, product pricing and control.

• Elimination of barriers to financial services, including unduly restrictive capital requirements, restrictions on local currency operations, unnecessarily complex and burdensome approval processes, equity limitations, and insurance product and pricing controls.

• Separation of supervisory activity between government and voluntary industry groups in the insurance sector, such that authority to review and make decisions and prepare guidelines for business conduct is not delegated to self-regulated organizations such as the Korea Life Insurance Association (KLIA) and the Korea Non-Life Insurance Association (KNLIA), where members have a conflict of interest and decisions risk compromising competitive advantage or otherwise creating unfair business operating conditions.

• Ensure that Korea Post and other quasi-financial institutions are subject to the same rules and regulations, including capital adequacy requirements, as private sector firms, in order to ensure a level playing field consistent with Korea’s international commitments. Placing Korea Post under the supervision of Korea’s competent financial supervisory agency is the best way to ensure that a level playing field is achieved.

• Greater liberalization of programming. The Korean Broadcasting Corporation (KBC) restricts foreign channels from inserting local advertisements into the retransmission of their programming due to a strict interpretation of the Re-Transmission Decree, which states the original broadcast programming cannot be altered. There is no rational basis for this restriction because simply replacing the original ads with ads that target Korean viewers would not affect the actual programming. This restriction should be eliminated.

• Elimination of KBC's restrictions against language dubbing of Korean-imported television content. As it stands, the only offshore companies allowed to provide dubbed feeds in Korea are those that set up local joint ventures in which they are minority partners at best. Moreover, specialized "news" channels are not even afforded the right to a joint venture. Unpublished internal KBC guidelines prohibit foreign news channels from gaining such approval.

• Liberalization and simplification of KBC's foreign programming restrictions. Current foreign programming may not exceed 20 percent of total airtime on terrestrial stations, with additional restrictions set by genre. Korea also has a local content quota for local program providers. The quotas are restrictive, difficult to apply, and almost impossible to meet.

Competition. Another area in which non-tariff barriers threaten to frustrate fair access to the Korean market by U.S. suppliers is competition law. While Korea’s competition law is not discriminatory on its face, it is at times interpreted and enforced in a non-transparent manner and in ways that effectively act as a trade barrier to U.S. products. On occasion, Korean competition authorities have failed to act aggressively against anti-competitive practices by Korean firms that restrict competition by one or more U.S. suppliers in the Korean market. Korean authorities have also imposed competition penalties that require the development and distribution of Korea-specific versions of U.S. exports--though with the apparent goal of assisting specific competitors who are active in the Korean marketplace rather than promoting the interests of Korean consumers.

A related U.S. industry concern is the investigation and regulation by Korean authorities of commercial practices by U.S. suppliers after these practices have already been investigated by U.S. antitrust authorities. For instance, in one recent case, the Korean Fair Trade Commission imposed far-reaching sanctions against a leading U.S. supplier for practices that had already been reviewed – indeed were undertaken in compliance with remedies already imposed – by the United States Department of Justice. Such divergent competition remedies pose a major threat to global trade, as they substantially increase business uncertainty and may force global U.S. suppliers to fragment their global development and distribution chains, thereby creating inefficiencies and preventing U.S. suppliers from reaping the full benefits of international trade.

In ECAT’s view, it is critical that a U.S.-Korea FTA include a robust competition chapter that improves transparency and prevents trade-distorting uses of competition law. Building upon the competition commitments set forth in recent FTAs (e.g., with Australia), the Korea FTA should strengthen obligations for national authorities not to apply competition rules in a manner that unnecessarily distorts trade or that nullifies the benefits otherwise accruing to exporters under other provisions of the FTA. One option would be to incorporate into the Korea FTA certain “comity” commitments set out in competition cooperation agreements that the United States has executed with several of its key trading partners. Such comity provisions would serve to strengthen coordination between U.S. and Korean competition authorities, particularly in cases where divergent outcomes threaten to distort bilateral trade. The risk of divergent remedies would also be lessened by ensuring that Korean regulators have clear legal authority to resolve cases on mutually agreed terms with the targets of enforcement action.

Government Procurement: While Korea is a member of the WTO Government Procurement Agreement (GPA), ECAT strongly believes that the incorporation of a government procurement chapter in the Korea FTA is necessary. An FTA government procurement chapter provides important and explicit protections against trade-distorting government procurement practices by Korean officials. A government procurement chapter would also provide a vital opportunity to strengthen Korea’s GPA obligations so as to ensure that its procurement practices are truly transparent, non-discriminatory, merit- based, and technology neutral, and that government procurement decisions take into account the overall value of the products or services at issue. An FTA government procurement chapter should also ensure that procuring entities do not impose standards or technical specifications that discriminate against U.S. suppliers or otherwise have the effect of creating barriers to trade, and that commitments in this area apply with equal force to the procurement of digital products and IT services.

In addition, further reform of Korea’s procurement sector is necessary to eliminate discriminatory and onerous barriers, including:

• Source Code Requirements in Information Technology Procurements. Korea requires that vendors for government procurements of information technology security submit the confidential source code for such products when applying for certification. As a result of this provision, no foreign vendors have applied for this certification, given the business confidential nature of this information. Korea also appears to be planning to expand the coverage of this regulation. The elimination of this requirement is necessary to ensure non-discriminatory and fair access of U.S. software products in Korea.

• Unlimited liability: Korean government procurement contracts typically subject the contractor to unlimited liability for any damage caused, with civil and criminal penalties. This unnecessarily broad liability clause acts as a major deterrent to U.S. participation in Korean procurements.

• IPR Ownership: Korean government procurement-contracting terms typically require the bidder to cede all ownership rights to materials submitted to the government. This overly broad requirement effectively negates IPRs that U.S. companies may have and, as a result, discourages U.S. participation in Korean procurements. With respect to software specifically, Korea should not condition government procurement or funding decisions on a vendor’s specific IPR licensing choices, including whether the vendor chooses to license its IPRs on a commercial or non-commercial basis. Any preference for one software licensing or development model over others risks depriving government agencies of the flexibility to procure whatever software program best meets their needs and budget.

• Confidentiality: Korean government procurement contracts typically provide that the government may copy and disclose any information and material provided by the contractor. This undermines business confidentiality and acts as a de facto barrier to U.S. participation in Korean government procurements. At the same time, the contractor is prohibited from the disclosure of any information acquired through the agreement, which is overly restrictive.

• Informal Barriers that produce de facto discrimination against U.S. companies, such as limits on labor costs in contracts and auditing requirements.

Intellectual Property Rights. ECAT strongly supports the negotiation, implementation and enforcement of strong protections for intellectual property rights (IPRs) to build upon and strengthen existing protections and commitments. Such provisions are critical in order to promote innovation and new research in the information technology, pharmaceutical and chemical sectors, to name just a few, and to stimulate a rich and diverse marketplace for the development and publishing of business information and literary, musical and other artistic and creative works. Strong intellectual property rules and effective enforcement are critical to eliminate pirating, counterfeiting and other activities that undermine U.S. research and development, and artistic and other activities.

In particular, the FTA should provide for intellectual-property protections similar to those found in U.S. law and recent U.S. FTAs, as directed by the Trade Act of 2002, and to ensure conformity with global standards, including the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), the WIPO Copyright Treaty (WCT), the WIPO Performances and Phonograms Treaty (WPPT) and the Berne Convention. The FTA should also ensure transparent and consistent intellectual-property enforcement procedures.

Particular issues that need to be resolved in the intellectual property area, include:

• The IP chapter in an FTA with Korea should address the high levels of counterfeiting and copyright piracy, due in part to non-deterrent penalties and lack of sufficient enforcement; and Korea's failure to comply with the 1996 WIPO Internet Treaties standards regarding technical protection measures for copyrighted materials and, application of reproduction rights to temporary copies.

• Korea should also be asked to provide an effective criminal prohibition and legal remedy against the widespread practice of camcording motion pictures in theaters for widespread distribution.

• Korea should extend its current copyright protection from the minimum standard of 50 years to 95 years for all copyright works, including films and sound recordings. Korea should also fulfill its obligations under Berne and TRIPS to provide a full term of protection to existing works and other subject matter whose copyright protections have expired in Korea but that remain protected in their country of origin.

• Korea should eliminate its pre-registration regime for new products and ingredients, which current undermines IPR protection.

• Korea should reform its Customs procedures, which require the disclosure of sensitive intellectual property in key areas. Korean customs authorities currently require very extensive product descriptions on imported ingredients for beverage production, which force companies to report the specific ingredient components thereby revealing sensitive intellectual property.

• Korea should commit to patent linkage to prevent the approval of generic forms of patented pharmaceutical products while the patent is still in force.

• Korea should commit to reform its panel specification requirements, which provide an unnecessarily restrictive burden on patentees.

Electronic Commerce/Information Technology. Electronic commerce (e-commerce) is an increasingly important venue for international trade that is now used in all sectors of the economy and will become increasingly important in the next decade. As a result, it will also be important to ensure that trade and investment rules promote and do not inhibit the growth of e-commerce and information technology products and services. Strong principles promoting e-commerce and technology will enhance the competitiveness of U.S. companies producing and consuming these goods and services, for the benefit of the broader U.S. economy. In this regard, both countries should agree to a permanent moratorium on customs duties on electronic transmissions and digital products and guarantees of national treatment and non-discrimination for such products.

Trade Facilitation and Customs Procedures. Furthermore, for all U.S. exporters, transparent and predictable Customs processes and procedures are important. In efforts to reduce compliance costs and create a more trade facilitative environment, the U.S-Korea FTA should include a chapter on Customs Administration and Trade Facilitation similar to that of other recent FTAs. As well, the Korea FTA should address longstanding problems in the operation of the Korean Customs Authority, including misclassifications, where the Korean Customs Authority is sometimes unable to distinguish between imported ingredients and imported finished products. For example, the Korean Customs Authority is repeatedly assessing customs duties on imports of drink ingredient components as if the imports constituted the finished beverage base concentrate (which is produced in Korea from the imported ingredient components).

ECAT urges U.S. negotiators to seek a comprehensive and commercially meaningful U.S.-Korea FTA that protects and promotes investment, intellectual property rights and digital trade and information technology, while eliminating tariffs and non-tariff barriers and liberalizing trade in agricultural and manufactured goods and services.

ECAT Position: ECAT supports the timely completion and implementation of a comprehensive, high-standard and commercially meaningful U.S.-Korea FTA that will liberalize trade and investment, eliminate Korea’s extensive non-tariff, customs and other barriers to full market access by U.S. manufacturers, farmers, service providers and investors and strengthen disciplines on intellectual property, investment, government procurement and transparency.

U.S.-Malaysia FTA Negotiations

On March 8, 2006, the United States and Malaysia announced their intention to launch FTA negotiations. According to the TPA 90-day Congressional notification requirement, the United States may begin negotiations by June 7, 2006.

Malaysia is the United States’ 10th largest trading partner. The U.S.-Malaysian commercial relationship has nearly quintupled over the last fifteen years, from two-trade in goods of $8.7 billion in 1990 to a $44.15 billion relationship in 2005. U.S. goods exports to Malaysia equaled $10.5 billion in 2005, with significant exports of machinery, medical equipment and aircraft. U.S. goods imports from Malaysia equaled $33.7 billion in 2005, with significant imports of machinery, furniture, and rubber products. U.S. services exports to Malaysia totaled $1.2 billion and U.S. services imports from Malaysia equaled $382 million in 2004. U.S. foreign direct investment in Malaysia equaled $8.7 in 2004.

A comprehensive and high-standard FTA with Malaysia will improve and help grow that relationship by eliminating tariff and non-tariff barriers to greater trade and investment. A strong FTA will also strengthen the broader U.S.-Malaysian relationship and enhance broader U.S. national interests in Asia.

In particular, ECAT urges U.S. negotiators to seek the elimination of the following barriers as part of the FTA negotiations:

• Agricultural and manufactured tariffs.
• Customs barriers to trade. For example negotiators should ensure, among others: advance rulings for, for example, tariff classification, valuation, and country of origin marking; procedures for expedited shipments; publication of regulations and laws on the Internet; accession to adherence to WTO Customs Valuation Agreement; elimination of certificates of origin in favor of a simple statement of origin on existing documents; standardized approach to preferential rules of origin based, as explained in the Korea section above.
• Other non-tariff barriers across all sectors, including Malaysia’s onerous import -approval permitting process and limitations on U.S. agricultural products.
• Services barriers, through adoption of negative list commitments.
• Barriers to investment in Malaysia and the incorporation into the FTA of strong protections for U.S. investors, including the free transfer of capital, fair and equitable treatment, protections against expropriation and full access to investor-state dispute settlement.
• Limitations on expatriate employees permitted in foreign-owned companies.
• Remaining government procurement barriers.
• Electronic commerce, digital and information technology barriers.
• Barriers created by the lack of full and effective protections for intellectual property rights, including the lack of a data exclusivity law or a patent linkage system, and other market access barriers.

ECAT Position: ECAT supports the timely completion and implementation of a comprehensive, high-standard and commercially meaningful U.S.-Malaysia FTA that will eliminate tariff and customs and other non-tariff barriers, further liberalize trade and investment and strengthen disciplines on intellectual property, investment, government procurement and transparency.

U.S.-Panama FTA Negotiations

The United States launched FTA negotiations in April 2004, but negotiations were not completed as expected by early 2005.

U.S. goods exports to Panama equaled. $2.2 billion in 2005, with major exports of fuel, machinery and pharmaceutical products. U.S. goods imports from Panama equaled $327 million, with significant imports of agricultural goods and precious stones.

ECAT supports a comprehensive and commercially meaningful FTA with Panama that will eliminate tariff and non-tariff barriers to trade and investment and help create new opportunities for the United States and Panama.

The United States and Panama have a Bilateral Investment Treaty (BIT) in force that was negotiated in 1982. While there are significant deficiencies with this BIT, including its exclusion of key sectors, it does provide full protection for investment agreements (existing and prospective). As a result, ECAT very strongly urges the Administration not to reduce existing protections, at the same time that it seeks strengthened investment protections for all sectors as part of the FTA. ECAT also supports a strong approach on investment that will not leave key sectors of the economy excluded.

ECAT urges U.S. negotiators to seek the elimination of the following barriers as part of the FTA negotiations:

• Investment barriers, particularly with respect to the Panama Canal investments, and the incorporation into the FTA of strong protections for U.S. investors, including the free transfer of capital, fair and equitable treatment, protections against expropriation and full access to investor-state dispute settlement.
• Tariff elimination to eliminate Panama’s agricultural and manufactured tariffs.
• Customs barriers to trade.
• Non-tariff barriers across all sectors, including sanitary and phytosanitary barriers.
• Services barriers, through adoption of negative list commitments.
• Government procurement barriers through commitments to transparent, predictable and fair-tendering procedures.
• Electronic commerce, digital and information technology barriers.
• Barriers created by the lack of full and effective protections for intellectual property rights.

ECAT Position: ECAT supports the timely completion and implementation of a comprehensive, high-standard and commercially meaningful U.S.-Panama FTA that will eliminate tariffs and customs and other non-tariff barriers, further liberalize trade and investment and strengthen disciplines on intellectual property, investment, government procurement and transparency. ECAT strongly urges that the investment protections already accorded to U.S. investors under the U.S.-Panama BIT not be reduced in any new commitments made as part of the FTA.

U.S.-Thailand FTA Negotiations

The United States launched FTA negotiations with Thailand in June 2004.

U.S. goods exports to Thailand equaled $7.2 billion in 2005, with major exports of machinery, medical equipment and precious stones. U.S. goods imports from Thailand equaled $19.9 billion, with significant imports of machinery, precious stones and apparel. U.S. services exports to Thailand equaled $1.1 billion and U.S. services imports from Thailand equaled $924 million in 2004. U.S. foreign direct investment in Thailand equaled $1.7 billion in 2004.

ECAT supports a comprehensive and commercially meaningful FTA with Thailand that will focus on key trade and investment issues and address the significant challenges in the market with respect to intellectual property protection. Such an agreement should eliminate tariff and non-tariff barriers to trade and investment and help create new opportunities for the United States and Thailand.

ECAT strongly urges U.S. negotiators to seek the elimination or reduction of the following barriers as part of the FTA negotiations:

• Investment barriers, including restrictions in the Foreign Business Act, and the incorporation into the FTA of strong protections for U.S. investors, including the free transfer of capital, fair and equitable treatment, protections against expropriation and full access to investor-state dispute settlement.
• Agricultural and manufactured tariffs.
• Customs barriers to trade.
• Other non-tariff barriers across all sectors.
• Services barriers, through adoption of negative list commitments.
• Government procurement barriers through commitments to transparent, predictable and fair-tendering procedures.
• Electronic commerce, digital and information technology barriers.
• Barriers created by the lack of full and effective protections for intellectual property rights.

ECAT also strongly supports the conclusion of an “open skies” agreement between the United States and Thailand, which would promote enormous benefits to consumers and support continued growth of aviation and aerospace industries as explained in section IV.2. .

ECAT Position: ECAT supports the timely completion and implementation of a comprehensive, high-standard and commercially meaningful U.S.-Thailand that will liberalize trade and investment and strengthen disciplines on intellectual property, investment, government procurement and transparency.

U.S.-United Arab Emirates FTA Negotiations

The United States launched FTA negotiations with the United Arab Emirates (UAE) in March 2005.

U.S. goods exports to the UAE equaled $8.5 billion in 2005, with significant exports of aircraft, machinery, and vehicles. U.S. goods imports from the UAE equaled $1.5 billion in 2005, with significant imports of fuel, chemicals and aluminum. U.S. foreign direct investment in the UAE equaled $386 million in 2004.

In March 2004, UAE signed a Trade and Investment Framework Agreement with the United States and, in December 2004, it also signed a Container Port Security Initiative with the United States, to protect global trade routes.

ECAT supports a comprehensive and commercially meaningful FTA with the UAE that will eliminate tariff and non-tariff barriers to trade and investment and help create new commercial opportunities. As with Bahrain and Oman, an FTA with the UAE will enable the Administration to make significant progress in its efforts to establish a Middle East FTA.

ECAT strongly urges U.S. negotiators to seek the elimination of the following barriers as part of the FTA negotiations:

• Investment barriers, including:
  requirements under the UAE Commercial Agencies Law (Federal Law No. 18 of 1981, as amended) that establish foreign ownership limitations on business operations in the UAE (outside of the free trade zone);
  significant limitations on land ownership and land transfer by foreigners, and
  a discriminatory tax regime that burdens foreign banks.

• Remaining agricultural and manufactured product tariffs.

• Customs barriers to trade, including the elimination of the current requirement to have the certificate of origin legalized by the Consulate even if the good are not eligible to receive preferential treatment.

• Remaining tariffs on the UAE’s agricultural and manufactured imports.

• Non-tariff barriers, including agency-sponsor-distributors requirements that reduce opportunities not only for investment, but also for the distribution and sale of U.S. agricultural and manufactured exports.

• Services barriers, through adoption of negative list commitments.

• Government procurement barriers through commitments to transparent, predictable and fair-tendering procedures, including through reform of the Public Tenders Law of 1975.

• Electronic commerce, digital and information technology barriers.

• Barriers created by the lack of full and effective protections for intellectual property rights.

• Potential barriers created by the Gulf Cooperation Council Customs Union.

ECAT also seeks strong protections for U.S. investors, including the free transfer of capital, fair and equitable treatment, protections against expropriation and full access to investor-state dispute settlement for breaches of the agreement or investment agreements. As well, ECAT seeks the UAE’s commitment to join the WTO ITA as a full participant with shortest staging of benefits possible.

ECAT Position: ECAT supports the timely completion and implementation of a comprehensive, high-standard and commercially meaningful U.S.-UAE FTA that will further liberalize trade and investment, eliminate tariff and customs and other non-tariff barriers and strengthen disciplines on intellectual property, investment, government procurement and transparency.

U.S.-South Africa Customs Union FTA Negotiations

The United States launched FTA negotiations in June 2003 with the South African Customs Union (SACU), comprised of South Africa, Botswana, Swaziland, Namibia, and Lesotho. Several negotiating rounds have been held, but progress has slowed and there is no set date for the conclusion of the SACU FTA.

The SACU already represents the largest U.S. export market in sub-Saharan Africa, with U.S. exports totaling more than $4.1 billion in 2005. Major exports include vehicles, machinery, aircraft, and medical equipment. U.S. imports from the SACU equaled $6.8 billion in 2005, with significant imports of precious stones, iron and steel, apparel and machinery.

ECAT supports a comprehensive and commercially meaningful FTA with the SACU that will eliminate tariff and non-tariff barriers to trade and investment and help create new commercial opportunities. ECAT strongly urges U.S. negotiators to seek the elimination of the following barriers as part of the FTA negotiations:

• Investment barriers, and the incorporation into the FTA of protections for U.S. investors, including the free transfer of capital, fair and equitable treatment, protections against expropriation and full access to investor-state dispute settlement.
• Tariffs through the elimination of agricultural and manufactured tariffs.
• Customs barriers to trade.
• Other non-tariff barriers across all sectors.
• Services barriers, through adoption of negative list commitments.
• Government procurement barriers through commitments to transparent, predictable and fair-tendering procedures.
• Electronic commerce, digital and information technology barriers.
• Barriers created by the lack of full and effective protections for intellectual property rights.

As well, ECAT seeks commitments by Botswana, Lesotho, Namibia, and Swaziland to join the WTO ITA as a full participant with shortest staging of benefits possible.

ECAT Position: ECAT supports the completion and implementation of a comprehensive, high-standard and commercially meaningful U.S.-SACU FTA that will further liberalize trade and investment, eliminate tariff and customs and other non-tariff barriers and strengthen disciplines on intellectual property, investment, government procurement and transparency.

Free Trade Area of the Americas Negotiations

The ongoing Free Trade Area of the Americas (FTAA) negotiations, formally launched in 1998, have the potential for creating the largest free trade area in the world, covering approximately 800 million people with a combined GDP of nearly $11 trillion. At the third Summit of the Americas in April 2001, the leaders of the 34 nations negotiating the FTAA agreed that negotiations would be completed by January 2005 – a deadline that was not met. In 2002, trade ministers initiated market-access negotiations, began a review of the second draft FTAA text and launched a Hemispheric Cooperation Program. The United States, which became a co-chair of the negotiations with Brazil in November 2002, has enormous benefits to reap from the FTAA and will need to play a leadership role to help move negotiations forward.

In 2003, the FTAA negotiations took a very different turn, with the 34 leaders agreeing to a two-track process at the Eighth FTAA Ministerial in Miami in November 2003. This was the result of significant disagreements among key countries, including Brazil and others in MERCOSUR that sought an FTAA focused on market access, as opposed to broader rules, which the United States, Canada and other countries in the Hemisphere have long supported as part of the FTAA process. Negotiations then stalled in 2004 and 2005 as countries were unable to reach agreement on key issues regarding the two-track process.

Meanwhile, two-way goods trade between the United States and the rest of the Western Hemisphere has more than doubled since 1990 to $976 billion in 2005. The share of the total value of U.S. trade accounted for by countries participating in the FTAA negotiations increased from 33 percent in 1990 to 38 percent in 2005. U.S. exports to the region equaled $400 billion, accounting for 44 percent of total U.S. exports to all destinations in 2005. Imports from the region equaled $576 billion, accounting for 34.5 percent of total U.S. imports from all destinations in 2005.

Background on the Negotiations

At the 1994 Miami Summit of the Americas, the United States joined 33 other nations of the Western Hemisphere – excluding Cuba – in agreeing to conclude a FTAA by 2005. FTAA negotiations were officially launched at the second Summit of the Americas meeting held in Santiago, Chile, in April 1998. The Santiago Summit Declaration endorsed the start of the FTAA negotiations and reaffirmed the goal of completing negotiations by 2005 – a deadline that was not met. It called for concrete progress, including specific business-facilitation measures, to be achieved by 2000. The Declaration states that the FTAA is to be balanced, comprehensive, and WTO-consistent, as well as to constitute a single undertaking (meaning signatories must adhere to all aspects of the agreement). The Declaration further provides that the negotiating process must be transparent and take into account the differences in the level of development and size of the economies in the Americas.

The Declaration established the following negotiating groups: market access, agriculture, investment, services, government procurement, dispute settlement, intellectual property rights, subsidies, antidumping and countervailing duties, and competition policy. The following three consultative committees were established to provide support to negotiators: the FTAA Consultative Group on Smaller Economies, the FTAA Committee of Experts on Electronic Commerce, and the FTAA Committee on Civil Society. There is a FTAA Trade Negotiating Committee (TNC) that oversees the entire negotiation process.

The FTAA Trade Ministerial in Toronto, Canada, in November 1999 directed negotiators to begin to develop a draft text of an FTAA agreement to be ready for the next ministerial meeting to be held in Buenos Aires, Argentina, in April 2001. Trade ministers also endorsed the launch of a round of WTO trade negotiations and the goal of seeking the complete elimination of agricultural export subsidies. The trade ministers adopted eight customs facilitation measures to be implemented by January 2000. USTR announced the conclusion of an Inter-American Mutual Recognition Agreement (MRA) for conformity assessment of telecommunications equipment. The MRA simplifies the conformity assessment procedures for testing and certification of telecommunications equipment. Throughout 2000, the FTAA negotiating groups met to discuss and put together draft-bracketed texts on each of the issues under negotiation. The United States submitted comprehensive proposals on each of the main issues in that year.

The sixth Ministerial meeting was held in Buenos Aires, followed by the Third Summit of the Americas held in Quebec City in April 2001. Negotiating groups presented a draft text of the FTAA to the Ministers who recommended its public release. For the first time in a major negotiation, the heads of state agreed to the public release of the draft negotiating text, which was made public on July 3, 2001. The Summit also fixed the end date of the negotiations as January 2005, with entry into force as soon as possible, but no later than December 2005.

On May 15, 2002, the market-access phase of the negotiations was initiated. At the seventh Ministerial in Quito, the second draft FTAA text was presented to ministers and also made public with solicitations for public comment. With the strong leadership of the United States, the ministers also agreed to a Hemispheric Cooperation Program through which countries would identify their capacity-building needs and programs would be developed to assist small and developing countries so that they can fully reap the benefits of the FTAA.

Status of the Negotiations and Outlook for 2006

At the Eighth FTAA Ministerial in Miami in November 2003, ministers of the 34 countries agreed to pursue a common set of obligations, while allowing any interested countries to also undertake additional obligations and benefits where there is no consensus at the hemispheric level. The ministers directed that a definition of the comprehensive set of common obligations be prepared, as well as procedures for their negotiation.

The creation of what some have called a two-tier approach resulted from concerns that the 34 countries could not bridge significant differences on the level of commitments sought to be obtained within the deadline of the negotiations. In significant part, Brazil and its partners in MERCOSUR, favored a much-reduced set of obligations, particularly in areas beyond market access. Rather than pursuing the FTAA over a longer period of time – while negotiating and consolidating comprehensive and high-standard bilateral and sub-regional FTAs (such as the U.S.-Chile FTA, CAFTA, or the U.S.-Peru-Colombia FTA) – or pursuing an FTA without those countries that did not want to achieve a comprehensive high-standard agreement, the United States and other countries in the Hemisphere who had sought a more comprehensive and higher standard agreement agreed to this compromise in an effort to realize concrete progress by 2005. As a result of this compromise, however, it is expected that comprehensive protections on investment, state-of-the art intellectual property protections and a negative-list approach to services will not likely be incorporated as part of the common set of obligations. ECAT recognizes that the Administration is continuing to press for the inclusion of these commitments, particularly in the area of intellectual property rights with Brazil, which has already largely adopted many of the key intellectual property rights protections in its own law.

Efforts to reach a consensus on the framework on the common set of obligations, as well as procedures for their negotiation, have yet to be successful. At the Fourth Summit of the Americas in November 2005 in Argentina, the United States and a majority of the FTAA countries supported a continuation of the negotiations and called for ministers to resume meetings in 2006. While meetings are likely to be held in 2006, there remains significant resistance among a few countries to further progress on these negotiations.

Importance of the FTAA Negotiations

As originally conceived, the FTAA negotiations presented an enormous possibility to eliminate barriers to trade and investment in the Western Hemisphere, which already accounts for 38 percent of total U.S. trade and 44 percent of total U.S. exports. A comprehensive and high standard FTAA would provide U.S. farmers, manufacturers and service providers expanded export and investment opportunities that will help sustain U.S. economic growth and the high standard of living in the United States. Improved disciplines in intellectual property and investment and strong dispute settlement rules would help ensure that U.S. interests are protected. As trade alliances deepen, so too would political, economic and security alliances that are critical to the United States in the decades ahead.

With the new approach adopted by the 34 ministers in Miami, the opportunities presented by the FTAA are somewhat more ambiguous, but hugely important. Significant commitments in market access for agriculture, services and industrial goods could have very concrete benefits for U.S. farmers, companies and their workers. It can help level the playing field. Much depends on what is left off the table at the end of the day and the extent to which a significant block of countries adopts a comprehensive, high-standard upper tier of commitments that creates inducements over time for Brazil and other countries to agree to such standards.

ECAT Position: ECAT supports significant progress through FTAA negotiations to eliminate barriers to agriculture, goods and services trade and develop strong, comprehensive protections with respect to investment and intellectual property rights that will promote economic growth and development and the rule of law throughout the Western Hemisphere. ECAT also supports further concrete progress in creating a transparent and predictable Customs environment in the Western emisphere for U.S. exporters and importers.

Consideration of Future FTAs

In addition to the FTAs discussed above, ECAT member companies remain interested in the potential for other FTAs that could be negotiated. As discussed above, ECAT is very interested in the negotiations with Korea and Malaysia, both of which are major trading and investment partners and would welcomes efforts to explore potential FTA negotiations with other countries where there is a significant and growing commercial relationship. ECAT companies recognize the difficulties in engaging in such negotiations with any of the common market countries of the European Union or even of such a negotiation with Japan, India, Indonesia or other key trading partners. Yet, the market potential of negotiating comprehensive and high-standard agreements with such countries and others, sooner, rather than later, should be an issue squarely on the U.S. trade and investment negotiating agenda.

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