US Business Groups Seek More FTAs

by Mike Godfrey, Tax-News.com, Washington

30 July 2010

The American Farm Bureau Federation (AFBF), the Coalition of Service Industries (CSI) and the National Association of Manufacturers (NAM) have put forward a comprehensive approach to increase United States exports, including the negotiation of new free trade agreements (FTAs).

A key goal of President Obama’s National Export Initiative (NEI) is the doubling of US exports in five years. The three organizations have outlined major policy changes to achieve that ambitious goal, largely by improving market access and leveling the playing field in a competitive global market.

The AFBF, CSI and NAM believe the US administration will need to enact the pending FTAs with Colombia, Panama and South Korea, negotiate new trade agreements, reduce non-tariff barriers, pursue a Doha Round agreement that expands world trade, and improve export promotion efforts and financing policies.

“Growth in US agricultural exports will be achieved with aggressive actions to expand market opportunities and reduce trade barriers,” said AFBF’s Director of International Policy, Rosemarie Watkins. “These measures are critical for increasing US agricultural competitiveness around the world and meeting the growing world demand for food with US agricultural products.”

“If drastic changes are not made to double exports, our nation’s manufactured goods exports will fall nearly USD300bn short of the President’s goal in 2014,” said NAM’s Vice President of International Economic Affairs, Frank Vargo. “Our partners and competitors are moving forward with negotiating new FTAs and enacting other policies to boost exports, and the US is being left behind. America needs to enact policies to make it easier for US companies to reach new markets.”

"While services account for 80% of the US economy, they account for only about 31% of US exports, in part because of the prevalence of barriers to services trade around the world,” said CSI’s President, Bob Vastine. “If the President's goal of doubling exports is to be realized, the US government must create a supportive trade policy that addresses discriminatory trade barriers erected by many of our trading partners."

In its submission to the President regarding the NEI, the CSI details its policy recommendations. It points out that, if the 2009 figure for services exports as a percentage of gross domestic product holds constant, US services exports would reach USD621bn in 2014; far short of the figure of USD960bn needed if the US is to double services exports.

It therefore recommends that the US should explore agreements among willing groups of key countries to liberalize trade in services on a sector-by-sector and/or mode-by-mode basis, either within or outside of the context of the Doha Round. A sector-focused approach, it says, may circumvent some of the obstacles that have hampered more comprehensive negotiations.

It confirms that US FTAs have, in the past, proven to be extremely effective in opening services markets. US services exports to both Mexico and Canada have doubled in the past decade; and services exports to Chile and Singapore are up 68% and 61%, respectively, since FTAs with those countries took effect in 2004. Since the enactment of the US-Australia FTA, services exports to that country are up by 57%.

Passing the pending FTAs with Korea, Colombia, and Panama would therefore be, it says, an essential first step towards growing US service exports and supporting the NEI’s goals. Reducing tariffs on goods, expanding opportunities for trade in digital products and enhancing regulatory and IPR protections, all create new opportunities for services providers from express delivery and retail services to banking and information/ telecommunications providers.

It confirms that all three agreements contain strong services provisions that will reduce foreign trade barriers, and that passing these agreements would ensure that market access, investment protection, and regulatory reform benefits will be realized by US exporters.

Furthermore, the CSI strongly supports the government’s negotiation of a Trans-Pacific Partnership (TPP), which could provide the core for building a larger trade bloc in the Asia Pacific region. By including issues such as regulatory coherence, small and medium-sized enterprises, competition and IPR protection, it believes that the TPP is a platform upon which to design a truly regional FTA that facilitates the movement of goods, services and investment among the parties.

Finally, where full FTAs are impractical, it recommends that the US should explore services-only trade agreements such as a services-only FTA between the US, EU and Japan. Such an agreement would also set high standards in services trade and investment, which could provide a template for negotiating future trade agreements with other countries.

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