On October 12, U.S. Congress passed free-trade-agreements (FTAs) with South Korea, Colombia, and Panama. The accords, reached under President George W. Bush and revised by the Obama administration, had been stalled in a stalemate with Republicans over aid for workers who lose their jobs to foreign competition. The benefits are commercially significant: 87% of the Colombian tariffs on US products will be eliminated within five years; in case of South Korea, nearly 95 percent of bilateral trade in consumer and industrial products would become duty free within three years and most remaining tariffs will be eliminated within 10 years; over 87 percent of U.S. exports to Panama will become duty-free immediately, with remaining tariffs phased out over ten years. The agreements would also take steps to better protect intellectual property and improve access for American investors in those countries.
As a result, the US Department of Commerce estimates that the US-Colombia Trade promotion Agreement will bring about a 2.6 billion GDP increase as well as opportunities and jobs for the service and good providers. As the upcoming EU-Colombia and Canada-Colombia FTA will come into effect soon, it becomes crucial to maintain U.S. market share in the Colombia market, which imports more U.S. goods than does Spain, Indonesia and even Russia. The U.S. International Trade Commission estimates that the reduction of Korean tariffs and tariff-rate quotas on goods alone would add $10 billion to $12 billion to annual U.S. Gross Domestic Product and around $10 billion to annual merchandise exports to Korea.
Overall, implementing the Free Trade Agreements allows the US to engage in trade with minimum dead-weight-loss created by tariffs and other intervening measures. Under a free trade policy, prices become the reflection of supply and demand and the sole determinant in resource allocation – further decreasing the costs of goods and services to both producers and consumers.
Bibliography
“Done Deal”, The Economist Online, Oct 11th 2011, 2:46
http://www.economist.com/blogs/americasview/2011/10/economist-asks-0
M. Angeles Villarreal, “The Proposed U.S.-Colombia Free Trade Agreement: Economic and Political Implications”, Congress Research Service, April 16, 2010
http://fpc.state.gov/documents/organization/142763.pdf
Kevin Gallagher, “Trading Away Development: The US-Colombia Free Trade Agreement”, Truthout, Tuesday 4 October 2011
http://truth-out.org/trading-away-development-us-colombia-free-trade-agreement/1317748475
“Benefits from the U.S.‐Colombia Trade Promotion Agreement”, International Trade Administration, U.S. Department of Commerce, August 2011
http://www.trade.gov/fta/colombia/
“Korea - U.S. Free Trade Agreement”, Executive Office of the President, Office of the United States Trade Representative, October 2011
http://www.ustr.gov/trade-agreements/free-trade-agreements/korus-fta
“Panama Trade Promotion Agreement”, Executive Office of the President, Office of the United States Trade Representative, October 2011
http://www.ustr.gov/trade-agreements/free-trade-agreements/panama-tpa
Eric Martin and William McQuillen, “Congress Begins Debate on Korea, Colombia, Panama Trade Accords”, Bloomberg Businessweek, October 12, 2011
“Benefits Of The U.S.-Panama Trade Promotion Agreement”, Executive Office of the President, Office of the United States Trade Representative, October 2011
http://www.whitehouse.gov/sites/default/files/panama_trade_agreement_benefits.pdf
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