Industry Trade Effects Related to NAFTA

CRS ReportCRSIndustryTradeNAFTARL31386.pdf: 3834 downloads, before Oct. 1, 2020

The Proposed U.S.-Colombia Free Trade Agreement

[Excerpt] The proposed U.S.-Colombia Trade Promotion Agreement, also called the U.S.-Colombia Free Trade Agreement (CFTA), was signed by the United States and Colombia on November 22, 2006. The agreement must be approved by Congress before it can enter into force. Upon congressional approval, it would immediately eliminate duties on 80% of U.S. exports of consumer and industrial products to Colombia. An additional 7% of U.S. exports would receive duty-free treatment within five years of implementation, and most remaining tariffs would be eliminated within 10 years of implementation. The agreement also contains other provisions in services, investment, intellectual property rights protection, labor, and the environment. About 90% of U.S. imports from Colombia enter the United States duty-free under trade preference programs or through normal trade relations, while U.S. exports to Colombia face duties of up to 20%. It is possible that the 112th may consider implementing legislation for the proposed CFTA. Negotiations for the agreement were conducted under the trade promotion authority (TPA), also called fast-track trade authority, that Congress granted the President under the Bipartisan Trade Promotion Act of 2002 (P.L. 107-210). The authority allowed the President to enter into trade agreements that would receive expedited congressional consideration (no amendments and limited debate). Implementing legislation for the CFTA (H.R. 5724/S. 2830) was introduced in the 110th Congress on April 8, 2008, under TPA. The House leadership, however, took the position that the President had submitted the implementing legislation without adequately fulfilling the TPA requirement for consultation with Congress. On April 10, 2008, the House voted 224-195 to make the provisions establishing expedited procedures, inapplicable to the CFTA implementing legislation (H.Res. 1092). In his January 2011 State of the Union address, President Barack Obama mentioned the importance of opening foreign markets for U.S. goods and services, and strengthening U.S. trade relations with Colombia. In 2010, the Administration initiated a new National Export Initiative (NEI), which includes a component that calls for opening new markets for U.S. exports by resolving outstanding issues on the pending CFTA. The Obama Administration also has made a case for pursuing free trade agreements as part of the National Security Strategy of the United States, though the CFTA is not specifically mentioned in the report. The congressional debate surrounding the agreement has mostly centered on the violence issues in Colombia. Some members of Congress oppose the agreement because of concerns about violence against union members and other terrorist activity in Colombia. However, numerous members of Congress support the CFTA and take issue with these charges, stating that Colombia has made progress in recent years to curb the violence in the country. They also contend that the agreement would open the Colombian market for U.S. exporters. Other policymakers argue that Colombia is a crucial ally of the United States in Latin America and that if the trade agreement is not passed, it may lead to further violence in the region. For Colombia, a free trade agreement with the United States is part of its overall economic development strategy. The United States is Colombia’s leading trade partner. Colombia accounts for a very small percentage of U.S. trade (0.8% in 2009), ranking 22nd among U.S. export markets and 27th as a source of U.S. imports. Economic studies on the impact of a U.S.-Colombia free trade agreement (FTA) have found that, upon full implementation of an agreement, the impact on the United States would be positive but very small due to the small size of the Colombian economy when compared to that of the United States (about 1.6%)

NAFTA and the Mexican Economy

The North American Free Trade Agreement (NAFTA), in effect since January 1994, plays a very strong role in the bilateral economic relationship between Mexico and the United States. The two countries are also closely tied in areas not directly related to trade and investment such as security, environmental, migration, and health issues. The effects of NAFTA on Mexico and the state of the Mexican economy have important impacts on U.S. economic and political interests. As NAFTA approaches its 15th anniversary, a number of policymakers have raised the issue of revisiting NAFTA and renegotiating parts of the agreement. Some important factors in evaluating NAFTA include the effects of the agreement on Mexico and how these relate to U.S.-Mexico economic relations. In the 110th Congress, major issues of concern have been related mostly to economic conditions in Mexico, the effect of NAFTA on the United States and Mexico, and Mexican migrant workers in the United States. In 1990, then Mexican President Carlos Salinas de Gortari approached the United States with the idea of forming a free trade agreement (FTA). Mexico’s main motivation in pursuing an FTA with the United States was to stabilize the Mexican economy by attracting foreign direct investment. The Mexican economy had experienced many difficulties throughout most of the 1980s with a significant deepening of poverty. The intention of Mexico in entering NAFTA was to increase export diversification by attracting foreign direct investment (FDI), which would help create jobs, increase wage rates, and reduce poverty. At the time that NAFTA went into effect, the expectation among supporters was that the agreement would improve investor confidence in Mexico, attract investment, and narrow the income differentials between Mexico and the United States and Canada. Measuring the effects of NAFTA on the Mexican economy is difficult because the economy was also affected by other factors, such as economic cycles in the United States (Mexico’s largest trading partner) and currency fluctuations. In addition, Mexico’s unilateral trade liberalization measures of the 1980s and the currency crisis of 1995 both affected economic growth, per capita gross domestic product (GDP), and real wages. While NAFTA may have brought economic and social benefits to the Mexican economy as a whole, the benefits have not been evenly distributed throughout the country. Wages and employment tend to be higher in states experiencing higher levels of FDI and trade. The agricultural sector experienced a higher amount of worker displacement after NAFTA because of increased competition from the United States and because of Mexican domestic agricultural reforms. In terms of regional effects, initial conditions in Mexico determined which Mexican states experienced stronger economic growth as a result of NAFTA. States with higher levels of telecommunications and transportation infrastructure gained more benefits than poorer states with lower levels of education, infrastructure, and institutional capacity. Some economists argue that while trade liberalization may narrow income disparities over the long run with other countries, it may indirectly lead to larger disparities in income levels within a country. This report will be updated as events warrant

CRS Insight

This report discusses the North American Leaders' Summits (NALS), a trilateral summit that meets in effort to increase cooperation on broader economic and security issues between the United States, Canada, and Mexico

U.S.-Mexico Economic Relations: Trends, Issues, and Implications

This report provides an overview of U.S.-Mexico economic relations, trade trends, the Mexican economy, NAFTA, and trade issues between the United States and Mexico

ATPA Renewal: Background and Issues

The Andean Trade Preference Act (ATPA) extends special duty treatment to certain U.S. imports from Bolivia, Colombia, Ecuador, and Peru that meet domestic content and other requirements. The purpose of ATPA is to promote economic growth in the Andean region and to encourage a shift away from dependence on illegal drugs by supporting legitimate economic activities. This report outlines the various aspects of the ATPA, including significant dates and modifications

U.S.-Mexico Economic Relations: Trends, Issues, and Implications

This report provides an overview of U.S.-Mexico economic relations, trade trends, the Mexican economy, NAFTA, and trade issues between the United States and Mexico

ATPA Renewal: Background and Issues

The Andean Trade Preference Act (ATPA) extends special duty treatment to certain U.S. imports from Bolivia, Colombia, Ecuador, and Peru that meet domestic content and other requirements. This report outlines the various aspects of the ATPA, including significant dates and modifications