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230 IRET Congressional Advisory 1 (2007)

handle is hein.taxfoundation/iretcgadv0227 and id is 1 raw text is: INSTITUTE FOR RESEARCH ON THE ECONOMICS OF TAXATION IRET is a non-profit 501 (c)(3) economic policy research and educational organization devoted to informing the public about policies that will promote growth and efficient operation of the market economy. October 18, 2007 Advisory No. 230 FOUR SOLID TRADE AGREEMENTS An overwhelming majority of Americans would support a trade agreement that offered greater benefits to the U.S. than to the foreign trading partner. Yet four such agreements face a hard slog in Congress, even though they are clearly good for this country. All four agreements make good sense for the U.S., and Congress should approve them all. Unfortunately, there has been opposition to the two most commercially significant accords, involving political arguments against the Colombian agreement, and commercial complaints in the case of Korea. The Peru, Colombia and Panama agreements convert one-way preference programs (that give special access to U.S. markets but no trade access for U.S. products in those countries) into permanent reciprocal agreements that grant new U.S. market access. Each agreement will open new markets for U.S. goods while continuing duty free access for our partners. No U.S. jobs are threatened; our economy has already adjusted to the duty free import of goods from these three countries under existing preference programs. Congressional approval of the Peru, Colombia and Panama agreements will bring to twelve the number of countries in the Americas with which we have approved reciprocal trading partnerships. These twelve free trade agreements will cover 88 per cent of our hemispheric trade. Disapproving any of these three pending pacts would be a major setback to reaching future agreements with our remaining potential partners in the region. The fourth agreement, the Korean FTA, is with our seventh largest trading partner, and it dwarfs all the others in economic significance. Indeed, it is the most commercially significant agreement the U.S. has negotiated in 15 years. Its geopolitical significance in Asia cannot be overestimated. China, Japan and the U.S. compete within the region, and the U.S. would get a major leg up if the Korean FTA were adopted. The agreement will correct a major tariff disadvantage for U.S. trade. Currently, Korea imposes import tariffs and quotas that exceed 30 percent on many U.S. agricultural products and just under 10 percent on U.S. industrial goods. Current U.S. tariffs on Korean goods are less than 5 percent (except on a few agricultural products). Fifty-one percent (by value) of Korean goods enter the U.S. duty free. The FTA will immediately eliminate duties on a wide range of U.S. exports to Korea. It will phase out the tariffs of each country on over 80 percent of goods in five years, and on 98 per cent of goods in ten years. Upon passage and implementation of the FTA (given the current asymmetry in tariff rates), the U.S. International Trade Commission (ITC) expects our export gains to Korea to be up to $4 billion greater than Korea's added exports to the United States. The ITC estimates that these four agreements will increase U.S. exports by over $13 billion per year. In contrast, imports from the four countries will increase by about $8 billion. The combined annual increase in U.S. GDP will be over $16.5 billion. All four agreements are winners for the U.S. economy, and they also help our trading partners. We gain a greater export boost than each of the partners, while they each gain a larger stimulus to their GDP, given the relative sizes of our economies. PERU The Peru agreement is ready for action in both houses of Congress, having passed the Senate Finance and House Ways and Means Committees. Currently, 8~*m k3. A * ~ g6~ e ~ee

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