Global trade agreements – be they multilateral or more regional and local, date back to Ancient Egypt (around 3100 B.C.). Over the centuries, some deals were achieved through peaceful negotiation, while others through violent military crusades and conquests (seen Netflix’s portrayal of the late 8th century Vikings?). The WTO trade history report explains that original commercial agreements were more concerned with guarding merchants from random arrest and capture in foreign countries than liberalizing trade and creating new markets. However, as history has shown, free trade agreements (FTAs) became increasingly complex, political, and we’ve seen our share of modern trade ‘wars.’ Yet FTAs have been one of the most auspicious ways the U.S. opened foreign markets for importers and exporters. Here are some of the most significant.
Today, the U.S. has bilateral FTAs with 20 countries, is a member of the World Trade Organization, and incorporates the 1947 General Agreement on Tariffs and Trade (GATT) – the most eminent multilateral trade agreement. Today, the U.S. has agreements with Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, Singapore, and South Korea.
The North American Free Trade Agreement (NAFTA) became the world’s largest FTA when entered into by the U.S., Canada, and Mexico on January 1, 1994. NAFTA was the first time two developed countries signed a trade deal with a developing nation. By excluding trade barriers between them and eliminating tariffs, investment opportunities flourished. At the time, the three countries’ economies were $6 trillion and directly influenced over 365 million people.
The agreement aimed to remove tax barriers from manufacturing, services, and agriculture, boost investments, and protect intellectual property rights. It also intended to address labor and environmental concerns. Those expected to reap the most reward were small businesses, as conducting business in Canada and Mexico would be cheaper, and there would be less bureaucracy on importing and exporting goods.
Central American-Dominican Republic Free Trade Agreement (CAFTA-DR or CAFTA) was endorsed on August 5, 2004, by the U.S. and the Dominican Republic, Costa Rica, El Salvador, Honduras, Nicaragua, and Guatemala. It removed tariffs on over 80% of U.S. exports. CAFTA unlocked trade limits on U.S. imports of Central American textiles, apparel, and sugar, significantly lowering these merchandise costs for U.S. consumers.
The Association of Southeast Asian Nations (ASEAN Initiative) comprises ten countries in Southeast Asia (Brunei, Cambodia, Indonesia, Thailand, Laos, Myanmar, Malaysia, Vietnam, Singapore, Philippines). It endorses the economic growth of member countries to balance power between Japan and China. The U.S. trade with ASEAN members has grown exceptionally, and the U.S. has effectively reached agreements with all members, except Myanmar and Laos.
Another profoundly significant FTA is the Asia-Pacific Economic Cooperation (APEC) between the U.S. and Asian countries bordering the Pacific Ocean. The Middle Eastern Trade Initiative (MEFTI) strives to help peaceful Middle Eastern countries get WTO membership, bilateral trade agreements, and join the Trade and Investment Action Plans. The U.S. has reached agreements with Israel, Morocco, Jordan, Oman, and Bahrain. Countries still seeking WTO membership include Yemen, Algeria, and Lebanon.
The Trans-Pacific Partnership (TPP), signed in 2016, would have succeeded NAFTA as the largest ever agreement. The partnership was to be entered into by the U.S. and 11 countries around the Pacific – Australia, Canada, Darussalam, Brunei, Chile, Mexico, Japan, New Zealand, Peru, Malaysia, Vietnam, Singapore. The members’ legislatures were ratifying it to promote investment and trade, encourage innovation, development, and economic growth, and support job retention and creation. The TPP, which accords with the APEC Forum’s efforts, also necessitates similar rules and regulations and small businesses’ support. However, in 2017, President Trump withdrew. His decision could make China membership a possibility, thereby shifting the balance of power in Asia.
The U.S. has been trying to reach a Free Trade Area of the Americas (FTAA) since the Reagan Administration. It would include Central, South, and North America and the Caribbean. The effort failed by 2005 due to concerns in South American countries that the U.S. agribusiness would leave their local farmers jobless and force them to work for U.S. companies without tariffs.
The Transatlantic Trade and Investment Partnership (TTIP) is an FTA still being negotiated between the U.S. and E.U. The two economic superpowers currently trade $1 trillion (more than the U.S. trades with China). Eliminating tariffs and other trade barriers could quadruple that amount. If ratified, the TTIP would replace the TPP and NAFTA as the world’s largest FTA. However, it has been a bumpy road. President Obama State of the Union Address in 2013 kick-started the TTIP, but in 2017 President Trump launched the “America First” economic policy, suspended TTIP negotiations, and threatened the E.U. and other trading partners with tariffs on aluminum and steel. We are yet to see the future of TTIP under the new administration!