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Congress likely to pass FTAs with South Korea, Colombia and Panama

by Tim Linden | October 06, 2011

The Obama administration submitted three free trade agreements to Congress Oct. 3, and approvals for the agreements with South Korea, Colombia and Panama are expected to come quickly.

In submitting the proposals, President Obama issued a statement urging their passage as part of a plan to help improve the U.S. economy.

“These agreements will support tens of thousands of jobs across the country for workers making products stamped with three proud words: Made in America,” he said in an Oct. 3 statement. “We’ve worked hard to strengthen these agreements to get the best possible deal for American workers and businesses, and I call on Congress to pass them without delay.”

The FTAs were originally negotiated by the Bush administration in 2007 but were not passed by Congress because Democrats did not believe the protection of workers and environmental laws in the affected countries were strong enough.

Although the Obama administration did renegotiate provisions in each of the agreements to now include language that requires those nations to enforce key environmental laws and labor rights, many Democrats are still expected to oppose the agreements.

A bi-partisan effort will most likely be needed for passage, but experts said that negotiations have already taken place and the FTAs would not have been submitted if passage were not assured.

Congress can only accept or reject the FTAs; there is no opportunity to add amendments. Congressional leaders did indicate that action will be swift and could come as soon as the week of Oct. 10. Under the law, Congress has 90 days to act.

The agreement with South Korea offers the largest opportunity, and the United States International Trade Commission has estimated that it could result in the addition of almost $11 billion in sales of hard goods, along with additional sales of services such as banking and legal work.

It has been estimated that the Colombian deal is worth more than $1 billion in export sales for the United States, and the agreement with Panama checks in at less than $1 billion annually.

Both the White House and congressional leaders have said that the FTAs would provide a major boost to U.S. exports and create thousands of new jobs.

The FTA with South Korea will lift tariffs on more than 95 percent of U.S. exports within five years, including nearly two-thirds of the tariffs on current U.S. agricultural exports.

In his statement, President Obama said that the agreement was vital to reverse the decline of U.S. exports to South Korea, which a decade ago accounted for nearly 21 percent of that nation’s imports, but represent just 10 percent today.

The Colombia FTA would allow most U.S. agricultural exports to enter that country duty-free for the first time, as well as eliminate tariffs on over 80 percent of U.S. consumer and industrial exports.

Panama has agreed to eliminate tariffs on 87 percent of the goods it imports from the United States and to allow more than half of the agricultural goods imported from the United States into the country duty-free. Within 15 years, Panama will eliminate almost all duties on U.S. imports, which will bring it more in-line with the nearly 98 percent of its goods being allowed in the United States duty-free.

Ken Gilliland, director of international trade for Western Growers Association, based in Irvine, CA, called the deals with Colombia and Panama “no brainers,” since those countries enjoy duty-free access to the U.S. market for almost all their goods.

“The FTAs can only help us,” he said.

With regard to South Korea, Mr. Gilliland said that the immediate beneficiaries would probably be non-citrus fruits and nuts, but some vegetable exporters will gain access as well. He said that there is already significant agricultural trade with South Korea, so the phasing out or eliminating of tariffs should help increase that trade.

Speaking on a conference call Oct. 5 about another subject, Kathleen Merrigan, deputy secretary of agriculture, paused to urge passage of the three FTAs. She relayed that the USDA estimates that the three agreements will result in an additional $2.3 billion in agricultural exports annually, resulting in 20,000 more jobs in the U.S. agricultural sector.

“This is big,” Ms. Merrigan said.

She also pointed to tree nuts and non-citrus fruit as early winners, stating that both cherries and raisins will be granted immediate duty-free access to South Korea, while plum tariffs will be phased out over two years.

She added that almonds and apples should also register immediate export gains when the three agreements are approved by Congress.

Tom Nassif, president and chief executive officer at WGA, said, “We applaud the president’s decision to transmit these free trade agreements to Congress. We now ask members of both parties to support quick passage of these export-expanding opportunities that will make our farmers more competitive on the global stage.”

He added that South Korea represents the largest opportunity but said that while Colombian and Panama currently send their specialty crops products to the United States duty-free, U.S. producers of the same crops are faced with duties in the neighborhood of 5-20 percent, depending upon the commodity.