GAO Report on Four U.S. Free Trade Agreements


One criticism of free trade agreements (FTAs) has been that analysis is not done on how the agreements actually work. The U.S. Government Accountability Office reviewed the impacts of four U.S. FTAs, Jordan, Morocco, Chile and Singapore, for Senator Max Baucus, Chairman of the Senate Finance Committee, in a report released in July titled “Four Free Trade Agreements GAO Reviewed Have Resulted in Commercial Gains, but Challenges in Labor and the Environment Remain.”

The good news is in the first half of the title as trade has increased between the U.S. and the partner countries. U.S.-Jordan trade increased by 259 percent from 2001 to 2008; U.S.-Chile trade increased 204 percent since 2003; U.S.-Singapore trade increased by 42 percent since 2003; and U.S.-Morocco trade increased by 141 percent since 2005. Singapore has made progress on both labor and the environment, while Jordan was rated as making considerable progress on environmental issues and some progress on labor issues. Chile and Morocco were rated on labor and the environment as “problems persist despite progress.” The U.S. was faulted for lacking oversight plans and insufficient funding of projects.

The four countries are substantially different in their economic development and focus on trade. The U.S.-Jordan FTA went into force in December 2001 after Jordan joined the WTO in 2000 and before Trade Promotion Authority that included labor and environment goals was granted to President Bush in 2002. Jordan’s per capita gross domestic product (GDP) in 2008 on a purchasing power basis (PPP) is estimated at $5000. Services account for 83.6 percent of GDP and only 3.6 percent of GDP is from agriculture. Rice and other food grains imports rank as the second largest import category to Jordan from the U.S. at $58.4 million in 2008; other oilseeds and food oils were number five at $22.3 million. Cotton apparel was the number one import category to the U.S. at $525.9 million.

The U.S.-Singapore FTA entered into force in January 2004, but open trade has been part of Singapore’s policies for decades. It is a high-income, small city-state and internationally competitive in trade and investments. Since most goods already entered duty free, the FTA was mostly about services and intellectual property rights (IPR). Because of its small population, none of the agricultural product categories made the list of top 25 imports from the U.S.

The U.S.-Chile FTA also began in January 2004. Chile is an upper-middle income country with per capital GDP of $14,900 per year. Chile has trade agreements with the EU, Canada, Japan and dozens of other countries; the U.S. increased its share of Chile’s imports with the FTA. Because Chile’s production season is opposite that of the U.S., the second largest import category to the U.S. are fruits and preparations at $1,493.3 million. Wine is eighth largest category at $223.8 million; farming materials, including breeding animals, is tenth at $174.4 million.
The U.S.-Morocco FTA entered into force in January 2006, the second with an Arab country. Morocco is a lower-middle-income country with per capita GDP of $4,000 per year. Agriculture accounts for 15-20 percent of the country’s GDP and 40-45 percent of the workforce. About two thirds of Morocco’s trade is with the EU and the FTA has not changed that; trade with the U.S. is less than 10 percent of total trade. Agricultural products are prominent in the 25 major U.S. export categories to Morocco with other oilseeds and food oils third at $122.6 million, corn fourth at $90.1 million, dairy and eggs fifth at $77.8 million and wheat seventh at $59.9 million. Among the top 25 imports from Morocco to the U.S. are vegetables and preparations at fourth at $53.3 million and fruit at fifth at $26.7 million.

The report shows that FTAs work for the U.S. across a wide range of incomes for countries and mixes of agricultural and non-agricultural trade. The report also shows that dealing with labor and environmental issues within trade agreements is difficult. As a high income country, Singapore has progressed on labor and environmental issues without help from the U.S. and has few problems. The other three countries are much further behind.

The report’s recommendations focus on the labor and environment issues and are based on findings that the U.S. Trade Representative’s Office (USTR), the Labor Department and the State Department did not update action plans and devote sufficient personnel and funds to carry out the needed work. Since responsibilities are spread among several agencies, better coordination of activities is needed. The report recommends that the USTR and other agencies prepare “updated plans to implement, enforce, monitor, and report on compliance with and progress under the FTAs’ labor and environmental provisions.” These plans should “reflect ongoing trade developments, be provided to Congress, and summarized in USTR’s annual trade agreements report.”

The Secretary of Labor is recommended to direct the Bureau of International Labor Affairs to reinvigorate its implementation and cooperation responsibilities by contacting FTA partners’ ministries of labor to review implementation of labor provisions and to develop ongoing priorities and plans for technical cooperation on labor matters. The Department of Labor should request additional funds for the necessary contacts and cooperative activities.

The Secretary of State is recommended to direct the Oceans and International Environmental and Scientific Affairs Bureau to work with other agencies to develop a more structured approach to manage and monitor the implementation of environmental cooperation mechanisms and projects. They would publicly report to Congress on activities and projects and FTA related cooperation objectives.

People are right to be skeptical of these programs, but to do nothing is not an option. Some believe FTAs should not be involved in partner countries’ domestic policies, while supporters believe the U.S. government will never commit enough personnel and funds to make a difference. Labor and environmental issues are part of the FTA agenda and that is not likely to change. Supporters of more open trade must find a way to deal with them so more FTAs will be approved by Congress.

Ross Korves

Ross Korves

Ross Korves served Truth about Trade & Technology, before it became Global Farmer Network, from 2004 – 2015 as the Economic and Trade Policy Analyst.

Researching and analyzing economic issues important to agricultural producers, Ross provided an intimate understanding regarding the interface of economic policy analysis and the political process.

Mr. Korves served the American Farm Bureau Federation as an Economist from 1980-2004. He served as Chief Economist from April 2001 through September 2003 and held the title of Senior Economist from September 2003 through August 2004.

Born and raised on a southern Illinois hog farm and educated at Southern Illinois University, Ross holds a Masters Degree in Agribusiness Economics. His studies and research expanded internationally through his work in Germany as a 1984 McCloy Agricultural Fellow and study travel to Japan in 1982, Zambia and Kenya in 1985 and Germany in 1987.

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