Free Trade

The US Jordan free trade agreement was signed in October 2000. It was America’s 3rd trade agreement and the first ever with an Arab state. Jordan’s economic relations with the US began with Jordan’s agreement with the World Trade Organization (WTO). The FTA has served as a base to strengthen the relations between the US and Jordan. With this FTA tariff on the trade of virtually all industrial and agricultural goods will be eliminated within 10 years of the agreement.

Amongst other Middle Eastern countries, Jordan has a competitive advantage for trading with the US. Even though Jordan and other Middle Eastern countries have similar patterns of comparative advantage for example, Jordan, Morocco, Tunisia, Israel and even Egypt have comparative advantage in manufactured fertilizers, foot wear, clothing and textile yarn. This means these countries unite encouraging regional trade relations; they could reap from economies of scale and enter global markets especially the US.

However, to achieve this infrastructure and larger investment is required which these developing countries lack unless they are willing to enter joint ventures with countries like the US. The exports of Jordan are not as competitive as these other Middle Eastern countries. This is because Jordan’s cross rates of currency have risen against the dollar when compared to other countries. This loss of export competitiveness initiated an increase in the imports and thus local production was lowered thereby creating a greater gap between exports and its imports.

However, Jordan’s macro dynamics for trade with the US are better as it poses more opportunities for the development of infrastructure, a better investment climate and better human capital than the other countries in the region. Jordan’s trade compatibility with the US from the point of view of exports is good. Jordan’s major export category to the US is transport material and furniture. Emerging export products like Dead Sea cosmetics to travel rugs and blankets, machinery for sorting and screening mineral substances and orthopedic appliances of Jordan are products that are imported by the US market and have a demand for them.

Though Jordan’s traditional exports are generally not that compatible with the US market, at the product level however, Jordan’s export fit in with US import requirements like apparel and clothing accessories, aluminum bars and rods, insecticides and animal feed. Products like olive oil, luggage, pharmaceuticals, household appliances, ceramic sinks and wash basins, paints and varnishes, articles of jewelry, tarpaulins and awnings, machinery for plant or laboratory equipment, tableware and kitchenware, electric accumulators, fruit and vegetable juices, chocolate and antibiotics.

Also, Jordan has a very transparent tariff schedule which is an incentive for other countries to trade it. Jordan is gifted with natural resources and human capital which in itself is an attractive opportunity for foreign investors. With an increased import and lowered domestic production, the environment is favorable for investment by foreigners thus benefiting from cheap labor and resources which make Jordan and US more compatible for trade. Policies for Implementation Both the countries have agreed to establish a free trade area in compliance with the specifications of the agreement.

Both the countries have consented that goods traded via this area will not be charged with customs duty by either country. Either of the countries will not introduce new import duties or tariffs which do not confer to the agreement. Vices The two countries would not only trade in goods but also in services. Services would also be traded as per the claws agreed upon. Importance has been given to intellectual property rights and each country would implement laws that protect it especially for the goods of the other country.

Trademarks shall include service marks, collective marks and certification marks and these would be protected. Each party should ensure that all reproductions are considered reductions and are in accordance with the terms agreed upon. In case of copyrights, the author or the performer should be given the exclusive rights to authorize or prohibit whether he wants his work to be in the other country or not. In case of pirated copies or counterfeit trade marks, strict legal action would be taken.

The agreement also deals with environmental laws and the two countries have agreed to enforce and practice environmental laws. This means that both the parties will not indulge in the other’s country in activities that do protect the environment, harms humans, animals or plants through environmental pollution, improper discarding of toxic waste or haring endangered species. Both the countries will adhere to International Labor Laws and the domestic laws will be modified to meet international laws. Both the countries should seek to protect the rights of labor and they will not relax local laws to encourage trade.

The law should protect basic rights of the labor like wages, hours worked, safety at work, health, age limit for working children etc. With the growing e-commerce business and the business opportunities that it poses, laws of e-commerce have been added to the agreement. It has been agreed that the two countries will not impose duties on e-commerce and electronic transmission or imposing unnecessary barriers to it. Where visa issues are concerned, both the parties will not create hindrances in visa for those who intend to trade or are visiting for business purposes.

Overall the visa laws would be relaxed in both the countries if it is business related. Safety measures have also been agreed upon by both the countries. Where importing is concerned, if by reducing the import duties of a particular item, and if the item is being imported in a large enough quantity to affect the domestic industry then the country doesn’t have to reduce the duty however such measures have to be taken in compliance with the laws of the agreement. Both the countries have agreed to readily promote economic cooperation.

Also, since Jordan is a developing country and the US will strive to help Jordan with economic and technical assistance when needed. A joint committee would be formed which would ensure proper implementation of the agreement and review the trade relationships between the countries. It will develop guidelines, rules and regulations for the agreement, making modifications where needed and making sure disputes are avoided. The basic function of the committee would be to ensure that the agreement is properly implemented and achieves its objectives.

Desired outcome of the FTA The two countries seek to improve not only economic but also political relations between themselves. They intend to strengthen their bond of friendship thereby generating a healthier environment for future trade relations. They wish to have rules and regulations between the countries regarding trade that give both the countries and advantage. By expanding their trade through liberalization, they seek to support their common interests. Such a trade relation would not only benefit the two countries but would benefit the whole region.

Both the countries seek sustainable economic development, raising living standards, promotes the growth of the economy, more investment opportunities, development, general prosperity, better employment opportunities and the most advantageous use of resources with such an agreement. They seek to have long-lasting trade relations that will strengthen both economies with time. The US would benefit from the economies of scale and at the same time help Jordan in areas of economic and technological so that it may have fewer problems when faced with challenges being a developing country.

Both the countries desire to encourage innovations and creativity promoting goods and services that are subject to intellectual property rights. They also seek to raise the international competitiveness of their goods and services. They also desire to enhance labor laws and standards by adhering to international laws and standing by the commitments they have made to each other. At the same time, they wish to protect the environment and have labor laws that improve the economy instead of hampering its development. Positive and negative impact of the FTA

The agreement is expected to have an overall a good impact on the economy of both the countries. It facilitates a greater economic activity for the US. Exporters from the US will have a greater access to the Jordanian market. This is the first time that the US has had such an agreement with a Middle Eastern country. This FTA could open doors to other countries in the region with US goods surging greater markets. This will also serve as a relationship builder as it already has made business relations healthier between the two countries.

The Jordanian service sector being liberalized allows better access to the US service providers. At the same time the US will not lose local business nor lose jobs due to the FTA. The FTA proves good for the trade, investment and employment opportunities of Jordan. The agreement has attracted investment to Jordan as there is better access to the US markets especially for Jordanian exporters in some industry sectors. Over time this will greater impact Jordanian labor creating better and more jobs for them. There are certain negative impacts that can’t be ruled out.

Jordan had to impose TRIPs-plus rules on Jordan. Thus the poor are prevented from having access to inexpensive generic medicines. This has greatly increased the prices of medicines and there could be dire health problems amongst the poorer population. The strict intellectual property right was to encourage local firms of Jordan to focus on research and development. However, there has been little or no research done and no new medicines have been introduced locally and those that have been are too expensive for the local market.

Though Jordan has had an upsurge in its economic development it had to pay a price. There is not enough protection for labors and foreigners coming in for work willing to work in worse environmental conditions and lesser pay are increasingly replacing Jordanians leaving them out of work. The laws of the FTA are implemented on migrants which makes the Jordanians suffer. Besides factories have a bad work condition, with long working hours, forced labor and child labor. The laws apparently have not been implemented as they had been agreed upon by the two governments.

Conclusion The FTA between Jordan and the US focuses on the development of both the countries opening trade prospects and resulting in an overall economic growth. Both the countries also seek to improve their standing in the global markets as well. The success of the agreement however depends upon how faithful both countries are to look out for the interest of the other. Both the governments have to stand by their commitments and make alterations with the help of joint committees so that none of them suffers a loss or problem.

They should work to resolve problems that arise so that they can set an example globally for others to follow. If the interests are not protected, even if there is economic progress the countries may in turn have to pay a heavy price for such a trade agreement. This in turn could create political and economic disparities and would discourage future possible FTAs.

References

Center For American Progress (2006, June 27) Focus on Jordan: Worker Rights, Human Rights, and Trade Relationships. Available: http://www. americanprogress. org/issues/2006/06/b1813793. html Cooper, W.

(2005, June 24) Free Trade Agreements: Impact on U. S. Trade and Implications for U. S. Trade Policy. Available: http://www. opencrs. com/rpts/RL31356_20050624. pdf Lord, M. , & Uraidi-Hammude, H. (2001, Feb) Economic Impact and Implications for Jordan of the U. S. – Jordan Free Trade Agreement. Available: http://usembassy-amman. org. jo/FTA-USAID. pdf Oxfam Briefing Paper (2007, March) All costs, no benefits: How TRIPS-plus intellectual property rules in the US-Jordan FTA affect access to medicines. Available: http://www. oxfam. org/en/policy/briefingpapers/bp102_jordan_us_fta

The FTA with Jordan Signed on October 24, 2000, the U. S. -Jordan FTA was the first such accord with an Arab state and is considered a template for future agreements. It calls for the elimination of all tariff and nontariff barriers to bilateral trade for r virtually all industrial goods and agricultural products within ten years. The agreement has had a significant effect on economic exchange between the two countries: Jordan exports to the United States jumped from $31 million in 1999 to $674 million in 2003; U.

S. investments in Jordan were up to more than $80 million by December 2004 and are expected to exceed $180 million next year; and American participation in Jordanian qualified industrial zones has encouraged Jordan’s strongest engine of job growth, helping to create an estimated 35,000 jobs in these areas since their inception in 1999.

The treaty was held up for some years by a dispute e in the United States about what labor and environmental provisions were appropriate for a FTA; the treaty negotiated by the Clinton administration only called on Jordan to enforce its own labor and environmental laws, without requiring any change in those laws unless needed to meet international agreements Jordan had signed. OVERVIEW: TARIFFS The FTA will eliminate all tariff barriers on virtually all goods traded between the United States and Jordan within ten years.

However, not every export of the United States or Jordan will qualify for this duty-free treatment. Under Article 2 of the FTA, the United States and Jordan has agreed to eliminate existing tariffs only on “originating goods of the other Party”. Goods must qualify under the Rules of Origin in order to take advantage of the FTA. Annex 2. 1 of the FTA defines five general staging categories, “A” through “E”, which covers the majority of products. Tariff reductions of categories “A” through “E” will occur in four stages: Category Tariffs will be eliminated over: A Two years (50% reduction per year)

B Four years (25% reduction per year) C Five years (20% reduction per year) D Ten years (10% reduction per year) E World Trade Organization duty elimination Commitments The FTA also defines special staging categories, “F” through “M”, which covers a select number of products. Products under special staging categories include certain alcohol and textile products, generalized system of preference (GSP) exports, agriculture quota-class goods, poultry, apples, and cars. Products under the special staging categories will experience either an accelerated reduction of tariffs or a delay in reduction.

Jordan’s Tariff Schedule and the United States’ Tariff Schedule, which are incorporated into the FTA, specifically explain the special staging categories. The FTA is now in its second year of tariff reductions. Year one reductions began on December 17, 2001 and year two reductions went into effect on January 1, 2002. OVERVIEW: TRADE RELATED ENVIROMENT Article 5 of the FTA addresses the issues of environmental laws. Seeking to protect and preserve the environment, each country affirms that neither will waiver nor relax their current environmental laws.

Furthermore, the country agrees to “provide for high level of environmental protection and to strive to continue to improve“their environmental laws. The United States and Jordan also issued a Joint Statement on Environmental Technical Cooperation. Under the memorandum, the United States and Jordan will establish a Joint Forum on Environmental Technical Cooperation, which will regularly discuss environmental priorities, and to work jointly to enhance levels of environmental protection. OVERVIEW: SERVICES

Article 3 of the FTA provides for liberalization of bilateral trade in services between the United States and Jordan. With the liberalization of trade in services, United States companies will have greater access to Jordanian service industries, especially tourism, transportation, health, financial, education, environmental, business, communications, distribution and recreational/cultural services. The liberalization of trade between the United States and Jordan is based upon their commitments to the General Agreement on Trade in Services (GATS) and as specified under Annex 3. 1: Schedule Services.

OVERVIEW: ELECTRONIC COMMERCE Article 7 of the FTA states that the United States and Jordan shall seek to refrain from “deviating from its existing practice of not imposing customs duties on electronic transmissions and imposing unnecessary barriers on electronic transmissions, including digitized products. ” United States and Jordan also issued a Joint Statement on Electronic Commerce. Under the joint statement, Jordan and the United States will cooperate in: • Making it easier to use the Internet to address social challenges, such as helping working adults to acquire new skills,

• Increasing access to healthcare, especially in isolated rural communities, • Improving the quality of life for people with disabilities, and • Strengthening democracy. Secretary of Commerce Daley stated “Electronic commerce between our two countries will enhance the standard of living, by creating new, high-paying jobs and opportunities. Small and medium-sized enterprises, in particular, will benefit from new opportunities to sell their products to a worldwide market. OVERVIEW: CONSULTATION AND DISPUTE SETTLEMENTS:

Under Articles 16 and 17 of the FTA, the United States and Jordan have incorporated a multi-step consultation and dispute settlement process similar to the United States-Israel Free Trade Agreement and consistent with World Trade Organization commitments. Any disputes must try to be resolved first through consultation and will then be referred to the Joint Committee if unresolved. The dispute will be referred to a dispute settlement panel consisting of three members who will determine a non-binding opinion.

This report from the dispute panel is then taken into consideration when the Joint Committee determines its final ruling. If the dispute is not settled by the committee, the affected Party”shall be entitled to take appropriate and commensurate measures. ” OVERVIEW: JORDAN ECONOMY Under the leadership of King Abdullah, Jordan has demonstrated its commitment to economic reform, especially in the areas of privatization and in improving the investment climate. In April 2000, Jordan acceded to the World Trade Organization (WTO), a process which entailed extensive legislative and regulatory reform.

The government has partially privatized the national telecommunications company and the state-owned cement firm, and is in the process of privatizing the national airline. In addition, Jordan and the U. S. signed a Free Trade Agreement (FTA) in October 2000 which will eliminate virtually all trade barriers between the two countries over a period of several years and create new opportunities for commercial business ventures for U. S. firms seeking to enter the Jordanian market and/or the Middle East Region. Reforms to the customs, taxation, and investment laws have improved Jordan’s business climate.

Investors have shown interest in Qualifying Industrial Zones (QIZs), which are industrial parks that can export products to the U. S. duty free if 35% of the product’s content comes from the QIZ, Israel, and/or the West Bank/Gaza. QIZ factories have created more than 15,000 jobs, and the number is expected to continue increasing rapidly. The government is also developing the port of Aqaba as a Special Economic Zone (SEZ), with low taxes, minimal bureaucracy, and investor-friendly policies. In 1999-2000, Jordan’s intellectual property (IP) laws were upgraded to meet international standards and are now regarded as TRIPS-consistent.

As a result, Jordan was removed from the United States Trade Representative’s Special 301 “Watch list” of countries having inadequate intellectual property protection. However, effective enforcement mechanisms and legal procedures have not yet been fully established. As a result, U. S. companies continue to lose sales to unauthorized reproductions of copyrighted and patented products. The U. S. Government has encouraged Jordan to continue moving forward on its economic reform program, as illustrated by the following: — Jordan and the U. S.

signed a Free Trade Agreement (FTA); — In 1999, the two countries signed a Trade and Investment Framework Agreement (TIFA), which seeks to remove impediments to trade and investment; — The U. S. and Jordan have ratified a Bilateral Investment Treaty (BIT), which protects investors and establishes procedures for resolving investment disputes; — The Zarqa Free Zone is Jordan’s major free zone area. Other areas include the Sahab Industrial Estate Free Zone, Queen Alia International Airport Free Zone, and the Gateway Qualifying Industrial Zone.

— The government converted the Aqaba port and surrounding area into a Special Economic Zone (ASEZ) in May 2001, with streamlined bureaucracy, lower taxes and facilitated customs handling. In the SEZ, the private sector has been given a free hand to develop transportation and communication services, tourism, and high value-added activities. — Annual cash transfers from the U. S. Agency for International Development (USAID) are conditioned on the implementation of specific policy reforms aimed at speeding privatization, developing capital markets and improving the investment climate.

In addition, USAID supports a comprehensive set of economic reform and private enterprise development activities aimed at implementing policy reforms and improving the overall business climate for trade and investment. Jordan is becoming an increasingly attractive market for global trade and investment. In addition to its accession to the WTO, privatizations and extensive trade and investment reforms, Jordan is looking at becoming a strong platform for regional and international trade. Congressional approval of the U. S.

– Jordan FTA, development of the ASEZA and continued growth in the QIZ’s should both strengthen Jordan’s economy and create a more attractive market for international trade and investment. Statistical Information • Population: 5. 3 million people • GDP $10 billion, GDP per capita is around $1,800 • 50% pf population under 20 • Well educated labor force with literacy over 90% • Economic grew by 3. 2% in 2003 and is expected to grow 5% and 5. 5% in 04 ; 05 respectively • Jordan economy is 70% composes of the service sector and 17% of manufacturing

• Relative large middle class, but still needs to reduce unemployment which stands at 15% • In 2003 the amount of U. S. exports to Jordan was $491. 9 million, while the amount of Jordanian exports to the U. S. reached $673. 4 million • Jordan is the third largest recipient of US aid US EMBASSY REPORT: The U. S. -Jordan Free Trade Agreement (FTA), which entered into force on December 17, 2001, is the fourth bilateral Free Trade Agreement concluded by the United States. It is an expression of America’s commitment to, and confidence in, Jordan’s economic future.

Since its entry into force in December 2001, U. S. -Jordanian bilateral trade has increased 37%, according to figures released by the U. S. Department of Commerce. The United States is now Jordan’s largest export market. The Agreement eliminates duties and commercial barriers to bilateral trade in goods and services between the United States and Jordan. The FTA also includes, for the first time ever in the text of a U. S. trade agreement, provisions addressing trade and environment, trade and labor, and electronic commerce.

Other provisions address intellectual property rights protection, balance of payments, rules of origin, safeguards and procedural matters such as consultations and dispute settlement. Virtually all trade in goods between Jordan and the United States is being liberalized in stages through the year 2010 by the FTA. In addition, a broad range of services is being liberalized on the basis of the U. S. and Jordan’s existing commitments to the General Agreement on Trade in Services (GATS). The FTA also affords U. S. exporters in certain industry sectors greater access to Jordan’s market.

In addition, the Jordanian services sector is being liberalized to allow greater access to U. S. service providers. The U. S. government supports a number of activities that help Jordanian businesses take advantage of opportunities under the FTA. Most prominent is support, channeled through the U. S. Agency for International Development (USAID) Mission, for the TIJARA initiative, a private-public sector partnership of organizations that coordinate their efforts to increase awareness and understanding of the FTA in Jordan and abroad.

TIJARA has brought together over 20 private sector trade and professional associations with the Jordanian government in an open forum to share information and program proposals to improve the ability of Jordanians to take advantage of the FTA. Another key U. S. -supported initiative aimed at widening awareness of opportunities offered by the FTA is the Jordan-U. S. Business Partnership’s Export Fast Track Action Program (EFTAP). This program encourages small and medium-sized Jordanian companies to learn about and improve their capacity to export to the U. S.

EFTAP has already helped small Jordanian companies in the cosmetics, jewelry, stone and marble, garment and machinery sectors secure over $10 million in export contracts since December 2001. This figure is expected to double in the coming year. EXAMPLE: The Modern Flour Mills and Macaroni Factories Company located in Amman, Jordan, specializes in flour, pasta, snack foods, and breakfast cereals. Established in 1949, the company began its operations as a flour mill and sold three products to a limited clientele within Amman. Today, the company produces 55 products, which reach consumers domestically and internationally.

Through the years the company had developed a name for itself in the Middle East; however it was time to expand sales to other portions of the world. Mr. Tuma Yaghnam, CEO of the Modern Flour Mills and Macaroni Factories Company, decided to explore opportunities in the United States. Knowing that the product had to meet certain specifications and regulations, he sent samples to a personal contact of his in the United States who forwarded the samples to the United States Food and Drug Administration (FDA) for testing and approval.

After the company’s products received FDA approval, the next step for the company was to find a U. S. company interested in purchasing their products. While in Boston, Massachusetts for a personal visit, Mr. Yaghnam frequented an Arab grocery store where he purchased produce and other grocery items. He felt like he was at home since he recognized most of the products in the store. This sparked an idea in his mind- his company could export their products to Arab markets in the United States since Arabs from the Middle East are familiar with the Modern Flour Mills products.

They would want to buy a product from their homeland. Mr. Yaghnam talked to the owner of the grocery store about this opportunity and the owner was able to supply Mr. Yaghnam with a list of companies who import ethnic foods. Using this list, Modern Flour Mills developed a relationship with owners of Arab markets in United States cities with large Arab populations, particularly Detroit, Chicago, and Boston. The Modern Flour Mills started exporting a limited amount of their products to the United States in 1994-5, totaling $5,000.

00. The company is still using this extensive list to pursue additional sales and plans to submit their products to FDA in the near future for renewal. With the signing of the United States Jordan Free Trade Agreement, the Modern Flour Mills saw this as an additional opportunity to penetrate the United States market. “I was aware of the United States Jordan Free Trade Agreement as it was developing,” stated Mr. Yaghnam. He heard about the potential of an agreement in the local news and followed its development.

In March 2002, representatives from the Modern Flour Mills and the Jordan United States Business Partnership (JUSBP) visited the United States in search of exporting opportunities, to develop ideas to modify their current products, and to explore potential new products, which may be appealing to United States consumers. The group met with United States marketing consultants to brainstorm and obtain potential buyers of their products. The meetings produced possible bulk purchases and a joint venture with an American ingredients company. Modern Flour Mills is still developing these leads today.

Modern Flour Mills desires to operate at its peak potential levels and realizes that this can only be accomplished through growth. The company envisions growth through capturing “the element of regional economics. ” In order to attain their goal, the Modern Flour Mills seeks to gain investors from the United States. Mr. Yaghnam would like to have United States companies use their plant for final production. “We have the facilities and infrastructure in place. Our company could be used as a basis for making products for United States companies.

” Mr. Yaghnam clearly envisions his company as being the “arm for United States producers of similar products in the Middle East. ” The Modern Flour Mills and Macaroni Factories recognizes that Jordan’s accession to the World Trade Organization and the United States Jordan Free Trade Agreement will open “new horizons for Jordanian manufacturers and create excellent opportunities for well-prepared companies. ” Modern Flour Mills is one of these well-prepared companies and is ready to pursue all avenues to success. WHITE HOUSE REPORT

September 28, 2001 U. S. -Jordan Free Trade Agreement (FTA) The Jordan Free Trade Agreement (FTA) was signed on October 24, 2000. It will take effect as America’s third free trade agreement, and the first ever with an Arab state. The FTA is the capstone of growing U. S. -Jordanian collaboration in economic relations, which began with close bilateral cooperation on Jordan’s accession to the World Trade Organization (WTO) and was followed by the conclusion of a trade and investment framework agreement and a bilateral investment treaty.

The FTA serves as an example for Jordan’s neighbors of the benefits of peace and economic reform. The Jordan FTA achieves significant and extensive liberalization across a wide spectrum of trade issues. It will eliminate all tariff and non-tariff barriers to bilateral trade in virtually all industrial goods and agricultural products within ten years. The FTA is the first trade agreement to include substantive provisions addressing electronic commerce, a step that should help advance a global free trade agenda in a sector critical to American high technology and multimedia companies.

Both countries agreed to seek to avoid imposing customs duties on electronic transmissions, imposing unnecessary barriers to market access for digitized products, and impeding the ability to deliver services through electronic means. These provisions also tie in with commitments in the services area that, taken together, aim at encouraging investment in new technologies and stimulating the innovative uses of networks to deliver products and services. The agreement will significantly liberalize bilateral trade in services across a wide range of services sectors.

The FTA’s provisions on intellectual property rights (IPR) build on the strong IPR commitments Jordan made in acceding to the WTO. The FTA incorporates the most up-to-date international standards for copyright protection, as well as data exclusivity for pharmaceuticals and stepped-up commitments on enforcement. Among other things, Jordan has undertaken to ratify and implement the World Intellectual Property Organization’s (WIPO) Copyright Treaty and WIPO Performances and Phonograms Treaty within two years.

These two treaties, sometimes referred to as the “Internet Treaties,” establish several critical elements for the protection of copyrighted works in a digital network environment, including creators’ exclusive right to make their creative works available online, as well as Jordanian adherence to new WIPO treaties on copyright protection in the internet. The agreement also contains trade-related environmental and labor provisions.

These provisions will not require either country to adopt any new labor or environmental laws, and each country retains the right to set its own labor and environmental standards and to change those standards. As part of the agreement, the two countries affirm the importance of not waiving or derogating from their labor or environmental laws in order to encourage trade, and commit to effective enforcement of their domestic labor and environmental laws. The Jordan FTA places a premium on cooperative resolution of disputes.

The Governments of the United States and Jordan exchanged letters in July 2001 acknowledging that few, if any; differences are expected to arise in how we interpret this Agreement, given the strong and cooperative relations between our countries. In the very unlikely event that differences arise, the Governments agreed in the letters that they expect to resolve such situations through consultations and other cooperative means, rather than through formal dispute settlement procedures.

The Jordan FTA creates a multi-step, transparent dispute settlement process. Any dispute that cannot be resolved through consultation may be referred to a panel of independent experts for a non-binding opinion. If a dispute cannot be settled after panel proceedings are completed, the FTA authorizes the affected party to take any appropriate and commensurate measure, without specifying the form that this action should take. However, the party taking the action may not act in a manner that is inconsistent with its WTO obligations.

Because the United States already has a Bilateral Investment Treaty with Jordan, the FTA does not include an investment provision. CONCLUSION: Unlike many trade agreements, the U. S. -Jordan FTA had widespread, bipartisan and multi-sectoral support, as evidenced by the support of the AFL-CIO and the pact’s passage by voice vote. As with other trade agreements, proponents pointed to the reduction of customs duties and other barriers to trade as a boon to exports.

REFERENCES:

• www. usjordanfta. com • White house report • US Embassy(Amman) report • Economic times/India edition

There are various reasons underlying the formation of free trade agreement among countries. One of the basic reasons is the easier access to the member’s markets due to the reduction or elimination of tariffs and non-tariff barriers. In 1989, the United States entered an agreement with Canada for this purpose (Congressional Research Service, 2006) Protection of local exporters from losing out to foreign companies is another reason underlying the formation of this trade. For instance, proponents of US-Chile foreign trade agreement argued that U. S firms might be at the losing end due to the Canada – Chile FTA

(Congressional Research Service, 2006). Generally, the free trade agreement usually serves the purpose of a catalyst for competitiveness, cost-cutting, greater economic efficiency and consumer welfare (See, 2004). In entering a free trade agreement, there would be tremendous effects on the economies of the two countries that are participating in the agreement. Here, the current and probable effects of a free trade agreement between the United States and Korea will be presented.

Before going into the effects of the agreement, let us first take a look on some of the inclusion in the US-South Korea Free Trade Agreement. The US Korea Free Trade Agreement The US –South Korea Free Trade Agreement (KORUS FTA) was signed by the two countries’ representatives on June 30, 2007. This agreement included a range of issues concerning the US-South Korean trading relationship like autos, agriculture, trade remedies (Congressional Research Service, 2007).

The free trade agreement was conducted by both countries despite of a high degree of political risks that would carry over as their legislature debate on the merits of the free trade agreement (Congressional Research Service, 2007). Ties between the United States and South Korea are still tight. The US-South Korea alliance began when the United States intervened on the Korean Peninsula and went to battle against a North Korean takeover (Congressional Research Service, 2007). However, the ties between South Korea and United States were showing signs of fraying.

Some argued that the free trade agreement would give strength to the US-South Korea alliance (Congressional Research Service, 2007). Trade frictions between the two countries have lessened over the last fifteen years since leaders have been pushed towards giving a higher priority to foreign policy and security concerns. Moreover, South Korea has introduced some reforms in order to welcome foreign competition and investment. Even though tensions have been reduced, there are still differences in trade and investment relations (Congressional Research Service, 2007).

Outcome of the Free Trade Agreement As mentioned earlier, the free trade agreement touched on the issues in agriculture. During the negotiations, the United States pushed towards a liberalization in agriculture trade; however, South Korea acted towards the exclusion of some products from the complete trade liberalization (Congressional Research Service, 2007). One of the products that were considered sensitive for South Korea is the rice. Fortunately for South Korea, it was able to protect its rice producers by excluding the product form the trade liberalizations.

The United States allowed for the exclusion of the product from the FTA for the preference of having the agreement with South Korea over losing the free trade agreement due to domestic pressures that may come from South Korea (Congressional Research Service, 2007). Restrictions were also placed on U. S beef. At the end of the negotiation, the officials from South Korea has yet not provided the US officials with a date by which shipments of US beef could be made (Congressional Research Service, 2007).

U.S.-Chile Free Trade Agreement

            More often, a country has to extend its activities outside its territory in order to advance its economic state. For this reason, there are countries which involve in activities that create ties with other countries. Chile, in particular, signed an agreement with the United States. This proved beneficial, as both country made improvements. Chile’s free trade agreement with the United States brought positive outcomes in terms of the conduct of business in Chile.

            Chile has its shares of many ups and downs through the years. It experienced economic failures time and again but also succeeded in its endeavors to improve the economy through reforms such as the tariff reductions and free trade agreements (Aninat, 2000). The military government led the economic reform during the early 1990s, but the democratic government of Patricio Aylwin further contributed to the improvement of the economic reform. Chile became the role model for economic reform, as shown in the growth of its GDP from 1997-1998, which averaged to 8% (The World Factbook, 2008). GDP or Gross Domestic Product measures the size of the economy of the country (Office Management and Budget, 2008).

One characteristic of Chile’s market-oriented economy is its high-level foreign trade. It held fast to its commitment to trade liberation (The World Factbook, 2008). In the country’s rise from stagnation, it involved in free trade agreement with other countries, especially the United States. The U.S. – Chile Free Trade Agreement (FTA) was put into force in 2004 after long years of bilateral conversations and negotiations. The United States wanted to expand its economic relations and pursue issues of interest. Thus, the country signed the agreement with Chile. Moreover, the United States government thinks that the entire hemisphere will benefit greatly if Chile has a healthy economy (Smurr, 1998).

The year preceding the FTA, used goods imported to Chile were subject to 50% tariff surcharge (“Chile,” n.d., p.64). With the FTA, tariffs charged on 90% of U.S. exports to Chile and 95% of Chile exports to the U.S. were removed (United States Trade Representative, 2004). However, there are still products that are prohibited from entering Chile, such as cargo transport and used passenger vehicles (Export.gov, n.d.).

The Free Trade Agreement consists of the set of laws, standards for health and safety, regulation and judicial transparency, regulations, property rights, capital flows, environmental regulation, and many others. In turn, these led to potential growth and welfare effects for the concerned countries. Additionally, new administrative practices and changes in legal issues and regulations that are required by the agreement and consistent with the policies and regulations may have a positive effect on policy stability and development at the institutional level. This then strengthens the policy credibility of the country. Furthermore, this will contribute to the increase in the international demand for Chilean liabilities, which would then mean larger capital inflows. All in all, this will advance growth and investment (Chumacero et.al, 2004).

However, it is important to note that political association and economic cooperation are not included in the agreement between U.S. and Chile. However, the agreement was comprehensive in terms of institutions and economic policies. Chile’s agreement with the United States has a transition period lasting 12 years. During this period, Chile is required to remove its luxury taxes on cars in five years and the complex price bands on agricultural products in 12 years. On the other hand, the agreement means that the U.S. must eliminate its subsidies on quantitative restrictions on Chilean exports and of subsidies charged on agricultural exports. Each country can only apply safeguards for agricultural products within the transition period. Both countries were also expected to follow WTO rules regarding anti-dumping policies (Chumacero et.al, 2004).

When it comes to telecommunications regulation, financial and non-financial services, and investment, Chile and U.S. must conform to the existing principles. Additionally, both countries must agree to observe intellectual property rights protection, which Chile assigned before the FTA was implemented. Through the FTA, regulations set to protect intellectual property rights and their enforcement was accelerated. The agreement requires that Chile must adhere to the environmental and labor-market regulations. Furthermore, the United States must cooperate to reduce environmental damages in forestry, mining and agriculture. Moreover, the country must use clean fuels and supervise and enforce environmental regulations (Chumacero et.al, 2004).

The Central Bank of Chile showed that for the year 2004, there was a substantial increase of 12.1% in Chilean exports to the U.S. This totaled to US$1.17 billion. The exports include industrial products (10.4%), natural resources (39.6%), and processed goods from natural resources (50%). There was also an increase in the raw materials exported from Chile which are used by U.S. businesses in manufacturing products that are of high value (United States Trade Representative, 2004). Moreover, the agreement enabled U.S. exports to increase. Some of these products are the following: computers exported in 2007 almost tripled the amount garnered in 2003; trucks increased by six folds; passenger cars tripled in 2007; scrapers also tripled; printers increased by almost 14 times; and, fertilizers increased twice in 2007 compared to 2003 when FTA was not yet in the picture. Some of these products became duty-free upon entrance to Chile (U.S. Department of Commerce, n.d.).

With the free trade agreement and the country’s being one with the most open economies, Chile has begun importing products from foreign countries. Its market for imported automobiles is booming, thus countries have exported their products to Chile. One example is the shipment of Chinese cars. The General Motors and Toyota Motor Corp dominated the market. Moreover, the motorcycles were also imported from China (de la Jara, 2006). When FTA took effect, the 85% luxury tax on imported automobiles decreased to 63.75% ((United States Trade Representative, 2004).

Through FTA, the U.S.’ conduct of business in Chile has dramatically improved. As was mentioned before, the FTA removed the 50% surcharge on used goods. However, other goods such as books and computer products from U.S. enter Chile duty-free. Moreover, used clothing and used textile articles were also duty-free due to the FTA (“Chile,” n.d., p.64). Additionally, the FTA enabled the U.S. to increase by 24% its exports to Chile, leading to an increase from $617.29 million to $766.79 million. Moreover, manufactured goods from U.S. account for a 19.5% increase during January/March 2004. This indicates an increase from $570.9 million to $682.3 million. These exported goods include construction equipment, medical equipment, and paper. Agricultural products exported, on the other hand, increased from $22.66 million to $27.77 million (United States Trade Representative, 2004).

U.S. has benefited from the FTA with Chile. It became Chile’s top source of imported goods. Despite the small size of Chile’s economy and its relative impact on the U.S., the FTA will benefit the U.S. in such a way that the Enterprise for the Americas Initiative (EAI), which Bush advanced, will be able to “create a Western Hemisphere free trade zone stretching from Alaska to Antarctica.” Moreover, the FTA will help the U.S. in realizing the long-term political and economic interests in the country. It will also help Chile in maintaining its impressive economic growth. Aside from all these, the agreement will further strengthen Chile’s reform programs (Wilson, 1992).

In much the same way, Chile has benefited from the free trade agreement. The FTA facilitated bilateral trade between the two countries which doubled upon the implementation of the agreement. There was also an increase in the totaled trade between U.S. and Chile. In 2003, trade totaled $6.4 billion. But a year later when FTA took effect, the total was $16.4 billion. Moreover, Chile’s exports reached $9.6 billion in 2006, as compared to $3.7 billion in 2003 (“Economic benefit,” 2007).

The FTA further advanced the increasing trade relationship between U.S. and Chile and enabled the two countries to advance in terms of political and economic (Roffe, 2004, p.4). Chile must implement stronger protection for trademarks, trade secrets, copyrights, and patents. Moreover, the agreement requires that Chile must eliminate its regulatory barriers for the U.S. service providers. These factors will enable U.S. businesses to have “a more accessible and more easily navigable Chilean market” (Export.gov, n.d.).

An analysis for the year 2007 showed that the bilateral trade between the two countries has reached $17.3 billion. Moreover, an increase of 206% was noted on U.S. exports to Chile. The trade relationship was further reflected in Chile’s being in the 28th place in 2007 as compared to being 35th in 2003. With Chile’s good economy, doing business in the country was beneficial for the U.S. (U.S. Department of Commerce, n.d.).

Additionally, U.S. exporters have lost some of their market share to the European Union, Canada, and Mexico, which all entered into free trade agreements with Chile long before United States. The FTA enabled these exporters to acquire their shares once more. By 2007, U.S. exports to Chile reached 17% in the share in Chilean market. This was a major change from the 14.5% market share in 2003. This can be shown in the following graph:

Source: U.S. Department of Commerce, n.d.

The following four years after the implementation of FTA, U.S. products exported to Chile have tripled. In 2007, some U.S. exports were duty-free upon entry into Chile. Some of these products were tractors, printers, fertilizers, bulldozer scrapers, passenger cars, trucks and computers. Moreover, U.S. farmers have also benefited from the agreement. With the tariff reductions, they were able to increase the products that are exported. Agricultural products such as wheat and meslin were duty-free under the FTA. Exports of these products amounted to $116 million in 2007, which shows that there was a 220 percent increase compared to pre-FTA levels. Others products such as yellow dent corn became duty-free, too. With the tariff reduction, its sales have increased. In fact, yellow dent corn became one of the products included in the top twenty U.S. exports to Chile. This was a first since FTA was implemented (U.S. Department of Commerce, n.d.).

Although there were still some things to polish regarding the Free Trade Agreement, studies have shown that it was beneficial for both the participating countries. Many say that the Free Trade Agreement was successful. The figures which increased since the FTA took its effect were evidence to this. The Free Trade Agreement entails laws, regulations and policies that lead to potential growth and welfare effects for the United States and Chile. Through the FTA, U.S. exports to Chile and Chilean exports to U.S. significantly increased right after the agreement was put in place. Moreover, the surcharge on used goods was eliminated. Tariffs charged on U.S. exports and Chilean exports were also removed. There were also products that became top exports of U.S. to Chile and vice versa. Since Chile is dependent on international trade, the agreement was beneficial for the United States. Through FTA, United States can expand its economic activities. Moreover, the country became Chile’s top source of imported goods. But more importantly, Chile has also benefited from the agreement. The implementation of FTA strengthened its reform programs. The trade also amounted to billions, which would not happen had Chile not signed the agreement with the United States. Furthermore, the FTA enabled both countries to advance in terms of politics and economics.

The conduct of business has positive results, as the business relationship between the two countries improved and advanced. All of these show contributed to the success of the conduct of business in Chile.

References

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