Free trade progress report: international trade over the next four years.

In the March 2001 "Capitol Comments" we attempted to forecast what United States international trade policy would look like with George W. Bush at the helm. In that article we predicted that U.S. companies could expect "four years of governmental efforts to open foreign markets and promote U.S. exports." Now, almost four years later, it is fair to say that the Bush Administration has fulfilled our predictions. And then some!

After appointing avowed free trader Robert Zoellick to serve as U.S. Trade Representative (USTR)--and regaining presidential trade promotion authority (TPA) from Congress--the White House pursued an ambitious trade agenda including the negotiation of free trade agreements (FTAs) with 12 countries. The Bush administration has also dedicated itself to advancing large-scale agreements like the hemispheric Free Trade Area of the Americas (FTAA) talks and the "Doha Round" of World Trade Organization (WTO) negotiations. In addition, the administration is actively working on deals for free trade pacts with 11 more countries, and additional talks are reportedly on the horizon.

Not coincidentally, about three years ago, INDA, Association of the Nonwoven Fabrics Industry, formed an International Trade Advisory Board (ITAB) in an effort to better represent the industry's interests on trade-related matters. And since its inception, two of ITAB's principal objectives have been to address market access imbalances resulting from previously negotiated trade agreements and to ensure that future trade agreements promote free and fair trade for our industry. As such, the ITAB has generally supported free trade pacts between the U.S. and other nations because they offer our industry opportunities to correct existing inequities and eliminate barriers.

With the presidential election now resolved, and with changes in the Bush cabinet being announced on an almost daily basis, this Capitol Comments column will provide an update on the status of pending and expected future free trade agreements involving the U.S. and various other countries.

Doha Round

Although many were skeptical of the WTO's long term viability after the 1999 breakdown of talks in Seattle, the successful launch of the "Doha Round" in 2001 ushered in a new sense of hope. But, optimism faded after talks collapsed during the September 2004 Cancun ministerial meeting due to a burgeoning resentment among many developing countries who felt that industrialized regions such as the U.S. and European Union were ignoring their needs. The failure of the negotiations in Cancun all but eliminated the possibility of completing the round by the original January 1,2005 deadline and fueled talk of a "North-South" divide that threatened the disintegration of the global trading system.

Faced with such a potentially dire outcome, WTO member countries took a significant step forward on August 1,2004 by agreeing to a general framework package for future negotiations in market access, trade facilitation and more. Of interest to our industry, trade ministers approved a framework that calls for a "non-linear" approach to cutting tariffs on non-agricultural goods. Under this approach, higher duties would be cut more significantly than lower ones. The non-linear formula would also be complemented by various sectoral initiatives designed to slash or harmonize tariffs that apply to certain, specific industries. WTO members also agreed to give developing countries extra time to cut tariffs and to exempt least-developed countries from the tariff cutting formula and sectoral initiatives altogether, provided they seek to cap more of their industrial tariffs.

They also decided to defer the original January 1, 2005 deadline and hold another ministerial conference in Hong Kong in December 2005. At present, therefore, the ultimate result of Doha Round negotiations will likely be at least 18-24 months away.

Free Trade Area of the Americas

Unfortunately, things are not looking as good for the FTAA talks. During a Ministerial meeting held November 2003 in Miami, FTAA countries agreed to pursue a common set of baseline obligations for all participating countries, while giving smaller groups of countries the flexibility to pursue even more ambitious commitments if they so choose.

But residual hostility between several of the countries involved in FTAA negations has caused the talks to stall. A primary area of disagreement centers, in fact, on the scope of a final agreement. Things are so bad right now that on November 16, 2004 a USTR spokesperson announced that any hope of concluding the FTAA by the original January 1, 2005 deadline was gone. This marked the first time that the Bush Administration publicly acknowledged problems with the talks. Just days later, Ambassador Zoellick publicly chastised Brazil and several other South American countries for being too inflexible and for placing "political constraints" on the FTAA process. This rare display of frustration underscores the general sense of pessimism that has come to surround the future of the FTAA in recent months.

Pending Free Trade Agreements

At present, bilateral free trade agreements between the U.S. and two other countries (Chile and Singapore), have already been enacted, and U.S. free trade agreements with Australia and Morocco will take effect January 1,2005. In addition, FTAs between the U.S. and several other countries (Bahrain and a regional pact with the Dominican Republic and several Central American nations) were awaiting Congressional approval. While the agreement with Bahrain has been generally non-controversial and is expected to have a fairly easy time gaining legislative approval, the DR-CAFTA will likely be a different story.

Recent threats by the Bush Administration to drop the Dominican Republic from the pact unless it repeals a tax on high fructose beverages have also angered some House and Senate lawmakers, further adding to the political melee surrounding the agreement. No specific timeline for a vote on DR-CAFTA has been mentioned as of yet, but U.S. business interests who support the FTA are hoping for Congressional consideration in early 2005 so that it does not become entangled in a possible vote to renew the President's trade negotiating authority (which will expire on June 30 unless Congress allows it to be extended for another two years).

The Road Ahead

In addition to the agreements listed above, the U.S. is currently engaged in negotiations with the five countries of the South African Customs Union (Botswana, Lesotho, Namibia, Swaziland and South Africa), Panama, Thailand, and four Andean nations (Bolivia, Colombia, Ecuador and Peru). The Administration also recently informed Congress of its intent to pursue agreements with Oman and the United Arab Emirates, and has mentioned of a possible agreement with Egypt somewhere down the road. While it is too soon to make predictions about how any of these agreements will shake out, INDA will continue to present the nonwovens industry's views to the appropriate government officials, and will keep industry members informed about developments related to all future trade agreements as they unfold.

Peter Mayberry's column appears monthly in NONWOVENS INDUSTRY.