Tradeology, the ITA Blog

From the Office of Trade and Economic Analysis, International Trade Administration

Free Trade Agreements (FTA) are an important tool to our nation’s economic growth and prosperity. As you know, an FTA is an agreement between two or more countries regarding certain obligations and protections in areas such as trade in goods and services, intellectual property, and investment. FTA objectives include the reduction of barriers to U.S. exports, protection of U.S. interests, and enhancement of the rule of law in partner countries. The reduction of trade barriers and the creation of a more stable and transparent trading and investment environment facilitate and reduce the costs of U.S. company exports to partner markets.

U.S. Export Growth

The U.S. currently has FTAs in force with 20 markets worldwide. In 2015, U.S. merchandise exports to FTA partners totaled $711 billion. This comprised almost half (47%) of total U.S. goods exports in 2015.

The importance of FTAs in promoting trade growth is evident in recent trends. From 2009-2015, goods exports from the U.S. to FTA partners increased at a faster rate (53%) than goods exports to the rest of the world (34%). Further, the share of U.S. goods exports to FTA countries has increased in five out of six years since 2009. Bilateral trade results are positive as well – exports increased for 19 out of 20 FTA partners during the 2009-2015 period. And at the sectoral level, the US had a $13 billion surplus in manufactured goods trade with FTA partners in 2015. Thus, both over time and currently, FTAs have encouraged trade growth, often at levels exceeding results for the rest of the world.

In 2015, the U.S. and its FTA partners contributed 34% of global Gross Domestic product (current U.S. dollars). The remainder presents opportunities for FTA expansion and continued trade growth.

The success we have seen with our current FTA partners bodes well for the success of the Trans-Pacific Partnership. The TPP is a regional FTA that has the potential to transform U.S. trade with the Pacific region, the fastest growing region in the world. In 2015, U.S. merchandise exports to TPP countries totaled $680 billion comprising approximately 45% of U.S. goods exports.

As with current FTA partners, goods export growth (49%) for TPP partners exceeded rest of world results from 2009 to 2015. The largest sectoral increases were transportation equipment ($54 billion increase to a record $537 billion), computer and electronic products ($25 billion increase), and petroleum and coal products ($18 billion increase).

Passing TPP is a priority of the Obama Administration and can benefit our businesses by reducing up to 18,000 tariffs on Made-in-America goods and services. Leveling the playing field for American businesses will make our products and services more affordable to the millions of consumers who desire our quality goods.

The economic forces at work globally make supporting U.S. exporters, particularly smaller companies, more important than ever. FTAs are a key way to support our workers and businesses. The International Trade Administration is committed to providing high-quality export assistance and programs as well as working to level the playing field through trade policies and 21^st Century agreements.

To learn more and to take advantage of any of these important trade agreements be reach out to ITA’s professional staff  in offices in more than 100 U.S. cities and 75 international markets . We stand ready to help U.S. companies succeed in the global marketplace.

Stefan M. Selig is the Under Secretary of Commerce for International Trade

Last week I was in Guangzhou, China, participating in the 26th Session of the U.S.-China Joint Commission on Commerce and Trade (JCCT). I was joined at the event by Secretary of Commerce Penny Pritzker, U.S. Trade Representative Ambassador Michael Froman, U.S. Secretary of Agriculture Tom Vilsack, and Deputy U.S. Trade Representative Ambassador Robert Holleyman. The JCCT brings together leaders from the world’s two largest economies to seek agreement on a path forward to expand and improve a two-way commercial relationship that has grown to nearly $600 billion since its inception more than 30 years ago.

Under Secretary Stefan Selig co-chairs a roundtable discussion with U.S. and Chinese government officials and business leaders.

It was an intense trip, with negotiating sessions stretching well past midnight, only to ramp up again early the next day. I left South China a little sleep-deprived, but with a strong sense of accomplishment for all the positive outcomes achieved during this critical annual event. Through meetings with our Chinese counterparts, we reached agreement in several areas of importance to U.S. farmers, innovators, manufacturers and workers. We agreed on key outcomes in the areas of intellectual property rights and enforcement, pharmaceuticals and medical devices, competition policy, and technology policy.

In the area of IPR protection and enforcement, new commitments from China will facilitate much needed improvements in a wide range of industries that rely on the ability to protect and enforce their IPR in China. Building on several prior commitments, China also clarified efforts to revise China’s trade secrets system and provide more effective remedies to deter  theft of trade secrets.

We made progress on several areas related to pharmaceuticals and medical devices. We announced concrete outcomes on implementing mutually agreed goals of eliminating drug and medical device application backlogs and improving the time it takes to make these products available to Chinese patients. China also agreed that imported medical devices will be treated the same as domestically produced medical devices. These outcomes on pharmaceuticals and medical devices pave the way for significant increases in U.S. exports in healthcare, a key sector for future growth in China as its population ages and its economy matures.

We also announced advancements in the competition policy arena. The United States and China made meaningful progress in China’s enforcement of its Anti-Monopoly Law (AML). China agreed that it would protect commercial secrets obtained in the process of AML enforcement from unauthorized disclosure and ensure that other agencies do not try to improperly influence that enforcement, for example, in favor of domestic competitors.

Significant strides were made on technology policy as well. China committed to nondiscriminatory and transparent policies for ICT information security, including assurances that Chinese banks are free to purchase ICT products regardless of the country of origin.

I was pleased to participate in several programs this weekend that continued our efforts to “re-imagine” the JCCT that Secretary Pritzker and Ambassador Froman launched in Chicago last year. The reinvigorated forum included a full day of collaborative programing designed to facilitate private sector engagement with officials from the United States and China, as well as to promote the exchange of information on trade opportunities at the state, provincial, and local level.

I had the privilege to co-chair a roundtable discussion on corporate governance and business-government engagement featuring U.S. and Chinese government officials and business leaders from U.S. and Chinese companies at the historic Chen Family Academy. With these 25 business leaders from both countries, we were able to explore conditions and best practices for successful business operations in both our countries. The other collaborative events included a networking event and luncheon recognizing the importance of bilateral cooperation at the local level; a program highlighting mutually beneficial health and healthcare public-private partnerships; and a U.S. and Chinese stakeholder discussion regarding recent progress made toward safer and more reliable food chains.

As Secretary Pritzker noted at the conclusion of this year’s JCCT, “a close and productive U.S.-China commercial relationship, based on responsible partnership, is essential to the growth and stability of the global economy.”

I’m happy to report that we had a successful JCCT, and particularly pleased to note that the International Trade Administration was able to achieve this success through close partnership with other Commerce Department bureaus such as the Bureau of Industry and Security, the U.S. Patent and Trademark Office, and the National Oceanic and Atmospheric Administration.  I look forward to working with my U.S. and Chinese counterparts as we strive to continue our efforts to enhance and expand the U.S.-China commercial relationship.

Building, deepening, and managing commercial relationships does not only define ITA’s work with our Chinese counterparts. This defines the singular importance of our agency as a whole. Between our consistent engagement with the private sector, our collection of trade specialists and industry experts, and the second-to-none global reach of our Commercial Service, ITA leads the efforts to work with and on behalf of U.S. business to promote trade and investment that makes U.S. companies more competitive abroad and encourages investment into the United States. You can expect that we will continue this important work well into the future.

This post contains external links. Please review our external linking policy.

This is a guest blog post by Philip Poland, Director of International Trade Compliance at DHL (USA). DHL was a Platinum Marketing Partner for the Discover Global Markets: The Americas Forum in Miami, FL, in May 2015, and is a Marketing Partner for the 2015 Discover Forum Series.

The North American trade relationship is the strongest in the world, and exceptionally important to U.S. businesses.  The United States exported over $600 billion in goods and services to both Canada and Mexico in 2014. Canada is our largest trading partner, with $658 billion in goods exported and imported last year. With this in mind, a recent panel discussion I participated in, held during the Discover Global Markets: The Americas conference, explored the opportunities and challenges for U.S. companies looking to do business with our closest neighbors.

How should businesses approach trade with Mexico and Canada, and what are the implications for organizations that want to expand and succeed?  The following is an overview of key considerations relating to the U.S.-Mexico and U.S.-Canada equations:

NAFTA is key. Since taking effect in 1994, the free trade pact has significantly reduced the cost of trading between the United States, Mexico, and Canada, by removing or reducing tariffs in multiple industries, including agriculture, textiles and automobiles.  U.S. manufacturing exports to NAFTA countries have increased 258 percent in the last 20 years.  Companies that have not yet launched an export strategy, and are analyzing opportunities for their products, must surely consider the cost implications involved under the free trade marketplace.  Simply put, if your business is just getting into the global trade game, Canada and Mexico may be a good place to start.  Both countries have a very skilled labor force as well as high-quality education in the areas of engineering that is needed for production and manufacturing.

Logistics costs are low.  Given the close proximity of our neighbors, and the productive relationships that exist between our governments, border movements are simplified relative to other nations. Lower transportation costs and streamlined customs procedures mean reduced logistics costs for those U.S. businesses exporting goods to Canada and Mexico – and for those importing manufactured goods and materials for use in production as compared with the cost of shipping from Asia.

Rules and details matter. Companies considering trade with our neighbors – and those that are already trading – must clearly understand the particular customs requirements that apply in each country.  For instance, in Mexico, customs officials can be very particular about accuracy on customs documents, right down to the smallest details.  Companies must state the date as “day, month, year” versus the way that it is ordinarily stated in the United States, or they risk delays.  Even the smallest errors on documentation can cause long delays in the clearance process.

Regulations and enforcement are subject to change. As in many countries, regulations in Canada and Mexico evolve and change. Companies need to stay up-to-date and work with a logistics partner who understands the shifting environment.  As an example, Mexican customs recently began enforcing regulations on shoes and apparel that require the importer in Mexico to be registered in an effort to prevent the undervaluation of shipments.  More information on this requirement is available here.

Licensing and permit requirements must be understood.  It is essential for companies to understand the way that products are regulated in Canada and Mexico before they decide on their trade strategy.  For instance, in the area of vitamins and supplements, in some cases items sold over the counter in the United States will be sold only with a prescription in Canada and Mexico.  This regulatory difference means that some items exported to these countries will require a specific license or permit.  On the import side, U.S. companies that work with particular manufacturers across the border also need to understand when a license is required.

Looming policy and process changes could make trade with Canada and Mexico even more attractive. The United States, Canada, and Mexico continue to pursue agreements to streamline the trade process and harmonize data flows and perimeter security procedures.  The Beyond the Border program is a good example.  Mutual recognition and acceptance of trusted trader programs, which will allow for expedited customs procedures, are also in the works.  More information is available here.  Finally, the United States is pursuing the implementation of the International Trade Data System (ITDS), which will allow international traders to submit documents required by U.S. Customs and Border Protection and its Partner Government Agencies through a “single window.”  The ITDS will expedite customs procedures and reduce paperwork, and fulfill U.S. commitments under the Beyond the Border program.  Mexico has also recently implemented a single window program.

I am glad that DHL was able to be a part of the Discover Forum in Miami, and we all look forward to participating in future events with the U.S. Commercial Service. Is your company engaged in trade with Canada and/or Mexico? Let us know what you see as the biggest opportunities and greatest challenges at @DHLUS, and be sure to check out the export resources available at export.gov.

Note: This article is not intended to be specific legal or compliance advice, but general information related to international trade.

Andres Leon is an intern in the International Trade Administration’s Office of North America.

Update: April 20, 2015: This post was updated to provide additional information about “preclearance.”

The United States and Canada have a $1.3 trillion trade and investment relationship. The broad scope of U.S.-Canadian bilateral relations includes extensive economic, cultural, and educational ties with nearly $2 billion in two-way trade in goods and services, and more than 300,000 border crossings each day.

As a result, the United States and Canada signed a historic cross-border agreement on March 16, 2015 that will further benefit travelers and enhance trade in North America. The Agreement on Land, Rail, Marine, and Air Transport Preclearance Between the Government of the United States and the Government of Canada, also known as “Preclearance,” creates the opportunity for requests for new preclearance locations and enables exploration of co-location at small and remote ports of entry. It also enables Canada to request the conversion of immigration pre-inspection sites at cruise, rail, and ferry terminals in British Columbia to full preclearance.

Preclearance customs inspection points have reduced waiting times and congestion at designated points of entry, while also strengthening security along the U.S.-Canada border. The Preclearance agreement also provides a framework to expand Preclearance sites, which will further facilitate trade and tourism in one of the most active economic regions in the world.

The Preclearance signing is yet another milestone for the Beyond the Border initiative that was announced by President Obama and Prime Minister Harper in 2011 in an effort to provide a shared approach to perimeter security and economic competitiveness. To learn more about Preclearance benefits and locations, visit U.S. Customs and Border Protection.

Andres Leon is an intern in the International Trade Administration’s Office of North America.

In 2011, President Obama and Canada’s Prime Minster Harper announced the Beyond the Border initiative to enhance security and accelerate the flow of people, goods, and services between the United States and Canadian border. On February 18, 2015, Beyond the Border reached a new milestone: the United States, Canada, and the state of Michigan signed an agreement to finance the proposed New International Trade Crossing (NITC) that will link Detroit and Windsor, Ontario. The Detroit-Windsor corridor is one of the most important crossings for U.S.-Canadian commerce. The new agreement includes funding for a U.S. customs plaza that will be procured as part of the NITC public-private partnership to finance, design, construct, operate, and maintain the project. The costs of the project will be paid from future toll revenues.

The public-private partnership is a true sign of progress for the border initiative and will provide the United States and Michigan with jobs, modern infrastructure, and improved security. The United States and Canada are strong economic partners, with Canada being the largest trading partner for the United States and the state of Michigan. Many jobs in the United States, and particularly in Michigan, depend on U.S.-Canada trade. In fact, last year, annual trade in goods and services between the two countries was roughly $658 billion, a quarter of which was facilitated in the Detroit-Windsor corridor.

The new agreement is a result of several years of discussions and cooperation among the U.S. Department of State, U.S. Customs and Border Protection, the U.S. General Services Administration, the state of Michigan, the Windsor-Detroit Bridge Authority, and Transport Canada. Above all, the agreement reflects the ongoing commitment of U.S. and Canadian officials to promote long-term economic growth in the region.

This post originally appeared on the Department of Commerce blog.

Guest blog post by Stefan M. Selig, Under Secretary of Commerce for International Trade

Under Secretary of Commerce for International Trade Stefan M. Selig

When we look back at 2014, it will be seen as the year our country regained its economic confidence, symbolized by the nearly 3 million jobs our economy created in 2014.

While this feat extended the longest streak of job growth in American history, we should not overlook the role our exports and our exporters played in regaining that economic confidence.

U.S. exports of goods and services tallied a record $2.35 trillion in 2014. That was the fifth consecutive year we achieved record exports. This is a clear validation of the Administration’s commitment to a robust trade and investment agenda.

In fact, there are three ways that our exports played an important role in the breakthrough year our economy produced.

First, at the same time that we were experiencing the longest streak of job growth, we also experienced a record year when it came to export-supported jobs: more than 11.7 million. This number includes the 2.8 million jobs supported by the exports to our North American Free Trade Agreement partners Canada and Mexico. And we know those export supported jobs pay 13 to 18% higher wages than non-export supported jobs.

Second, U.S. exporters reaped the benefits of a record year of exports with our 20 free trade partners – with a total of $765 billion in goods sent to these markets. That record included increases in exports to Colombia (up 10.5%), South Korea (up 6.8%) and the Central America Free Trade Agreement-Dominican Republic partners (up 5.7%). Overall, these 20 countries purchase nearly half of all U.S. exports today – 47% to be exact.

Third, a major driver of our export growth came from our Latin American free trade partners, such as Chile, Colombia, Mexico, Panama, and Peru. Exports to these 11 countries alone represented more than a third of our entire year-over-year increase in exports. The region is a major destination for U.S. petroleum and coal, computers and electronics, chemicals, and transportation equipment.

So 2014 was clearly a breakthrough year for our exports and for our economy in general. Now, we need the tools that will allow us to carry that momentum into 2015 and beyond.

That is why passing trade promotion legislation is even more crucial, particularly as we work to finalize the historic Trans-Pacific Partnership agreement (TPP).

TPP will give U.S. exporters better access to the Asia-Pacific, which will carry the majority of global middle class by 2030. TPP means taking the very success we have seen in Latin America – U.S. goods exports to Look South markets increased 5.4 percent in 2014 from the previous year, more than double the increase of goods exports to the rest of the world — and replicating it in the Asia-Pacific.

To help our negotiators reach the best deal possible, the President needs Congress to pass trade promotion legislation. This would signal to our negotiating partners that a successfully negotiated TPP will not be held up by amendments when it goes to Congress for a final vote. This would give those trading partners the confidence to put their final offers on the table.

And because trade promotion legislation empowers Congress to determine the priorities and objectives our negotiators must pursue, it will ensure TPP embodies the values of 21st century global commerce: environmental protection, workplace regulations, and fair wages.

If we want a future that will include connecting U.S. exporters to 60% of global GDP, accessing the majority of global middle class consumers, supporting more American jobs through expanded exports, and locking 21st century values into the global trading system, then trade promotion legislation will be an essential element.