Free Trade Agreements (FTAs) in the United States

A Free Trade Agreement is an agreement between two or more countries where the countries agree on certain obligations that affect trade in goods and services, and protections for investors and intellectual property rights, among other topics. For the United States, the main goal of trade agreements is to reduce barriers to United States exports, protect United States interests competing abroad, and enhance the rule of law in the Free Trade Agreement partner country or countries. The reduction of trade barriers and the creation of a more stable and transparent trading and investment environment make it easier and cheaper for United States companies to export their products and services to trading partner markets.

Benefits to Exporters or Investors

United States Free Trade Agreements typically address a wide variety of government activity. One example is the reduction or elimination of tariffs charged on all qualified products coming from the other country. For example, a country that normally charges a tariff of 5% of the value of the incoming product will eliminate that tariff for products that originate (as defined in the Free Trade Agreement) in the United States.

Documenting how a product originates, or meets the rules of origin, can make using the Free Trade Agreements negotiated tariffs a bit more complicated. However, these rules help to ensure that U.S. exports, rather than exports from other countries, receive the benefits of the agreement.

Some other types of opportunities frequently found in Free Trade Agreements include:

• the ability for a United States company to bid on certain government procurements in the Free Trade Agreement partner country;
• the ability for a United States investor to get prompt, adequate, and effective compensation if its investment in the Free Trade Agreement partner country is taken by the government (expropriated);
• the ability for United States service suppliers to supply their services in the Free Trade Agreement partner country;
• protection and enforcement of American-owned intellectual property rights in the Free Trade Agreement partner country; and
• the ability for United States exporters to participate in the development of product standards in the Free Trade Agreement partner country.

Countries with Free Trade Agreements with the United States

The United States has 14 Free Trade Agreements in force with 20 countries, and is currently in the process of negotiating regional Free Trade Agreements with several others.

U.S. Free Trade Agreement Partner Countries are: Australia; Bahrain; Chile; Colombia; DR-CAFTA: Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, & Nicaragua; Israel; Jordan; Korea; Morocco; NAFTA: Canada & Mexico; Oman; Panama; Peru; and Singapore.

Identify tariffs on exports to FTA partner countries

Free Trade Agreement partners will collect when a U.S. exported product that meets the FTA rule of origin enters the country. The exporter can look up the tariff rate for a given product in a given day, as well as identify when in the future the tariff rate will go down further or be eliminated altogether.

The North American Free Trade Agreement (NAFTA)

As of January 1, 2008, all tariffs and quotas were eliminated on U.S. exports to Mexico and Canada under the North American Free Trade Agreement (NAFTA). NAFTA created the world’s largest free trade area, which links 454 million people producing over $17.2 trillion worth of goods and services in 2010. The dismantling of trade barriers and the opening of markets has led to economic growth and rising prosperity in all three countries.

Total merchandise trade among the United States, Canada, and Mexico reached $944.6 billion in 2010, an increase of 218% since 1993. Canada and Mexico are our first and third largest merchandise trading partners, accounting for 32.3 percent of U.S. exports to the world in 2010.

The NAFTA provides coverage to services with the exception of aviation transport, maritime, and basic telecommunications. The agreement also provides intellectual property rights protection in a variety of areas including patent, trademark, and copyrighted material. The government procurement provisions of the NAFTA apply not only to goods but to contracts for services and construction at the federal level. Additionally, U.S. investors are guaranteed equal treatment to domestic investors in Mexico and Canada. Overall investment from the United States to Canada and Mexico reached $628 billion in 2009, growing 75 percent since 2003.

By Sector

U.S. exports to its NAFTA partners totaled $411.5 billion in 2010 and increase of 23 percent over 2009. Principal U.S. exports to Mexico and Canada in 2010 included electrical machinery, machinery, vehicles, mineral fuel/oil, and plastics.

Comparison of Free Trade Agreements and Selected Preferential Trade Legislation Programs: Non-Textiles

Find more information on Comparison of Free Trade Agreements and Selected Preferential Trade Legislation Programs: Non-Textiles in relation to the Customs Trade Law in the legal Encyclopedias.

Dominican Republic: Central America: United States Free Trade Agreement

Find more information on Dominican Republic: Central America: United States Free Trade Agreement in relation to the Customs Trade Law in the legal Encyclopedias.

United States-Israel Free Trade Area Agreement

Find more information on United States-Israel Free Trade Area Agreement in relation to the Customs Trade Law in the legal Encyclopedias.

United States-Morocco free trade agreement

Find more information on United States-Morocco free trade agreement in relation to the Customs Trade Law in the legal Encyclopedias.

United States-Singapore free trade agreement

Find more information on United States-Singapore free trade agreement in relation to the Customs Trade Law in the legal Encyclopedias.

Free Trade Agreements and the International Trade Law

Resources

See Also

Further Reading

• Free Trade Agreements entry in the Dictionary of International Trade Law (Raj Bhala)
• Free Trade Agreements entry in the Gale Encyclopedia of U.S. Economic History (Thomas Carson; Mary Bonk)
• Free Trade Agreements entry in the Dictionary of International Trade
• Free Trade Agreements entry in the Dictionary of International Trade: Handbook of the Global Trade Community (Edward G. Hinkelman)