Several recent trade agreements have eased the way for exports from U.S. businesses to countries all over the world by eliminating or reducing tariffs and regulatory burdens. Over the last few years, agreements between the U.S. and Israel and South Korea, as well as Russia’s admission to the World Trade Organization, have already benefitted the countries involved, their people and their economies. They have expanded the potential reach of businesses in this country and increased profits for companies of all sizes that export goods and services. Other agreements that are currently pending offer similar opportunities for businesses.
Latin America and Colombia
The Latin American economy has grown over the last few years and offers American businesses many opportunities for trade. In general, Latin America’s middle class has increased 50 percent in the past decade alone. By some estimates, it is nearly the size of China’s. There is enormous potential — economically, politically and socially — for the U.S. in its relations with countries in the Western Hemisphere. Following Vice President Joe Biden’s recent trip to Colombia, Trinidad, and Brazil he said, “As leaders across the region work to lift their citizens out of poverty and to diversify their economies from commodity-led growth, the U.S. believes that the greatest promise – for Americans and for our neighbors – lies in deeper economic integration and openness.”
Not only is the U.S. strengthening what is already a trillion-dollar trading relationship with Mexico and Canada, it also has free-trade agreements that stretch nearly continuously from Canada to Chile. One of the most promising developments is the year-old Alliance of the Pacific that includes Chile, Colombia, Peru and Mexico. This pact, involving four of the region’s fastest-growing countries, has nations across the world seeking to participate or to play a positive supporting role, including the U.S. By committing to lowering trade barriers and integrating diplomatic and commercial interests, alliance members are showing that pragmatism, not ideology, is the secret to success.
The U.S. is Colombia’s largest trading partner, accounting for 30 percent of its total trade in 2012. In the year since the U.S.-Colombia Trade Promotion Agreement (TPA) went into effect in May of 2012, U.S. exports have increased 20% to $16 billion. The rise is even more dramatic for exports from Utah. In 2011, companies in the state exported $16 million to Colombia. By the end of 2012, that number had skyrocketed to nearly $47 million. When the agreement went into effect, 80 percent of U.S. consumer and industrial goods became eligible to enter the country duty-free and by the fifth year of the pact, 95 percent of Colombian tariffs on U.S. products will be eliminated. By the 10th year, all remaining duties will be phased out. Colombia’s economy is the third largest in Central and South America and its people are eager to try new products and services.
U.S. exports of soybeans, pork and rice have increased since the agreement was signed and overall agricultural exports were up 68 percent from May 2012 to March 2013. Other principal U.S. exports to Colombia in 2011 were machinery, mineral fuels, electrical machinery, organic chemicals, and plastic. In addition, U.S. companies export goods and services that include automotive parts, construction and mining equipment, electrical power systems, food and beverage processing equipment, information technology, medical equipment, transportation and infrastructure, and travel and tourism. The primary products Utah companies export to the country include transportation equipment, food, machinery, computers and electronics, and chemicals.
Trans-Pacific Partnership Agreement
The Trans-Pacific Partnership (TPP) agreement is currently being negotiated by nine countries: the U.S., Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam. In April, the U.S. Trade Representative notified Congress of its intent to include Japan, the world’s third largest economy, in the negotiations. Japan’s entry further distinguishes the TPP as the most credible pathway to broader Asia-Pacific regional economic integration. It is an ambitious, next-generation, trade agreement that reflects American priorities and values. The agreement has the potential to increase U.S. economic growth and support the creation and retention of high-quality jobs by increasing exports in a region that includes some of the world’s most robust economies and that represents more than 40 percent of global trade.
The large and growing markets of the Asia-Pacific are key destinations for U.S. manufactured goods, agricultural products, and a range of services, and the TPP will further enhance this trade and investment. As a group, the TPP countries are the largest goods and services export market for U.S. goods. Exports to the broader Asia-Pacific region totaled $942 billion in 2012, representing 61 percent of total U.S. exports. The TPP agreement will provide U.S. businesses many trading opportunities by eliminating tariffs and other barriers to trade and investment. It will also facilitate the development of production and supply chains and will make trade between the countries more seamless and efficient. The agreement will be set up to enable any necessary updates to address trade issues that might emerge in the future as well as new issues that arise with the expansion of the agreement to include new countries.
The Transatlantic Trade and Investment Partnership
The Transatlantic Trade and Investment Partnership (TTIP) is being negotiated between the U.S. and the European Union, with the first round of negotiations taking place the week of July 8 in Washington, D.C. It will be an ambitious, comprehensive, and high-standard agreement that will offer significant benefits to both areas. It will further open markets there to U.S. companies, increasing the $458 billion in goods and private services the U.S. exported in 2012 to the EU, which is its largest export market. The U.S. and EU already maintain a total of nearly $3.7 trillion in investment in each other’s economies (as of 2011) and the TPIP will strengthen those investments.
U.S. and EU officials want the trade pact to be ambitious and hope that it will largely eliminate trade tariffs and harmonize regulations across a broad range of industries. Officials hope that by launching the talks, they will deliver a boost to confidence for businesses and workers, helping to support what has been a disappointing recovery from the recession in both areas. UK PM Cameron said that a trade deal between the U.S. and the EU would be “the biggest … in history,” and could help create two million new jobs on both sides of the Atlantic.
Zions Bank is actively working to help businesses take advantage of the improved climate for trade around the world. Members of its International Banking Group are planning to travel to Colombia and Panama in February 2014 to establish banking relationships that will enhance export opportunities for businesses throughout Utah and Idaho.