Shippers await benefits of pending U.S. free trade deals
The country's largest shippers are anxious for Congress to enact pending free trade agreements that the Bush administration has recently concluded with Peru, Panama, Colombia and South Korea.
William C. Lane, Washington director of governmental affairs for Caterpillar, said he's frankly 'befuddled' why Congress has not passed these free trade deals earlier, considering they are pro-U.S. exports.
'I'm a 32-year (industry) veteran, and in those 32 years this is the best of times,' he told a National Foreign Trade Council luncheon on Friday. 'Exports are at record levels. Companies like Caterpillar are very competitive on the international scene.'
With the exception of the U.S.-South Korean free trade pact, which is considered the biggest of its type negotiated by the United States in nearly two decades, shippers find numerous business benefits to implementing free trade agreements with developing economies, such as Peru, Panama and Colombia.
R. Scott Miller, director of global trade policy for Procter & Gamble, said the consumer products giant expects 'very important commercial opportunities' from entering free trade agreements with Peru and Colombia in particular. The company's overall global sales with developing countries have increased from about $8 billion in 2001 to $20 billion today. P&G has set a $30 billion sales target for this market by 2010.
Miller noted that Peru's tariff on imports of Pringles, for example, is about 25 percent, or 60 cents per can sold in the South American country. This tariff would be immediately eliminated upon congressional approval of the U.S.-Peru free trade agreement, he said.
Marietta E. Bernot, global trade and customs advisor for Mars, praised Panama for moving ahead with implementing most aspects of its free trade agreement with the United States, and credited the action to widely restoring its pet food business in the Central American country. Panama, like most countries, banned U.S. beef products after the U.S. Department of Agriculture confirmed a case of bovine spongiform encephalopathy (BSE), or 'mad cow' disease, in a Washington state cow in December 2003. After the discovery, Mars scrambled to supply the market with pet food that it manufactured in Mexico and Argentina, she said.
However, in the U.S.-Panama free trade agreement, Panama agreed to implement improved sanitary and phytosanitary measures. The country put those measures in place in February 2007. 'The Panama agreement is just outstanding,' Bernot said.
Mars' business should also benefit from the immediate elimination of tariffs on confectionary products once the U.S.-Panama free trade agreement is enacted by Congress, Bernot said.
Caterpillar plans to benefit from the enacted U.S. free trade agreement in Panama, especially as the country ramps up for the expansion of the Panama Canal. 'Don't wait until the expansion is over to implement the FTA,' Lane said, referring to Congress' inaction to move the agreement's approval forward.
Even large U.S. retailers intend to benefit from the free trade agreements with Peru, Panama and Colombia.
Wal-Mart Stores imports fruits, vegetables, flowers and apparel duty-free under the Andean Trade Promotion and Drug Eradication Act, the Caribbean Basin Initiative, and Generalized System of Preferences. However, while these trade programs are beneficial, they are routinely plagued by periodic congressional reauthorization delays.
Sarah Thorn, Washington representative for Wal-Mart, said the retailer would benefit more once these programs are essentially made permanent by fully implementing the free trade agreements.
Wal-Mart has no immediate plans to set up stores in Peru, Panama and Colombia, but Thorn said the opportunities are there. She explained that Wal-Mart has already opened 600 stores among the countries participating in the recently enacted U.S.-Central American-Dominican Republic free trade agreement. She said a lot of people don't realize that these free trade agreements eliminate the barriers to store opening and expansion inputs, such as shopping carts and shelving units.
Shippers plan to intensify their lobbying of the House and Senate to approve these four free trade agreements. Many trade analysts believe the agreement with Peru is the least politically controversial and closest to approval.
In 2006, U.S. goods exports to Peru totaled $2.9 billion, a more than 25 percent increase from the previous year, according to the National Foreign Trade Council. The U.S.-Peru Trade Promotion Agreement would allow for continued and increased market access for U.S. goods, such as machinery, electronics, plastics and agricultural products. U.S. services suppliers also stand to gain in areas of telecommunications, finance, energy, construction and transportation, the council said.
However, shippers are concerned that Washington lawmakers may turn their backs on future free trade deals.
'While the rest of the world moves aggressively forward with new commercial agreements, trading blocks and free trade agreements, many in Congress are rejecting legislation that would open markets and maintain our nation's foothold in the global economy,' said Caterpillar Chairman and Chief Executive Officer James W. Owens, in an Aug. 28 letter to members of the Senate.
'Such trends greatly disadvantage U.S. businesses and hamper our ability to succeed in U.S. and international marketplaces,' Owens warned.