What is in this article?:
- Empirical evidence shows Free Trade Agreements (FTAs) increased trade among member countries, suggesting that the large number of FTAs that do not include the United States may be eroding the U.S. presence in foreign markets.
Colombia’s FTA with Mercosur appears to be an example of appreciable damage to U.S. bilateral exports from an FTA between countries other than the U.S. The $305 million loss of U.S. exports of corn and wheat alone is equivalent to about a fourth of U.S. agricultural exports to Colombia—a far deeper cut than the 6-percent loss projected following implementation of the two ASEAN FTAs.
The difference between the two cases is that Colombia has imposed higher tariffs on the principal U.S. exports than is the case for most U.S. exports to ASEAN countries. U.S. commodity exporters face competition from Mercosur exporters who are exempt from these tariffs because of the Mercosur-Colombia FTA.
The effect on U.S. agricultural exports of FTAs in which the United States is not a partner will vary depending on the thoroughness of the cuts in tariffs in the FTAs, how high the Most Favored Nation tariffs were to begin with, and the degree to which partners in those FTAs can supply products that the United States exports. The U.S. advantages as a large, low-cost, and reliable exporter are not automatically canceled by third-party FTAs. However, third-party FTAs always give their members a margin of tariff preference over the United States, which in some cases can lead to serious declines in U.S. agricultural exports.