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Report to Congressional Requesters:

January 2004:

INTERNATIONAL TRADE:

Intensifying Free Trade Negotiating Agenda Calls for Better Allocation 
of Staff and Resources:

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-04-233]:

GAO Highlights:

Highlights of GAO-04-233, a report to congressional requesters 

Why GAO Did This Study:

Free trade agreements (FTA) involve trade liberalization between the 
United States and selected countries or regions and are also expected 
to provide economic and other benefits. GAO was asked to review how 
potential FTA partners are selected, in view of the increased number 
of FTAs and their growing importance to U.S. policy. Specifically, GAO 
(1) provided information about the factors influencing the selection 
of FTA partners, (2) analyzed the interagency process for selecting 
FTA partners, and (3) assessed how the executive branch makes 
decisions about the availability and allocation of resources to FTAs.

What GAO Found:

The Trade Representative used 13 factors in selecting four potential 
FTA partners in 2002 (Australia; the Central American Free Trade Area, 
a subregional group of five Central American countries; the Southern 
Africa Customs Union of five countries; and Morocco). Subsequently, 
selected executive branch agencies decided to use six broad factors—
country readiness, economic/commercial benefit, benefits to the 
broader trade liberalization strategy, compatibility with U.S. 
interests, congressional/private-sector support, and U.S. government 
resource constraints. These decisions are not mechanical, and the 
factors cited most often regarding the selected FTA partners primarily 
reflect U.S. trade strategy, foreign policy, and foreign economic 
development goals.

The interagency process for selecting FTA partners now involves four 
interagency groups that use decision papers to assess potential FTA 
partners and make recommendations that eventually go to the president. 
This new process is more systematic and inclusive than the process 
previously used. The Office of the U.S. Trade Representative (USTR) 
reports that it routinely considers the Congress’s views in making 
selections. 

Decisions about FTA partners are made with little systematic data or 
planning regarding trade-offs with other trade priorities, even though 
FTAs are resource intensive. USTR staff and travel funds are heavily 
committed to FTAs, and USTR relies on specialists at other agencies as 
well. As more FTAs are contemplated, existing mechanisms may prove 
inadequate to the task of aggressively pursuing a bilateral FTA agenda 
while remaining engaged in regional and multilateral forums.

What GAO Recommends:

GAO recommends that USTR work with other key trade agencies to develop 
more systematic data and plans for allocating staff and resources 
across the full U.S. trade agenda, including FTAs and other 
negotiating priorities.

The Trade Representative agreed that the intensifying trade 
negotiation agenda requires management improvements, but he disagreed 
with our specific recommendation. He attributes the main cause of 
strain at USTR to the amount of resources. We believe that better data 
and plans will promote the flexibility needed to respond to USTR’s 
demanding multilateral, hemispheric, and bilateral FTA negotiations.

www.gao.gov/cgi-bin/getrpt?GAO-04-233.

To view the full product, including the scope and methodology, click 
on the link above. For more information, contact Loren Yager at (202) 
512-4347 or yagerl@gao.gov.

[End of section]

Contents:

Letter: 

Results in Brief: 

Background: 

Early FTA Selections Were Based Primarily on the Trade Representative's 
Evaluation; New Interagency Process Uses Six Factors: 

The Administration Has Enhanced Its Interagency Process for Assessing 
Potential FTA Partners: 

Ambitious FTA Agenda Calls for Better Resource Management: 

Conclusions: 

Recommendation for Executive Action: 

Agency Comments and Our Evaluation: 

Appendixes:

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: European Union and United States Free Trade Agreements, by 
Region: 

Appendix III: U.S. Trade with Potential and Existing FTA Partners: 

Appendix IV: Selected U.S. Free Trade Agreement Partner Profiles: 

U.S.-Australia FTA: 

U.S.-Bahrain FTA: 

U.S.-Chile FTA: 

U.S.-Dominican Republic FTA: 

U.S.-Morocco FTA: 

U.S.-Singapore FTA: 

U.S.-CAFTA FTA: 

U.S.-SACU FTA: 

Appendix V: Comments from the Office of the U.S. Trade Representative: 

GAO Comments: 

Appendix VI: GAO Contacts and Staff Acknowledgment: 

GAO Contacts: 

Staff Acknowledgments: 

Tables: 

Table 1: Fiscal Year 2003 USTR Nonstaff Costs for Negotiating FTAs: 

Table 2: Estimated Agency Staff on U.S. Negotiating Teams for Completed 
Rounds of FTA Negotiations, as of October 2003: 

Table 3: International Trade Administration Free Trade Agreement 
Resource Allocation, Fiscal Year 2003: 

Table 4: U.S. Trade with Potential and Existing FTA Partners, 2002: 

Figures: 

Figure 1: FTA Time Line, 1985-2003: 

Figure 2: Interagency Process for FTA Partner Selection and Notification 
to the Congress: 

Figure 3: Selected Milestones for U.S. Trade Agreement Negotiations, 
2000-05: 

Figure 4: USTR Sequences FTAs in Four Regions to Negotiate Ambitious FTA 
Agenda: 

Abbreviations: 

AGOA: African Growth and Opportunity Act:

APEC: Asia-Pacific Economic Cooperation:

ASEAN: Association of Southeast Asian Nations:

CAFTA: Central American Free Trade Agreement:

CARICOM: Caribbean Community:

FTA: Free Trade Agreement:

FTAA: Free Trade Area of the Americas:

GCC: Gulf Cooperation Council:

GSP: Generalized System of Preferences:

MEFTA: Middle East Free Trade Area:

NAFTA: North American Free Trade Agreement:

NEC: National Economic Council:

NSC: National Security Council:

SACU: Southern African Customs Union: 

TPA: Trade Promotion Authority:

TPRG: Trade Policy Review Group:

TPSC: Trade Policy Staff Committee:

USTR: Office of the U.S. Trade Representative:

WTO: World Trade Organization:

Letter January 12, 2004:

The Honorable Max Baucus: 
Ranking Minority Member, Committee on Finance: 
United States Senate:

The Honorable Calvin Dooley: 
House of Representatives:

Free trade agreements (FTA) have recently been the subject of much 
attention as the United States undertakes negotiations with multiple 
negotiating partners. FTAs involve liberalization of trade between the 
United States and selected countries or regions and are also expected 
to provide economic and other benefits. The passage of trade promotion 
authority legislation in 2002 has positioned the United States to 
pursue more FTAs, because this authority has streamlined the agreement 
approval process through the U.S. Congress. Because FTA negotiations 
call upon many experts from the Office of the U.S. Trade Representative 
(USTR) and other agencies, they are resource intensive. The recent 
collapse of the World Trade Organization (WTO) trade talks at a 
September 2003 meeting in Cancun, Mexico, is expected to make FTAs a 
more important vehicle for accomplishing U.S. trade goals.

As a result of this increase in the number of FTAs and their growing 
importance to U.S. trade policy, you asked us to review how potential 
FTA partners are selected. More specifically, you asked us to (1) 
provide information about the factors that influence the selection of 
FTA partners and how these factors have been applied; (2) analyze the 
interagency process for selecting FTA partners, including how USTR 
coordinates the views of key trade agencies and consults with the 
Congress, and business and public interest groups; and (3) assess how 
the administration makes decisions regarding the availability and 
allocation of resources to FTAs and other trade priorities, such as the 
regional Free Trade Area of the Americas (FTAA) and multilateral talks 
at the WTO.

To meet these objectives, we reviewed documents from the key U.S. 
agencies involved in the process of selecting FTA partners, including 
USTR, and the departments of State, Commerce, Agriculture, and the 
Treasury. In addition, we interviewed key executive branch officials, 
including the U.S. Trade Representative. (App. I provides detailed 
information on our objectives, scope, and methodology.):

Results in Brief:

Various factors influence FTA partner selections. Four FTA partners 
were selected in 2002, primarily on the basis of the Trade 
Representative's own evaluation of 13 factors related to U.S. 
political, economic, and trade strategy goals. After the four 
selections in 2002, the key trade agencies decided to use six broad 
factors to guide their future discussions on potential FTA partners. 
These factors are (1) country readiness, (2) economic and commercial 
benefits, (3) benefits to the broader trade liberalization strategy, 
(4) compatibility with U.S. interests, (5) congressional and private-
sector support, and (6) U.S. government resource constraints. Senior 
trade officials with whom we spoke stressed that FTA partner decisions 
are not mechanical and take into consideration the President's goal of 
making significant progress in liberalizing global trade within and 
across geographic regions. The factors cited most often regarding the 
FTA partners that were selected to date primarily reflect U.S. 
strategic, foreign policy, and foreign economic development goals.

The interagency process for selecting FTA partners has become more 
systematic since 2002 and routinely considers input from the Congress 
and the private sector. Up through 2002, only a cabinet-level group, 
composed of the Trade Representative and some counterparts in key trade 
agencies, assessed potential FTA partners. Some high-level agency 
officials told us that they provided input to these deliberations, but 
others said the process had been ad hoc and exclusive. Subsequently, in 
May 2003, the National Security Council advanced guidelines to improve 
the process of assessing potential partners by, among other things, 
expanding the number of interagency groups involved in the assessments. 
Agencies used this new process for assessing the Dominican Republic as 
a potential FTA partner. U.S. officials with whom we spoke expressed 
satisfaction with the new process because it allows wider interagency 
participation and uses decision papers to guide deliberations. USTR 
officials said that they keep the Congress apprised of the countries 
under consideration as FTA partners, and that they regularly receive 
input from the Congress and from business and nongovernmental groups on 
potential FTA partners as part of the process.

The administration's overall trade liberalization strategy has driven 
decisions about deploying resources to advance the U.S.'s ambitious FTA 
negotiating agenda. However, decisions to pursue FTAs have been made 
with little systematic planning regarding trade-offs with other trade 
priorities, even though FTAs are resource intensive. USTR staff and 
travel funds are heavily committed to FTAs. For example, FTA-related 
travel accounted for 37 percent of USTR's travel budget in fiscal year 
2003. USTR also relies on specialists at other agencies to assist with 
negotiations and analysis. USTR is taking steps, such as sequencing 
negotiations, to address these constraints. Because of concerns over 
the resources required to accomplish the growing FTA negotiating 
agenda, the consideration of resource constraints has now been included 
as one of the factors used for selecting FTA partners. However, 
decisions to pursue FTAs still come without systematic data or planning 
for the actual resources that USTR or other agencies require. As more 
FTAs are contemplated in the wake of the failed Cancun WTO talks, 
existing mechanisms may prove inadequate to the task of aggressively 
pursuing a bilateral FTA agenda while remaining engaged in regional and 
multilateral forums.

In this report, we are recommending that USTR work with other key trade 
agencies to develop more systematic data and plans for allocating staff 
and resources across the full U.S. trade agenda, including FTAs and 
other negotiating priorities.

Background:

Under its constitutional authority to regulate commerce with foreign 
nations, the Congress has enacted laws authorizing the President to 
enter into trade agreements with other countries to reduce tariff and 
nontariff barriers.[Footnote 1] One major recent law to provide this 
authority is the Bipartisan Trade Promotion Authority Act of 2002 
(TPA).[Footnote 2] The TPA legislation sets forth U.S. trade 
negotiating objectives that apply to negotiating FTAs.[Footnote 3] 
However, the TPA legislation does not impose any specific criteria on 
the President for choosing FTA partners, except that the President must 
take into account the extent to which the negotiating partner has 
implemented or has accelerated implementation of its WTO 
obligations.[Footnote 4]

Other trade legislation encourages pursuit of FTA negotiations. For 
example, in the 2000 African Growth and Opportunity Act,[Footnote 5] 
the Congress declared that FTAs should be negotiated with interested 
sub-Saharan African countries. Furthermore, in the United States-
Caribbean Basin Trade Partnership Act, the Congress declared that it 
was the policy of the United States to seek the participation of 
Caribbean Basin beneficiary countries in the FTAA or another FTA, with 
the goal of achieving full participation in any such agreement by 
2005.[Footnote 6]

USTR, the President's principal trade policy advisor and coordinator, 
has the lead responsibility for the formulation and coordination of 
trade policy; the negotiation of trade agreements, including FTAs; and 
the enforcement of trade agreements. Under the Trade Expansion Act of 
1962, President John F. Kennedy established an interagency trade policy 
organization to be chaired by USTR to assist with these and other trade 
responsibilities.[Footnote 7] Currently, this organization consists of 
three tiers of committees, which from the lowest tier to the highest 
tier are the Trade Policy Staff Committee (TPSC), the Trade Policy 
Review Group (TPRG), and the National Security Council/National 
Economic Council (NSC/NEC). Within this framework, USTR coordinates 
with Commerce, Agriculture, State, and Treasury and other U.S. agencies 
as issues needing their expertise arise.

The United States currently has five FTAs with six nations: Israel 
(1985), Canada (1989), Mexico (1994),[Footnote 8] Jordan (2001), 
Singapore (2003), and Chile (2003). The United States has already begun 
negotiating four more bilateral or subregional FTAs with Central 
America, the Southern Africa Customs Union (SACU), Australia, and 
Morocco. USTR has announced that it plans to negotiate FTAs with the 
Dominican Republic; Bahrain; Panama; and the Andean countries of 
Colombia, Peru, Ecuador, and Bolivia. In addition, in October 2003, the 
President announced the U.S.'s intent to negotiate an FTA with 
Thailand. Other countries are under consideration as FTA partners. For 
a general time line of U.S. FTAs since 1985, see figure 1.

Figure 1: FTA Time Line, 1985-2003:

[See PDF for image]

[End of figure]

Early FTA Selections Were Based Primarily on the Trade Representative's 
Evaluation; New Interagency Process Uses Six Factors:

The factors used since the 2002 selection of FTA negotiating partners 
have evolved. According to the Trade Representative and other U.S. 
officials, the Trade Representative chose the first four FTA partners 
on the basis of his own evaluation of factors and after he had 
consulted the President and certain other high-level officials in 
several other agencies. Subsequently, the NSC coordinated the views of 
key trade agencies, which decided to use six factors in a revised 
interagency process to recommend proposed FTA partners to the 
President.

The Trade Representative Used 13 Factors for Early Selections:

The Trade Representative told us that his early FTA proposals emerged 
from his evaluation of 13 factors he developed over time--the same 
factors that the Trade Representative and other USTR officials continue 
to use. However, he cautioned that these factors "carry no 
coefficients"--that is, they do not have relative weights. The Trade 
Representative described the factors in some detail, with examples.

* Congressional guidance. According to the Trade Representative, his 
office consults with the Congress before and after FTA selection to 
ensure support and eventual congressional approval. USTR officials also 
examine public support, including the ethnic components of such 
support.

* Business and agricultural interest. The Trade Representative 
considers the views of business and agriculture and evaluates both 
current and future economic benefits of a potential FTA.

* Special product sensitivities. The Trade Representative assesses how 
an FTA will adversely affect certain sectors and products, such as 
textiles and sugar.

* Serious political will of the prospective partner to undertake needed 
trade reforms. The Trade Representative considers the political will in 
the foreign country to enact and implement trade reforms. He also 
assesses the country's trade capabilities and the candidate's track 
record in meeting current trade obligations.

* Willingness to implement other reforms. The Trade Representative 
stated that FTAs are a development tool that may help promote other 
economic reforms. The United States views these reforms as links to 
market-oriented economic development and future growth. Prospective FTA 
partners are expected to show serious intention in this regard to 
ensure that they understand (1) how important it is to make this 
commitment to reform and (2) the extent of the obligations that a 
comprehensive FTA with the United States involves.

* Commitment to WTO and other trade agreements. USTR considers a 
potential FTA partner's commitment to the trade disciplines in the WTO 
and the commitments being discussed at the ongoing FTAA negotiations.

* Contribution to regional integration. The United States has put in 
place initiatives to advance U.S. goals on a regional basis and foster 
regional economic integration. The Trade Representative told us that 
the Central American Free Trade Agreement (CAFTA)--Costa Rica, El 
Salvador, Guatemala, Honduras, and Nicaragua--and Chile FTAs have the 
potential to help integrate the whole region by helping to enact and 
implement the FTAA. Similarly, the SACU FTA may also help the 
integration of these five African countries (South Africa, Botswana, 
Lesotho, Namibia, and Swaziland).

* Support of civil society groups. The Trade Representative highlighted 
the views of labor and environmental groups as important components of 
FTA selections because these views affect prospects of congressional 
passage.

* Cooperation in security and foreign policy. The Trade Representative 
considers the extent to which potential partners are willing to support 
U.S. security and foreign policy objectives. For example, Jordan, 
Morocco, and Bahrain support U.S. objectives in the Middle East, and 
the CAFTA nations supported U.S. objectives in Iraq.

* Need to counter FTAs that place U.S. commercial interests at a 
disadvantage. The Trade Representative is interested in negotiating 
FTAs that will offer U.S. commercial interests opportunities on a par 
with other countries that already have FTAs. (See app. II for a list of 
European Union and U.S. FTAs.):

* Need to do FTAs in each of the world's major regions. The Trade 
Representative prefers to negotiate FTAs in each of the major regions 
of the world: Asia (Singapore, Australia, and Thailand); the Middle 
East (Jordan, Morocco, and Bahrain); Africa (SACU); and the Americas 
(CAFTA and the Dominican Republic).

* Need to ensure a mix of developed and developing countries. The Trade 
Representative also seeks FTAs with both developed and developing 
countries--for example, Australia and SACU. Developing countries are a 
key to trade growth because they account for a significant share of the 
world's population and represent an important negotiating bloc in the 
WTO.[Footnote 9]

* Demand on USTR resources. The Trade Representative recognizes that 
the resources needed for FTA negotiations are not unlimited.

Agencies Now Consider Six Factors:

As a result of discussions among relevant agencies, six factors now 
guide the discussions in selecting future FTA partners.

* Country readiness. Country readiness involves the country's political 
will, trade capabilities, and rule of law systems.[Footnote 10] U.S. 
agencies involved in FTA partner selection discussions may interpret 
this factor somewhat differently, since each agency filters the 
information though the lens of its specific mission. For example, USTR 
may review a prospective candidate's adherence to trade obligations and 
its leaders' commitment to negotiating all trade issues that currently 
comprise the comprehensive FTAs that the United States seeks to 
negotiate. However, Treasury may look at the candidate's overall 
macroeconomic stability and the strength of its financial and banking 
system.

* Economic/Commercial benefit. According to U.S. officials, the 
interagency group reviews the likely economic benefit to the United 
States. It assesses macroeconomic benefits (trade and investment 
potential) and the likely effects on specific products and sectors. 
(See app. III for potential and existing FTA partners' share of total 
U.S. trade.):

* Benefits to the broader trade liberalization strategy. This factor 
relates to the prospective FTA partner's overall support for U.S. trade 
goals. Other elements considered within this category are the potential 
FTA partner's willingness to resolve trade problems through its 
participation in a Trade and Investment Framework Agreement with the 
United States, success in meeting its WTO obligations, and support of 
key U.S. positions in FTAA and WTO negotiations.

* Compatibility with U.S. interests. A potential FTA partner is 
examined for its compatibility with broad U.S. interests, including its 
support for U.S. foreign policy positions. One USTR official stated 
that sometimes a foreign leader's visit can prompt serious discussions 
that lead to that country's consideration as a future FTA partner. 
Likewise, the Trade Representative's foreign travels also are important 
in bringing attention to a possible FTA with a particular country. 
However, other requirements, including but not limited to WTO 
membership and a Trade and Investment Framework Agreement, must still 
be met.

* Congressional/Private-sector support. Agencies also review the extent 
to which a particular FTA selection has garnered support from the 
Congress, business groups, and civil society.

* U.S. government resource constraints. This factor focuses primarily 
on constraints at USTR--what regional office is available to lead the 
negotiation, what staff are available, and how the timing may affect 
meeting postnegotiation TPA requirements. Other agencies' resources 
also play a role in this discussion.

Selections Are Not Mechanical; Trade Strategy and Foreign Policy 
Considerations Predominate:

In terms of how the six selection factors are applied, according to 
officials that we interviewed, the broad factors guide the discussion, 
but they are not hard-and-fast decision rules. Moreover, administration 
decision makers have not set thresholds for eligibility determinations. 
Key officials told us that USTR's views are central but that the now-
standard discussion of the factors permits each participating executive 
agency to contribute its perspective, thus potentially adding to issues 
that USTR needs to address in the future negotiations. For example, 
other agencies may be aware that a prospective partner has engaged in 
money laundering or human rights abuses or has been slow to resolve 
intellectual property disputes.

As illustrated below, the FTA selections made to date in 2002-03 
primarily reflect U.S. trade strategy, foreign policy, and foreign 
economic goals. (See app. IV for more details on specific FTA 
partners.) According to USTR, the administration is working 
aggressively on its "competitive liberalization" strategy, because it 
seeks to spur progress by creating a positive dynamic to liberalize 
trade on multiple levels: bilaterally, regionally, and multilaterally. 
USTR also reports that the U.S.'s willingness to pursue bilateral FTAs 
has bolstered countries' interest and encouraged them to make the 
changes necessary to enter into FTA negotiations with the United 
States.

* Australia. This FTA negotiation represents the greatest immediate 
commercial benefit of any single ongoing FTA, with 1.2 percent of total 
U.S. trade in 2002. A U.S.-Australia FTA would add to the regional 
distribution of FTAs for the United States and would strengthen U.S. 
ties to a valued ally. The increased U.S. access to Australia's market 
would likely increase trade in goods and services, enhance employment 
opportunities, and encourage additional two-way investment.

* Bahrain. Although Bahrain represents a small share of U.S. trade, an 
FTA with this U.S. ally and moderate Muslim nation would support U.S. 
security and political goals by fostering prosperity in the region. As 
a stepping-stone to an eventual Middle East Free Trade Area, Bahrain 
could become the hub of a subregional block of countries with closer 
trading relationships with the United States. An FTA with Bahrain might 
be completed relatively quickly due to Bahrain's reform-minded outlook.

* Central American Free Trade Agreement. The commercial benefit of an 
FTA with five Central American countries would be 0.95 percent of total 
U.S. trade. In the United States-Caribbean Basin Trade Partnership Act, 
the Congress declared that it was the policy of the United States to 
seek the participation of Caribbean Basin beneficiary countries in the 
FTAA or another FTA, with the goal of achieving full participation in 
any such agreement by 2005.[Footnote 11] CAFTA would provide regional 
balance among FTAs and add to the momentum for the hemispherewide FTAA, 
a major U.S. trade priority. It would also help lock in and broaden 
reforms such as anticorruption and government accountability measures, 
support economic integration within the region, and enable the United 
States to increase exports and gain U.S. access to more affordable 
goods.

* Dominican Republic. If the Dominican Republic is added to the overall 
CAFTA region, it would bring the CAFTA trade from 0.95 percent to 1.32 
percent of total U.S. trade in 2002, slightly more than that of 
Australia. The Dominican Republic had strong support in the Congress 
for its addition to the CAFTA negotiations, in part because excluding 
it from CAFTA could lead to adverse economic consequences in the 
Dominican Republic. However, according to a key participant in the 
discussion, the decision to add the Dominican Republic also included 
careful consideration of U.S. concerns about its protection of 
intellectual property rights and its status as one of the worst 
offenders on human trafficking.

* Morocco. Although a U.S.-Morocco FTA would have minimal trade benefit 
to the United States, one USTR official stated that this FTA would 
further the administration's goal of promoting openness, tolerance, and 
economic growth across the volatile Middle East. Morocco, a moderate 
Muslim country, also signaled its readiness to enter into a 
comprehensive FTA by demonstrating its willingness to liberalize its 
economy and make domestic reforms.

* Southern Africa Customs Union.[Footnote 12] Responding to 
congressional guidance in the 2000 African Growth and Opportunity Act, 
USTR inititated FTA negotiations with SACU in November 2002. This FTA 
contributes to the U.S.'s desire for regional balance among FTAs, 
creates an opportunity for the United States to build trade capacity in 
the region, and strengthens SACU's role as a negotiating partner in 
other trade forums, such as the WTO. The commercial benefit of this FTA 
represents 0.42 percent of total U.S. trade.

The Administration Has Enhanced Its Interagency Process for Assessing 
Potential FTA Partners:

The selection of FTA partners has evolved from a limited high-level 
consultation to a more systematic and deliberative process involving 
more U.S. officials. USTR keeps the Congress apprised of potential FTA 
partners and routinely considers the Congress's views in making 
selections. Business and other nongovernmental groups have also 
provided their views to USTR on potential FTA partners and FTA 
negotiations.

Initially, the Trade Representative Consulted with Counterparts:

In February 2002, the Trade Representative made recommendations for 
potential FTA partners to a cabinet-level interagency group under the 
leadership of the NSC/NEC. According to agency officials, this 
interagency group informally assessed the proposed countries and 
offered a consensus recommendation to the President, who named the four 
FTAs that are currently under negotiation (Australia, CAFTA, Morocco, 
and SACU). We found no evidence that this group used decision papers on 
the potential partners to guide its deliberations. Nevertheless, some 
high-level U.S. officials we interviewed confirmed that they provided 
USTR and other key trade agencies with input at the time and were on 
board with the final selections. Other officials, however, expressed 
concern that the discussions of the four FTAs had been ad hoc and that 
they had not been able to provide important input.

Also, in February 2002, the cabinet-level interagency group directed 
their deputies to make the process more systematic by formalizing the 
factors that would be used for assessing future FTA partners. The 
desire to have a more systematic interagency process for assessing 
partners was largely driven by the expected growth in the number of 
potential FTAs that would follow the enactment of the trade promotion 
authority legislation.

Recently Enhanced Interagency Process Is More Deliberative and 
Inclusive:

In May 2003, the NSC/NEC issued guidelines on assessing potential FTA 
partners. In addition to identifying the factors to be used, the 
guidelines make the interagency process more inclusive by supporting 
the use of four standing interagency groups for in-depth 
deliberations.[Footnote 13] Each group in turn is to use decision 
papers to assess potential FTA partners and make recommendations for 
consideration at the next level, all the way up to the President. After 
the President selects an FTA partner, he is to notify the Congress, 
through USTR, at least 90 days before he intends to start FTA 
negotiations with the selected partner. USTR consults with the 
Congressional Oversight Group before sending its notification letter 
about a prospective FTA negotiation to the Congress.

As shown in figure 2, the selection process is initiated by USTR and 
begins with the assessments of potential FTA partners by the TPSC and 
the TPRG. The TPSC is composed of senior officials from more than 19 
U.S. agencies and departments who bring specialized technical knowledge 
on trade issues to the deliberations. The TPRG is composed of under 
secretaries or assistant secretaries and other senior officials from 
all of these U.S. agencies and departments who contribute policy 
perspectives on trade to the discussions. Although USTR leads and 
coordinates interagency discussions, other agencies are expected to 
play an important role in developing pertinent information and 
discussing the pros and cons of potential FTA partners.

The next level of the process consists of the Deputies Committee and 
the Principals Committee, two interagency groups that the NSC/NEC lead 
and coordinate.[Footnote 14] The Deputies Committee is composed of the 
deputies from all the cabinet agencies involved in trade. The 
Principals Committee is composed of the secretaries from all of these 
agencies, such as the Trade Representative and the Secretaries of State 
and the Treasury. Deputies and Principals meet and use decision papers 
as needed to assess potential FTA partners before forwarding their 
recommendations to the President.

Figure 2: Interagency Process for FTA Partner Selection and 
Notification to the Congress:

[See PDF for image]

[End of figure]

USTR and other agencies used this new interagency process for the first 
time in assessing the Dominican Republic as a potential FTA partner in 
mid-2003. Agency officials with whom we spoke expressed satisfaction 
that this process enabled their agencies to contribute to the 
assessment of potential FTA partners and strengthen the content of the 
decision papers. Nevertheless, because the process is new, it remains 
to be seen how it will continue to perform.

Congress and Private Sector Provide Input into the Process:

Input from the Congress and the private sector is part of the process 
of selecting potential FTA partners and negotiating FTAs, according to 
USTR officials. Although the President is not specifically required to 
consult with the Congress before selecting potential FTA partners, USTR 
officials nevertheless stated that they keep the Congress apprised of 
the FTA partners under consideration through formal and informal means. 
According to these officials, the views of the Congress are very 
important to their agency and are seriously considered in FTA partner 
selections because the Congress must ultimately approve all FTAs. USTR 
gave us an extensive list of pertinent contacts between the agency and 
the Congress to confirm these discussions. As required by the TPA 
legislation, USTR has notified and consulted with the Congress about 
FTA negotiations. For instance, USTR has provided written notice to the 
Congress at least 90 days before initiating FTA negotiations since the 
passage of TPA.

Few Members of Congress have openly questioned choices of FTA partners 
to date, and those Members that have raised questions still expressed 
broad support for the "competitive liberalization strategy." 
Nevertheless, certain Members of Congress have urged USTR to give 
greater priority to economic and commercial conditions in selecting 
future FTA partners.

Also, business and nongovernmental groups have given USTR their views 
on potential FTA partners and FTA negotiations. In late 2002, for 
instance, a major U.S. business group provided USTR with its views on 
potential FTA partners and on the factors that USTR and other U.S. 
agencies involved in trade should consider during the assessment of 
potential partners. Also, nongovernmental groups have provided input on 
FTA negotiations. However, representatives of some of these groups 
indicated that they were not sure whether USTR had seriously considered 
their comments.

Ambitious FTA Agenda Calls for Better Resource Management:

Despite the administration's ambitious and growing FTA agenda, USTR and 
other agencies have made resource decisions without considering 
resource trade-offs among FTAs and other trade priorities. FTAs are 
resource intensive, and USTR has taken some measures to cope with 
resource constraints. Nevertheless, the administration continues to 
consider new FTAs. Present strategies for managing staff and other 
resources mean that newly announced FTA partners will have to wait to 
begin negotiations until other ongoing negotiations are concluded. 
Although resource constraints are now one of the factors taken into 
account when USTR and other agencies select FTA partners, these 
interagency discussions still leave gaps because they are not based on 
robust data and do not specify resource needs or commitments.

The Administration's Active FTA Agenda Drives Resource Deployment:

The administration's ambitious trade agenda has driven its resource 
decisions about FTAs and other trade priorities. Since the enactment of 
TPA in August 2002, the administration has stepped up its pursuit of 
bilateral and subregional FTAs as part of its overall strategy of 
competitive liberalization. As shown in figure 3, the United States now 
has numerous, simultaneous FTA negotiations under way, with ambitious 
target dates for completion. Although it took 2 years to negotiate two 
FTAs with relatively advanced partners (Chile and Singapore), USTR 
currently has FTAs under negotiation with four partners, three of which 
(Australia, Morocco, and CAFTA) are slated to be completed within 1 
year. Negotiations for the fourth partner (SACU) will be conducted 
through 2004, as will negotiations for Bahrain. In addition, USTR 
officials hope to complete negotiations with the Dominican Republic in 
early 2004.

Figure 3: Selected Milestones for U.S. Trade Agreement Negotiations, 
2000-05:

[See PDF for image]

Note: USTR has not specified ending dates for the Bahrain or Dominican 
Republic negotiations or for the implementation of the potential CAFTA 
agreement.

[End of figure]

The administration's decisions to pursue these FTAs have been made with 
little formal consideration for potential resource trade-offs, even 
though the WTO and FTAA negotiations are scheduled to finish by January 
1, 2005. As a result, USTR has had to deploy its resources in a 
reactive manner. According to agency officials, the four FTAs currently 
being negotiated were selected before any explicit resource decisions 
were made because USTR officials assumed that resources would be 
identified afterward to carry out these priority negotiations. 
According to USTR, in these cases the resources were "made to fit" the 
priorities.

FTAs Are Resource Intensive:

FTA negotiations require intensive effort on the part of USTR and other 
trade agencies such as Agriculture, Commerce, State, and Treasury. For 
example, our analysis of the U.S. negotiating team suggests that on 
average each of the six FTAs under negotiation in 2003 involved 11 
percent of USTR's 209 full-time staff. In addition, USTR estimates 
prepared for us show that the nonstaff costs of negotiating rounds in 
fiscal year 2003 were $1.7 million, of which approximately 68 percent 
were travel costs (see table 1). Moreover, FTA travel comprised 37 
percent of USTR's total travel costs in fiscal year 2003, and USTR 
estimates that it will constitute 42 percent of its total travel costs 
in fiscal year 2004.

Table 1: Fiscal Year 2003 USTR Nonstaff Costs for Negotiating FTAs:

Dollars in thousands: 

FTA: Chile; 
Employee travel: $104; 
Interpretation/Translation: $151; 
Video-conferencing: $15; 
Fiscal data[A]: $4; 
Representation costs: $9; 
Total cost: $283.

FTA: Singapore; 
Employee travel: $162; 
Interpretation/Translation: $0; 
Video-conferencing: $4; 
Fiscal data[A]: $5; 
Representation costs: $1; 
Total cost: $172.

FTA: CAFTA; 
Employee travel: $258; 
Interpretation/Translation: $80; 
Video-conferencing: $0; 
Fiscal data[A]: $3; 
Representation costs: $0; 
Total cost: $341.

FTA: Morocco; 
Employee travel: $137; 
Interpretation/Translation: $198; 
Video-conferencing: $2; 
Fiscal data[A]: $0; 
Representation costs: $2; 
Total cost: $339.

FTA: Australia; 
Employee travel: $246; 
Interpretation/Translation: $0; 
Video-conferencing: $10; 
Fiscal data[A]: $9; 
Representation costs: $1; 
Total cost: $266.

FTA: SACU; 
Employee travel: $214; 
Interpretation/Translation: $0; 
Video- conferencing: $0; 
Fiscal data[A]: $28; 
Representation costs: $1; 
Total cost: $243.

FTA: Middle East; 
Employee travel: $63; 
Interpretation/Translation: $1; 
Video-conferencing: $3; 
Fiscal data[A]: $23; 
Representation costs: $1; 
Total cost: $91.

Total; 
Employee travel: $1,184; 
Interpretation/Translation: $430; 
Video-conferencing: $34; 
Fiscal data[A]: $72; 
Representation costs: $15; 
Total cost: $1,735. 

Source: USTR.

Note: Costs do not include staff time for working on negotiations.

[A] Cost refers to logistical support provided by the State Department 
when USTR officials travel to countries.

[End of table]

Although USTR takes the lead for all negotiating groups except 
financial services, it relies on other agencies, such as Agriculture, 
Commerce, State, and Treasury, for analysis, expertise, and staff to 
support its negotiations. For example, other trade agencies regularly 
provide staff on a nonreimbursable "detail" (loan) basis to USTR. USTR 
currently has more than 30 such detailees. In addition, of the 134 U.S. 
officials present for the first five rounds of the Australia FTA 
negotiations, 22 were from USTR and the rest (112) came from other 
agencies. In fact, table 2 shows that other agencies comprised an 
average of 76 percent of all members of U.S. FTA negotiating teams.

Table 2: Estimated Agency Staff on U.S. Negotiating Teams for Completed 
Rounds of FTA Negotiations, as of October 2003:

Free Trade Agreement: Australia; 
Number of negotiating rounds (as of 10/03): 5; 
Number and percentage of staff: USTR: 22; (16%); 
Number and percentage of staff: Commerce: 20; (15%); 
Number and percentage of staff: Agriculture: 8; (6%); 
Number and percentage of staff: Treasury: 16; (12%); 
Number and percentage of staff: State: 23; (17%); 
Number and percentage of staff: Other: 45; (34%); 
Number and percentage of staff: Total for all agencies: 134; (100%).

Free Trade Agreement: CAFTA; 
Number of negotiating rounds (as of 10/ 03): 7; 
Number and percentage of staff: USTR: 20; (27%); 
Number and percentage of staff: Commerce: 10; (13%); 
Number and percentage of staff: Agriculture: 7; (9%); 
Number and percentage of staff: Treasury: 3; (4%); 
Number and percentage of staff: State: 12; (16%); 
Number and percentage of staff: Other: 23; (31%); 
Number and percentage of staff: Total for all agencies: 75; (100%).

Free Trade Agreement: Chile; 
Number of negotiating rounds (as of 10/ 03): 14; 
Number and percentage of staff: USTR: 25; (22%); 
Number and percentage of staff: Commerce: 16; (14%); 
Number and percentage of staff: Agriculture: 5; (4%); 
Number and percentage of staff: Treasury: 8; (7%); 
Number and percentage of staff: State: 10; (9%); 
Number and percentage of staff: Other: 48; (43%); 
Number and percentage of staff: Total for all agencies: 112; (100%).

Free Trade Agreement: Morocco; 
Number of negotiating rounds (as of 10/ 03): 5; 
Number and percentage of staff: USTR: 21; (16%); 
Number and percentage of staff: Commerce: 19; (15%); 
Number and percentage of staff: Agriculture: 7; (5%); 
Number and percentage of staff: Treasury: 8; (6%); 
Number and percentage of staff: State: 19; (15%); 
Number and percentage of staff: Other: 56; (43%); 
Number and percentage of staff: Total for all agencies: 130; (100%).

Free Trade Agreement: SACU; 
Number of negotiating rounds (as of 10/03): 3; 
Number and percentage of staff: USTR: 22; (47%); 
Number and percentage of staff: Commerce: 6; (13%); 
Number and percentage of staff: Agriculture: 2; (4%); 
Number and percentage of staff: Treasury: 2; (4%); 
Number and percentage of staff: State: 6; (13%); 
Number and percentage of staff: Other: 9; (19%); 
Number and percentage of staff: Total for all agencies: 47; (100%).

Free Trade Agreement: Singapore; 
Number of negotiating rounds (as of 10/03): 11; 
Number and percentage of staff: USTR: 26; (19%); 
Number and percentage of staff: Commerce: 23; (17%); 
Number and percentage of staff: Agriculture: 1; (1%); 
Number and percentage of staff: Treasury: 16; (12%); 
Number and percentage of staff: State: 22; (16%); 
Number and percentage of staff: Other: 50; (36%); 
Number and percentage of staff: Total for all agencies: 139; (100%). 

Source: GAO analysis of USTR data.

Notes:

Morocco and SACU numbers were based on GAO analysis of the USTR 
negotiating lists. SACU numbers were based on lists from two 
negotiating rounds.

Percentages are rounded to the nearest percent.

[End of table]

However, while table 2 conveys the wide range of officials who are part 
of an FTA negotiating team, it does not capture "staff effort" to 
support the team because none of the agencies involved routinely tracks 
staff time devoted to FTA negotiations, and only one agency was able to 
produce estimates for us. According to USTR officials, nearly all USTR 
staff are involved in each FTA before, during, or after negotiating 
sessions. One USDA official said its delegates to the negotiating team 
were just the tip of the iceberg because many other people at 
Agriculture were involved in providing complex analyses during the 
negotiations. Commerce data prepared for us (see table 3) show that a 
large number of staff support FTAs, but their total staff hours 
translate into fewer full-time equivalents.

Table 3: International Trade Administration Free Trade Agreement 
Resource Allocation, Fiscal Year 2003:

Total number of staff involved; 
FTAs in progress: Australia: 71; 
FTAs in progress: Bahrain: 21; 
FTAs in progress: CAFTA: 76; 
FTAs in progress: Dominican Republic: 22; 
FTAs in progress: Morocco: 61; 
FTAs in progress: SACU: 55; 
FTAs signed: Chile: 91; 
FTAs signed: Singapore: 60.

Total number of full-time equivalents; 
FTAs in progress: Australia: 4.16; 
FTAs in progress: Bahrain: 0.53; 
FTAs in progress: CAFTA: 7.24; 
FTAs in progress: Dominican Republic: 0.6; 
FTAs in progress: Morocco: 3.53; 
FTAs in progress: SACU: 4.42; 
FTAs signed: Chile: 8.51; 
FTAs signed: Singapore: 3.5.

Total fiscal year 2003 travel expenditures; 
FTAs in progress: Australia: $43,074; 
FTAs in progress: Bahrain: $0; 
FTAs in progress: CAFTA: $88,046; 
FTAs in progress: Dominican Republic: $0; 
FTAs in progress: Morocco: $17,626; 
FTAs in progress: SACU: $48,515; 
FTAs signed: Chile: $38,118; 
FTAs signed: Singapore: $32,737. 

Source: Commerce.

Note: The Chile and Singapore FTAs are complete; therefore, travel 
expenditures and staff time were higher in previous years.

[End of table]

The conclusion of negotiations does not mean that the work is completed 
on a given FTA. Additional demands, such as legal checks and 
translation activities, continue. For example, USTR officials reported 
that negotiations in the Americas have been slowed because of follow-up 
work after the signing of the Chile FTA. The increase in the number of 
FTAs is also likely to result in higher implementation-related needs, 
such as monitoring, enforcement, and dispute resolution. Our prior work 
has highlighted concerns about the increasing monitoring and 
enforcement workload at trade agencies,[Footnote 15] and USTR estimates 
that every three additional disputes require an additional legal 
specialist.

USTR Is Taking Measures to Cope with Resource Constraints:

USTR's approach to dealing with resource constraints is sequencing one 
set of negotiations per region at a given time in order to leverage the 
expertise of its negotiators. As a result, as depicted in figure 4, 
USTR's Office for the Americas will not start negotiating with the 
Dominican Republic until after the CAFTA negotiations have been 
completed.[Footnote 16] Similarly, although Bahrain was ready to begin 
negotiating immediately with the United States, USTR's Office of Europe 
and the Mediterranean will postpone those negotiations until the 
completion of negotiations with Morocco. USTR has indicated that it 
will continue to schedule negotiations in each region after the current 
set of FTAs is completed. Thus, regional negotiators will remain fully 
occupied, and the queue of countries waiting to negotiate with the 
United States will likely grow.

Figure 4: USTR Sequences FTAs in Four Regions to Negotiate Ambitious 
FTA Agenda:

[See PDF for image]

Note: Actual ending dates may differ from those shown in the figure.

[End of figure]

In addition, USTR officials reported that they are using past 
agreements as a template for the ongoing negotiations.[Footnote 17] 
This strategy has progressed to the point that USTR now believes it can 
save resources by having countries accede to already negotiated FTAs. 
This process, called "docking," means that negotiators will not have to 
spend time renegotiating every area. For example, USTR officials stated 
that the Dominican Republic will be integrated into the U.S.-CAFTA FTA 
and that only market access issues should require separate, detailed 
negotiations. Although CAFTA will require 1 year to complete, USTR 
expects that docking the Dominican Republic onto the agreement will 
take considerably less time. USTR is also considering how to integrate 
separate FTAs as it works toward a U.S.-Middle East Free Trade Area.

USTR is taking other measures to save resources. For example, USTR 
officials noted that they regularly combine various missions in one 
trip abroad and that they use extensive teleconferencing. In addition, 
USTR officials reported that they have cut costs by holding meetings in 
a central location[Footnote 18] and conducting negotiations in English 
when possible to avoid interpretation expenses. USTR is also improving 
its system for tracking TPA requirements for each FTA. To facilitate 
interagency collaboration, USTR developed a negotiations calendar 
listing the various bilateral, regional, and multilateral negotiating 
rounds so that negotiators may better identify competing demands.

Finally, concerns that the FTA agenda would continue to be busy led to 
resource constraints' inclusion as a factor used for FTA partner 
selection during the interagency process. This step represents an 
improvement over the past situation, in which no formal discussion of 
resource constraints or trade-offs preceded FTA partner selection even 
though USTR and other trade agencies already faced human capital 
challenges.[Footnote 19] As a result, resource constraints are now a 
standard part of interagency FTA partner selection discussions. One 
official welcomed this development because it has enabled assumptions 
regarding resource allocations to be made ahead of time and for 
consideration to be given to how resources are currently devoted to 
ongoing bilateral and regional efforts.

Present Resource Management Efforts Leave Gaps:

Despite USTR's efforts to better manage resource constraints, important 
gaps remain. For example, decisions about staffing and funds for FTA 
negotiations lack formal data and systematic consideration of their 
likely impact on other trade priorities. Moreover, USTR is continuing 
to make specific requests for resources from other agencies on a case-
by-case basis, after FTA partners are selected, making it difficult for 
these agencies to do their own resource planning for FTAs.

Resource Decisions Are Made with Limited Data and Planning:

USTR's resource data are not sufficiently robust for resource planning, 
and this limits USTR's flexibility in meeting its resource needs. When 
assigning resources for the current set of FTAs, USTR officials did not 
have clear data on hand regarding what was needed and what resources 
were available. We reported in 2002 that valid and reliable data are 
critical to assessing an agency's workforce requirements and to 
heighten an agency's ability to manage risk by allowing managers to (1) 
spotlight areas for attention before crises develop and (2) identify 
opportunities for enhancing agency results.[Footnote 20] In 2003, we 
also noted the importance of considering human capital challenges by 
relying on valid and current data and reported that the absence of such 
data can seriously undermine efforts to respond to current and emerging 
challenges.[Footnote 21] USTR has indicated that it is developing a new 
system for tracking spending according to different trade priorities, 
including FTAs, but this system is not yet operational. In addition, 
although staff time is a major resource devoted to FTAs, USTR officials 
informed us that they have no plans to track the time staff spend 
working on FTAs.

The importance of systematic data and planning can be seen in the 
constraint imposed by limited numbers of functional experts, who focus 
on areas such as intellectual property rights, agriculture, and market 
access. These experts are often needed to support multiple, concurrent 
negotiations. However, the offices in which these staff work at USTR 
average only eight people each, so they often represent a limiting 
factor to completing FTA negotiations.

USTR officials reported that they make many resource management 
decisions informally on an ongoing basis, in addition to those 
decisions based on advance planning that took into account the U.S.'s 
various trade priorities. For example, although regional assistant U.S. 
trade representatives provide staff and travel estimates as part of the 
annual budget cycle, they frequently bring specific resource requests 
to USTR management throughout the year. USTR officials, who must 
mediate among these often competing priorities, told us that they 
looked at several factors--for example, negotiating deadlines and the 
need for specific expertise--to make these resource decisions. If there 
were competing demands for staffing for the Morocco and SACU 
negotiations, for example, USTR management might consider that the need 
would be more pressing for the Morocco negotiator because of that 
negotiation's shorter deadline for completion (e.g., the end of 2003 
versus the end of 2004 for SACU). If USTR managers identify a lack of 
available staff to cover certain issues, they then turn to other 
agencies to supplement their own staff. This informal, reactive 
approach may no longer be adequate to meet the needs of increasing 
numbers of negotiations, particularly if the U.S.'s trade strategy 
shifts to an emphasis on bilateral agreements in the wake of the failed 
Cancun ministerial of the WTO. Moreover, this approach also affects 
resource management at other trade agencies.

USTR Makes Staffing Requests to Other Agencies on a Case-by-Case Basis:

The revised interagency process has not made requesting and securing 
staff from other agencies more systematic because participants do not 
address specific staffing needs or other cost estimates in detail in 
the formal interagency meetings, such as the TPSC and the TPRG, that 
are used to select FTA partners. Instead, the discussion of resource 
constraints focuses more on matters like timing for multiple FTAs in 
the same region, such as Morocco and Bahrain.

Specific requests for and commitments of resources by other agencies 
still occur after FTA partners are selected. According to USTR, after 
an FTA partner country is selected, the Trade Representative's office 
asks the assistant U.S. trade representatives for a listing of 
officials at USTR and other agencies they propose to constitute the 
U.S. negotiating team. On the basis of these lists, USTR managers 
report that they talk to their respective counterparts at other 
agencies regarding USTR's needs. These discussions generally begin just 
before USTR notifies the Congress about the FTA and are ongoing 
thereafter as negotiations get under way. According to USTR, the ad hoc 
nature of these requests is due in part to USTR's varying needs for 
different agencies' involvement, depending on the topics being 
negotiated and the changing requirements over time.

USTR's reactive method for requesting staff from other agencies makes 
it difficult for their own resource planning. Commerce officials, for 
example, noted that the department had much less notice about FTA 
staffing needs than it did about the need for staff support during 
NAFTA negotiations. Agencies report that they were generally able to 
comply with USTR's requests but noted that the requests sometimes 
strained their resources. At times it was necessary for agencies to 
make trade-offs, if the same person was requested for concurrent 
negotiations, agency officials told us. According to Treasury 
officials, they have had to "perform triage" on some operations due to 
the heavy FTA workload. Other agencies also noted the burden of travel 
costs. Although agencies continue to respond to USTR's informal method 
of requesting resources, it is unclear how well this system will 
continue to function in light of the intensifying FTA agenda.

Conclusions:

After selecting the first several FTA partners with limited interagency 
consultation, the administration has adopted a more rigorous and 
inclusive process to implement its FTA agenda. This framework for 
interagency discussions appears to be promoting fuller deliberations 
and wider involvement in the FTA partner selections. However, other 
management challenges remain. In particular, USTR and other agencies 
have reported that FTA negotiations are already straining available 
resources. Several steps have since been taken to deal with resource 
constraints associated with FTAs. However, present mechanisms still 
leave important gaps because they do not involve systematic data or 
interagency resource planning. As the United States sets its sights on 
more bilateral agreements, especially in light of the breakdown of the 
September 2003 Cancun negotiations, the importance of managing trade 
priorities at USTR and other trade agencies becomes increasingly 
significant. Managing resources, especially across diverse agencies, is 
paramount in meeting the competing demands of a complex and 
intensifying U.S. trade agenda.

Recommendation for Executive Action:

In light of USTR's limited resources and management systems to track 
those resources, we recommend that the Office of the U.S. Trade 
Representative work with other key trade agencies to develop more 
systematic data and plans for allocating staff and resources across the 
full U.S. trade agenda, including FTAs and other negotiating 
priorities.

Agency Comments and Our Evaluation:

We provided a draft of this report to the departments of State, 
Commerce, Agriculture, and the Treasury. State and Treasury did not 
provide comments. We received written comments on a draft of this 
report from the U.S. Trade Representative (see app. V). USTR, Commerce, 
and Agriculture also provided technical comments, which we incorporated 
in the report as appropriate.

In his response to our draft report, the Trade Representative 
emphasized the administration's competitive liberalization strategy 
and the role of FTAs in the strategy. He laid out the steps his office 
is taking to promote liberalized trade and described what the 
administration is doing in several regions throughout the world. He 
referred to resource pressures when he noted that his office is 
pressing forward with global, hemispheric, and five subregional or 
bilateral FTA negotiations simultaneously; while at the same time, USTR 
litigation activities have soared, with WTO disputes doubling over the 
last 5 years.

The Trade Representative agreed with us that the intensifying trade 
agenda requires continual management improvements at USTR and 
supporting agencies, and he acknowledged that increased pressures 
demand "nothing less than a transformation of USTR." However, he did 
not agree with our recommendation that USTR and other key trade 
agencies develop more systematic data and plans for allocating staff 
and resources across the full trade agenda. The Trade Representative 
wrote that our emphasis on a better allocation of staff and resources 
reflects an inaccurate assessment of how to allocate limited resources 
most effectively and efficiently.

According to the Trade Representative, the main cause of strain at USTR 
is the amount of available resources, not their allocation. The Trade 
Representative maintained that USTR must be "agile, flexible and 
adaptable--not bureaucratic." We believe that aligning goals and 
resources promotes the flexibility needed to respond to evolving 
circumstances. Our recommendation focuses on setting priorities among 
the multilateral, hemispheric, and FTA negotiations that take into 
account available staff. It also calls for coordinating those staff 
allocations with other agencies whose resources USTR routinely calls 
upon during the course of negotiations. Resource management 
fundamentally involves taking a given (and limited) amount of resources 
and deploying (allocating) it over program objectives aligned with the 
agency's overall priorities. This approach frees managers to focus on 
its core program, not on continually reacting to the daily fluctuations 
of resource needs.

The resources that USTR requested in fiscal year 2004 appear to have 
been justified based on its needs for completing the ongoing four FTAs 
(Australia, Morocco, CAFTA, and SACU). Since then, negotiations with 
the Dominican Republic, Bahrain, Panama, and the Andean countries have 
been announced. This increasing workload with its related demand for 
staff and travel can be better managed with (1) the collection of data 
to help managers understand what resources are linked to accomplishing 
agency objectives and (2) the use of these data in advance planning for 
future resource allocation, which can help USTR managers coordinate 
with other agencies whose own resources are affected by USTR 
negotiations. The Trade Representative listed several steps that USTR 
has taken to address its resource limitations. Although we recognize 
and encourage the steps that USTR has already taken to make 
improvements, we note that many of these efforts are already recognized 
in this report and are not sufficient to address our concerns for 
forward planning.

The Trade Representative pointed to the fact that we did not identify 
any "misallocation of funds." Solid data would permit sound conclusions 
about how federal funds are managed at USTR. The limited information 
that USTR and Commerce finally provided us had to be specially 
tabulated for this report because it is not routinely tracked. Our data 
show that FTAs involved considerable resources at both USTR and other 
agencies. Specifically, 37 percent of USTR travel funds were used for 
FTA-related travel in 2003, and 11 percent of USTR's staff were 
involved in each of the six FTAs completed or negotiated FTAs in 2003. 
These data also show that other agencies account, on average, for more 
than three-fourths of the members of U.S. FTA negotiating teams, which 
averaged 106 members. Thus, USTR and other agencies commit significant 
resources on trade initiatives that cover 8 percent of total U.S. 
trade.

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution until 30 days 
from the report date. At that time, we will send copies to interested 
congressional committees, the U.S. Trade Representative, the Secretary 
of Commerce, the Secretary of the Treasury, the Secretary of State, and 
the Secretary of Agriculture. Copies will also be made available to 
others upon request. In addition, the report will be available at no 
charge on the GAO Web site at [Hyperlink, http://www.gao.gov].

If you or your staff have any questions about this report, please 
contact me on (202) 512-4128. Other GAO contacts and staff 
acknowledgments are listed in appendix VI.

Signed by:

Loren Yager: 
Director, International Affairs and Trade:

[End of section]

Appendixes: 

Appendix I: Objectives, Scope, and Methodology:

Senator Max Baucus, Ranking Minority Member of the Senate Finance 
Committee, and Representative Calvin Dooley asked us to examine the 
factors and process used to make decisions regarding the selection of 
free trade agreement (FTA) negotiating partners and the allocation of 
negotiating resources. In response, we (1) provided information about 
the factors that influence the selection of FTA partners and described 
how they were developed; (2) analyzed the interagency process for 
selecting FTA partners, including how the Office of the U.S. Trade 
Representative (USTR) coordinates the views of key agencies and 
consults with the Congress and business and nongovernmental groups; and 
(3) assessed how the executive branch makes decisions regarding the 
availability and allocation of resources to FTAs and other trade 
priorities, such as the regional talks of the Free Trade Area of the 
Americas (FTAA) and the multilateral talks at the World Trade 
Organization (WTO).

To provide information about the factors that influence the selection 
of FTA partners and how they were developed, we reviewed pertinent 
documentation from key U.S. agencies involved in assessing potential 
FTA partners, such as USTR and the departments of State and Commerce. 
For example, we reviewed pertinent USTR documentation from 2000 to 2003 
on FTAs, including public speeches, articles, and agency documentation 
on FTA partners. We also reviewed U.S. International Trade Commission 
documents on FTAs and Congressional Research Service reports on U.S. 
trade and FTAs. In addition, we interviewed knowledgeable officials at 
the key agencies involved in the process of assessing potential FTA 
partners. For instance, we interviewed the U.S. Trade Representative, 
the Deputy U.S. Trade Representative, and several assistant U.S. Trade 
Representatives; the Director of the Office of International Economics 
at the National Security Council (NSC); the Under Secretary for 
Economics, Business, and Agricultural Affairs at the Department of 
State; the Assistant Secretary for International Affairs at the 
Department of the Treasury; the Under Secretary of Farm and Foreign 
Agricultural Services at the Department of Agriculture; and the Under 
Secretary for International Trade at the Department of Commerce.

To analyze the interagency process for selecting FTA partners, 
including how USTR coordinates the views of key trade agencies and 
consults with the Congress and business and nongovernmental groups, we 
reviewed pertinent documentation from key U.S. agencies involved in the 
process of selecting FTA partners. For example, we reviewed USTR 
documentation from 2000 to 2003 on FTAs, including public speeches, 
articles, agency documents, records of contacts with the U.S. Congress, 
records of public hearings, and papers on FTA partners prepared for the 
consideration of the Trade Promotion Staff Committee and Trade 
Promotion Review Group. Also, we interviewed officials at the key 
agencies involved in the process of assessing potential FTA partners. 
For example, we interviewed the U.S. Trade Representative, the Deputy 
U.S. Trade Representative, and several assistant U.S. Trade 
Representatives; the Director of the Office of International Economics 
at the NSC; the Under Secretary for Economics, Business, and 
Agricultural Affairs at the Department of State; the Assistant 
Secretary for International Affairs at the Department of the Treasury; 
the Under Secretary of Farm and Foreign Agricultural Services at the 
Department of Agriculture; and the Under Secretary for International 
Trade at the Department of Commerce. In addition, we obtained 
information from business and nongovernmental organizations, including 
the U.S. Chamber of Commerce, the Washington Office on Latin America, 
Oxfam America, Public Citizen, World Vision, and the Center for 
International Environmental Law.

To assess how decisions are made regarding the availability and 
allocation of resources to FTAs and other trade priorities, we reviewed 
pertinent documentation from key U.S. agencies involved in assessing 
FTA partners, such as USTR and State and Commerce. For example, we 
reviewed USTR documentation from 2000 to 2003 on FTAs, including papers 
on potential FTA partners, lists of FTA negotiating teams, and budget 
and personnel-related data. Because negotiating lists were not complete 
for four of the negotiations, we asked USTR to provide summary numbers 
of the participating agencies. For the other two negotiations, we did 
our own analysis of agency staffing based on the negotiating lists 
provided by USTR. As noted in the text, these data merely identify the 
number of individuals involved and do not necessarily reflect staff 
effort. We determined that USTR data were sufficiently reliable for 
purposes of our assessment, even though, as our recommendation 
indicates, we determined that these data are not sufficiently robust 
for agency decision making and should be improved. Moreover, we 
interviewed knowledgeable officials at the key agencies involved in the 
process of assessing potential FTA partners. For instance, we 
interviewed the U.S. Trade Representative, the Deputy U.S. Trade 
Representative, and several assistant U.S. Trade Representatives; the 
Director of the Office of International Economics at the NSC; the Under 
Secretary for Economics, Business, and Agricultural Affairs at the 
Department of State; the Assistant Secretary for International Affairs 
at the Department of the Treasury; the Under Secretary of Farm and 
Foreign Agricultural Services at the Department of Agriculture; and the 
Under Secretary for International Trade at the Department of Commerce.

Despite repeated requests to the NSC, we were unable to obtain key 
documents from the February 2002 and May 2003 meetings that provided 
guidance to the interagency efforts to formalize the criteria and 
enhance the process for developing recommendations to the President for 
selecting potential FTA partners.

We conducted our review from June to November 2003 in accordance with 
generally accepted government auditing standards.

[End of section]

Appendix II: European Union and United States Free Trade Agreements, by 
Region:

[See PDF for image]

[End of figure]

[End of section]

Appendix III: U.S. Trade with Potential and Existing FTA Partners:

The following table presents trade data that describe the percentage 
and amount of total U.S. trade with current and potential FTA partners, 
as well as with non-FTA countries.

Table 4: U.S. Trade with Potential and Existing FTA Partners, 2002:

Dollars in millions.

Potential FTA Partners: 

FTAA (excluding the North American Free Trade Agreement (NAFTA) and 
Chile); 
Percentage of total trade: 5.25; 
Total trade (exports+imports): $119,135; 
Total exports (goods+services): $53,119; 
Total imports (goods+services): $66,017.

U.S. trading partners: Andean; 
Percentage of total trade: 0.71; 
Total trade (exports+imports): 16,075; 
Total exports (goods+services): 6,464; 
Total imports (goods+services): 9,611.

U.S. trading partners: Bolivia; 
Percentage of total trade: 0.02; 
Total trade (exports+imports): 342; 
Total exports (goods+services): 182; 
Total imports (goods+services): 160.

U.S. trading partners: Colombia; 
Percentage of total trade: 0.38; 
Total trade (exports+imports): 8,727; 
Total exports (goods+services): 3,345; 
Total imports (goods+services): 5,382.

U.S. trading partners: Ecuador; 
Percentage of total trade: 0.16; 
Total trade (exports+imports): 3,612; 
Total exports (goods+services): 1,496; 
Total imports (goods+services): 2,116.

U.S. trading partners: Peru; 
Percentage of total trade: 0.15; 
Total trade (exports+imports): 3,394; 
Total exports (goods+services): 1,441; 
Total imports (goods+services): 1,953.

U.S. trading partners: Central American Free Trade Agreement (CAFTA); 
Percentage of total trade: 0.94; 
Total trade (exports+imports): 21,269; 
Total exports (goods+services): 9,423; 
Total imports (goods+services): 11,846.

U.S. trading partners: Central American Free Trade Agreement (CAFTA): 
Costa Rica; 
Percentage of total trade: 0.27; 
Total trade (exports+imports): 6,038; 
Total exports (goods+services): 2,891; 
Total imports (goods+services): 3,146.

U.S. trading partners: Central American Free Trade Agreement (CAFTA): 
El Salvador; 
Percentage of total trade: 0.16; 
Total trade (exports+imports): 3,583; 
Total exports (goods+services): 1,608; 
Total imports (goods+services): 1,976.

U.S. trading partners: Central American Free Trade Agreement (CAFTA): 
Guatemala; 
Percentage of total trade: 0.21; 
Total trade (exports+imports): 4,761; 
Total exports (goods+services): 1,976; 
Total imports (goods+services): 2,785.

U.S. trading partners: Central American Free Trade Agreement (CAFTA): 
Honduras; 
Percentage of total trade: 0.26; 
Total trade (exports+imports): 5,786; 
Total exports (goods+services): 2,524; 
Total imports (goods+services): 3,262.

U.S. trading partners: Central American Free Trade Agreement (CAFTA): 
Nicaragua; 
Percentage of total trade: 0.05; 
Total trade (exports+imports): 1,101; 
Total exports (goods+services): 423; 
Total imports (goods+services): 677.

U.S. trading partners: Dominican Republic; 
Percentage of total trade: 0.36; 
Total trade (exports+imports): 8,276; 
Total exports (goods+services): 4,109; 
Total imports (goods+services): 4,167.

U.S. trading partners: Panama; 
Percentage of total trade: 0.07; 
Total trade (exports+imports): 1,594; 
Total exports (goods+services): 1,299; 
Total imports (goods+services): 295.

U.S. trading partners: Remaining FTAA; 
Percentage of total trade: 3.17; 
Total trade (exports+imports): 71,921; 
Total exports (goods+services): 31,825; 
Total imports (goods+services): 40,097.

U.S. trading partners: Southern African Customs Union (SACU); 
Percentage of total trade: 0.41; 
Total trade (exports+imports): Potential FTA partners: 9,215; 
Total exports (goods+services): Potential FTA partners: 3,674; 
Total imports (goods+services): Potential FTA partners: 5,541.

U.S. trading partners: Southern African Customs Union (SACU): Botswana; 
Percentage of total trade: 0.00; 
Total trade (exports+imports): 61; 
Total exports (goods+services): 32; 
Total imports (goods+services): 30.

U.S. trading partners: Southern African Customs Union (SACU): Lesotho; 
Percentage of total trade: 0.01; 
Total trade (exports+imports): 323; 
Total exports (goods+services): 2; 
Total imports (goods+services): 321.

U.S. trading partners: Southern African Customs Union (SACU): Namibia; 
Percentage of total trade: 0.00; 
Total trade (exports+imports): 111; 
Total exports (goods+services): 54; 
Total imports (goods+services): 57.

U.S. trading partners: Southern African Customs Union (SACU): South 
Africa; 
Percentage of total trade: 0.38; 
Total trade (exports+imports): 8,594; 
Total exports (goods+services): 3,576; 
Total imports (goods+services): 5,018.

U.S. trading partners: Southern African Customs Union (SACU): 
Swaziland; 
Percentage of total trade: 0.01; 
Total trade (exports+imports): 126; 
Total exports (goods+services): 11; 
Total imports (goods+services): 114.

U.S. trading partners: Australia; 
Percentage of total trade: 1.18; 
Total trade (exports+imports): 26,830; 
Total exports (goods+services): 17,496; 
Total imports (goods+services): 9,334.

U.S. trading partners: Bahrain; 
Percentage of total trade: 0.04; 
Total trade (exports+imports): 803; 
Total exports (goods+services): 407; 
Total imports (goods+services): 395.

U.S. trading partners: Morocco; 
Percentage of total trade: 0.04; 
Total trade (exports+imports): 970; 
Total exports (goods+services): 560; 
Total imports (goods+services): 410.

U.S. trading partners: Thailand; 
Percentage of total trade: 0.94; 
Total trade (exports+imports): 21,221; 
Total exports (goods+services): 5,615; 
Total imports (goods+services): 15,606.

Subtotal; 
Percentage of total trade: 7.85; 
Total trade (exports+imports): $178,174; 
Total exports (goods+services): $80,872; 
Total imports (goods+services): $97,302.

Existing FTA partners: 
U.S. trading partners: NAFTA; 
Percentage of total trade: 28.33; 
Total trade (exports+imports): $642,934; 
Total exports (goods+services): $268,815; 
Total imports (goods+services): $374,119.

U.S. trading partners: NAFTA: Canada; 
Percentage of total trade: 17.44; 
Total trade (exports+imports): 395,769; 
Total exports (goods+services): 166,837; 
Total imports (goods+services): 228,932.

U.S. trading partners: NAFTA: Mexico; 
Percentage of total trade: 10.89; 
Total trade (exports+imports): 247,165; 
Total exports (goods+services): 101,978; 
Total imports (goods+services): 145,187.

U.S. trading partners: Chile; 
Percentage of total trade: 0.34; 
Total trade (exports+imports): 7,777; 
Total exports (goods+services): 3,499; 
Total imports (goods+services): 4,278.

U.S. trading partners: Israel; 
Percentage of total trade: 0.95; 
Total trade (exports+imports): 21,587; 
Total exports (goods+services): 7,567; 
Total imports (goods+services): 14,020.

U.S. trading partners: Jordan; 
Percentage of total trade: 0.04; 
Total trade (exports+imports): 809; 
Total exports (goods+services): 397; 
Total imports (goods+services): 412.

U.S. trading partners: Singapore; 
Percentage of total trade: 1.62; 
Total trade (exports+imports): 36,670; 
Total exports (goods+services): 20,484; 
Total imports (goods+services): 16,186.

U.S. trading partners: Subtotal; 
Percentage of total trade: 31.28; 
Total trade (exports+imports): $709,777; 
Total exports (goods+services): $300,762; 
Total imports (goods+services): $409,015.

Trade with non-FTA countries; 
Percentage of total trade: Potential FTA partners: 60.87; 
Total trade (exports+imports): $1,381,187; 
Total exports (goods+services): $527,460; 
Total imports (goods+services): $853,728.

Total U.S. Trade (all countries); 
Percentage of total trade: Potential FTA partners: 100.00; 
Total trade (exports+imports): Potential FTA partners: $2,269,138; 
Total exports (goods+services): Potential FTA partners: $909,094; 
Total imports (goods+services): Potential FTA partners: $1,360,045. 

Source: Commerce.

Notes:

Imports are imports for consumption at customs value; and exports are 
domestic exports at free-alongside-value. Detailed 2002 services data 
by country are available only for Argentina, Australia, Brazil, Canada, 
Chile, Israel, Mexico, Venezuela, Singapore, South Africa, and 
Thailand.

"Remaining FTAA countries" are Antigua and Barbuda, Argentina, the 
Bahamas, Barbados, Belize, Brazil, Dominica, Grenada, Guyana, Haiti, 
Jamaica, Paraguay, St. Kitts and Nevis, St. Lucia, St. Vincent and the 
Grenadines, Suriname, Trinidad and Tobago, Uruguay, and Venezuela.

[End of table]

Excluding the FTAA negotiation, the current FTA negotiating partners 
(CAFTA, SACU, Morocco, Australia, the Dominican Republic, Bahrain, 
Thailand, Panama, and the Andean countries) collectively account for 
about 4.7 percent of total U.S. trade. Of these nine partners, 
Australia contributes almost 1.2 percent, or about 25 percent of their 
combined trade. Chile and Singapore account for another 2.0 percent of 
U.S. trade. In contrast, NAFTA brought together the U.S.'s top two 
trading partners (Canada and Mexico), representing about 28 percent of 
total U.S. trade. Completing the FTAA negotiations would bring an 
additional 3.0 percent of total trade under FTA disciplines.

[End of section]

Appendix IV Selected U.S. Free Trade Agreement Partner Profiles:

In this appendix, we describe the background, considerations in FTA 
partner selection, milestones, features, concerns, and FTA partner 
participation for six countries with which the United States has or 
intends to have FTAs. We also describe those components for two 
regional entities--CAFTA and SACU.

U.S.-Australia FTA:

Background:

The United States and Australia are among the world's most open 
economies. Both countries are prominent supporters of trade 
liberalization and have maintained a stable commercial relationship, 
having brought only a few dispute resolution cases against each other 
in the WTO. In 2002, Australia accounted for more than $13 billion in 
U.S. exports. Total two-way trade between the United States and 
Australia was almost $20 billion in that year as well. The United 
States and Australia have signed two bilateral agreements--the 
settlement on leather products trade in 1996 and the understanding on 
automotive leather subsidies in 2000. For several years, Australian 
officials told U.S. policy makers about Australia's interest in an FTA 
with the United States. The current Prime Minister also raised this 
matter in meetings with President Bush. Until recently, though, the 
Bush administration had expressed interest but had not committed to 
begin negotiations. However, the FTA negotiations between the United 
States and Australia are starting from a strong base, given the 
similarity of the structure of their economies and the compatibility of 
their trade policies.

Considerations in FTA Partner Selection in FTA Partner Selection:

USTR highlighted several reasons why Australia was selected as an FTA 
partner in 2002. First, two-way trade between the United States and 
Australia grew significantly in the past decade. In 2002, the United 
States exported $13.1 billion to Australia, the 13TH largest 
destination of U.S. exports. It also imported $6.5 billion from 
Australia, the 28TH largest source of U.S. imports. Second, the 
increased U.S. access to Australia's market made possible by an FTA 
would further boost trade in both goods and services, enhancing 
employment opportunities in both countries. Third, an FTA would 
encourage additional foreign investment between the United States and 
Australia, adding to the many jobs that the significant investment 
flows between the two countries currently support. Fourth, an FTA would 
result in greater business integration, especially in the information 
technology sector, increasing efficiency and the competitiveness of the 
U.S. industry. Overall, U.S. manufacturers and services providers 
support these FTA negotiations. Finally, an FTA would address barriers 
that U.S. exports to Australia face today, including Australia's use of 
sanitary and phytosanitary measures as a means of restricting 
agricultural trade.

FTA Milestones:

In November 2002, USTR notified the Congress that the United States 
intended to enter into FTA negotiations with Australia in at least 90 
days. In February 2003, the United States and Australia started the 
first of six planned negotiating rounds. The United States and 
Australia had intended to complete the negotiations by the end of 2003, 
but negotiations will continue into 2004.

FTA Features:

The WTO requires that an FTA, at a minimum, substantially eliminate 
tariffs and other restrictions on mutually traded goods and services. 
However, the U.S.-Australia FTA is likely to be more comprehensive 
given the broad negotiating objectives that the governments have 
announced will cover agriculture, industry, and services issues. The 
U.S.-Australia FTA will negotiate 20 broad, trade-related issues, 
including market access for goods, agriculture, textiles, rules of 
origin, customs administration, sanitary and phytosanitary measures, 
technical barriers to trade, trade remedies, services, investment, 
telecommunications, financial services, competition policy, government 
procurement, electronic commerce, intellectual property, labor, 
environment, transparency, and institutional arrangements and dispute 
settlement. USTR leads the U.S. delegation with other delegation 
members, including the NSC; the departments of State, Commerce, 
Agriculture, Labor, Justice and the Treasury; the Environmental 
Protection Agency; and the Federal Trade Commission.

FTA Concerns:

The United States and Australia have a firm trade relationship, and 
their tariffs on most products are already very low. Therefore, 
critical issues in the FTA negotiations will be nontariff barriers and 
other issues. According to trade policy experts, agricultural issues 
will be the greatest challenge during these negotiations. For example, 
agriculture accounted for only 2.2 percent of U.S. exports to Australia 
but for 29.2 percent of U.S. imports from Australia in 2002. Some in 
the U.S. agricultural community oppose the negotiations. The most 
recent round of negotiations took place in October 2003. Each side has 
presented its own proposals and raised concerns regarding agricultural 
issues.

Australia takes issue with U.S. tariff-rate quotas on dairy products, 
sugar, beef, and many other products. Australia announced that it would 
seek the removal of these quotas during the FTA negotiations. 
Government-run commodity boards control Australian exports of wheat and 
rice. Because these boards restrict U.S. exports, the United States has 
targeted them for removal during the FTA negotiations. Separately, the 
United States has also targeted specific Australian sanitary and 
phytosanitary measures because they are highly restrictive and have 
adversely affected U.S. exports of citrus, apples, pears, corn, stone 
fruit, chicken, and pork. These bilateral discussions are proceeding on 
a parallel track to resolve the sanitary and phytosanitary issues 
between the United States and Australia.

Because all foreign investment in Australia is subject to government 
screening and approval, the United States has noted Australia does not 
conform to the principle of national treatment--that is, treating 
foreign investors no less favorably than domestic investors. As a 
result, the United States will seek the elimination or reduction of 
these trade-distorting investment measures.

Even after resolving these irritants, U.S. officials are concerned 
that, after the implementation of this FTA, the United States may face 
many disputes on agricultural matters and other issues with Australia, 
one of its closest allies.

FTA Partner Participation in Other Trade Agreements:

Australia is a WTO member and has had FTAs with New Zealand since 1966 
and with Singapore since 2003. Australia and the United States are 
founding members of the Asian-Pacific Economic Cooperation (APEC) 
forum, an organization of 21 countries that has established the goal of 
free trade and investment in that region by 2020.

U.S.-Bahrain FTA:

Background:

Bahrain is an emerging regional financial center in the Persian Gulf 
region. The United States has been holding talks on economic policy 
with the Gulf Cooperation Council (GCC), of which Bahrain is a member, 
through the U.S.-GCC Economic Dialogue. In 2001, the United States and 
Bahrain signed a bilateral investment treaty. On June 18, 2002, the two 
countries signed a Trade and Investment Framework Agreement, which 
enabled the United States to increase its engagement with Bahrain on 
economic reforms and on bilateral trade and investment issues.

Considerations in FTA Partner Selection:

USTR emphasized several reasons for selecting Bahrain as an FTA 
partner. First, an FTA with Bahrain would support U.S. security and 
political goals by increasing prosperity and globalization in the 
region. Second, the executive branch views the U.S.-Bahrain FTA as a 
stepping-stone to an eventual Middle East Free Trade Area (MEFTA). 
Bahrain could become the hub of a subregional block of countries that 
might develop closer and more open trading relationships with the 
United States. Third, Bahrain has been an important U.S. ally in the 
region. Fourth, USTR emphasized Bahrain's readiness to undertake an FTA 
with the United States, particularly in comparison with other states in 
the Persian Gulf region. U.S. officials emphasized the commitment among 
the highest levels of the Bahraini government to make strong economic 
and political reforms to facilitate trade. Bahrain made economic 
reforms in areas such as property rights and copyright laws and is an 
emerging regional financial center. The country also made political 
reforms, such as strengthening its parliament. According to USTR 
officials, an FTA could be completed relatively quickly with Bahrain 
because of its small size and reform-minded outlook. Finally, USTR 
officials emphasized that an FTA with Bahrain would generate 
opportunities for U.S. business.

FTA Milestones:

In January 2003, the King of Bahrain raised the idea of an FTA in a 
meeting with President Bush. In May 2003, the USTR met with the 
Bahraini Crown Prince and announced the executive branch's plans for 
negotiating an FTA with Bahrain. On August 4, 2003, USTR notified the 
Congress of the administration's intent to initiate negotiations for an 
FTA with Bahrain. The target date for beginning negotiations is January 
2004.

FTA Features:

The U.S.-Bahrain FTA is expected to be a key part of the U.S.-MEFTA 
that the United States is supporting to address the related problems of 
terrorism and poverty in the region. According to the World Bank, 
unemployment in the Middle East is estimated conservatively at around 
15 percent, and the labor force could expand by as much as 40 percent 
in the next 10 years. In addition, USTR notes that the region has 
extremely low rates of internal trade. The United States hopes that 
MEFTA could encourage economic reforms that would spur investment and 
increase opportunities in the region. In Jordan, for example, which 
signed an FTA with the U.S. in 2001, exports to the United States grew 
by 72 percent in 2002, and the United States is now Jordan's biggest 
trading partner. USTR has outlined a step-by-step approach to building 
a MEFTA that takes into account the different developmental and 
economic levels of the countries in the region. These steps include 
supporting the potential partner country's membership in the WTO; 
expanding the Generalized System of Preferences (GSP) Program[Footnote 
22] to increase U.S. trade with the Middle East; signing bilateral 
investment treaties, trade and investment framework agreements, and 
ultimately FTAs; and providing financial and technical assistance for 
trade capacity-building. The President's Middle East Partnership 
Initiative will help direct more than $1 billion per year from U.S. 
government agencies to support trade in the Middle East.

FTA Concerns:

Despite Bahrain's and the U.S.'s interest in establishing an FTA, the 
U.S. government officials with whom we spoke described regional 
influences that may serve as potential obstacles to countries in the 
Persian Gulf region that would like to make progress on trade with the 
United States.

FTA Partner Participation in Other Trade Agreements:

Bahrain is a member of the GCC customs union, which is still developing 
its trade rules. In 1989, the European Commission and the GCC signed a 
Cooperative Agreement that contains a commitment from both sides to 
enter into FTA negotiations. The two entities are now actively pursuing 
FTA talks.

U.S.-Chile FTA:

Background:

Preceding the U.S.-Chile FTA negotiations, which began in December 
2000, Chile undertook political and economic reforms. These reforms 
positioned the country to implement a comprehensive trade agreement. 
Before the negotiations, Chile deregulated and restructured its economy 
and opened its trade ties to industrial countries. For example, in 1994 
Chile reacted positively to the possibility of becoming a party to 
NAFTA but negotiations ceased, due in part to the expiration of the 
U.S. President's fast-track negotiating authority.[Footnote 23] 
However, the Congress did not grant the President such authority for 8 
years; with this delay, the accession of Chile to NAFTA did not occur. 
Despite this delay, the U.S.-Chile Joint Commission on Trade and 
Investment was founded on the occasion of President Clinton's visit to 
Chile in 1998. The commission established a work program to address a 
variety of bilateral trade and investment issues and facilitated the 
exchange of trade information. Thus, both countries were prepared to 
negotiate a comprehensive FTA when the negotiations began.

Considerations in FTA Partner Selection:

A variety of factors may have contributed to the U.S.'s decision to 
initiate an FTA with Chile. First, U.S. exports faced a 6 percent 
Chilean tariff, while exports from Chile's existing FTA partners 
entered the Chilean market duty-free. Chile had therefore reduced its 
purchases of U.S. exports by almost one-third from $4.38 billion in 
1997 to $3.13 billion in 2001 in favor of relatively cheaper goods from 
its FTA partners. An FTA with Chile provided the opportunity to reduce 
this tariff that had disadvantaged U.S. exports. USTR noted that the 
FTA would ensure that U.S. businesses and investors received treatment 
equal to or better than Chile's other FTA partners. Second, Chile 
adopted economic reforms, such as the elimination of price controls and 
the privatization of state-owned enterprises, that signaled that Chile 
was willing to implement a mutually beneficial FTA by solidifying these 
reforms. Finally, through FTA negotiations, the United States hoped to 
build Chile's support for important issues in the FTAA negotiations. 
For example, the U.S.-Chile FTA negotiations better defined key 
negotiating issues in areas such as labor and the environment and 
demonstrated to other countries participating in the FTAA negotiations 
the U.S.'s interest in furthering trade liberalization.

FTA Milestones:

On November 29, 2000, the Clinton administration announced its 
intention to negotiate a comprehensive FTA with Chile. Negotiations 
began on December 6, after U.S. and Chilean officials agreed on the 
initial list of topics to be discussed and the organization of 
negotiating groups. During the negotiations, and following the change 
in U.S. administration, the U.S. and the Chilean presidents declared 
their intention on April 16, 2001, to complete the agreement by the end 
of that year with meetings scheduled to occur approximately once a 
month through the end of 2001. However, due to the complexities of some 
trade topics, the negotiations would require an additional year and 
would include 14 negotiating rounds. Following the completion of these 
negotiating rounds, on December 11, 2002, USTR announced that an 
agreement had been reached. On June 6, 2003, USTR and the Chilean 
Foreign Minister signed the agreement. USTR then submitted draft FTA 
implementing bills to the Congress on July 15, 2003. The House of 
Representatives and the Senate passed the U.S.-Chile Free Trade 
Implementation Act on July 24 and July 31, 2003, respectively. 
President Bush signed the act on September 3, 2003. USTR expects the 
FTA to be implemented on or after January 1, 2004.

FTA Features:

The FTA is comprehensive in its treatment of industrial and 
agricultural products and, according to USTR, provides a template to 
demonstrate to other FTA partners the U.S.'s high expectations with 
regard to the scope of FTAs. For example, the negotiations encompassed 
trade in all goods, with approximately 85 percent of U.S.-Chilean trade 
in industrial and commercial goods becoming duty-free upon the 
agreement's implementation. In addition, 75 percent of trade in 
agricultural products will become duty-free during the first 4 years 
following implementation. The FTA will also increase each country's 
market access to a wide range of services.

FTA Concerns:

Some Members of Congress and certain nongovernmental organizations have 
expressed concern about the use of the U.S.-Chile FTA as a model for 
negotiations with other FTA partners, particularly with regard to the 
agreement's provisions concerning labor standards and the temporary 
entry of professionals. For example, certain Members and labor 
interests have argued that the FTA's labor provisions may be adequate 
for countries, such as Chile, that maintain stringent labor standards 
but such provisions may not be as appropriate for other countries that 
have not maintained or enforced strong labor laws. In addition, certain 
Members have raised concern with regard to the FTA's provisions 
facilitating the entry of professionals, stating that such provisions 
touch upon immigration laws that are within the purview of the Congress 
and should not be amended through trade agreements.

FTA Partner Participation in Other Trade Agreements:

Successive Chilean governments have pursued trade liberalization 
strategies and export-oriented development policies, resulting in FTAs 
with Canada in 1997; Mexico in 1999; Central America and the European 
Union in 2002; and South Korea in 2003. In addition, Chile signed 
economic complementation agreements with Argentina in 1992; Venezuela, 
Colombia, and Bolivia in 1993; Ecuador in 1994; and Peru in 1998. Chile 
has also enacted an association agreement with the member countries of 
the Southern Common Market in October 1996. Finally, Chile joined the 
APEC organization in 1992 to boost commercial ties to Asian markets and 
is currently involved in negotiations for an FTAA in the western 
hemisphere.

U.S.-Dominican Republic FTA:

Background:

The Dominican Republic is the largest economy in the Caribbean Basin 
region. The trading relationship between the United States and the 
Dominican Republic has been shaped by the Caribbean Basin Initiative, 
which is a series of U.S. laws and programs beginning in 1983 that 
established unilateral U.S. trade preferences for goods from the 
Dominican Republic and 23 other countries in the region. In October 
2002, the two countries held their first meeting under the U.S.-
Dominican Republic Trade and Investment Council to deepen trade 
relations. When the United States began pursuing an FTA with the five 
Central American countries in 2002, the Dominican Republic expressed 
concern that it would suffer adverse economic consequences if it were 
not also included in the agreement. However, the United States did not 
support the request, in part because it did not believe the Dominican 
Republic had exhibited sufficient commitment to negotiate and implement 
a comprehensive FTA with high-levels of commitment. In response, the 
Dominican government took steps to address some problematic issues, and 
aligned themselves more with the United States in multilateral trade 
forums.

Considerations in FTA Partner Selection:

According to USTR officials, the Dominican Republic was the first FTA 
partner that was selected under the new interagency process established 
in May 2003. USTR has emphasized several reasons for the selection of 
the Dominican Republic as an FTA partner. First, according to USTR, an 
FTA with the Dominican Republic would help support the broader U.S. 
trade strategy of competitive liberalization because the Dominican 
Republic would continue to uphold U.S. positions in the WTO and FTAA 
negotiations. Second, the FTA could bring economic and commercial 
benefits to the United States by increasing market access and creating 
more jobs. The Dominican Republic is the largest U.S. trading partner 
in the Caribbean, and USTR has described the country as an economic 
engine in the region. The combined markets of the Dominican Republic 
and the CAFTA countries would be larger than Brazil and would become 
the second-largest U.S. trading partner in Latin America. Third, the 
Dominican Republic was selected because the FTA would support U.S. 
efforts to strengthen democracy and the rule of law. For example, the 
United States plans to push for the inclusion of strong anticorruption 
and transparency requirements in the agreement. Fourth, the Congress 
has instructed the executive branch through the Caribbean Basin 
Initiative to enter into mutually advantageous FTAs with countries 
included in this initiative.[Footnote 24] Fifth, there appears to be 
broad bipartisan support in the Congress for this FTA. Sixth, the 
Dominican Republic has made clear progress in terms of its readiness to 
negotiate an FTA with the United States, according to USTR. For 
example, the Dominican government familiarized itself with the U.S.-
Chile FTA and improved its protections of intellectual property rights, 
including satellite broadcasts and antipiracy provisions, in response 
to U.S. concerns. According to USTR, there is a clear willingness at 
the highest levels of the Dominican government to meet U.S. 
requirements for FTA partners. Seventh, there is strong support for an 
FTA among U.S. industry and agricultural exporters, including from such 
groups as the U.S. Chamber of Commerce.

FTA Milestones:

The Dominican President met with President Bush in July 2002 to request 
an FTA with the United States. In a joint statement issued at a March 
2003 meeting of the U.S.-Dominican Republic Trade and Investment 
Council, the United States acknowledged the steps that the Dominican 
Republic had taken so far to improve its trade policy and stated its 
willingness to consider adding the Dominican Republic to CAFTA. On 
August 4, 2003, following a meeting with the Congressional Oversight 
Group, the Trade Representative formally notified the Congress of the 
executive branch's intent to initiate FTA negotiations with the 
Dominican Republic. The target date for starting negotiations is 
January 2004. USTR hopes to conclude negotiations in March 2004.

FTA Features:

USTR plans to integrate the Dominican Republic into the FTA it is 
already negotiating with five Central American countries. Officials 
will propose that the Dominican Republic accede to the framework of 
CAFTA as it is being discussed, after which the talks will focus on 
market access issues. USTR hopes to present the Congress with one 
agreement for CAFTA countries and the Dominican Republic.

FTA Concerns:

Given the short time frame, integrating the Dominican Republic may be 
challenging. In fall 2003, USTR is to consult with the Dominicans about 
the Chile and Singapore FTAs to explore the extent of Dominican support 
in adopting provisions similar to those in these agreements.

Other concerns involve the State Department's identification of the 
Dominican Republic as a country that does not fully comply with minimum 
standards in the trafficking of persons.

FTA Partner Participation in Other Trade Agreements:

The Dominican Republic has FTAs with the Caribbean Community 
(CARICOM)[Footnote 25] and the Central American countries.

U.S.-Morocco FTA:

Background:

Morocco is a U.S. ally in the war against terrorism and a long-time 
democratic partner in the Arab world. The U.S.-Morocco Bilateral 
Investment Treaty, signed in 1991, provided protections to U.S. 
investors in Morocco. In 1995, the United States signed a trade and 
investment framework agreement with Morocco to promote freer trade, 
increased investment, and stronger economic ties between the two 
countries. Moreover, the 2001 "open skies" agreement between the United 
States and Morocco supported increased air passenger and cargo links 
between the two countries. According to USTR, Moroccan supporters of an 
FTA with the United States cited the benefits that Jordan attained 
after it signed an FTA in 2001 as a reason for desiring a U.S.-Morocco 
FTA.

Considerations in FTA Partner Selection:

USTR emphasized several reasons for selecting Morocco as an FTA 
partner. First, USTR officials noted that a trade agreement with 
Morocco would further the executive branch's goal of promoting 
openness, tolerance, and economic growth across the Muslim world. 
Second, Morocco has been a staunch ally in the war against terrorism. 
Third, the agreement would ensure stronger Moroccan support for U.S. 
positions in the WTO negotiations. Fourth, according to USTR, an FTA 
with the United States would enable Morocco to strengthen its economic 
and political reforms, such as its recent program to liberalize and 
privatize key sectors, and help promote sustainable development and 
environmental protection. The FTA would emphasize transparency, which 
would help make Morocco's government institutions more accountable. 
Fifth, the United States is expected to benefit economically from an 
FTA with Morocco because the agreement would eliminate tariffs and 
other unjustified barriers to trade between the two countries. Morocco 
currently taxes U.S. products at an average of 20 percent, while the 
United States only poses a 4 percent tariff on Moroccan products. A 
U.S.-Morocco FTA would also help protect U.S. investments in Morocco 
and level the playing field with the European Union, with which Morocco 
has an association agreement. Growth prospects for U.S. products and 
services, such as energy and tourism, also exist. Finally, USTR 
officials noted that Moroccan negotiators were well prepared to 
undertake FTA negotiations with the United States because they had 
studied the U.S.-Jordan FTA.

FTA Milestones:

On April 23, 2002, President Bush and the Moroccan King announced that 
their two countries would seek an FTA. USTR notified the Congress of 
its intent to negotiate an FTA with Morocco on October 1, 2002. On 
November 21, 2002, USTR convened a public hearing on the U.S.-Morocco 
FTA. Negotiations started on January 21, 2003. On July 22, 2003, four 
U.S. legislators announced the creation of the Moroccan Caucus, whose 
purpose is to support increased trade and stronger ties between the 
United States and Morocco. Because the target date for completing 
negotiations of December 2003 was not met, negotiations will continue 
in 2004.

FTA Features:

The executive branch views the U.S.-Morocco FTA as a key to 
underpinning the President's broader Middle East trade strategy. The 
agreement builds upon the FTAs with Jordan and Israel and might serve 
as a model for other North African and Middle Eastern countries 
interested in increased trade. U.S. executive branch officials hope 
that Morocco will become a hub for subregional integration and in turn 
serve as one of several subregional centers that could be built into a 
MEFTA.

The U.S. Agency for International Development will provide assistance 
for trade capacity-building programs to help Morocco meet the 
obligations involved in signing and implementing an FTA with the United 
States. The United States will also provide technical assistance in 
areas such as agriculture sector reform, which are likely to be 
sensitive. U.S. assistance will also focus on civil society and 
business groups in order to strengthen public input to the negotiating 
process and maximize the benefits of an FTA for Morocco. The U.S. 
Agency for International Development estimates that these activities 
will cost between $40 million and $48 million over 5 years.

FTA Concerns:

Morocco may face complex decisions in its agricultural sector, which 
employs 40 percent of Morocco's workforce.

FTA Partner Participation in Other Trade Agreements:

Morocco signed the Euro-Mediterranean Association Agreement with the 
European Union in 1996. As part of the Barcelona Process, which 
envisions a free trade zone stretching across Europe and in North 
Africa by 2010, Morocco has signed FTAs with several other North 
African countries. According to USTR, agriculture was generally 
excluded from the association agreement with the European Union, and 
U.S. exporters could gain significant advantages under an FTA with 
Morocco.

U.S.-Singapore FTA:

Background:

Singapore has been a long-time proponent of trade liberalization. 
However, a U.S. trade official noted that the announcement of the 
intention to negotiate a U.S.-Singapore FTA at the APEC conference in 
November 2000 was unexpected, but the selection was based on the 
Clinton administration's interest in completing an FTA with a 
relatively large trading partner that maintained an open economy. In 
addition, as Singapore's economy did not include many sectors sensitive 
to U.S. producers, the Clinton administration hoped to conclude the FTA 
quickly, while establishing a model for future FTAs.

Considerations in FTA Partner Selection:

The negotiation of a U.S.-Singapore FTA in 2000 may have been motivated 
by various factors. First, an FTA with Singapore furthered the Clinton 
administration's emphasis on access to big emerging markets. The year 
negotiations began, Singapore was the 10th largest U.S. trading 
partner, and the value of U.S.-Singapore trade had doubled since the 
early 1990s, according to Commerce. In addition, many U.S. corporations 
invest in Singapore as a regional base for exports and production, 
thereby making the United States the largest foreign investor in 
Singapore. Second, an FTA with Singapore is the first such agreement 
between the United States and an Asian country, and this agreement 
offered an opportunity to strengthen U.S. relations with a region 
experiencing economic integration and expanding trade. For example, as 
Singapore has undertaken efforts to liberalize trade and attract 
multinational corporations, USTR noted that this FTA may serve as a 
foundation for the Enterprise for ASEAN Initiative.[Footnote 26] Third, 
both countries maintain mutual security interests, and since 1992 the 
U.S. military has had access to facilities in Singapore, which 
facilitates military deployments to strategic locations. In addition, 
Singapore has supported the U.S. military's continued presence and 
opposes any ASEAN defense arrangements that might withdraw U.S. armed 
forces from Asia. Fourth, the Congress and the U.S. business community 
undertook efforts to support an FTA with Singapore. For example, before 
the negotiations, legislation was introduced in the Congress that would 
have authorized the President to enter into an FTA with Singapore and 
would have provided for expedited congressional consideration of the 
agreement. Business support included a 1999 visit to Singapore by 22 
U.S. business executives to discuss with the Singaporean Prime Minister 
the possibility of establishing an FTA and strengthening U.S.-Singapore 
ties.

FTA Milestones:

President Clinton and the Prime Minister of Singapore announced an 
agreement to negotiate an FTA during the APEC conference in November 
2000. Negotiations then began under the Clinton administration in 
December 2000 and concluded under the Bush administration in November 
2002. Following 11 rounds, USTR announced on January 15, 2003, that 
agreement had been reached; on January 30, 2003, the executive branch 
notified the Congress of its intent to sign the FTA. President Bush and 
the Singaporean Prime Minister signed the agreement on May 6, 2003. 
USTR sent the draft FTA implementing legislation to the Congress in 
June 2003, and the House and Senate passed the legislation on July 24 
and July 31, 2003, respectively. President Bush signed the FTA 
implementing legislation on September 3, 2003. January 1, 2004, is the 
scheduled date for the FTA's implementation.

FTA Features:

Preceding the FTA negotiations, the United States and Singapore had 
signed a Trade and Investment Framework Agreement, and 99 percent of 
U.S. exports already entered Singapore duty-free. In addition, both 
countries have maintained relatively open investment regimes. Thus, the 
FTA is expected to have relatively little impact on U.S. exports, and 
the elimination of nontariff barriers will provide the majority of 
benefits. However, USTR has commented that the FTA serves as a model 
for future FTAs due to its comprehensive scope and the inclusion of 
commitments not covered in earlier FTAs. For example, according to USTR 
officials, the text of the U.S.-Singapore FTA has served as a template 
to demonstrate to future FTA partners the comprehensive scope that the 
United States expects in FTAs.

FTA Concerns:

Certain Members of Congress and some labor and environmental groups 
have expressed concern over (1) the possible impact of the U.S.-
Singapore FTA and (2) the use of the FTA as a template for other 
agreements. Specific concerns include the potential threat to U.S. 
producers in import-competing sectors, such as U.S. manufacturers of 
electronic equipment and other machinery, and the possible negative 
environmental effects, such as increased pollution from 
industrialization. In addition, certain Members have also expressed 
concern about some of the agreement's provisions, including those 
relating to the temporary entry of professionals, which they say 
impinge on U.S. immigration law without congressional input, and the 
agreement's Integrated Sourcing Initiative, which some Members claimed 
expands trade benefits under the U.S.-Singapore FTA to territories 
outside of Singapore, although these territories have not assumed key 
obligations that the Congress has insisted should be included in 
FTAs.[Footnote 27]

FTA Partner Participation in Other Trade Agreements:

Singapore is party to many preferential trade agreements, with the 
majority of these agreements only recently implemented. For example, 
while Singapore has been a member of the ASEAN Free Trade Area since 
1992, only since January 2001 has Singapore entered into an FTA with 
New Zealand. In addition, in January 2002, Singapore concluded an FTA 
with Japan, which excludes agricultural products; effective January 
2003, Singapore implemented an FTA with the European Free Trade 
Association. In February 2003, Singapore signed an FTA with Australia 
and has been negotiating FTAs with Mexico and Canada since 2000 and 
2001, respectively. In addition, a study group was established in 
November 2002 to explore a possible FTA between Singapore and South 
Korea.

U.S.-CAFTA FTA:

Background:

Since the late 1980s, the countries of Central America have been moving 
from civil conflict toward peace and democracy. The U.S.-Central 
American trading relationship has been shaped by the Caribbean Basin 
Initiative, which promotes economic growth in the region through a 
series of unilateral U.S. trade preferences for 24 countries. President 
Clinton stressed the commitment of the United States to expanding trade 
between the United States and Central America at a 1997 summit with 
leaders from Central America and the Dominican Republic. President Bush 
has continued the push for increased free trade with Central America.

Considerations in FTA Partner Selection:

USTR emphasized several reasons why the CAFTA countries (Costa Rica, El 
Salvador, Guatemala, Honduras, and Nicaragua) were selected as FTA 
partners. First, CAFTA would help lock in and broaden the economic and 
political reforms made in these countries throughout the 1990s. For 
example, elements of the FTA that require increased transparency could 
help counter corruption and support government accountability in the 
CAFTA countries. Second, pursuing an FTA with the CAFTA countries would 
complement U.S. goals in the FTAA and the WTO, particularly given the 
support of CAFTA countries for U.S. negotiating positions. The 
agreement would also support the ongoing economic integration of the 
region. Third, an FTA would enable the United States to address market 
access barriers in the CAFTA countries and thus promote U.S. exports to 
the region and increase U.S. access to more affordable goods. Under the 
Caribbean Basin Initiative, U.S. tariffs on Central American goods are 
already low, with 74 percent of CAFTA country imports entering the 
United States duty-free in 2002. An FTA would enable the United States 
and the CAFTA countries to have reciprocal tariff levels and would 
remove the requirement that Caribbean Basin Initiative preferences be 
reviewed every year. A fourth reason for the selection is country 
readiness. The CAFTA countries are familiar with U.S. approaches to 
trade because they have concluded a NAFTA-like agreement with Mexico in 
2000. Fifth, the Congress has instructed the executive branch through 
the Caribbean Basin Initiative to enter into mutually advantageous FTAs 
with Central American countries. Finally, the U.S. business community 
is interested in the potential gains they could see from CAFTA. Some 40 
percent of total goods imported by Latin America come from the United 
States, thereby making the region an important market for some U.S. 
sectors.

FTA Milestones:

In September 2001, the Bush administration held talks on free trade 
with the CAFTA countries. In January 2002, Bush announced that the 
United States would explore an FTA with these countries. Starting in 
February 2002, USTR held seven workshops with the CAFTA countries to 
ensure they would be able to develop and implement an FTA with the 
United States. In October 2002, following a meeting of the 
Congressional Oversight Group, President Bush formally notified the 
Congress of his intention to begin FTA negotiations with the CAFTA 
countries. USTR convened a public hearing on CAFTA in November 2002. 
Working-level negotiations started in January 2003 and concluded in 
December 2003, without Costa Rica. The United States hopes to sign the 
agreement--which could include a component with the Dominican Republic-
-by spring 2004.

FTA Features:

There are five negotiating groups[Footnote 28] for the CAFTA 
negotiations. The decision to establish only five negotiating groups 
reflects the CAFTA countries' interest in consolidating the 
negotiations, given their limited negotiating resources. In addition to 
these five working groups, there is also a nonnegotiating, multiagency 
effort responsible for trade capacity-building. This capacity-building 
effort includes projects to increase citizen access to trade 
negotiations, support the negotiating teams, strengthen food safety 
inspection systems, and enhance the implementation of labor laws. As 
part of these efforts, each country identified its needs in a National 
Trade Capacity Building Strategy. Other agencies involved in trade 
capacity-building include the U.S. Agency for International Development 
and the Inter-American Development Bank. The executive branch made a 
$47 million budget request for U.S. capacity-building assistance in the 
region in 2003.

FTA Concerns:

Some civil society groups and Members of Congress are concerned that 
the CAFTA agreement will not adequately address their labor and 
environmental concerns in the CAFTA countries. There is concern that 
USTR may support language of the U.S.-Chile FTA, which calls for 
countries to enforce their domestic labor laws. Some civil society 
groups and Members believe this approach is not appropriate for the 
CAFTA countries because their labor laws are not as stringent as 
Chile's laws. Similarly, some civil society groups claim that the 
environmental commitments stemming from the FTA may not build upon 
existing programs or preclude investor lawsuits that could undermine 
environmental laws. Finally, there is concern that there has not been a 
sufficient mechanism for public input.

Market access for agricultural goods and textiles is another potential 
area of contention. Two Members have expressed concern that the CAFTA 
countries are reluctant to lower tariffs on U.S. agricultural products. 
The U.S. sugar industry and some U.S. textile and apparel producers 
have also expressed concern about heightened competition from CAFTA 
suppliers.

FTA Partner Participation in Other Trade Agreements:

The CAFTA countries are members of the Central American Common Market. 
In addition, these countries have negotiated more than 20 FTAs with 
such countries as Mexico, Canada, and several South American countries.

U.S.-SACU FTA:

Background:

The Southern African Customs Union, which is comprised of Botswana, 
Lesotho, Namibia, South Africa, and Swaziland, accounted for almost 
one-half of the gross domestic product in sub-Saharan Africa and for 
$2.5 billion in U.S. exports to the region in 2002. Total two-way trade 
between the United States and SACU was more than $7 billion that year. 
South Africa has the largest economy among the SACU countries and the 
United States and South Africa have had a trade and investment 
framework agreement since 1999. The 2000 African Growth and Opportunity 
Act (AGOA)[Footnote 29] declares that FTAs should be negotiated with 
sub-Saharan African countries to serve as catalysts for trade and for 
U.S. private-sector investment in the region. As a result, by moving 
from one-way trade preferences to a reciprocal FTA with SACU, the 
United States expects to build on the success of AGOA and to deepen 
U.S. political and economic ties to sub-Saharan Africa. The United 
States also hopes to lend momentum to U.S. development efforts in the 
region by encouraging greater foreign direct investment and promoting 
regional integration and economic growth.

Considerations in FTA Partner Selection:

USTR noted several reasons why the SACU countries were selected as FTA 
partners. For instance, in pursuing an FTA with SACU, the executive 
branch responded to Congress's direction to negotiate FTAs with sub-
Saharan countries, as expressed in AGOA. USTR emphasized that the SACU 
countries are ready, individually and collectively, to be free trade 
partners. An FTA with the SACU countries would strengthen growing 
bilateral commercial ties between the United States and these countries 
and address barriers in these countries to U.S. exports. These barriers 
include high tariffs on certain goods, overly restrictive product 
licensing measures, inadequate protection of intellectual property 
rights, and restrictions the SACU governments impose that make it 
difficult for U.S. service firms to do business in these countries. An 
FTA would offer an opportunity to improve southern Africa's commercial 
competitiveness and to better position the region for success in the 
U.S market and the global economy. In addition, an FTA would help the 
SACU countries attract much-needed new foreign direct investment 
because international investors prefer access to a large and integrated 
market. An FTA might also level the playing field in areas where U.S. 
exporters are disadvantaged by the European Union's FTA with South 
Africa. Finally, this FTA would reinforce the economic reforms that 
have taken place in the SACU countries and might encourage additional 
progress where needed.

FTA Milestones:

In November 2002, USTR notified the Congress that the United States 
intended to enter into FTA negotiations with SACU in at least 90 days. 
The United States and SACU intend to complete the negotiations by 
December 2004.

FTA Features:

A U.S.-SACU FTA agreement is likely to be comprehensive because the 
governments have announced broad negotiating objectives that cover 
agriculture, industry, and services issues. The United States is 
committed to providing the technical assistance necessary for SACU 
countries to assume the responsibilities of full partnership and to 
share in the benefits of free trade. The United States and SACU have 
established a special cooperative group on trade capacity-building 
specifically for these negotiations, with $2 million in initial funding 
from the U.S. Agency for International Development. This group is to 
meet regularly during the negotiations to identify needs and swiftly 
direct technical assistance resources to help SACU countries better 
prepare for and participate in negotiations, implement agreed-upon 
commitments, and take advantage of free trade.

FTA Concerns:

Several groups representing U.S. retailers, food distributors, and 
metal importers have supported the reduction of U.S. tariffs on SACU 
goods. Groups representing service industries and recycled clothing 
have favored removing tariff and nontariff barriers in the SACU market. 
However, other groups have opposed the additional opening of U.S. 
markets to SACU goods. Agriculture, steel, and the textile and apparel 
industries are expected to monitor negotiations closely.

FTA Partner Participation in Other Trade Agreements:

The SACU countries are members of the WTO. South Africa has had an FTA 
with the European Union since 2000.

[End of section]

Appendix V: Comments from the Office of the U.S. Trade Representative:

EXECUTIVE OFFICE OF THE PRESIDENT 
THE UNITED STATES TRADE REPRESENTATIVE 
WASHINGTON, D.C. 20508:

December 3, 2003:

Mr. David M. Walker 
Comptroller of the United States 
United States General Accounting Office 
Washington, DC 20548:

Dear Mr. Walker:

Thank you for requesting our comments on the draft report entitled, 
"International Trade: Intensifying Free Trade Negotiating Agenda Calls 
for Better Allocation of Staff and Resources." I understand this report 
follows a Congressional request that you review how potential partners 
for U.S. free trade agreements (FTAs) are selected. In response, we 
would like to provide our perspective on the FTA selection process as 
well as some specific comments on the resource issues you identified.

Selecting FTA Partners:

When the Bush Administration set out to revitalize America's trade 
agenda almost three years ago, we outlined our plans clearly and 
openly: We would pursue a strategy of "competitive liberalization" to 
advance free trade globally, regionally, and bilaterally. By moving 
forward simultaneously on multiple fronts, the United States can: 
overcome or bypass obstacles; exert maximum leverage for openness; 
target the needs of developing countries, especially those most 
committed to economic and political reforms; establish models of 
success, especially in cutting-edge areas; strengthen America's ties 
with all regions within a global economy; and create a fresh political 
dynamic by putting free trade on the offensive.

Careful selection of FTA partners is a key part of this design --but as 
a part, it must be understood in the context of the overall strategy. 
As GAO rightly explains in its report, the selection process cannot be 
a mechanical one in which we choose only the most eager, or the 
largest, or the friendliest countries as partners. Rather, we need to 
consider a range of factors, including how an FTA fits with our larger 
goal of advancing free trade around the world. Your report outlines the 
criteria we examine.

At its most basic level, the competitive liberalization strategy simply 
means that America expands and strengthens its options. If free trade 
progress becomes stalled globally --where any one of 148 economies in 
the World Trade Organization (WTO) has veto power --then we can move 
ahead regionally and bilaterally. If our hemispheric talks are 
progressing stage-by-stage, we can point to more ambitious 
possibilities through FTAs with individual countries and sub-regions. 
Having a strong bilateral or sub-regional option helps spur progress 
in the larger negotiations. The recent disappointment in Cancun 
provides a case in point. A number of the "won't do" countries that 
frustrated the "can do" spirit of Doha are now rethinking the 
consequences as the United States vigorously advances FTAs around the 
world.

Pathways to Greater Trade:

Competitive liberalization offers countries within regions a step-by-
step pathway to greater trade reforms and openness with the United 
States. Both the President's Enterprise for ASEAN Initiative and his 
plan to work toward a Middle East Free Trade Area start by helping non-
member countries to join the WTO, strengthening both the global rules-
based system and countries participating in it. For those more 
advanced, we negotiate Trade and Investment Framework Agreements 
(TIFAs) and Bilateral Investment Treaties (BITs). We employ these 
customized arrangements to resolve trade and investment issues, improve 
performance in areas such as protecting intellectual property rights 
and strengthening customs operations, promote business ties, analyze 
the possibilities for an FTA, and prepare the capacity to negotiate an 
FTA. Finally, we may negotiate a wide-ranging, state-of-the-art FTA 
that will help establish a model for a region and incentives for 
neighbors. With this graduated, stepladder approach, we can engage 
virtually every country interested in working with us, and more 
importantly, we create a healthy dynamic in which countries compete to 
become fuller members of the trading system and better partners of the 
United States.

For example, the President launched the Enterprise for ASEAN Initiative 
in October 2002. With our newly completed Singapore FTA serving as a 
benchmark for what ASEAN nations may achieve, we are helping those 
nations not part of the WTO to join. Cambodia recently acceded and 
Vietnam is working toward WTO membership. We are using TIFAs with the 
Philippines, Indonesia, Brunei, and Thailand to spur further progress. 
We are working with private groups to help our respective publics 
understand the value of improved trade and to lay the groundwork for 
future agreements. As a result of these efforts, the President 
announced our intention to initiate negotiations for a comprehensive, 
state-of-the-art FTA with Thailand early in 2004.

Our Middle East Free Trade Area initiative offers a similar pathway for 
the Mahgreb, Gulf states, and the lands near Israel. We are making 
progress toward bringing Saudi Arabia into the WTO. We have TIFAs and 
BITs throughout the region and several more in the works. We are 
working to complete an FTA with Morocco this year, to complement our 
FTAs with Israel and Jordan, and we will begin FTA negotiations with 
Bahrain early in 2004. It is our aim that within ten years these 
initiatives may be integrated to form a region-wide free trade area.

In Africa, the African Growth and Opportunity Act (AGOA) is creating 
tangible incentives for commercial and economic reform as it provides 
enhanced access to the U.S. market for products from 38 eligible sub-
Saharan nations. Our FTA negotiations with the five countries of the 
Southern African Customs Union (Botswana, Lesotho,

Namibia, South Africa, and Swaziland) will create a first-of-its-kind 
agreement with the continent, build on AGOA's success, and show other 
Africans that the United States is committed to helping those who are 
working toward reforms and open trade.

For Latin America, we are pursuing dual tracks. We are strongly 
committed to creating a comprehensive and ambitious Free Trade Area of 
the Americas (FTAA). At the same time, we are pursuing multiple FTAs 
that will complement NAFTA and our new agreement with Chile. We are 
aiming to complete the Central America FTA negotiations in December, 
and we expect to integrate the Dominican Republic into that agreement 
in 2004. We would then move forward with Panama, Colombia, Peru, 
Ecuador, and Bolivia. Together, these agreements would open up over 
two-thirds of the hemisphere's non-U.S. GDP to free trade across a 
comprehensive, modern agenda. At the same time, our aim is to open the 
markets of all the Americas, while assisting development and democracy 
in places as different as Caribbean islands and the large economies of 
Mercosur.

South Asia remains a challenge, but we are looking hard for 
opportunities. In particular, Sri Lanka, with which we have a strong 
TIFA and relationship in the WTO, may be a promising FTA candidate for 
the near future.

Finally, our strategy seeks a mix of developing and developed nations. 
Our negotiations with Australia will create a top-quality FTA with a 
large industrial, service, and agricultural economy of growing promise 
and set a strong standard for future agreements.

As part of our larger strategy, deeper trade and economic ties with our 
FTA partners are producing substantial results in their own right:

* Our new and pending FTA partners, if considered together, would 
constitute America's third largest export market and the sixth largest 
economy in the world.

* Our current and pending FTA partners in the Americas encompass two-
thirds of Western Hemisphere's GDP (excluding the United States.).

* These FTAs are state-of-the-art, breaking new ground and setting high 
standards. Unlike the many FTAs around the world, centered largely on 
tariffs for goods and perhaps some agriculture, the U.S. agreements 
address services, investment, intellectual property rights, public 
transparency, government procurement, and labor and environment issues.

* Our FTAs enhance regional integration. When countries negotiate with 
us as a group (e.g., in CAFTA and the Southern Africa FTA), they also 
commit to free trade with each other to their great mutual advantage. 
Botswana, for instance, is both a successful multiparty democracy and a 
well-run economy, but it is hindered by its small size. As part of the 
larger market formed by the Southern Africa FTA, Botswana will have far 
better prospects for investment and becoming a hub for service 
providers. The five small Central American democracies are:

more likely to attract investment, create jobs, and increase 
competitiveness if they are integrated with one another and the United 
States.

* Our free trade agreements encourage sectoral reforms and advance 
development agendas. Morocco, for example, has been hindered by an 
agricultural economy shaped by the economics of the Roman Empire. Its 
FTA with the United States will help it adjust to a productive and 
prosperous role in the modern world. Chile had labor laws dating to the 
Pinochet era. During our FTA negotiations, those laws were completely 
reformed. Bahrain will use its FTA with the United States to help 
further its stature as a successful post-oil and gas economy in the 
Persian Gulf.

In summary, our FTA selections are part of larger, multifaceted 
strategy. Criteria can aid in making the selections of FTA partners, 
but the execution of the strategy requires the careful judgment of 
policymakers in close consultation with Congress and private sector 
stakeholders. Ultimately, we need the support of Congress to pass these 
agreements.

Your report notes that "certain Members of Congress have urged USTR to 
give greater priority to economic and commercial considerations in 
selecting future FTA partners." That is true, although in our 
experience when Members of Congress or the private sector mention other 
countries as FTA candidates, including large markets beyond Canada and 
Mexico, we often find those countries are unwilling to enter into FTA 
talks with us --usually because they want to continue to protect their 
agriculture market. If one does not count the EU-25, Japan, and Korea -
-which have been unwilling to negotiate FTAs with us that open 
agriculture markets --and China, which just entered the WTO, our 
current and announced FTA negotiations total 73 percent of America's 
remaining export markets and 69 percent of the United States' two-way 
trade. In general, we agree with your assessment that "Few Members of 
Congress have openly questioned choices of FTA partners to date, and 
those that have still expressed broad support for the `competitive 
liberalization strategy."':

Managing the Trade Agenda:

Advancing this multi-faceted free trade strategy has placed significant 
demands on USTR, and we appreciate GAO considering the resource 
challenge we face. In less than three years, we have moved from the 
absence of a Congressional grant of comprehensive trade negotiating 
authority to pressing forward with global, hemispheric, and five sub-
regional or bilateral FTA negotiations simultaneously. All tend to be 
far more complex than trade talks in the past, encompassing not only 
tariffs and customs, but all aspects of 21S` Century commerce. We are 
also working closely with a number of other countries to prepare for 
FTAs, with some to be launched in 2004. At the same time, our 
litigation activities have soared as nations become more accustomed to 
the WTO's dispute settlement process. Our WTO caseload has doubled in 5 
years. And the more agreements we complete, the more our monitoring and 
enforcement needs rise. All this demands nothing less than a 
transformation of USTR --a transformation that is well underway.

GAO recognized that our agenda was "straining the available resources" 
at USTR and recommended that USTR should develop "better allocation of 
staff and resources." We believe this emphasis reflects a proper 
assessment that USTR is aggressively promoting America's economic and 
national interests on numerous fronts, but an inaccurate assessment of 
how to allocate limited resources most effectively and efficiently. In 
our view, the main cause of the strain at USTR has been the amount of 
available resources, not their allocation. Indeed, GAO did not identify 
any areas within USTR from which funds could be transferred to higher 
priority functions. As lean as USTR is, most observers would have 
trouble finding activities they would downgrade in priority.

Both the President and bipartisan trade supporters in the Congress 
agree that USTR cannot carry out the post-TPA trade agenda with a pre-
TPA budget. That is why the President and Congress have supported 
budget increases to bring USTR resources more in line with the 
revitalized trade agenda. These increases will ease much of the strain 
your report notes and prevent America's trade strategy from being 
handicapped for lack of funds.

Under any cost-benefit analysis, USTR would fare extremely well. For 
less than $40 million a year --a fraction of the budget of comparable 
government agencies --USTR has played a leading role in creating jobs 
and opportunities at home by opening markets and enforcing agreements 
around the world. Many countries around the globe look to their trade 
ties with the United States as their principal economic link with our 
country.

Although GAO does not mention any actual misallocation of funds, it 
nevertheless criticizes USTR's allocation process because it appears to 
be "informal" and not based on "robust data." "For example," the report 
notes, "although regional Assistant U.S. Trade Representatives provide 
staff and travel estimates as part of the annual budget cycle, they 
frequently bring resource requests to USTR management throughout the 
year." This, GAO concludes, "is an informal, reactive approach.":

We believe this observation reflects a misunderstanding of how USTR can 
function most effectively and flexibly. Management tools appropriate to 
large organizations carrying out routinized tasks are not suitable for 
a small agency pursuing fast-moving, dynamic trade negotiations in a 
world where trade opportunities and disputes often emerge unexpectedly. 
USTR's model, we believe, should be more like that of an 
entrepreneurial small business in a rapidly changing international 
environment than that of a large government bureaucracy.

In a sense, USTR's situation may be analogized to that of a 
Congressional committee staff. It would hardly be productive at the 
beginning of a Congressional session for a committee chair and staff 
director to chart rigid staff time estimates involved in moving a 
prescription drug bill, for instance. Nor would precise data on how 
much staff time was devoted to last year's version of the bill be 
especially useful. Too much would depend on a rapidly changing 
legislative environment. Instead, the committee managers would 
thoroughly consult with staff members, make a reasoned judgment of 
priorities, and then be prepared to adjust as circumstances warrant.

USTR must be agile, flexible, and adaptable --not rigidly bureaucratic. 
Only with these qualities can we carry out a complex, multi-dimensional 
strategy to advance free trade.

The heart of USTR's budget is for personnel and travel. Therefore, 
USTR's annual planning and budgetary process seeks to allocate human 
and financial resources to offices based on projected goals and 
demands. We seek to give the senior career staff --Assistant United 
States Trade Representatives --flexibility to manage these funds and 
people. Since many activities within USTR and the U.S. Government as a 
whole necessitate "horizontal management," the Deputies and Chief of 
Staff help supervise allocations and schedules across functions. We do 
not believe that time-consuming and costly systems to account for time 
would be helpful. USTR is better served by 21S' Century entrepreneurial 
systems focused on results and outputs than early 20TH Century 
"Taylorism" that would concentrate on time/cost inputs. Indeed, these 
methods would lower productivity among the federal workers drawn to 
USTR, who are willing to work hard and fast because of the results-
oriented culture.

We wholeheartedly agree, however, with GAO's general finding that the 
intensifying trade agenda requires continual management improvements at 
USTR and supporting agencies. For this reason, we have taken a number 
of steps over the past two years. We have:

* Reorganized regional and issues-based offices to reflect negotiating 
demands.

* Overhauled our financial system to allow us to track travel and other 
expenses by negotiation.

* Established new program-based accounting codes that will capture 
travel, interpretation, logistical support, and other categories of 
spending by major trade initiative.

* Devised a management system to carefully monitor the dozens of new 
legal requirements under the Trade Act of 2002.

* Established a system to ensure that hundreds of Congressional and 
private sector consultations occur in a timely manner.

* Continually improved our scheduling of FTA negotiations to make the 
best use of our available resources.

* Where possible, combined overseas trips to reduce the amount of 
overseas travel.

* Increasingly used videoconferencing and teleconferencing as low-cost 
alternatives to overseas travel, where possible.

* Accepted financial support for logistics from host city committees 
sponsoring negotiating rounds consistent with USTR's statutory 
authority.

* Sought out low-cost venues for negotiations, both in the U.S. and 
abroad, typically using mid-point geographic sites as meeting 
locations, thereby avoiding the added expense of travel to distant 
locations of negotiations partners.

* Upgraded USTR's website to provide access to all key documents.

* Instituted daily staff leadership meetings to coordinate assignments.

* Accomplished these changes in an environment of heightened security.

Again, we appreciate having this opportunity to comment on GAO's 
report, and we look forward to continuing to work closely with you in 
the future.

Sincerely,

Signed by:

Robert B. Zoellick: 

The following are GAO's comments on the U.S. Trade Representative's 
letter dated December 3, 2003.

GAO Comments:

1. As the Trade Representative states, if the 43 percent of U.S. trade 
that is accounted for by the EU-25, Japan, Korea, and China is 
excluded, then current and announced FTA negotiations account for 69 
percent (according to our calculation) of the remainder of total U.S. 
trade. However, U.S. trade with existing FTA partners (Canada, Chile, 
Jordan, Mexico, Israel, and Singapore) accounts for the majority of 
this. The trade data can be segmented in several ways, but the data 
show that trade partners with which the U.S. has begun or has announced 
FTA negotiations account for $178 billion in two-way trade with the 
United States, or about 8 percent of the $2.3 trillion total U.S. 
trade.

2. We believe that given its admittedly limited available resources, 
USTR needs to better manage its staffing and funds to implement its 
growing and complex trade negotiating agenda. As discussed in this 
report, USTR's main strategy for undertaking multiple FTA negotiations 
appears to be working on one FTA per region at a time. Assistant USTRs 
in four regional offices lead FTA negotiations in each of four regions. 
With the announcement of three new FTA negotiations--the Dominican 
Republic, the Andean countries, and Panama--in Latin America alone, it 
is not clear how USTR will be able to meet its new and ongoing 
negotiating demands in a timely fashion. We have noted in this report 
that one factor that constrains negotiations is a limited number of 
regional and functional specialists. To address these challenges, USTR 
would do well to develop a resource strategy across its entire 
negotiating agenda that is based on solid data and planning.

3. While we appreciate USTR's efforts in pursuing intensive trade 
negotiations in an often unpredictable international environment, this 
situation makes it all the more important to make staffing and resource 
decisions based on valid and reliable data and planning. Relying on 
informal, ad hoc decision making increases risk and reduces the chance 
that the agency will accomplish its goals. The human capital model that 
we developed calls for organizations, regardless of size, to use solid 
data to determine the current and future human capital required to 
support their mission and goals.

4. Just like other federal agencies, USTR is responsible for standard 
accountability procedures to manage its program and federal funds. Our 
recommendation calls for a result--not specific procedures or output 
measures. Since its own and other agencies' expert staff are the most 
substantial resources for FTA negotiations, improving upon the present 
lack of systematic data would better position USTR and other agencies 
to make decisions that involve staffing trade-offs among competing 
priorities. In addition, travel is an important resource component and 
must be programmed in advance. While we recognize and encourage the 
steps that USTR has already taken to make improvements, we note that 
these efforts are already recognized in this report and are not 
sufficient to address our concerns for forward planning.

[End of section]

Appendix VI: GAO Contacts and Staff Acknowledgment:

GAO Contacts:

Kim Frankena, (202) 512-8124 Judy Knepper, (202) 512-8554:

Staff Acknowledgments:

In addition to those named above, Martin De Alteriis, Francisco 
Enriquez, Bradley Hunt, Rona Mendelsohn, Juan Tapia-Videla, Timothy 
Wedding, and Eve Weisberg made major contributions to this report.

(320208):

FOOTNOTES

[1] Nontariff barriers are those that are not related to tariff levels 
but nevertheless impose obstacles to trade. Examples include 
quantitative restrictions (quotas) on imports and requirements that 
importers obtain licenses to import certain products.

[2] Pub. L. No. 107-210, §§ 2101-13, 116 Stat. 993-1022. This act was 
part of larger legislation entitled the Trade Act of 2002, 116 Stat. 
933. The trade promotion authority continues through June 1, 2005, or 
June 1, 2007, if extended by the President without disapproval of the 
Congress.

[3] The overall objectives set forth in TPA include obtaining greater 
market access and reducing or eliminating trade barriers; enhancing 
economic growth, raising living standards, and promoting full 
employment in the United States; ensuring that trade and environmental 
policies are mutually supportive; and promoting respect for worker 
rights. The principal objectives include expanding competitive market 
opportunities for U.S. exports, including agricultural products; 
reducing or eliminating barriers to international trade in services and 
foreign investment; enhancing intellectual property rights protection; 
obtaining wider and broader application of transparency; seeking 
provisions in trade agreements providing for effective dispute 
resolution; and preserving the ability of the United States to 
rigorously enforce its trade laws. Pub. L. No. 107-210, § 2102, 116 
Stat. 994-1001. 

[4] Id. § 2102(e), 116 Stat. 1004.

[5] Pub. L. No. 106-200, 114 Stat. 251-75.

[6] Id. §§ 202(b) and 213, 114 Stat. 276, 288. This legislation also 
required the President to take necessary steps to convene a meeting 
with the trade ministers of these countries to establish a schedule of 
meetings on the likely timing for initiating negotiations for entering 
into FTAs with the United States. 

[7] See 19 U.S.C. § 1872.

[8] The U.S.-Canada FTA was suspended in 1994 and superseded by the 
North American Free Trade Agreement. 

[9] The World Bank classifies 105 WTO members, or approximately 73 
percent, as developing countries.

[10] According to the U.S. Agency for International Development, the 
rule of law embodies the basic principles of equal treatment of all 
people before the law and is founded on a predictable and transparent 
legal system with fair and effective judicial and law enforcement 
institutions to protect citizens against the arbitrary use of state 
authority and lawless acts.

[11] Pub. L. No. 106-200, §§ 202(b), 213, 114 Stat. 276, 288. This 
legislation also required the President to take necessary steps to 
convene a meeting with the trade ministers of these countries to 
establish a schedule of meetings on the likely timing for initiating 
negotiations for entering into FTAs with the United States. 

[12] According to the WTO, a customs union is organized to permit the 
free exchange of goods among its members and has a common external 
tariff. 

[13] In 1962, as noted in our Background section, the President 
established these groups under USTR and the NSC/NEC, respectively, for 
developing trade policy. Early during the present administration, these 
groups were not used for assessing FTA partners. Instead, they were 
only used during FTA negotiations, after partners had been selected.

[14] Not all of the 19 agencies that participate in the TPSC and the 
TPRG are cabinet-level agencies, for example, the U.S. International 
Trade Commission and the U.S. Agency for International Development.

[15] See U.S. General Accounting Office, International Trade: Strategy 
Needed to Better Monitor and Enforce Trade Agreements, NSIAD-00-76 
(Washington, D.C.: Mar. 14, 2000).

[16] This office is also working on the resource-intensive FTAA.

[17] For example, according to USTR officials, much of the CAFTA text 
is similar to the Chile FTA.

[18] Several of the meetings for the Singapore negotiations were in 
London, for example, and two of the negotiating rounds for the 
Australia FTA were held in Hawaii.

[19] See GAO/NSIAD-00-76.

[20] See U.S. General Accounting Office, A Model of Strategic Human 
Capital Management, GAO-02-373SP (Washington, D.C.: March 2002).

[21] See U.S. General Accounting Office, High Risk Series - Strategic 
Human Capital Management, GAO-03-120 (Washington, D.C.: January 2003).

[22] The GSP program is a unilateral program that extends duty-free 
entry of certain imports from developing countries.

[23] Although the Congress granted the President the authority to 
negotiate trade agreements with expedited implementation procedures, 
known as Fast Track, almost continuously since 1974, this authority 
lapsed in 1994. Similar authority was reauthorized under the Trade Act 
of 2002.

[24] The Caribbean Basin Initiative collectively refers to the 
Caribbean Basin Economic Recovery Act of 1983, the Caribbean Basin 
Economic Recovery Expansion Act of 1990, and the U.S.-Caribbean Basin 
Trade Partnership Act of 2000. The countries include Antigua, Aruba, 
the Bahamas, Barbados, Belize, British Virgin Islands, Costa Rica, 
Dominica, the Dominican Republic, El Salvador, Grenada, Guatemala, 
Guyana, Haiti, Honduras, Jamaica, Montserrat, Netherlands Antilles, 
Nicaragua, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent and the 
Grenadines, and Trinidad and Tobago.

[25] CARICOM members include Antigua and Barbuda, the Bahamas, 
Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, 
Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the 
Grenadines, Surinam, and Trinidad and Tobago.

[26] In October 2002, President Bush announced the Enterprise for ASEAN 
Initiative, which is a new trade initiative to establish a network of 
bilateral FTAs with those ASEAN member countries that are committed to 
enacting economic reforms and maintaining openness. 

[27] For a limited number of information technology products and 
medical devices that already are duty-free in the United States and 
Singapore, the Integrated Sourcing Initiative eliminates the 
requirement that these products meet specific "rules of origin" when 
shipped between the United States and Singapore. This customs procedure 
is streamlined and the burden on the importer is reduced, with respect 
to completing certification paperwork or paying merchandise processing 
fees.

[28] The negotiating groups cover (1) market access, (2) investment and 
services, (3) government procurement and intellectual property, (4) 
labor and environment, and (5) institutional issues.

[29] Pub. L. No. 106-200, § 116, 114 Stat. 266-67.

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