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Report to the Chairman, Committee on Finance, U.S. Senate: 

United States Government Accountability Office: 
GAO: 

July 2009: 

International Trade: 

Four Free Trade Agreements GAO Reviewed Have Resulted in Commercial 
Benefits, but Challenges on Labor and Environment Remain: 

GAO-09-439: 

GAO Highlights: 

Highlights of GAO-09-439, a report to the Chairman, Committee on 
Finance, U.S. Senate. 

Why GAO Did This Study: 

Since 2001, Congress has approved free trade agreements (FTA) with 14 
countries. Most were negotiated under Trade Promotion Authority (TPA), 
which aims to lower trade barriers while strengthening the capacity of 
trading partners to promote respect for workers’ rights and to protect 
the environment. The Office of the United States Trade Representative 
(USTR) is responsible for overseeing implementation of the FTAs, and 
the Departments of Labor (Labor) and State (State) have 
responsibilities for implementing and managing FTA cooperation 
projects. GAO was asked to assess progress through FTAs in (1) 
advancing U.S. economic and commercial interests, (2) strengthening 
labor laws and enforcement in partner nations, and (3) strengthening 
partners’ capacity to improve and enforce their environmental laws. GAO 
focused on Jordan, Chile, Singapore, and Morocco, chosen because of 
their economic, social, and geographic diversity and relatively older 
FTAs. GAO analyzed relevant trade laws and trends, met with U.S. 
agencies and foreign government officials, conducted fieldwork in the 
four countries, and solicited input from the private sector. 

What GAO Found: 

The four selected FTAs have largely accomplished the U.S. objectives of 
achieving better access to markets and strengthening trade rules, and 
have resulted in increased trade, as summarized in the table. While 
varying in details, the FTAs have all eliminated import taxes, lowered 
obstacles to U.S. services such as banking, increased protection of 
U.S. intellectual property rights abroad, and strengthened rules to 
ensure government fairness and transparency. Overall merchandise trade 
between the United States and partner countries has substantially 
grown, with increases ranging from 42 percent to 259 percent. Services 
trade, foreign direct investment, and U.S. affiliate sales in the 
largest partners also rose. 

FTA negotiations spurred some labor reforms in each of the selected 
partners, according to U.S. and partner officials, but progress has 
been uneven and U.S. engagement minimal. An example cited was Morocco’s 
enactment of a long-stalled overhaul of its labor code. However, 
partners reported that enforcement of labor laws continues to be a 
challenge, and some significant labor abuses have emerged. In the FTAs 
we examined, Labor provided minimal oversight and did not use 
information it had on partner weaknesses to establish remedial plans or 
work with partners on improvement. 

The selected partners have improved their environmental laws and made 
other progress, such as establishment of an environmental ministry and 
a 400-strong environmental law enforcement force in Jordan, according 
to U.S. and foreign officials. However, partner officials report that 
enforcement remains a challenge, and U.S. assistance has been limited. 
Elements needed for assuring partner progress remain absent. Notably, 
USTR’s lack of compliance plans and sporadic monitoring, State’s lax 
management of environmental projects, and U.S. agencies’ inaction to 
translate environmental commitments into reliable funding all limited 
efforts to promote progress. 

Table: FTA Commercial, Labor, and Environment Results, and U.S. 
Agencies’ Oversight: 

Partner country results as reported to GAO: Jordan; 
Commercial: U.S. and partner gains evident; 
Labor: Some progress after serious problems; 
Environment: Considerable progress. 

Partner country results as reported to GAO: Singapore; 
Commercial: U.S. and partner gains evident; 
Labor: Progress; 
Environment: Progress. 

Partner country results as reported to GAO: Chile; 
Commercial: U.S. and partner gains evident; 
Labor: Some problems persist despite progress; 
Environment: Problems persist despite progress. 

Partner country results as reported to GAO: Morocco; 
Commercial: U.S. and some partner gains evident; 
Labor: Problems persist despite progress; 
Environment: Problems persist despite progress. 

Oversight status: U.S. agencies’ oversight; 
Commercial: Generally adequate; 
Labor: Lack cooperation plans, sufficient funding, oversight; 
Environment: Lack monitoring plans, sufficient funding. 

Source: GAO. 

[End of table] 

What GAO Recommends: 

GAO recommends that agencies update plans for implementing and 
overseeing FTAs to make the FTAs more effective in producing results. 
Agencies intend to do so but saw important progress. 

View [hyperlink, http://www.gao.gov/products/GAO-09-439] or key 
components. For more information, contact Loren Yager at (202) 512-4347 
or yagerl@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

FTA Results Vary among Partner Countries, but Reveal Positive Economic 
and Commercial Outcomes Consistent with TPA Goals: 

FTAs Contribute to Labor Improvements in Partners, but U.S. Follow-up 
on FTA Labor Commitments Has Been Minimal: 

FTA Partners Have Improved Environmental Laws, but the Lack of 
Systematic U.S. Monitoring and Other Factors Impede Assessment of Their 
Impact: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Commercial/Economic Results of the Jordan FTA: 

Appendix III: Commercial/Economic Results of the Singapore FTA: 

Appendix IV: Commercial/Economic Results of the Chile FTA: 

Appendix V: Commercial/Economic Results of the Morocco FTA: 

Appendix VI: Average Annual Growth Rates of Bilateral Trade with FTA 
Partner Countries Compared with Overall U.S. Trade: 

Appendix VII: Comments from the Department of Labor: 

Appendix VIII: Comments from the Department of State: 

Appendix IX: Comments from the Office of the United States Trade 
Representative: 

Appendix X: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Amount of Two-Way Trade, Percent Increase in Two-Way Trade, 
and Percentage Increase in U.S. Exports and Imports, from Year Prior to 
FTAs to 2008: 

Table 2: U.S. Exports to Jordan: Top 25 Categories by Value, Pre-and 
Post-FTA Average Annual Growth Rates, and Change in Growth Rates 
between Periods: 

Table 3: U.S. Imports from Jordan: Top 25 Categories by Value, Pre-and 
Post-FTA Average Annual Growth Rates, and Change in Growth Rates 
between Periods: 

Table 4: U.S. Exports to Singapore: Top 25 Categories by Value, Pre-and 
Post-FTA Average Annual Growth Rates, and Change in Growth Rates 
between Periods: 

Table 5: U.S. Imports from Singapore: Top 25 Categories by Value, Pre- 
and Post-FTA Average Annual Growth Rates, and Change in Growth Rates 
between Periods: 

Table 6: U.S. Exports to Chile: Top 25 Categories by Value, Pre-and 
Post-FTA Average Annual Growth Rates, and Change in Growth Rates 
between Periods: 

Table 7: U.S. Imports from Chile: Top 25 Categories by Value, Pre-and 
Post-FTA Average Annual Growth Rates, and Change in Growth Rates 
between Periods: 

Table 8: U.S. Exports to Morocco: Top 25 Categories by Value, Pre-and 
Post-FTA Average Annual Growth Rates, and Change in Growth Rates 
between Periods: 

Table 9: U.S. Imports from Morocco: Top 25 Categories by Value, Pre-and 
Post-FTA Average Annual Growth Rates, and Change in Growth Rates 
between Periods: 

Table 10: Average Annual Growth Rates of Bilateral Trade with Partner 
Countries Pre-and Post-FTA and U.S. Growth in Trade with the World for 
Similar Time Periods: 

Figures: 

Figure 1: U.S. Bilateral Trade with Jordan, 1998-2008: 

Figure 2: U.S. Bilateral Trade with Morocco, 1998-2008: 

Figure 3: U.S. Bilateral Trade with Chile, 1998-2008: 

Figure 4: U.S. Bilateral Trade with Singapore, 1998-2008: 

Figure 5: Market Share of the Top Five Exporting Countries to Jordan, 
1999-2007: 

Figure 6: Market Share of the Top Five Exporting Countries to 
Singapore, 1999-2008: 

Figure 7: Market Share of the Top Five Exporting Countries to Chile, 
1998 to 2008: 

Figure 8: Market Share of the Top Five Exporting Countries to Morocco, 
1999 -2007: 

Abbreviations: 

AFBF: American Farm Bureau Federation: 

AmCham: American Chamber of Commerce: 

APHIS: Animal and Plant Health Inspection Service: 

ASEAN: Association of Southeast Asian Nations: 

AVA: Agri-Food and Veterinary Authority: 

BEA: Bureau of Economic Analysis: 

CAFTA-DR: Central America-Dominican Republic Free Trade Agreement: 

CITES: Convention on International Trade in Endangered Species of Wild 
Fauna and Flora: 

CLDP: Commercial Loan Development Program: 

CONAMA: National Commission for Environmental Cooperation: 

DRL: Democracy, Human Rights, and Labor Bureau: 

EAC: Environmental Affairs Council: 

EPA: Environmental Protection Agency: 

EU: European Union: 

FDI: foreign direct investment: 

FTA: free trade agreement: 

GDP: gross domestic product: 

GNI: gross national income: 

GSP: Generalized System of Preferences: 

ILAB: Bureau of International Labor Affairs: 

ILO: International Labor Organization: 

IMF: International Monetary Fund: 

IPR: intellectual property rights: 

ITC: International Trade Commission: 

ITUC: International Trade Union Confederation: 

MAT: marine, aviation and transport insurance: 

MEFTA: Middle East Free Trade Agreement: 

MFN: Most-Favored Nation: 

MNC: multinational corporation: 

MOFA: majority-owned foreign affiliate: 

NAFTA: North American Free Trade Agreement: 

NGO: nongovernmental organization: 

OECD: Organisation for Economic Co-operation and Development: 

OES: Oceans and International Environmental and Scientific Affairs 
Bureau: 

OMB: Office of Management and Budget: 

PhRMA: Pharmaceutical Research and Manufacturers of America: 

PPP: purchasing power parity: 

QIZ: Qualifying Industrial Zone: 

SPS: sanitary and phytosanitary: 

TEPAC: Trade and Environment Policy Advisory Committee: 

TPA: Trade Promotion Authority: 

UN: United Nations: 

UNCTAD: United Nations Conference on Trade and Development: 

USAID: U.S. Agency for International Development: 

USDA: Department of Agriculture: 

USTR: Office of the United States Trade Representative: 

WTO: World Trade Organization: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

July 10, 2009: 

The Honorable Max Baucus: 
Chairman: 
Committee on Finance: 
United States Senate: 

Dear Mr. Chairman: 

Free trade agreements (FTA) have been a major feature of recent U.S. 
trade policy. Their growth was spurred by Congress' 2002 renewal of 
presidential Trade Promotion Authority (TPA),[Footnote 1] which had the 
goal of promoting U.S. and foreign economic growth and lowering 
barriers to (liberalizing) trade through FTAs with specific partners, 
while strengthening protection of workers' rights and the environment. 
Beginning in 2001, Congress approved FTAs with 14 countries, and all of 
these are now in effect, including 4 with the countries highlighted in 
this report--Jordan, Singapore, Chile, and Morocco. 

The current Congress faces several FTA-related questions hinging in 
part on confidence that trade agreements do indeed benefit U.S. 
citizens and that TPA's goals, as set forth in Sections 2102(a) (b) and 
(c) of that statute, and official expectations created by the President 
under Sections 2105 (a), are being achieved. Bills to strengthen 
monitoring and enforcement of FTAs and other trade agreements to better 
assure effective implementation have been introduced. President Obama 
may decide to seek congressional approval of the FTAs with Colombia, 
Panama, and Korea that President Bush finalized. Congress may also need 
to decide whether to provide the President a new grant of trade 
agreement negotiating authority, which lapsed in July 2007. Certain 
members of Congress have said a "time out" on FTAs is in order, 
questioning whether existing agreements are having the positive 
commercial, labor, and environmental effects that were claimed, and 
some suggest more rigorous conditions should be considered for future 
agreements. Others are anxious to press on with trade accords, saying 
they offer American workers benefits and level the playing field at a 
time of economic uncertainty. 

The Office of the United States Trade Representative (USTR) is 
responsible for overseeing implementation of the FTAs as part of its 
overall responsibilities for monitoring and enforcing trade agreements. 
The Departments of Labor (Labor) and State (State) have key 
responsibilities for ongoing cooperation with FTA partners on labor and 
the environment. 

To inform these debates and address the concerns that have been raised 
as to whether the FTAs are achieving Congress' objectives and meeting 
expectations established by Congress and the President for U.S. 
agencies, you asked us to provide an assessment of the progress that 
has been made through FTAs in (1) advancing U.S. economic and 
commercial interests, (2) strengthening labor laws and enforcement in 
partner nations, and (3) strengthening partners' capacity to improve 
and enforce their environmental laws. This work builds on GAO's past 
reports on monitoring and enforcement of trade agreements, factors 
influencing FTA partner selection, and the overall commercial 
significance of FTAs pursued under TPA and the effectiveness of TPA- 
related mechanisms calling for active and meaningful consultations with 
Congress and the private sector on trade negotiations.[Footnote 2] 

To address these objectives and associated U.S. agency responsibilities 
and performance in a concrete manner, we have focused on pre-versus 
post-FTA progress related to four FTAs enacted since 2001 with Jordan, 
Chile, Singapore, and Morocco. These four nations are economically, 
socially, and geographically diverse, and their FTAs are among those in 
force longest. We analyzed the text (agreements and associated annexes) 
of the U.S.-Jordan, U.S.-Chile, U.S.-Singapore, and U.S.-Morocco FTAs; 
related but separate agreements between the United States and each of 
the four countries on environmental cooperation;[Footnote 3] and 
reports or subsequent officially agreed proclamations or plans by the 
United States and these FTA partners associated with the FTAs and 
cooperative mechanisms, such as work plans or plans of action; TPA and 
other relevant laws, regulations, executive orders, Federal Register 
notices, and congressional guidance; and reports submitted to Congress 
in response to TPA requirements, including those submitted in 
conjunction with FTA implementing legislation. From testimonial 
evidence from officials and experts and from secondary sources, we 
identified and reported on partner laws that were passed or changed in 
connection with or after each FTA's entry into force, and relied on 
characterizations of those changes, the partner's enforcement, and 
remaining challenges from officials and experts. Thus, the information 
on foreign law in this report does not reflect our independent legal 
analysis. We used official U.S. and partner data to analyze trends in 
U.S., international, and national trade and investment data with 
selected partners; and reviewed pertinent academic literature and 
authoritative reports. We met with U.S. agencies and foreign government 
officials and conducted fieldwork in the four selected FTA partner 
nations, and solicited input on experience with FTAs from members of 
the private sector and intergovernmental advisory committees that are 
charged with advising USTR, the President, and Congress on trade 
policy. We also interviewed selected experts, as well as several 
umbrella organizations of business, labor, and environmental groups. 
The fieldwork to partner nations included interviews with in-country 
U.S. and foreign government officials, business groups such as chambers 
of commerce and industry, officials of international organizations such 
as the International Labor Organization (ILO), economists, and trade 
union and environmental groups. Finally, where possible missed 
opportunities for progress or material gaps in agency documentation and 
internal controls became evident in the course of GAO's efforts to 
establish and evaluate FTA-related progress, consistent with generally 
accepted government auditing standards, we also report on these 
deficiencies. 

Key limitations of our work are that the findings are largely limited 
to the partners, private sector representatives, time period, and 
information reviewed. While we considered data on trends after FTA 
implementation and opinions on FTA-induced effects, we did not seek to 
quantitatively isolate FTA-induced effects. We did not independently 
assess partners' laws. Although we gathered information through 
December 2008, the data and foreign interviews do not generally capture 
the full impact of the deterioration in trade that ensued as a result 
of the global financial crisis and economic downturn occurring during 
2008-2009. Moreover, while our overall goal is to shed light on whether 
FTAs are living up to their official goals, this report was not 
designed to assess legal compliance by the United States or its 
partners with FTAs or other requirements. We conducted this performance 
audit from April 2008 to June 2009, in accordance with generally 
accepted government auditing standards. Those standards require that we 
plan and perform the audit to obtain sufficient, appropriate evidence 
to provide a reasonable basis for our findings and conclusions based on 
our audit objectives. We believe that the evidence obtained provides a 
reasonable basis for our findings and conclusions based on our audit 
objectives. For a fuller description of our objectives, scope, and 
methodology, see appendix I. 

Results in Brief: 

The four selected FTAs have largely accomplished U.S. commercial 
objectives. While varying in some details, these FTAs have all 
eliminated import taxes (tariffs) on goods, lowered obstacles to 
services such as banking, increased protection of U.S. intellectual 
property rights (IPR) abroad, and strengthened rules to ensure fairness 
and transparency in government regulation and procurement. Overall 
merchandise trade between the United States and partner countries has 
substantially increased, generally exceeding what was experienced prior 
to FTA implementation. Since FTA implementation, two-way trade with the 
partners has shown actual increases ranging from 42 percent to 259 
percent. Moreover, growth in U.S. exports of many leading agricultural 
goods--such as grains, corn, and almonds--and manufactured goods has 
accelerated, resulting in U.S. suppliers securing a larger share of 
partner country purchases from abroad. Agriculture and machinery in 
particular have seen widespread increases and improvements in U.S. 
market share. In two partner countries, Singapore and Chile, trade in 
services increased, as did the stock of foreign direct investment and 
the sales of foreign affiliates of U.S.-based companies. 
Representatives of a broad range of U.S. industries generally expressed 
satisfaction with FTA results. For example, industry representatives in 
the agricultural sector reported that they have seen benefits in a 
variety of products. In the services and IPR-related industries, gains 
in sales, market share, or legal treatment due to the agreements were 
reported by U.S. express delivery, financial services, information 
services, telecommunications services, and pharmaceutical firms. 
However, disappointments (such as with Chile's IPR implementation) and 
potential import disruptions were also noted in several sectors in the 
United States (such as fruits and vegetables and cotton), prompting 
calls for U.S. agencies to continue to work with partner governments to 
pursue further improvements. 

During and after the FTA negotiations, all of the four countries we 
reviewed enacted improvements to their labor laws. For example, 
according to a Labor report on Morocco's labor rights, Morocco enacted 
a long-stalled overhaul of its labor code, bringing it into closer 
alignment with international norms and TPA goals. Nevertheless, 
significant labor abuses were confirmed by Jordan's government in its 
export garment industry several years after FTA implementation, related 
to poor enforcement of labor laws and an ongoing failure to provide 
full labor rights for migrant workers; Jordan has since begun to 
correct these problems. Other FTA partner countries also reported 
enforcement challenges in key export sectors. U.S. labor rights 
reviews, conducted before the FTAs were implemented, provided 
information on some of these problems, but U.S. agencies did not 
translate them into remedial plans or work with partners on labor 
improvements. Labor's appropriations for technical cooperation on labor 
issues (excluding those related to the elimination of child labor) were 
mostly eliminated just as the FTAs with Chile and Singapore entered 
into effect in 2004. Consequently, U.S. assistance to strengthen 
country capacity to enforce labor laws has since been ad hoc and very 
limited. In addition, U.S. agencies have provided minimal oversight and 
engagement on labor commitments under the FTAs, despite expressed 
interest by or known problems in some partner countries. 

The selected trade partners have made several improvements to 
environmental laws since their FTAs were signed, according to U.S. and 
partner government officials. Although most changes were not made in 
direct response to requirements in the FTA, partner officials stressed 
that having environmental obligations in FTAs had brought attention to 
environmental protection and heightened the urgency of taking action. 
Nevertheless, officials in most of the selected trade partner countries 
reported that enforcement of environmental laws remains a challenge, 
and that some environmental concerns--such as the impact of apparel 
production on Jordan's water and pollution from salmon farming and 
other resource-intensive exports in Chile--have grown. Our fieldwork 
revealed examples of environmental progress, such as establishment of 
an environmental ministry and a 400-strong environmental law 
enforcement force in Jordan, partly due to U.S. assistance. However, 
some experts said that without more U.S. resources, commitment, and 
oversight, environmental provisions in FTAs and the accompanying 
cooperation agreements will do little to help strengthen environmental 
protections in partner countries. USTR's sporadic monitoring of partner 
implementation of FTA environmental provisions, State's lack of a 
systematic means to monitor FTA environmental projects, and U.S. 
agencies' collective failure to translate FTA environmental commitments 
into reliable funding have also undercut efforts to promote partner 
progress in strengthening environmental capacity. For example, in 
Chile, expected U.S. follow-up to the initial pilot projects did not 
occur and, in Morocco, just 8 of the 24 planned cooperative activities 
were completed. 

To build and improve upon the mixed record of FTA progress in these 
areas, GAO recommends that agencies review and update their plans for 
implementing and overseeing FTAs with a view to making the plans more 
effective in producing expected results such as labor and environmental 
progress. 

USTR, State, and Labor indicated that they intend to improve monitoring 
and enforcement of FTAs. However, State urged GAO to give partner 
governments and U.S. agencies more credit for post-FTA improvements in 
partners' structural and institutional capacity to protect the 
environment and labor rights. State and USTR also took issue with the 
basis and balance for some of GAO's findings and provided technical 
corrections. GAO made several adjustments in response, but continues to 
believe more a robust approach to FTA implementation is needed to 
address the remaining challenges three of the four partners' face in 
assuring labor and environmental protection. 

Background: 

FTAs Are a Major Component of Recent U.S. Trade Policy: 

Expanding trade by lowering tariffs and other less tangible barriers to 
trade offers Americans potential benefits such as enhanced efficiency, 
lower prices, and greater choice. But such trade liberalization can 
involve costs and has often proved controversial. Export growth was one 
of the few bright spots in U.S. economic performance in 2008, and the 
importance of trade to the U.S. economy has grown markedly over the 
past decade. Yet, polls show growing U.S. public skepticism of trade's 
benefit amidst concerns over manufacturing job losses and rising income 
inequality. 

FTAs--which phase out barriers to trade in goods with particular 
countries or groups of countries and contain rules designed to improve 
access for U.S. services, investment, and IPR--have been a major 
component of U.S. trade policy in recent years. After an 8-year gap 
that began shortly after the North American Free Trade Agreement 
(NAFTA) entered into effect in 1994, TPA for the President was restored 
by the Trade Act of 2002 and extended through July 1, 2007.[Footnote 4] 
FTAs were aggressively pursued as part of a three-pronged U.S. strategy 
to liberalize trade and level the playing field abroad for U.S. 
producers and workers: multilaterally at the World Trade Organization 
(WTO), regionally, and bilaterally. President Clinton began the 
endeavor shortly before leaving office in early 2001, finishing 
negotiations with Jordan and announcing the start of negotiations with 
Singapore and Chile. President Bush finalized these and other accords 
and secured their passage by Congress. Meanwhile, global negotiations 
at the WTO have been slow and regional negotiations such as toward a 
Free Trade Area of the Americas have foundered. FTAs are thus one of 
the major results of U.S. trade liberalization efforts over the past 
decade, along with negotiating WTO accessions by China, Vietnam, and 
others. 

Numerous FTAs Containing Labor and Environmental Provisions Are Now in 
Effect: 

FTAs with 14 countries have entered into effect since 2001,[Footnote 5] 
bringing the total number of countries with FTAs in effect to 17. Three 
more await a decision by President Obama on whether to seek 
congressional action on legislation approving and implementing these 
FTAs.[Footnote 6] While most are individually small, collectively they 
account for a significant share of U.S. trade and foreign direct 
investment--31 percent in 2008 and 25 percent in 2007, respectively. 

Controversy over labor and the environment was a major factor in 
Congress' allowing the President's TPA negotiating authority (sometimes 
called "fast track" authority) to lapse during the 1994-2002 period. 
The inclusion of worker protection language had been a part of 
congressional trade policy goals for decades. But passage in 1993 of 
NAFTA and its accompanying agreements on labor and the environment did 
not assuage critics concerned that competition with developing Mexico 
would result in a "race to the bottom" for U.S. workers and producers. 
Passed in August 2002, TPA represents the deal struck by Congress to 
balance U.S. commercial interests with other U.S. goals and values, 
such as protecting the environment and workers. 

FTAs Selected for This Report Reflect Diverse Range of U.S. FTA 
Partners: 

The countries with which FTAs have been concluded vary considerably. In 
a November 2007 report,[Footnote 7] we noted that the FTA partners were 
selected by the President and USTR for a variety of geopolitical and 
commercial reasons and represent a diverse mix. Some partners, such as 
Australia, are both high income and highly developed, according to 
widely reported indicators such as the United Nations' Human 
Development Index. However, many of the agreements are with developing 
nations with much lower income and human development levels. FTA 
partner governments' records of economic and political freedom also 
range widely. Many were chosen in part due to their embrace of market- 
oriented reform and willingness to lead regionally and globally on key 
U.S. interests such as fostering peace, countering terrorism, and 
liberalizing trade. Indeed, several already had or have since concluded 
FTAs with key U.S. competitors such as the European Union (EU), Canada, 
or Japan. 

The four partners on which we chose to focus--Jordan, Singapore, Chile, 
and Morocco--were selected after considering variables such as 
development status and dates for entry into force, and reflect a cross 
section of the larger group's country characteristics and the regional 
dispersion of U.S. FTAs across Asia, Latin America, and the Middle 
East. Yet each has unique characteristics, including the following: 

* Singapore, a diverse city-state and trading hub with a highly 
developed economy where trade in services plays a very significant 
role, is the United States' twelfth largest export market, with a 
positive U.S. trade balance in 2008. 

* Chile, is a resource-rich, middle-income economy with a transparent 
and liberal trade and investment regime that has made impressive 
inroads in reducing poverty. Chile represents our twenty-fourth largest 
export market in 2008 and has a strong complementary trading 
relationship with the United States, notably in agriculture. 

* Morocco, a lower middle income developing country that represented 
only about 0.1 percent of U.S. exports in 2008, has typically been a 
closer trading partner with the EU due to cultural, language, 
transportation, and social ties, especially to France. 

* Jordan, a resource-poor small developing country with which the 
United States now has a trade deficit, acceded to the WTO in 2000, and 
was the first Arab country associated with the Middle East peace 
process to sign an FTA with the United States. This FTA is less 
comprehensive in scope than post-TPA agreements. 

Such country differences, as well as the length of time FTAs have been 
in force, likely affect FTA results. Jordan's FTA has been in effect 
longest (since December 2001). Chile and Singapore's FTAs entered into 
effect on January 1, 2004. Morocco's FTA has been in effect since 
January 1, 2006. 

FTA Provisions Vary but Reflect TPA Commercial, Environmental, and 
Labor Goals: 

TPA sets a series of economic/commercial, environmental, and labor 
negotiating objectives, as well as procedures for action of legislation 
approving and implementing trade agreements. These range in specificity 
from broad to highly detailed. The objectives provide guidelines the 
administration is to consider in negotiating FTAs and have generally 
been reflected in the FTAs we reviewed. They also provide perspective 
for evaluating how progress through FTAs compares with established 
congressional expectations for the FTAs and the U.S. agencies that 
administer them. 

Generally, TPA's commercial objectives call for lowering barriers to 
U.S. exports, securing a more level playing field abroad for U.S. 
exporters, and strengthening trade rules through actions such as by 
improving protection abroad of U.S. intellectual property rights and 
investment. The Jordan FTA predates TPA. Though just 19 pages long, it 
eliminates tariffs on most goods, liberalizes services, and strengthens 
IPR. It was also the first agreement to include labor and environmental 
provisions in the body of the FTA; these provisions were a partial 
basis for TPA and subsequent FTAs. The FTAs negotiated since then 
generally reflect TPA guidance and tend to follow a similar format. For 
example, in the 200-plus page body of the Singapore FTA, 16 chapters 
address trade, investment, and other commercial issues; 3 chapters 
cover general transparency, administration, and dispute settlement; and 
1 chapter each addresses labor and the environment. Following the 
economic and commercial goals of TPA since 2002, FTAs contain similar 
elements of market liberalization, including eliminating barriers on 
trade in goods and services, opening trade to agricultural products, 
protecting investments, strengthening IPR and enforcement, and 
increasing regulatory and administrative transparency, in many cases 
immediately. They also provide for rules of origin and dispute 
settlement. The labor and environment provisions of the FTAs generally 
are less prescriptive and more aspirational than some of the commercial 
provisions.[Footnote 8] Notably, nearly all of the more extensive 
commercial commitments are subject to dispute settlement and possible 
trade measures for failure to comply, versus one commitment in the post-
TPA FTAs' environment and labor chapters--that a party shall not fail 
to effectively enforce its labor/environmental laws, through a 
sustained or recurring course of action or inaction, in a manner 
affecting trade between the parties. To address the rest of the 
commitments in the environment and labor chapters, TPA calls for and 
the FTAs establish consultative or diplomatic means to strengthen 
partners' capacity to respect labor rights and protect the environment 
over time. 

Consistent with TPA priorities and FTA requirements, cooperation 
mechanisms were developed with each partner on labor and environmental 
matters. Among other things, these were to exchange information, 
establish priorities, develop specific activities or projects, and 
generally promote implementation of goals agreed in discussions under 
the mechanism on labor and the environment. The form of these 
mechanisms varies. For example, after all four FTAs were concluded, 
separate agreements on environmental cooperation were reached with 
these FTA partners.[Footnote 9] However, for Chile, Singapore, and 
Morocco, the environmental cooperative agreements state that the 
realization of cooperation activities is contingent on the availability 
of necessary resources. 

The President must submit reports explaining how the FTAs make progress 
toward TPA objectives when he submits FTAs to Congress for approval. In 
each instance, the President attested that the FTAs advanced TPA's U.S. 
commercial objectives and helped assure labor and environment 
protection. For example, in a June 2005 report he explained that each 
FTA negotiated under TPA includes labor and environmental chapters with 
obligations aimed at ensuring that FTA partners meet the labor and 
environmental objectives of TPA. He further stated that mechanisms for 
ongoing labor and environmental cooperation were negotiated and that 
all of these FTAs call for cooperative projects to support 
environmental protection. The formal advisory committees on trade 
policy and negotiation generally concurred with this assessment, with 
some caveats or objections. Notably, the Labor Advisory Committee 
consistently raised concerns that the labor chapters in post-TPA FTAs 
did not meet TPA objectives, in part due to their limited 
enforceability, and several concerns were raised by certain 
environmental, industry, and intergovernmental advisors. TPA does not 
generally require subsequent reports,[Footnote 10] although a one-time 
report was required as a condition of the extension of TPA through June 
2007 requested by the President. USTR nonetheless has an ongoing 
requirement to provide reports to the President and Congress on the 
operation of trade agreements. 

Several U.S. Agencies Are Responsible for FTA Implementation and 
Monitoring: 

Several U.S. agencies play key roles in FTA implementation and 
monitoring. The United States Trade Representative is the President's 
principal adviser and spokesperson on trade and has lead responsibility 
for negotiating trade agreements, including FTAs, as well as developing 
and coordinating U.S. trade policy and issuing policy guidance related 
to international trade functions. It is responsible to the President 
and Congress for the administration of trade agreements.[Footnote 11] 
USTR coordinates the administration's monitoring of foreign government 
compliance with trade agreements and pursues enforcement actions with 
the aim of ensuring that these agreements yield the maximum benefits 
for Americans and create a fair, open, and predictable trading 
environment. According to USTR, this includes asserting U.S. rights, 
vigorously monitoring and enforcing bilateral agreements, providing 
technical assistance to trading partners, and promoting U.S. interests 
under FTAs, including labor and environmental interests. 

In earlier reports on USTR's monitoring and enforcement efforts, GAO 
noted that experts and officials agree U.S. government monitoring and 
enforcement efforts should attain three broad goals: ensuring foreign 
compliance, providing credible deterrence, and inspiring confidence. 
Specifically, they agreed that vigorous U.S. efforts are necessary to 
ensure foreign partners fulfill trade agreement obligations and that 
U.S. firms fully realize the improvements in market access these 
agreements offer. Credible deterrent efforts improve the likelihood 
foreign partners will fully implement their commitments. A reliable, 
well-functioning monitoring and enforcement effort helps sustain 
congressional and public confidence in the President's trade strategy 
and fosters support for continued trade liberalization. Indeed, as the 
USTR General Counsel testified before the Senate Committee on Finance, 
"Without enforcement, a trade agreement is just a piece of 
paper."[Footnote 12] Though he went on to assure the committee that 
USTR is "committed to using every tool in the U.S. trade arsenal to 
ensure a level playing field for American workers, farmers, and 
entrepreneurs," our past GAO reports found both signs of, and room for, 
improvement in U.S. monitoring and enforcement efforts. We further 
identified several key steps in monitoring and enforcing trade 
agreements, notably (1) identifying problems, (2) setting priorities, 
(3) gathering and analyzing information, (4) developing responses, and 
(5) taking enforcement action.[Footnote 13] While the agencies' goal is 
to identify important trade agreement compliance problems (rather than 
monitor all aspects of every agreement), both reactive and proactive 
efforts are used. The trade principles at stake are often considered 
equally or more important than the amount of trade involved. 

USTR is designated as the principal contact point under each FTA 
agreement. Among other things, USTR plans and conducts meetings, with 
partners, of general FTA oversight mechanisms. USTR is also the contact 
point for FTA environmental provisions. Many of the specific functions 
and requirements established in TPA were delegated by the President to 
USTR. One specific requirement to provide a report to Congress on plans 
for implementing and enforcing FTAs was delegated to USTR and then 
redelegated to the Director of the Office of Management and Budget. 
[Footnote 14] Among other things, these plans were to identify the 
resources necessary to implement the accords. 

Other agencies, notably the Departments of Commerce (Commerce), Labor, 
and State, play important roles in FTA oversight and implementation, 
including the following: 

* Commerce is responsible for monitoring compliance with economic and 
commercial aspects of the agreements. Commerce's Market Access and 
Compliance unit, for example, prepared the prevote reports analyzing 
how FTAs advance U.S. commercial objectives and has detailed matrixes 
of FTA commercial requirements and the status of implementation. It 
also issues intermittent analysis of trade trends with FTA partners. 
Commerce's Foreign Commercial Service advocates on behalf of U.S. 
business and works with other parts of the agency and foreign 
counterparts to assist firms facing FTA implementation difficulties and 
promote U.S. exports abroad. 

* Labor has the lead on FTA labor matters, except in the case of 
Jordan. Labor's Bureau of International Labor Affairs (ILAB) is 
designated as the point of contact for implementation of the labor 
provisions of all but the Jordan FTA, as well as for the labor 
cooperation mechanisms.[Footnote 15] Prior to implementation, Labor's 
responsibilities include preparing reports (in consultation with USTR 
and State) on FTA partners' labor rights protections, the potential 
employment impact of agreements on U.S. workers, and FTA partners' 
child labor laws. After FTAs enter into force, Labor's responsibilities 
as contact point include receiving, reviewing, and acting upon any 
concerns raised about partner compliance with FTA labor obligations and 
assisting partners seeking to strengthen their capacity to promote 
respect for core labor standards. Under TPA Labor has an ongoing 
responsibility for planning, developing, and pursuing cooperation with 
partners on labor matters. Labor does not have an in-country presence 
overseas, instead relying on periodic staff travel, as well as outreach 
and reporting by State personnel. 

* Several bureaus at State play roles in FTAs. State's Democracy, Human 
Rights, and Labor Bureau (DRL) coordinates State's in-country labor 
officers, who carry out regular monitoring and reporting and day-to-day 
interaction with foreign governments on labor matters. With USTR and 
Labor, DRL is a member of the interagency team that negotiates the 
labor chapters of FTAs, contributes critical input to the research and 
analysis of labor reports produced by Labor, as required under TPA, and 
provides technical assistance funding to strengthen some countries' 
labor capacity. State's Oceans and International Environmental and 
Scientific Affairs Bureau (OES) has the responsibility to lead on 
international environmental and scientific agreements generally and on 
ongoing cooperative mechanisms, as well as overseeing and facilitating 
U.S. efforts with FTA partners to strengthen environmental capacity. It 
is supported by agencies with line environmental responsibilities, such 
as the Environmental Protection Agency (EPA) and the Department of 
Interior, as well as the U.S. Agency for International Development 
(USAID), which execute and sometimes fund capacity-building projects. 
State's Economics Bureau and regional desks and economics officers are 
also involved in the commercial aspects of FTAs. 

FTA Results Vary among Partner Countries, but Reveal Positive Economic 
and Commercial Outcomes Consistent with TPA Goals: 

Merchandise Trade between the United States and FTA Partner Countries 
Increased: 

U.S. merchandise (goods) trade with the four FTA partners increased 
substantially following the FTAs' entry into force. Total two-way 
trade, U.S. exports, and partner country exports for the four selected 
FTAs all rose. Annual average rates of merchandise trade growth 
increased substantially for the United States and three of the four FTA 
partner countries in the period since the FTAs came into force, 
compared with rates for a similar period prior to the agreements. We 
also observed higher annual average rates of growth for top product 
categories for both U.S. exports and partner country imports. In some 
cases, these also translated into U.S. gains in its share of partner 
country markets relative to the share of other competitors. (More 
detailed commercial/economic results for the four FTAs are examined in 
appendices II through V.) 

In the four FTAs we reviewed, consistent with the TPA objectives, a 
large percentage of goods became duty-free immediately. For example, in 
the Morocco FTA, duties on more than 95 percent of all consumer and 
industrial products were eliminated immediately. In the Chile FTA, the 
agreement allowed for immediate duty-free market access into Chile for 
about 85 percent of all U.S. consumer and industrial goods, with about 
75 percent of all agricultural products entering duty-free. The 
remaining goods represent sensitive products of which barriers were 
removed using staged or scheduled tariff elimination categories over a 
period of years. The Jordan FTA, although in force before TPA, is like 
its post-TPA counterparts we are examining and is consistent with the 
TPA goals of liberalizing and expanding trade.[Footnote 16] 

Prior to the agreements, U.S. trade barriers were lower on average 
compared with FTA partner countries. For example, prior to the Jordan 
FTA, the United States had a mean unweighted tariff rate of 6 percent, 
while Jordan had a mean unweighted tariff rate of 16 percent.[Footnote 
17] Many partner country imports already entered the United States duty 
free, including over 90 percent of imports from Singapore and 70 
percent of imports from Chile,[Footnote 18] in part because the United 
States had granted them benefits under one-way preferential trade 
programs such as the U.S. Generalized System of Preferences (GSP). 

Overall Trade Increased with Four FTA Partner Countries: 

Total two-way trade (U.S. imports plus U.S. exports), U.S. exports, and 
U.S. imports each increased substantially after implementation of the 
four FTA agreements we examined.[Footnote 19] As shown in table 1, 
growth in two-way trade since implementation ranged from 42 percent for 
the Singapore FTA (from 2003 to 2008) to 259 percent for the Jordan FTA 
(from 2001 to 2008). Increases in U.S. exports ranged from 72 percent 
for Singapore to 365 percent for Chile since implementation. U.S. 
import increases ranged from 10 percent for Singapore to 397 percent 
for Jordan. These post-FTA increases do not isolate the effects of the 
FTAs from other trade factors and are based on the total changes in 
actual trade volumes subsequent to implementation. As a result, they 
are not directly analogous to the statutorily required studies prepared 
by the International Trade Commission (ITC) prior to their 
implementation, which predicted generally positive but small effects on 
the U.S. economy and trade overall from these FTAs. [Footnote 20] The 
ITC models did seek to isolate the effects of the FTAs on trade, but 
they could neither measure certain difficult to quantify factors, such 
as nontariff barriers, nor estimate the effects of certain ex post 
factors such as the beneficial impacts of new products being traded due 
to the agreements. [Footnote 21] 

Table 1: Amount of Two-Way Trade, Percent Increase in Two-Way Trade, 
and Percentage Increase in U.S. Exports and Imports, from Year Prior to 
FTAs to 2008 (Dollars in millions): 

Partner country and year prior to FTA implementation: Jordan (2001); 
Two-way trade: Year prior to FTA: $568; 
Two-way trade: 2008: $2,043; 
Increase in two-way trade: 259%; 
Increase in U.S. exports: 167%; 
Increase in U.S. imports: 397%. 

Partner country and year prior to FTA implementation: Morocco (2005); 
Two-way trade: Year prior to FTA: $988; 
Two-way trade: 2008: $2,387; 
Increase in two-way trade: 141%; 
Increase in U.S. exports: 190%; 
Increase in U.S. imports: 87%. 

Partner country and year prior to FTA implementation: Chile (2003); 
Two-way trade: Year prior to FTA: $6,422; 
Two-way trade: 2008: $19,549; 
Increase in two-way trade: 204%; 
Increase in U.S. exports: 365%; 
Increase in U.S. imports: 106%. 

Partner country and year prior to FTA implementation: Singapore (2003); 
Two-way trade: Year prior to FTA: $29,181; 
Two-way trade: 2008: $41,374; 
Increase in two-way trade: 42%; 
Increase in U.S. exports: 72%; 
Increase in U.S. imports: 10%. 

Sources: GAO analysis using data from Commerce and ITC. 

Note: Changes in two-way trade are measured from the dates just prior 
to implementation of the agreement to 2008. For Jordan, since 
implementation was in December 2001, we measured growth in two-way 
trade from 2001 to 2008. 

[End of table] 

Moreover, across partner countries, we found that post-FTA average 
annual growth rates for U.S. exports were all higher than pre-FTA 
annual average growth rates and, in some instances, average growth went 
from negative to positive.[Footnote 22] For example, the post-FTA 
average annual U.S. export growth rate for Chile was 32.6 percent, 
compared with the pre-FTA growth rate, which was -9.1 percent. For U.S. 
imports, we found that average annual growth rates were higher or less 
negative in three out of the four partner countries in the post-FTA 
period, with Jordan having a higher rate of pre-FTA growth. (For a more 
detailed explanation of this analysis, see appendix VI.) 

Figure 1 shows the dramatic increase in U.S. imports since 2000 from 
Jordan, as well as the increase in U.S. exports. Of the four FTAs, U.S. 
imports from Jordan have experienced the largest increase, from $229 
million in 2001 to over $1.139 billion in 2008, while U.S. exports 
increased from $339 million prior to the FTA to about $904 million in 
2008. Between 2002 and 2008, an average of 87 percent of U.S. imports 
from Jordan were textiles and apparel, with much of these imports 
originating from the preexisting U.S. Qualifying Industrial Zone (QIZ) 
program, although exports under the FTA are increasing.[Footnote 23] 
The EU remains the dominant overall foreign supplier in Jordan's 
market, and the U.S. market share has decreased somewhat since the FTA. 

Figure 1: U.S. Bilateral Trade with Jordan, 1998-2008 (Dollars in 
millions): 

[Refer to PDF for image: multiple line graph] 

Year: 1998; 
U.S. exports: $351; 
U.S. imports: $16. 

Year: 1999; 
U.S. exports: $270; 
U.S. imports: $31. 

Year: 2000; 
U.S. exports: $306; 
U.S. imports: $73. 

Year: 2001 (U.S.-Jordan FTA signed); 
U.S. exports: $339; 
U.S. imports: $229. 

Year: 2002; 
U.S. exports: $397; 
U.S. imports: $412. 

Year: 2003; 
U.S. exports: $479; 
U.S. imports: $673. 

Year: 2004; 
U.S. exports: $531; 
U.S. imports: $1093. 

Year: 2005; 
U.S. exports: $607; 
U.S. imports: $1267. 

Year: 2006; 
U.S. exports: $623; 
U.S. imports: $1421. 

Year: 2007; 
U.S. exports: $832; 
U.S. imports: $1333. 

Year: 2008; 
U.S. exports: $904; 
U.S. imports: $1139. 

Sources: GAO analysis using data from Commerce and ITC. 

[End of figure] 

As figure 2 shows, from 2005 through 2008, U.S. exports to Morocco grew 
190 percent, from $519 million to over $1.5 billion, while imports from 
Morocco grew by 87 percent, from $470 million to about $880 million. 
The EU still has the largest overall share in this market, at 63 
percent in 2008. The U.S. market share increased marginally since 
before the FTA went into force, from 3 percent in 2005 to 5 percent in 
2008. However, in several important agricultural products/sectors, such 
as cereals and soybean oil cake, the U.S. increased market share grew 
substantially during this period. In addition to the effects of the 
FTA, several factors led to higher U.S. gains in the value of exports 
to Morocco during this period compared with Moroccan exports to the 
United States. These factors included the drought in Morocco in 2007, 
which caused its government to lift tariff-rate quotas on its own, 
higher worldwide commodity prices, and an exchange rate favorable to 
the United States. 

Figure 2: U.S. Bilateral Trade with Morocco, 1998-2008 (Dollars in 
millions): 

[Refer to PDF for image: multiple line graph] 

Year: 1998; 
U.S. exports: $549; 
U.S. imports: $352. 

Year: 1999; 
U.S. exports: $571; 
U.S. imports: $414. 

Year: 2000; 
U.S. exports: $522 
U.S. imports: $456. 

Year: 2001; 
U.S. exports: $283; 
U.S. imports: $452. 

Year: 2002; 
U.S. exports: $560; 
U.S. imports: $410. 

Year: 2003; 
U.S. exports: $463; 
U.S. imports: $396. 

Year: 2004; 
U.S. exports: $516; 
U.S. imports: $545. 

Year: 2005 (U.S.-Morocco FTA signed); 
U.S. exports: $519; 
U.S. imports: $470. 

Year: 2006; 
U.S. exports: $869; 
U.S. imports: $546. 

Year: 2007; 
U.S. exports: $1334; 
U.S. imports: $626. 

Year: 2008; 
U.S. exports: $1506; 
U.S. imports: $880. 

Sources: GAO analysis using data from Commerce and ITC. 

[End of figure] 

Figure 3 shows that both U.S. exports and imports from Chile increased 
following the Chile FTA. Specifically, total U.S. exports to Chile 
increased by 365 percent, from $2.4 billion to $11.4 billion from 2003 
to 2008, and Chile's exports to the United States rose from $4 billion 
to $8.2 billion, or by 106 percent. U.S. agricultural exports increased 
tenfold and U.S. exports to Chile of intermediate or capital goods 
exports rose markedly. After the agreement came into force, the United 
States steadily regained its overall market share in the Chilean market 
that it had lost prior to the FTA. Other trading partners had secured 
FTAs there first, notably countries in the Mercosur regional trade 
agreement, as well as Canada and the EU.[Footnote 24] In 2008, the U.S. 
share of Chile's market finally reached the pre-FTA levels that it had 
in 2001. U.S. imports from Chile dropped somewhat in 2007 and 2008, due 
to increased exports of copper to China, with which Chile signed an FTA 
that entered into force in 2006, as well as the global economic 
downturn in 2008. While Chilean officials noted that they were looking 
to see increases in manufacturing goods exports following the FTA, most 
Chilean exports to the United States have consisted of natural resource 
exports such as those from mining, fisheries, and agriculture. 

Figure 3: U.S. Bilateral Trade with Chile, 1998-2008 (Dollars in 
millions): 

[Refer to PDF for image: multiple line graph] 

Year: 1998; 
U.S. exports: $3.7; 
U.S. imports: $2.3. 

Year: 1999; 
U.S. exports: $2.9; 
U.S. imports: $2.8. 

Year: 2000; 
U.S. exports: $3.2; 
U.S. imports: $3.3. 

Year: 2001; 
U.S. exports: $2.8; 
U.S. imports: $3.3. 

Year: 2002; 
U.S. exports: $2.3; 
U.S. imports: $3.6. 

Year: 2003 (U.S.-Chile FTA signed); 
U.S. exports: $2.4; 
U.S. imports: $4.0. 

Year: 2004; 
U.S. exports: $3.2; 
U.S. imports: $5.0. 

Year: 2005; 
U.S. exports: $4.7; 
U.S. imports: $6.7. 

Year: 2006; 
U.S. exports: $6.2; 
U.S. imports: $9.6. 

Year: 2007; 
U.S. exports: $7.6; 
U.S. imports: $9.0. 

Year: 2008; 
U.S. exports: $11.4; 
U.S. imports: $8.2. 

Sources: GAO analysis using data from Commerce and ITC. 

[End of figure] 

Figure 4 displays bilateral trade with Singapore before and after the 
FTA. Since the FTA, U.S. exports to Singapore have grown by 72 percent, 
from $14.9 billion in 2003 to $25.7 billion in 2008, while imports from 
Singapore have grown by 10 percent, from $14.3 billion to $15.7 
billion. Although total U.S. market share in Singapore has declined 
slightly, from 13 to 12 percent from 2003 to 2008, the United States 
has remained a major competitor despite several other trade agreements 
by Singapore with key trading partners, such as China, Malaysia, and 
Japan. The top valued, higher growth U.S. exports to Singapore in 2008 
included electrical machinery such as semiconductors and related 
devices, as well as other industrial machinery, such as excavating, 
paving, and construction machinery. While total U.S. imports from 
Singapore have grown overall since 2003, they have faced intensified 
competition from Asian suppliers such as China and India. Moreover, in 
2008, the global financial downturn especially impacted U.S. imports 
from Singapore, which is highly dependent on exports of finished goods. 

Figure 4: U.S. Bilateral Trade with Singapore, 1998-2008 (Dollars in 
millions): 

[Refer to PDF for image: multiple line graph] 

Year: 1998; 
U.S. exports: $14.2; 
U.S. imports: $18.2. 

Year: 1999; 
U.S. exports: $14.8; 
U.S. imports: $18.1. 

Year: 2000; 
U.S. exports: $16.0; 
U.S. imports: $19.1. 

Year: 2001; 
U.S. exports: $15.8; 
U.S. imports: $14.9. 

Year: 2002; 
U.S. exports: $14.7; 
U.S. imports: $14.1. 

Year: 2003 (U.S.-Singapore FTA signed); 
U.S. exports: $14.9; 
U.S. imports: $14.3. 

Year: 2004; 
U.S. exports: $17.8; 
U.S. imports: $14.8. 

Year: 2005; 
U.S. exports: $18.7; 
U.S. imports: $15.1. 

Year: 2006; 
U.S. exports: $21.9; 
U.S. imports: $17.6. 

Year: 2007; 
U.S. exports: $23.6; 
U.S. imports: $19.1. 

Year: 2008; 
U.S. exports: $25.7; 
U.S. imports: $15.7. 

Sources: GAO analysis using data from Commerce and ITC. 

[End of figure] 

Majority of Leading Product Categories Experienced Increased Growth 
Rates: 

To examine how the United States and partner countries benefited from 
the FTAs at the product category/sector level, we analyzed (1) the pre- 
and post-FTA growth rates at the product category level for trade with 
each partner, (2) market share data for trade among countries in the 
FTA markets, and (3) product/sector data obtained from our partner- 
country visits where available. We found that for trade with the four 
selected FTA partner countries, from 60 to 100 percent of the top 25 
U.S. export product categories by value experienced increased rates of 
annual average growth after the FTAs were in force.[Footnote 25] 
Specifically, average annual growth rates increased in the post-FTA 
time period for 100 percent of the top 25 export categories to Chile, 
92 percent of the top export categories to Singapore, 64 percent of 
these categories to Jordan, and 60 percent to Morocco. For U.S. import 
categories, two out of the four selected FTA partner countries, Chile 
and Singapore, experienced increased rates of growth for a majority of 
their product categories after the agreements came into force.[Footnote 
26] (For a more detailed examination of these product categories, see 
apps. II through V.) Moreover, several broader sectors of the U.S. 
economy, including agriculture and manufacturing, made substantial 
gains in market share versus other suppliers following implementation 
of the FTAs. 

Among sectors, we found that U.S. agricultural exports, such as wheat, 
corn, rice, edible fruits and nuts, and dairy products, grew 
substantially post-FTA in several partner countries, with U.S. market 
share gaining against major trading partners. For example, U.S. exports 
to Chile of agricultural, horticultural products, and livestock, grew 
tenfold, from $25 million in 2004 to $256 million in 2007. The United 
States' share of Chile's total agricultural imports rose significantly, 
from 6 percent in 2004 to 26 percent in 2007. In the dairy sector for 
instance, the U.S. Dairy Export Council explained that, because of 
reductions in tariffs and adjustments to their inspection system for 
dairy products under the Chilean FTA, U.S. exports had increased by 
tenfold. In the Jordanian corn market, U.S. market share grew from just 
3 percent in 2001 to 77 percent in 2007 after the 5 percent tariff on 
grains being removed by the FTA. There were also increases in U.S sales 
of almonds to Jordan, from $3 million to almost $12 million in 2007, 
after duties were lowered. 

Numerous U.S. manufacturing sectors--such as construction equipment to 
Morocco, automobiles to Jordan and Chile, and machinery, gas turbines, 
and optical/medical equipment to Singapore--also showed significant 
gains in U.S. exports to FTA partners and increases in U.S. market 
share. For example, U.S. exports of machinery increased from about $4.8 
billion in 2003 to over $9 billion in 2007 following the FTA with 
Singapore in 2004. Sales of gas turbines to Singapore increased 
threefold, from about $650 million before the FTA came into force, to 
almost $1.8 billion in 2007. The elimination of Chile's luxury tax on 
imported cars, along with tariff reductions, also spurred greater U.S. 
automobile exports. 

In some instances, reduced trade barriers led to circular flows of 
trade that benefited both parties of an agreement. We were told by the 
American Forest and Paper Association that increased amounts of kraft 
liner that go into the production of corrugated boxes were exported to 
Chile to accommodate increases in Chilean agricultural exports to the 
United States, both of which received reductions in duties after the 
Chile FTA. According to U.S. and Singapore officials we spoke with, the 
greater IPR protection and enforcement resulting from the FTA were 
factors encouraging more investment by U.S. pharmaceutical firms in 
Singapore. These firms import pharmaceutical manufacturing equipment 
and drug components for the manufacture of pharmaceuticals that are 
exported in bulk back to the United States, where they are then 
marketed to the United States and the world. 

Trade in Services Increases: 

Singapore: 

For the FTAs we studied, Singapore has the highest level of bilateral 
services trade, with the United States exporting over $7 billion, and 
importing almost $4 billion, for a services trade surplus of over $3 
billion in 2007. U.S. service exports to Singapore grew 24 percent from 
the average level of the pre-FTA 3-year period 2001-2003 to 2007, 
while, U.S. service imports from Singapore grew by 90 percent. For both 
exports and imports, substantial gains have taken place in the broad 
category "other private services," within which the subcategory 
"business, professional and technical services" has shown very high 
growth. These exports to Singapore grew over 800 percent, and imports 
to the United States grew over 1,200 percent. The "royalties and 
license fees" category also had a sizable increase. Some of the export 
growth of these categories is likely associated with the improved 
market access and IPR environment resulting from the FTA. 

Chile: 

Services trade with Chile during the period since FTA implementation 
has also shown substantial growth. In 2007, U.S. services exports to 
Chile were $1.76 billion, and U.S. imports were $868 million, for a 
trade surplus of $888 million. U.S. exports to Chile grew 47 percent 
compared with the pre-FTA period, while imports grew just 19 percent. 
Exports in the "other private services" category grew 100 percent, and 
"business, professional and technical services" grew by 168 percent. 
Also, royalties and licensure fees" grew 140 percent. 

Jordan and Morocco: 

For Jordan and Morocco, the Bureau of Economic Analysis (BEA) does not 
provide separate data on services trade, and this hampers our ability 
to assess the U.S. role in these countries. United Nations' data do 
show, however, that both of these countries have experienced 
substantial growth in their worldwide services trade. Since 2001, 
Jordan has experienced growth of 96 percent in its service exports, to 
a level of $2.9 billion in 2007. For the same period, Jordan's imports 
of services grew 78 percent, to a level of $3.1 billion. As for 
Morocco, since 2001, service exports grew over 230 percent, to a level 
of $13.4 billion. Morocco's service imports grew 181 percent, to a 
level of almost $6 billion. While the United States no doubt shared in 
some of this overall services trade growth by Jordan and Morocco, we 
cannot assess U.S. performance. 

As the data on services trade show, worldwide growth during the 2000s 
and the periods of FTA implementation mean that the overall U.S. share 
of worldwide services trade has experienced a declining trend. Yet, the 
United States experienced substantial services trade growth in both 
Singapore and Chile. Moreover, strong growth was apparent in service 
sector categories that are associated with provisions of the FTAs. 

Foreign Direct Investment and Affiliate Sales Increase: 

Singapore: 

The data on foreign direct investment (FDI) suggest that the post-FTA 
period has seen bilateral growth with Singapore and greater economic 
integration between the partners. In 2007, the U.S. stock of FDI in 
Singapore (outward FDI) reached over $82 billion. This is 73 percent 
higher than that during 2001-2003, prior to the FTA. Singapore's share 
of overall U.S. FDI has remained stable at about 3 percent.[Footnote 
27] 

The level of FDI in the United States by Singapore firms (inward FDI) 
has also grown. In 2007, inward FDI from Singapore had grown over 370 
percent compared with 2003, the year prior to FTA implementation. 
Singapore government data suggest that its FDI in the United States is 
concentrated in financial services and manufacturing. 

An indicator of greater economic integration is the growth in sales by 
majority-owned foreign affiliates (MOFA) of U.S. multinational 
corporations (MNC). These sales can be viewed as a complement to FDI in 
so far as the investment in foreign affiliates leads to greater access 
to the domestic market. In fact, sales by foreign affiliates can exceed 
the amount of cross-border trade in goods and services. BEA data show 
that, in 2006, U.S. MOFAs in Singapore had sales of $193 billion. 
Compared with the 3-year period prior to the FTA (2001-2003), total 
U.S. affiliate sales grew over 117 percent.[Footnote 28] 

Chile: 

The Chile FTA sought to consolidate Chile as a secure location for 
foreign investment and improve the IPR environment, according to 
Commerce. The United States was already one of the major foreign 
investors in Chile prior to the FTA, even though FDI in Chile has 
generally been less than 1 percent of total U.S. FDI. BEA data show 
that in 2007 the U.S. stock of FDI in Chile totaled $12.6 billion. This 
level represents growth of 33 percent compared with the average level 
of the 3-year period prior to the FTA, 2001-03. While no one sector 
strongly dominates as a target for U.S. FDI in Chile, the financial 
sectors and manufacturing garner substantial shares, with chemicals 
playing a strong role within the manufacturing sector. The stock of FDI 
by Chilean entities in the United States is small and has not shown 
much growth in the post-FTA period. 

Sales by MOFAs of U.S. multinationals in Chile totaled about $14.8 
billion in 2006, based on preliminary BEA data. Compared with the 3- 
year average prior to the FTA, total U.S. affiliate sales in Chile grew 
72 percent, with sales of goods growing faster than sales of services. 

Jordan and Morocco[Footnote 29] 

U.S. FDI in Jordan and Morocco also grew following FTA implementation, 
but by less than FDI from other nations. Recent BEA data show that U.S. 
FDI in Jordan was $119 million in 2007, up from $39 million in 2006. 
U.S. FDI in Morocco was $238 million in 2007, a substantial increase 
over the $130 million level attained in 2006, the first year of the 
Morocco FTA. However, this 2007 level is still lower than the stock of 
U.S. FDI in the period 2001-2003. 

Both Jordan and Morocco experienced even stronger growth in total 
inward FDI from the world during the 2000s, according to data from the 
United Nations Conference on Trade and Development (UNCTAD). In Jordan, 
inward FDI holdings more than tripled from $4 billion in 2002 to over 
$14.5 billion in 2007.[Footnote 30] In Morocco, between 2000 and 2007, 
worldwide inward FDI grew at an annual rate of over 50 percent, 
attaining a level of $32.5 billion in 2007. Comparing these figures 
with the U.S. totals from BEA gives some indication that the United 
States has yet to play a significant role in FDI in these countries. 

U.S. Industry and In-Country Officials Expressed General Satisfaction 
with FTA Results, While Indicating Several Outstanding Concerns: 

Information we obtained from a cross section of agriculture, 
manufacturing, services, and IP-related industry representatives on 
committees that advise the U.S. government generally suggest that, to 
date, FTAs have provided direct and indirect commercial benefits to 
U.S. businesses across a range of sectors. While acknowledging that 
other industry and macroeconomic factors are also at work, most 
business groups that we contacted reported FTAs had played a role in 
these favorable trade and investment trends. Among the more significant 
beneficial provisions of the FTAs identified by the private sector were 
tariff cuts, strengthened IPR, and improved regulatory frameworks as 
follows: 

* Agricultural interests that advise the U.S. government were generally 
enthusiastic about their experience with FTAs, reporting improved 
market access in a variety of product areas, such as processed food, 
dairy, grains, almonds, tree fruits, and, to a certain extent, meat. 
Sectors that are highly protected, such as sugar, reported that these 
FTAs would not affect them since all of these countries are net sugar 
importers. Other product areas, such as certain U.S. beef and chicken 
meat products, still face certain nontariff barriers to trade and do 
not have full access to these FTA markets. 

* Manufacturing FTA-related gains were reported by industries such as 
U.S. construction equipment, industrial equipment, and electrical 
machinery, while some others, such as textiles and apparel, and the 
chemicals industry, reported mixed to no impact. For instance, the 
Industrial Equipment Manufacturers, an association representing 800 
manufacturers of industrial equipment used in the construction, 
agriculture, mining, forestry, and utility sectors, report that their 
members have seen sharp increases in exports to Chile, Singapore, and 
Morocco after the FTAs went into effect. Officials of the chemicals 
industry, on the other hand, reported that while FTAs had some impact 
on increases in exports, they believed that this was more due to 
overall growth in demand and other factors. 

* Many services trade and intellectual property-related industries 
reported gains due to FTA market-opening provisions in services, 
improved investor protections, strengthened IPR, procurement 
liberalization, and regulatory transparency. These industries included 
express delivery, financial services, pharmaceuticals, business 
software, and information services. 

In addition, evidence we gathered on fieldwork in partner countries, 
including the views of the United States and partner country officials 
and a range of market participants, reveals a generally positive view 
of the impact and results of the FTAs. 

Continued Focus on Outstanding Trade Concerns Urged by Private Sector, 
United States, and Partner Country Officials: 

Despite the overall positive tenor of views about the FTAs' commercial 
results, some outstanding concerns remain among U.S. private sector 
groups, as well as among U.S. and partner governments. As a result, 
continued efforts to resolve outstanding issues were urged, 
specifically the following: 

* In a few U.S. industries, concerns were expressed about actual or 
potential displacement (cotton, fruit, and vegetable producers). Others 
said that the FTAs haven't achieved their full potential and may 
involve some costs due to varying rules of origin and cumbersome 
paperwork (for example, businesses in the express delivery sector said 
they benefit from innovative market access and treatment provisions, 
but they find FTA-related paperwork and packing requirements can 
counter their strengths in global supply chain support and "hub and 
spoke" redistribution systems). 

* From a U.S. government perspective, IPR-related issues in Chile have 
not been adequately addressed and have since been elevated by USTR to 
the Special 301 Priority Watch list in 2006 and 2007.[Footnote 31] U.S. 
officials and the private sector remain frustrated by Chile's slow and 
incomplete implementation of its FTA IPR obligations, particularly 
since this was billed as being a major benefit of the FTA for the 
United States. The United States and Chile have previously conducted a 
review of Chile's implementation of several of its IPR obligations 
under the FTA and plan continued engagement on these issues in 2009. 

* In Chile, some concern and disappointment was expressed by officials 
with the level of trade in services and U.S. investment since the FTA 
was implemented. In addition, Chilean officials said that Chile's FTAs 
with other partners (such as Mexico) were more flexible and contain 
cumulation provisions that allow inputs from other countries.[Footnote 
32] 

* Regarding Jordan, a representative of U.S. fabric producers suggested 
FTAs as a whole have been quite helpful and important to the industry's 
survival by creating export markets for U.S. fabric. However, he also 
expressed concern that imports from Jordan and other suppliers with 
preferential access to the United States without requirements to use 
U.S. fabric were undermining apparel producers under NAFTA and the 
Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) that 
do use U.S. inputs and, in turn, their producers. While in Jordan, 
complaints from officials included that, especially in agriculture, 
Jordanian products could not meet U.S. regulatory standards and that 
U.S. customs paperwork and regulations were complex. Broader concerns 
were also expressed by Jordanian officials about the level of trade in 
services and investment from the United States after the FTA. 

* U.S. officials we met with in Morocco and Moroccan officials shared a 
concern that Morocco had undertaken liberalization and seen sharp 
increases in imports from the United States but had yet to see much in 
terms of gains in sales to the United States. Meetings with Moroccan 
government representatives revealed their general dissatisfaction with 
their trade results so far, which they believed did not reflect "the 
objectives and potential of the FTA." They listed several factors that 
they felt contributed to this situation including: (1) discrepancies 
between Moroccan and U.S. trade statistics; (2) problems relating to 
the inability to meet U.S. regulatory standards, in particular sanitary 
and phytosanitary standards; (3) specific difficulties of Moroccan 
exporters pertaining to U.S. Customs; and (4) long phaseout periods of 
U.S. tariffs on some Moroccan products.[Footnote 33] 

* Ongoing U.S. concerns in Singapore pertain to frustration with some 
opaque or cumbersome regulatory practices that are undermining U.S. 
firms' access to Singapore's telecommunications and domestic 
pharmaceutical procurement markets. In addition, some animal, plant, or 
human-health related bans or restrictions remain, posing hurdles for 
U.S. exporters of some meat and other agricultural products. Despite a 
very positive view of the FTA by Singaporean officials, there were 
calls from some exporters for more flexible rules of origin, such as in 
the case of optical disc producers who cannot meet the value-added 
requirement. Some disappointment was expressed with the results of the 
congressionally modified "integrated sourcing initiative"[Footnote 34] 
compared with the expectations during FTA negotiations. Also, concern 
was expressed about the ease of obtaining visas for Singaporean 
business persons in some countries, including the United States. 

While GAO did not do a comprehensive examination of agency efforts in 
this area, it appeared that active monitoring and ongoing engagement 
were already under way in most of these areas. For example, U.S. 
officials were able to give a detailed scorecard of Chile's IPR 
implementation efforts, as well as provide a timeline documenting 
extensive bilateral contacts. Similarly, in Singapore, U.S. officials 
were able to provide extensive information regarding IPR developments 
and services market access concerns. Nevertheless, USTR, Commerce, and 
Department of Agriculture (USDA) officials told us that evaluation of 
FTAs in terms of trade results is infrequent and done on an ad hoc 
basis. For example, agencies produced a one-time report required for 
TPA in 2005 and Commerce produced charts on particular FTAs in 2008. 

FTAs Contribute to Labor Improvements in Partners, but U.S. Follow-up 
on FTA Labor Commitments Has Been Minimal: 

FTAs Spurred Some Labor Law Reforms, but Most Partners Face Enforcement 
Challenges: 

Jordan, Chile, Singapore, and Morocco have all made efforts to meet 
their commitment in the FTAs to strive to ensure that their domestic 
labor laws provide for agreed labor standards consistent with the 
internationally recognized labor rights and strive to make 
improvements. (See boxed text, which describes some of the most 
important labor commitments in the FTAs.) U.S. and partner officials 
said the FTA negotiations stimulated labor law reforms and improvements 
in enforcement of the laws in all four partner countries, either during 
the FTA negotiations or later. However, Jordan, Chile, and Morocco all 
have documented difficulties ensuring respect for core labor rights and 
face enforcement challenges. U.S. agencies missed opportunities to 
promote partner capacity because they have provided little sustained 
engagement or assistance. 

Table: TPA and FTA Provisions Related to Labor: 

TPA Goals: 
TPA's overall negotiating objectives on labor include promoting respect 
for workers' rights and the rights of children consistent with core 
labor standards of the ILO, as defined in TPA. Principal negotiating 
objectives include strengthening the capacity of U.S. trading partners 
to promote respect for core labor standards. The President is directed 
to seek to establish consultative mechanisms among parties to trade 
agreements to strengthen the capacity of U.S. trading partners to 
promote respect for core labor standards as enumerated in TPA. 

FTA Commitments: 
All of the primary provisions of the pre-TPA Jordan FTA labor article 
are echoed in the Chile, Singapore, and Morocco FTAs. In each of the 
agreements, the parties commit to: 

* not fail to effectively enforce their own labor laws, through a 
sustained or recurring course of action or inaction, in a manner 
affecting trade between the parties; 

* strive to ensure that their domestic labor laws provide for labor 
standards consistent with the internationally recognized labor rights 
set forth in the labor article, while recognizing the right of each 
party to establish its own domestic labor standards, and strive to 
improve those standards; 

* strive to ensure that they do not waive or derogate from, or offer to 
waive or derogate from, domestic labor laws as encouragement for trade 
with the other party; and; 

* strive to ensure that the labor principles and internationally 
recognized labor rights set forth in the labor article are recognized 
and protected by domestic law. 

The Singapore, Chile, and Morocco FTAs also contain provisions on labor 
consultations, commitments to labor cooperation in order to advance 
common labor commitments, public awareness, and domestic procedural 
guarantees. For example, parties are required to ensure that their 
proceedings for the enforcement of their labor laws are fair, 
equitable, and transparent. 

Internationally Recognized Labor Rights: 
The internationally recognized labor rights defined in TPA and the FTAs 
are: 

* the right of association; 

* the right to organize and bargain collectively; 

* a prohibition on the use of any form of forced or compulsory labor; 

* a minimum age for employment of children, and; 

* acceptable conditions of work with respect to minimum wages, hours of 
work, and occupational safety and health. 

[A] Consistent with TPA guidance, prohibition and elimination of the 
worst forms of child labor is also included in the Singapore, Chile, 
and Morocco FTAs but not the Jordan FTA. The Singapore and Chile FTAs 
also refer to "labor protections for children and young people," 
including the elements specified here. 

[End of table] 

The following sections describe progress and challenges in labor law 
reforms and enforcement in each partner country. 

Jordan: 

Jordan has made some improvements to its labor laws and enforcement in 
recent years, according to USTR and Labor officials, but ongoing 
weaknesses in its labor protections contributed to abuses of workers 
that occurred in factories in the U.S.-designated QIZs. Despite U.S. 
awareness of such weaknesses going into the agreement, little was done 
by the United States or Jordan to address them between 2002 and mid- 
2006, the first 5 years of the FTA. Jordan's actions since then are 
generally seen as serious responses intended to correct labor abuses 
and have resulted in recognized improvements. Although some labor 
problems persist in the QIZs, the U.S. government recently decided to 
widen Jordan's duty-free access to the U.S. apparel market. 

A former U.S. official involved in the labor negotiations for the 
Jordan FTA told us that, during the negotiations, Jordan's labor laws 
had been found wanting in some respects, but the United States did not 
require changes as part of the FTA. State's human rights reports have 
for years noted limitations in Jordan's labor protections, which were 
particularly weak for foreign workers and workers in the informal 
sector. According to USTR, Jordan's labor laws were amended by Jordan 
in 2008 to cover some previously excluded workers, including 
agricultural workers. 

Until 2006, the International Trade Union Confederation's Annual Survey 
of Violations of Trade Union Rights routinely noted that Jordan's labor 
inspection service was ineffective and labor laws were not always 
enforced. In addition, State's human rights reports have noted a lack 
of government training for labor inspectors on the country's child 
labor laws and the inspectors' failure to enforce these laws over the 
past decade. However, they also described the government's efforts 
during this period to establish a new child labor unit in the Ministry 
of Labor and to oversee recruitment and employment of certain foreign 
workers. 

A serious failure in both Jordan's laws and its enforcement--which 
Jordan, with the help of U.S. agencies, independently verified and has 
now taken some steps to address--was publicized in a May 2006 report by 
the National Labor Committee, a U.S. labor advocacy organization. It 
described widespread abuses of foreign workers in garment factories 
operating in Jordan's QIZs, whose duty-free exports to the United 
States have grown dramatically under the FTA. The majority of workers 
in Jordan's QIZs are not Jordanian; they are brought to Jordan under 
contract from several east and southeast Asian nations. While many of 
the investors are from China, Taiwan, India, and Pakistan, some U.S. 
brands and stores source goods for export from Jordan. The National 
Labor Committee report detailed problems such as workers' passports 
being confiscated by factory managers, regular work shifts of 12 to 20 
hours and occasional shifts of 48 or more hours, withholding of wages 
for up to 6 months, nonpayment of full wages with overtime, threats and 
incidents of deportation, overcrowded and unsanitary living quarters 
provided by employers, and incidents of physical and sexual abuse. 

According to U.S. officials, the government of Jordan reacted 
immediately to the 2006 public report. Jordan initiated its own 
investigation and requested U.S. funding for an independent assessment 
of working conditions in the QIZs, conducted by a contractor 
specializing in labor compliance monitoring, which confirmed numerous 
violations of Jordan's labor laws and international labor standards. 
[Footnote 35] The assessment found some problems were pervasive in the 
QIZ factories, while others were limited to a few cases or a few 
factories. According to the assessment, the widespread violations of 
Jordanian laws included non-voluntary and routine overtime of 2 or more 
hours daily and incorrect wage payments including pay below the minimum 
wage. 

Jordan's Ministry of Labor took steps to improve workers' conditions 
and compliance with labor laws, with assistance from USAID and other 
donors, including closing some factories, transferring workers to 
factories with better working conditions, developing a voluntary code 
of conduct for factories, creating a hotline for complaints from 
migrant workers, hiring new inspectors, and instituting new training 
programs for labor inspectors. Jordan agreed with the ILO to start a 
"Decent Work" program to create quality jobs and reduce unemployment 
nationally, as well as a "Better Work" program to implement a 
monitoring system in the garment sector, combined with needs 
assessment, remediation, and training at the enterprise level. However, 
the National Labor Committee has reported recurrences of some problems 
in the QIZs over the past 2 years, and a Ministry of Labor report 
indicates that at least one case was so egregious that it closed the 
factory. The ministry said it also accelerated an ongoing effort to 
revise the national labor law through a process involving the 
government, employers, and workers. U.S. officials, trade union 
officials, and others told us that a comprehensive reform package was 
developed in late 2006, but the ministry delayed in submitting it to 
parliament until June 2008. According to U.S. officials, Parliament 
enacted a set of labor reforms but did not enact some elements of the 
proposed revisions, including providing legal rights to foreign workers 
to organize and join unions, despite the government's repeated 
assurances to U.S. officials over a period of years that this 
particular reform would be made "soon." 

Chile: 

According to Chilean officials, Chile has continued to strengthen its 
labor laws since its FTA went into effect in 2004, but they also told 
us about ongoing difficulties with ensuring respect for labor rights by 
employers and with its enforcement regime. Chile began a process of 
labor reform in the 1990s that has continued up to and since passage of 
the 2004 FTA. As a result, its labor enforcement regime is considered 
among the best in Latin America, according to ILO officials. According 
to the FTA labor rights report for Chile submitted to Congress, reform 
legislation that was enacted in 2001 significantly improved workers' 
rights to organize. It also reduced the official work week from 48 to 
45 hours, tightened overtime pay regulations, and improved safety 
standards, among other changes. In addition, according to Ministry of 
Labor officials, a 2007 law established a legal responsibility for 
employers to protect the health and safety of subcontracted workers, 
guarantee their pay, and clarify their contracting status.[Footnote 36] 
However, comments from individuals in the Chilean government and 
nongovernmental organizations during GAO's fieldwork indicated this 
reform was seen as fixing some problems but creating others. Both 
ministry and trade union officials noted some continuing problems with 
workers' rights, including inequality in pay for subcontractors and 
legal limitations on workers' ability to organize and bargain 
collectively across enterprises. 

The State Department's 2007 Report on Human Rights Practices indicates 
that Chile's Ministry of Labor effectively enforced its laws and 
regulations on minimum wages, work hours, and safety and health 
standards and devoted considerable resources to oversight of child 
labor policies. Chilean labor ministry officials we met said 
enforcement has improved since the FTA went into effect, but Chile 
still faces some of the same challenges in enforcement that existed at 
the time the FTA entered into effect. They said the ministry has 
increased the number of labor inspectors, raised inspectors' salaries, 
and introduced unannounced inspection visits. In addition, they said 
labor court procedures have been modified to address labor disputes in 
a more timely way. Spurred by its FTA commitments to the United States, 
Chile's Ministry of Labor proactively undertook a self-study, with 
initial cooperation from the private sector, of two of Chile's leading 
export sectors, salmon and forestry products. It identified some labor 
rights problems with the aim of convincing companies that improving 
labor practices would be good for business. Chilean labor ministry 
officials also acknowledged that enforcement is weaker than they would 
like. Fines for violations remain low, and labor inspectors' pay is 
still among the lowest for government inspectors in Chile. 

When asked about post-FTA developments and effects, labor groups we met 
in Chile generally agreed with the government's assessment that there 
had been some progress but continued to be problems with Chile's labor 
laws and enforcement. They added that workers' jobs, pay, benefits, and 
protections in Chile, particularly in manufacturing, had been under 
pressure as a result of near-continual import liberalization by Chile 
most recently through conclusion of an FTA with China. While the U.S- 
Chile FTA was not seen as the sole or even primary cause of these 
downward pressures on Chilean working conditions, the FTA also was not 
seen as a powerful or well-used tool for betterment. 

Singapore: 

Singapore generally had strong protections for workers going into the 
FTA and has since improved them. As a high-income economy, Singapore 
provides good working conditions and a broad range of social benefits 
for most of its workers, and U.S. officials involved in the 
negotiations said changes in Singapore's labor laws were not needed to 
conclude the FTA. The International Trade Union Confederation (ITUC) 
reports that there are some restrictions on unions in Singapore's labor 
laws, but many of the restrictions are not applied in practice. U.S. 
FTA negotiators were initially concerned by Singapore's lack of a 
minimum wage law, but these concerns were allayed by an understanding 
of Singapore's unique system for determining wage increases through the 
annual recommendations of a National Wages Council that is composed of 
government, trade union, and employer representatives. U.S. embassy 
officials said Singapore has made changes in its laws to improve worker 
protections since the FTA took force. The embassy officials stated 
that, for example, a workplace safety and health act was enacted to 
provide safety protections to a broader range of workers. 

State's 2008 human rights report indicates that Singapore's Ministry of 
Manpower effectively enforced its laws and regulations on working 
conditions, safety and health standards, and child labor. 

Morocco: 

Morocco has strengthened its labor laws in connection with the FTA, but 
its enforcement is often poor, and child labor and suppression of 
strikes remain problems, according to U.S. government reports and 
officials. USTR and Labor officials indicated that Morocco achieved 
significant labor reforms and progress in employer-worker relations 
with reform legislation that took effect in 2004. Although these 
reforms had been under discussion for over 20 years, U.S. officials 
said the FTA negotiations provided an external push that was helpful in 
gaining agreement among workers, employers, and the government on 
outstanding issues. Moroccan government officials told us that the 
number of labor disputes has decreased 50 percent since 2004, and trade 
union officials agreed that the environment for labor dialogue has 
improved as a result of the new labor code. In 2004, Morocco's 
legislature also passed reforms to the family code and the penal code, 
which strengthened labor protections and other rights for women and 
children, according to State's human rights reports. Despite the 
progress, trade union officials and labor experts told us that labor 
protections should be further expanded to cover workers in Morocco's 
large informal economy. 

State's human rights reports note that enforcement of all of these laws 
has often been poor, particularly within Morocco's informal work 
sector, due partly to limited government resources. For example, in 
April 2008, approximately 55 deaths caused by a mattress factory fire 
in Casablanca reportedly occurred after inspections had identified 
safety violations that were not corrected. During our fieldwork, an ILO 
official also told us that Moroccan labor inspectors are reluctant to 
cite employers for labor violations because an inspector was sentenced 
to prison for issuing a citation several years ago. The Morocco FTA 
labor rights report states that Morocco has experienced repeated 
incidents of violent repression of worker strikes, and a 2007 
confederation report indicated at least one of these involved a U.S.- 
affiliated export manufacturer. Furthermore, according to State's human 
rights, Labor's child labor, and Human Rights Watch reports, Morocco 
has a relatively high rate of child labor, especially in rural areas. 
Moroccan labor experts have attributed this to poverty, poor quality 
education and poor access to education (particularly for girls), broken 
families, and wide social acceptance of child labor. The Moroccan 
government has ongoing programs aimed at eliminating child labor 
through education for child workers and other efforts, which have been 
developed with support from the ILO and Labor. 

U.S. Agencies Did Not Develop Labor Cooperation Plans and Had Limited 
Resources to Strengthen Partner Capacity: 

In addition to their responsibilities described in the boxed text, 
pursuant to TPA reporting requirements, U.S. agencies created fairly 
comprehensive baseline assessments of these FTA partners' labor rights 
regimes. TPA does not require that U.S. agencies use the assessments to 
systematically plan or set priorities with partners, and U.S. agencies 
did not do so. However, because U.S. agencies were disengaged and 
provided little assistance to partners, agencies may have missed 
opportunities to cooperate with partners in promoting capacity. 

Table: U.S. Agency Responsibilities for FTA Labor Matters: 

Labor is responsible for overseeing FTA labor commitments and 
cooperation and is the lead on all but the Jordan FTA, in coordination 
with State and USTR. In Federal Register notices for the Singapore, 
Chile, and Morocco FTAs, Labor's ILAB was designated as the point of 
contact for implementation of the labor provisions for the FTAs, as 
well as for the labor cooperation mechanisms established by the annexes 
to these FTAs. Under the labor cooperation mechanisms, the parties have 
broad authority to undertake cooperative activities on any labor 
matter, and the responsible agencies shall cooperate to establish 
priorities for cooperative activities. The Federal Register notices 
also outline ILAB's responsibilities in relation to the FTAs, which 
include implementing trade-related labor policy, coordinating 
international technical cooperation in support of the labor provisions 
in FTAs, and receiving, determining whether to accept for review, and 
reviewing submissions on another party's compliance with commitments 
and obligations arising under a labor chapter. ILAB is required to 
consult with State and USTR on these activities. 

[End of table] 

Reports Required by TPA Provided a Comprehensive Baseline on Labor 
Rights: 

Before congressional review of a final trade agreement, TPA required 
U.S. agencies to prepare and submit to Congress a "meaningful labor 
rights report" for each partner country and a report describing the 
country's laws governing exploitative child labor.[Footnote 37] USTR 
and Labor officials told us that, in general, at the start of 
discussions about each possible FTA, they consult with partner 
government officials, clarify U.S. FTA labor requirements for them, and 
seek information about the labor situation in the country. As the 
negotiations continue, they conduct an analysis of the country's labor 
laws and practices and visit the country to meet with government, 
union, and private sector officials. If labor concerns are serious, 
U.S. negotiators may request legislative changes to remedy them. Labor 
officials said they also work with partner government officials at this 
stage to identify weaknesses and needs for technical assistance 
concerning labor rights and enforcement, as required by TPA.[Footnote 
38] The information gathered contributes to the labor rights report 
prepared for Congress and also informs the negotiations and decisions 
about cooperation and assistance. 

The TPA labor rights reports we reviewed for these FTA partners 
provided detailed descriptive information on and insight into the labor 
rights situation in these countries. They described each country's 
legal framework, the administration of labor law, labor institutions, 
and the labor justice system, as they pertained to the core labor 
standards defined in U.S trade legislation. Although the reports did 
not attempt to evaluate the severity of labor problems, our comparison 
of them indicated that they portrayed more significant labor problems 
in Morocco, limited problems in Chile, and very few in Singapore. The 
reports did not include any analysis of the potential effects of 
expanded trade on the situation for workers in export sectors. 

Because the Jordan FTA negotiations occurred before TPA was enacted, 
neither a meaningful labor rights report nor a report on laws governing 
exploitative child labor was required or prepared for Congress. Our 
document review indicated, however, that in response to a USTR request, 
in 2004, Labor identified various labor rights weaknesses, including 
the facts that the estimated 125,000 registered foreign workers in 
Jordan lacked the right to organize, bargain collectively, or join 
unions and that the recently increased minimum wage was set at poverty 
levels. 

U.S. Agencies Did Not Establish a Process to Prioritize and Plan 
Cooperative Activities: 

The post-TPA FTAs establish labor cooperation mechanisms and explicitly 
recognize that bilateral cooperation provides enhanced opportunities to 
improve labor standards and advance common commitments. USTR and ILAB 
officials told us that when the four FTAs GAO focused on were 
negotiated, they foresaw greater cooperation between experts at Labor 
and partner countries' labor ministries than has occurred. U.S. 
agencies have not utilized the bilateral cooperation process laid out 
in the FTA annexes to set joint priorities and plans for cooperative 
activities with these FTA partners. Information from the labor rights 
reports identified partners' weaknesses, and Labor did use this 
information to develop its initial interactions with these partners. 
Labor and the agencies it must consult with concerning cooperation 
activities did not use the information as a basis for assessing and 
prioritizing needs and planning cooperative efforts with partner 
countries beyond these initial projects. However, as discussed below, 
Labor's direct funding for technical cooperation projects was 
essentially eliminated at the time the FTAs we examined began entering 
into force. 

In contrast to the arrangements for environmental cooperation described 
later in this report, there is no process between the United States and 
its trade partners for developing work plans for labor cooperation that 
establish objectives and activities over a period of time. In the FTA 
labor cooperation annexes, the parties committed to establish 
priorities for cooperation and develop specific activities in line with 
the priorities. However, the annexes do not set a time frame in which 
these actions are to be completed. In practice, no cooperation 
priorities or multiproject work plans have been developed with any of 
these FTA partners, apart from plans for individual projects described 
below. 

Labor Cooperation Efforts Have Been Limited and Driven by Type of 
Funding Available: 

The text of each of the three FTAs negotiated under TPA anticipates 
cooperation between the United States and its trade partner on labor 
matters. Each of these FTAs creates a labor cooperation mechanism and 
the respective associated annexes state that parties shall cooperate 
and the parties recognize that cooperation provides enhanced 
opportunities to improve labor standards and advance common commitments 
including the ILO Declaration. To promote these goals, in the Chile, 
Singapore, and Morocco FTAs, the "Cooperative Activities" and 
"Implementation of Cooperative Activities" provisions of the labor 
cooperation mechanism annexes identify areas of cooperation and types 
of cooperative activities that could be undertaken by the United States 
and the partner country, but does not require that these enumerated 
activities be undertaken.[Footnote 39] The annexes identify activities 
such as exchanging information, organizing joint conferences, and 
undertaking joint research projects, on topics such as fundamental 
labor rights and their effective application, labor relations, and 
working conditions. None of these FTAs' labor provisions and associated 
annexes specifies a time frame for completion of the activities. The 
Jordan FTA does not have a labor cooperation mechanism annex, but it 
provides an opportunity for labor cooperation by requiring that the 
Joint Committee established to implement the FTA consider any 
opportunity for cooperation identified by any of the parties to the 
agreement. In addition, the "Economic Cooperation and Technical 
Assistance" article in the Jordan FTA (which is not focused on labor) 
states that "in view of Jordan's developing status, and the size of its 
economy and resources, the United States shall strive to furnish Jordan 
with economic technical assistance, as appropriate." 

However, none of the FTAs contains a specific commitment of financial 
assistance. Instead, Labor's ILAB programs for non-FTA-related 
technical assistance have been the initial or primary source of funding 
for technical assistance projects on labor issues for these FTAs. ILAB 
technical assistance has typically supported improvements in labor law 
enforcement and labor relations, as well as programs to prevent and 
withdraw children from exploitative child labor. In addition, USAID has 
been a primary source for funding in Jordan recently, and State's 
Middle East Partnership Initiative provided funds for Morocco. 

U.S. assistance to help partners build labor capacity was limited to 
partners or issues with preexisting program resources and was less than 
initially foreseen due to funding cuts. ILAB officials told us their 
budget for general bilateral and multilateral technical assistance that 
could be used for FTA partner countries was greatly reduced in 2004 
(from $37 million to $2.5 million) and has been eliminated in every 
year since 2005. As a result, ILAB has not had a direct source of 
funding available to dedicate to new technical assistance for FTA 
partners, except for child labor projects. For some FTAs, ILAB has 
identified funding from other U.S. agencies to support labor 
assistance, including a large amount from USAID in Jordan and a very 
small amount from State in Morocco. Although cooperation could involve 
less costly technical or information exchanges, as well as assistance 
projects, ILAB officials said they do not have much funding for travel 
to meet with or provide in-house technical assistance to labor ministry 
officials. In addition, they said other Labor agencies that have 
technical expertise they would like to draw on, such as the 
Occupational Health and Safety Administration, are limited by their 
domestic missions in their ability to pay for sending staff overseas. 
ILAB officials said they are trying to explore less costly ways of 
participating in international meetings, such as through 
videoconferences. However, in response to an invitation by Chile to 
participate in a labor forum it organized in 2008, the officials told 
us ILAB did not have funds for travel. While not able to make 
alternative arrangements to participate, they provided materials and 
preparation so that a U.S. embassy employee could attend instead. 

Following are descriptions of U.S. labor assistance that has been 
provided to each partner country and how it relates to labor 
enforcement capacity weaknesses cited in the FTA labor rights (or other 
U.S. government) reports and expectations for cooperation stemming from 
the existence of the labor cooperation annexes. 

Jordan: 

U.S. support for capacity building to counter Jordan's weaknesses in 
labor law enforcement, including those noted in State's human rights 
reports, was originally provided through two ILAB-funded projects 
implemented by the ILO. Total funding for these projects, both 
initiated in 2002, was about $2.4 million. One project was designed to 
form a committee of workers, employers, and government officials for 
ongoing "social dialogue" on national labor issues; develop a proposal 
for labor law reforms; support collective bargaining; and strengthen 
the labor inspectorate. The other project supported development of a 
national program to eliminate child labor. In 2008, ILAB committed an 
additional $4 million to a 4-year child labor/education project. After 
labor rights and enforcement problems in the QIZs became publicly known 
in 2006, USAID, which has a large assistance program in Jordan, 
committed $4.186 million to address these problems. This has included 
$442,000 for an assessment of labor problems in the QIZs in 2006, 
$1.044 million for advisory services for the Ministry of Labor and its 
labor inspectorate since 2007, and $2.7 million in 2008 to support the 
launch of a 5-year "Better Work Jordan" program, designed by the ILO 
and the International Finance Corporation and co-funded by Jordan's 
Ministry of Labor, to improve labor standards and overall 
competitiveness in the export garment industry. According to documents 
we reviewed, the U.S. embassy and USAID did not commit the bulk of this 
assistance until they were asked to do so by USTR in mid-2007, more 
than a year after the problems were publicly reported and at least 3 
years after the U.S. government itself was apparently aware of them. 
State explained that the ILO first proposed the Better Work Jordan 
program to donors in November 2006 and then made two project scoping 
visits, but was reluctant to move forward until certain labor law 
reforms had been made by Jordan. The ILO formally requested USAID 
funding for the program in March/April 2007, and the grant for the 
program was signed in February 2008. 

Chile: 

One largely unsuccessful U.S. assistance project with Chile was started 
near the time of the FTA's entry into force. The FTA labor rights 
report for Chile described a functioning labor enforcement system that, 
nevertheless, had overburdened labor courts and some enforcement 
weaknesses. Chile had graduated from USAID assistance by this time and 
did not have a significant child labor problem, which limited the 
available sources of U.S. funding for capacity building. In response to 
the interests of Chilean labor officials, ILAB provided $1.4 million 
for a project to improve labor law compliance. The project was 
initiated in 2003 and focused on training labor inspectors and 
improving the efficiency of labor courts. However, according to the 
midterm project evaluation, the project was overly ambitious, given its 
resources, and faced a number of obstacles. A final evaluation was not 
available, but ILAB officials told us project funding and activities 
were subsequently reduced in 2005 due to budget cuts in their 
international technical assistance. 

According to State and ILAB officials, lack of funding has consistently 
stymied efforts to provide Chile FTA-related technical assistance and 
cooperation. Chilean labor officials told us they were eager to have 
technical exchanges with the United States on labor issues--similar to 
exchanges Chile has had with other FTA partners, such as Canada and the 
EU--but have had few opportunities to do so. In addition, little 
technical cooperation or assistance has been directed toward some of 
the nonmandatory elements listed in the labor cooperation annex that 
are unique to this FTA, such as promoting the collection of comparable 
labor data and addressing labor issues related to small and medium 
enterprises. The annex also provides for periodic labor cooperation 
reviews at the request of either party, but neither party has requested 
such reviews. 

ILAB officials described a few recent cooperative efforts with Chile, 
including an information request from Chile concerning innovative job 
training programs and meetings between U.S. and Chilean labor officials 
at multilateral labor meetings. A joint U.S.-Chilean proposal to send 
Chilean labor inspectors to the United States to learn about labor 
hotlines was recently selected for funding from the Organization of 
American States. The embassy is also organizing a series of digital 
video conferences; the first one took place in May 2009. 

Singapore: 

No U.S. activity or assistance on labor has been provided since the FTA 
went into effect, according to ILAB officials. Singapore has high labor 
standards and relatively few labor problems, as indicated in the FTA 
labor rights report. U.S. officials told us that because Singapore's 
labor laws and enforcement systems were good, they did not see a need 
for extensive cooperation and, furthermore, Singapore had not requested 
it. No U.S. financial assistance for labor activities has been 
provided. Despite the provisions in the labor cooperation annex and the 
expectations of negotiators in both countries, neither U.S. nor 
Singapore government officials were aware of any technical cooperation 
activities concerning labor since the FTA was implemented. However, 
Singaporean officials told us they were cooperating on labor issues 
with other trade partners, such as the Trans-Pacific Strategic Economic 
Partnership that also includes Chile, New Zealand, and Brunei 
Darussalam. 

Morocco: 

About $11 million in U.S. assistance has been provided to help Morocco 
bolster enforcement and stem child labor abuses. The FTA labor rights 
report noted that Morocco had numerous labor enforcement weaknesses, 
including a lack of resources and training for labor inspectors and 
pervasive child labor violations. Although the labor cooperation annex 
for the Morocco FTA is largely similar to the others we examined, one 
of its unique elements is a focus on promoting compliance with the ILO 
convention concerning the worst forms of child labor. In response to 
these concerns, the United States has provided a relatively large 
amount of labor assistance to Morocco, with most of the funding focused 
on child labor prevention and elimination. ILAB provided $8.351 million 
for three child labor projects and $3.072 million for one project to 
strengthen labor relations and capacity to implement and enforce its 
new labor laws,[Footnote 40] in response to a request from the Ministry 
of Labor. Three of the projects started in 2003, during the FTA 
negotiations, while the fourth, a child labor project, started in 2007. 

Minimal U.S. Oversight and Dialogue on Labor Issues May Have Resulted 
in Missed Problems and Opportunities: 

A reliable, well-functioning monitoring and enforcement effort helps 
sustain congressional and public confidence in the President's trade 
strategy and fosters support for continued trade liberalization. The 
key steps we have identified in monitoring and enforcing trade 
agreements include identifying problems, setting priorities, gathering 
and analyzing information, developing responses, and taking enforcement 
action. However, according to officials at ILAB, State, and USTR, U.S. 
agencies are not required to proactively monitor and report on FTA 
partners' labor commitments after the agreements enter into force. FTAs 
rely on passive monitoring structures, through which outside parties 
can raise concerns that the U.S. government can or must react to. U.S. 
agencies may have missed labor problems and overlooked opportunities in 
these partners because they did not use the structures established by 
the FTAs as a vehicle for ongoing engagement on labor matters. Agencies 
cited a lack of funding and the staff levels necessary for increased 
labor cooperation. The FTAs provide a framework for bilateral oversight 
and dialogue on FTA commitments, including labor. However, bilateral 
mechanisms for dialogue on labor issues between the FTA trade partners 
have largely been inactive, and labor-related discussions have been 
minimal. In addition, U.S. agencies have not actively monitored FTA 
partners' compliance with labor commitments, and U.S. interaction with 
partners on labor issues after the FTAs entered force has been very 
limited in most cases--except in Jordan, where external parties pushed 
labor problems into the spotlight. U.S. and Jordanian officials did not 
seriously address Jordan's migrant labor rights violations until those 
problems were taken up in the international news media, and U.S. 
officials have missed other opportunities to work constructively with 
FTA partner countries on labor issues of common interest. 

For some of these FTAs, labor issues have rarely or never been 
discussed in the FTA's Joint Committee, which is the main forum for 
bilateral dialogue on FTA implementation for each FTA, or in one of its 
subcommittees.[Footnote 41] However, the provisions of the FTAs 
reviewed do not prescribe the agenda or discussion points for meetings 
of the Joint Committee. The Joint Committee, which is required to meet 
annually,[Footnote 42] is chaired by cabinet-level trade officials from 
both countries. Its duties include supervising implementation of the 
agreement and reviewing the trade relationship between the parties; 
therefore, it may address a broad range of issues. USTR has the U.S. 
lead in organizing such meetings. Under three of the FTAs we reviewed, 
the committee is required or allowed to establish a labor affairs 
subcommittee or similar entity.[Footnote 43] Under the Chile FTA, the 
Labor Affairs Council was required to meet within the first year after 
the FTA's entry into force and thereafter as it considered necessary. 
The council met once in December 2004 and has not met again. Under the 
Singapore and Morocco FTAs, the Joint Committees have not exercised 
their prerogative to convene labor affairs subcommittees, and our 
review of available Joint Committee meeting agendas and summaries 
indicated that labor issues have not been discussed in Joint Committee 
meetings for these FTAs.[Footnote 44] The Jordan FTA did not call for a 
labor affairs subcommittee, but the two partners established a labor 
affairs working group in 2006. Labor issues were discussed by the Joint 
Committee in 2004, 2006, and 2008, according to a USTR official, and 
our file review showed gaps in U.S. engagement before 2006, despite 
Jordan's labor abuses. 

ILAB has not used its role as the lead agency and designated point of 
contact on labor issues and cooperation for the Singapore, Morocco, and 
Chile FTAs to proactively monitor partners' progress or problems or to 
promote cooperative efforts. Labor and State have not updated ongoing 
reports to ensure substantive coverage of partners' conformity with FTA 
labor commitments, and the number and expertise of in-country U.S. 
labor officers has fallen. (However, as stated previously, according to 
officials at ILAB, State, and USTR, U.S. agencies are not required to 
proactively monitor and report on FTA partners' labor commitments after 
the agreements enter into force.) 

Labor made progress in developing its mechanism for reviewing FTA- 
related labor concerns, but this mechanism is not available for Jordan 
because USTR handles labor concerns under that FTA. A process for 
public submissions concerning FTA labor provisions is built into the 
functioning of the FTAs that were enacted under TPA, and this provides 
a venue for nongovernmental organizations and others to raise 
complaints about labor violations in FTA countries. In December 2006, 
ILAB revised and clarified its procedures for receiving and reviewing 
public submissions, including those related to an FTA partner's labor 
commitments. It also established that Labor could self-initiate a 
review of any matter related to the labor provisions. The new 
procedures identified the type of information a submission should 
include, the timeline for ILAB review, and the criteria ILAB uses in 
deciding how to handle the submission; however, ILAB retains discretion 
about whether to accept a submission for further review. Ultimately, 
Labor has the authority to recommend whether the U.S. government should 
seek formal consultations with the FTA partner government, request a 
bilateral labor committee be convened to review the matter, or pursue 
other dispute resolution measures. 

To date, ILAB officials have received only one public submission for 
any of the FTAs negotiated under TPA--a 2008 complaint about labor 
problems under CAFTA-DR.[Footnote 45] A 2006 complaint about Jordan was 
filed with USTR because Labor is not the lead for that agreement. While 
it was not formally considered for investigation, USTR pledged to 
continue to engage senior Jordanian officials, the private sector, the 
ILO, labor unions, and other interested groups in order to help improve 
working conditions in Jordan and stated, "We will keep open all options 
available under the FTA should the issues not be adequately addressed." 
According to USTR, the United States has not pursued formal 
consultations or dispute resolution on a labor matter--or any other 
matter--under the FTAs we reviewed. 

Assessing partner progress enables agencies to take key steps in 
monitoring, such as identifying problems, setting priorities, and 
gathering and analyzing information. Regarding the FTAs we examined, 
the provisions of TPA and/or the FTAs do not require that U.S. agencies 
actively use existing reports on labor issues to assess partners' 
compliance with FTA labor commitments or update the content or approach 
of the reports to enable them to be used to assess progress over time, 
and U.S. agencies have not done so. Although proactive monitoring of 
FTA labor commitments does not routinely occur, State and Labor do 
regularly monitor and report on certain labor issues overseas, as part 
of other duties. However, agency officials told us no effort has been 
made to modify the pertinent reports to include information or 
assessments concerning FTA compliance or progress on FTA commitments. 
State and Labor compile country-specific information that is published 
in three annual reports--State's country reports on human rights, 
State's report on trafficking in persons, and Labor's Findings on the 
Worst Forms of Child Labor. State's human rights reports contain a 
section on workers' rights, organized with reference to the list of 
internationally recognized workers' rights contained in U.S. trade 
legislation. State's trafficking in persons report sometimes reports on 
FTA-related labor issues, such as concerns that QIZ violations in 
Jordan involved human trafficking. Labor's report provides information 
on the child labor aspect of workers' rights for all countries that are 
beneficiaries of U.S. trade preference programs, including FTA partners 
that were formerly preference program beneficiaries. These annual 
reports--particularly the human rights reports--include some detailed 
information related to the internationally recognized labor rights 
referred to in U.S. trade legislation and FTAs, but none of them 
contains information or analysis focused on whether a country is 
meeting its FTA commitments. For example, they do not indicate whether 
a country has weakened or reduced the protections in its labor laws in 
order to encourage trade or investment, or whether a country promotes 
public awareness of its labor laws--commitments made in the FTA labor 
chapters. Moreover, we were told the reports are not necessarily 
comparable from year-to-year, making them unreliable for use in gauging 
whether partners are making forward progress. Finally, while Labor 
periodically updates its comprehensive Foreign Labor Trends report 
series, no reports on these FTA partners have been issued since the 
FTAs went into effect. 

State and, to a lesser extent, Labor have staff assigned to monitor 
labor issues overseas. (This staffing is not addressed by TPA or FTA 
provisions.) State and Labor officials and advocacy group 
representatives told us that the number and expertise of State labor 
officers charged with such monitoring has declined since the mid-1990s. 
Some officials pointed out that this decline in personnel responsible 
for labor reporting occurred despite the fact that the United States 
has now entered into FTAs containing labor obligations with more than a 
dozen nations. Although State told us that efforts are made to ensure 
labor issues are adequately covered when a country has an FTA, most 
embassy labor officers are economic or political officers who take on 
the added duty of reporting on labor issues. Only 45 are currently 
"designated" labor officers who were selected for the post and received 
specialized training, according to State officials. They said that in 
the mid-1990s the number of designated labor officers was higher-- 
reaching a peak of 60--when there was an exchange program that allowed 
Labor employees to serve in these positions. Labor advocacy group 
representatives also told us that the quality of training for labor 
officers has generally declined in recent years, and only basic 
information about labor rights is presented. Among the four FTA 
countries we reviewed, only Morocco has a designated labor officer. 

Following are our observations on how U.S. officials have engaged with 
these four countries concerning FTA labor issues. 

Jordan: 

U.S. engagement with Jordan on labor has episodically intensified and 
waned. According to a former State official involved in the FTA 
negotiations, the labor rights abuses faced by migrant workers in 
Jordan's QIZs were not anticipated by U.S. officials during the 
negotiations, although the deficiencies in Jordan's labor laws with 
respect to foreign workers' rights were known. In our review of USTR 
and State files concerning labor issues in Jordan, certain U.S. 
officials were aware of potential labor problems in the QIZs as early 
as 2001 and, in 2004, interagency discussions reflected serious 
concerns. However, these records indicated there were no further 
discussions of the problems for almost 2 years, until shortly before 
the National Labor Committee's report was issued in mid-2006. 

Throughout the rest of 2006, intensive interagency and bilateral 
activity occurred as U.S. and Jordanian officials sought to document 
and address the problems. According to an ILAB official, an ad hoc 
interagency team met regularly during this period to focus on Jordan's 
labor issues. USTR and State officials told us high-level exchanges 
occurred, and USTR eventually recommended that USAID provide funding to 
support the ILO's Better Work project in Jordan. After public reports 
about QIZ abuses again surfaced in September 2008, USTR told us more 
focused interagency and bilateral discussions about Jordan's labor 
progress would be resumed in 2009. 

U.S. agency responsibilities under the Jordan FTA are less clear than 
under the later FTAs. No agency is designated responsible, leaving USTR 
as lead. In subsequent FTAs, Labor is designated as having lead 
responsibility for labor matters. ILAB's procedures for public 
submissions on labor issues concerning the FTAs negotiated under TPA, 
which are public (described above), also do not pertain to the Jordan 
FTA. 

Chile: 

While the labor chapter of the FTA only requires that members of the 
Labor Affairs Council[Footnote 46] (representatives of the parties) 
meet within the first year after the date of entry into force of the 
FTA, Chilean government officials were disappointed at the minimal 
level of cooperation and dialogue with the United States on labor 
issues after the FTA took effect. The officials said they had expected 
more cooperation and dialogue. Labor Ministry officials told us their 
government had taken the FTA labor provisions seriously and had funded 
a study of labor compliance issues under the FTA in two key export 
industries--forestry and salmon fisheries. The ministry had hoped to 
use the FTA as leverage to promote better labor standards and practices 
in those industries.[Footnote 47] The study found that the growing use 
of subcontractors in these multinational industries created labor 
rights problems, including high accident rates and antiunion practices. 
They said that, when the study was initiated in 2005, firms were 
concerned about complying with commitments in the FTA labor chapter; 
however, by the time the study ended, their interest had dissipated 
because they discerned U.S. agencies were not monitoring or enforcing 
the FTA labor provisions. U.S. agencies told GAO that Chile did not 
approach embassy or other U.S. officials with the results of the study, 
nor did they ask for assistance in these areas. Labor and USTR 
officials we spoke with were not aware of this study and had not 
discussed these issues with Chilean officials. 

Chilean officials also told us they were frustrated at not being able 
to schedule high-level meetings with U.S. labor officials. Under the 
labor chapter of the FTA, after the first meeting, it is up to the 
Labor Affairs Council to determine, by mutual consent, if and when it 
will meet. Relatively few high-level meetings have taken place between 
U.S. and Chilean labor officials, and ILAB officials acknowledged 
problems on both sides in scheduling meetings between Chilean officials 
and the U.S. Secretary of Labor. ILAB and USTR officials acknowledged 
the low level of cooperation and dialogue relative to the original 
expectations. 

Singapore: 

In Singapore, government officials said they had had no discussions 
with U.S. officials about labor issues since the FTA negotiations took 
place. Joint Committee[Footnote 48] meeting agendas that we reviewed 
did not cover labor topics, and U.S. and Singaporean officials told us 
the subcommittee on labor affairs had never been convened, as meetings 
are not required. 

Morocco: 

Although the Moroccan government has had fairly extensive cooperation 
and interaction with Labor through several technical assistance 
projects, U.S. and Moroccan officials told us the subcommittee on labor 
affairs had never been convened. Meetings are not required, and Labor 
has not sought to convene one. Moroccan Ministry of Labor officials 
with whom we met were not aware that such a body could be formed. 

U.S. Efforts to Monitor FTA Labor Compliance Have Been Limited: 

How a country implements and enforces its labor laws is as critical to 
improving labor conditions as having labor laws that incorporate 
international labor standards, according to U.S. officials, labor 
experts, advocates with whom we spoke. They said many countries have 
passed good labor laws and ratified numerous ILO conventions, but fewer 
countries are willing or able to enforce their laws adequately. 
Nevertheless, most of these experts believed that including labor 
provisions in the FTAs is valuable because it can result in 
improvements in a partner country's labor laws. During the period of 
FTA negotiations, several of the experts and U.S. officials said, is 
when the United States has the greatest leverage to influence reforms 
in the partner country--as we observed in Morocco. 

As mentioned earlier, key steps in monitoring and enforcing trade 
agreements include identifying problems, setting priorities, developing 
responses, and taking enforcement action. With respect to the labor 
obligations in these FTAs, the responsible U.S. agencies have made 
little or no effort, or a belated effort, to identify labor compliance 
concerns after FTA enactment, and engagement with these partners on 
labor issues has been a low priority most of the time. In Jordan, the 
U.S. agencies responded quickly to problems, once they were revealed 
publicly, but the overall U.S. response has been reactive rather than 
proactive. Agencies have had some success, through diplomatic efforts 
and assistance, in encouraging Jordan to improve its labor conditions 
and standards, but at a cost of diminished public confidence in 
agencies' decisions, to date, not to take formal enforcement action 
with any FTA partners. While admittedly lacking in funding to assist 
partners, agencies also have not taken full advantage of the 
information and expertise available to set priorities and pursue 
partner improvements. 

FTA Partners Have Improved Environmental Laws, but the Lack of 
Systematic U.S. Monitoring and Other Factors Impede Assessment of Their 
Impact: 

FTA Partners Have Made Several Changes to Environmental Laws, but 
Despite Some Progress, Enforcement Remains a Challenge for Most: 

As described in the boxed text, the FTAs include provisions in which 
partner countries commit to strive to improve the level of 
environmental protection under their laws, and our work revealed that 
Jordan, Chile, Singapore, and Morocco have taken steps consistent with 
their commitments in the respective FTAs to strive to improve the level 
of environmental protection under their laws. While we did not conduct 
a comprehensive review of all the changes made in environmental laws in 
the four countries, we were told that, in all of them, laws to provide 
additional protections to the environment have been passed since the 
FTAs were negotiated. While government officials in all four countries 
said the changes made to their laws were not in direct response to the 
commitments made under the FTAs, but rather in response to internally 
recognized environmental issues, they said the fact that international 
commitments were made to provide improved environmental protection was 
taken into consideration in passing the laws. 

Table: TPA and FTA Provisions Related to the Environment: 

TPA Goals: 
TPA's overall negotiating objectives on environment include: to assure 
that trade and environmental policies are mutually supportive and to 
protect and preserve the environment and enhance the international 
means of doing so, while optimizing the use of the world's resources. 
Principal trade objectives include strengthening the capacity of U.S. 
trading partners to protect the environment through the promotion of 
sustainable development. The President is directed to seek to establish 
consultative mechanisms among parties to trade agreements to strengthen 
the capacity of U.S. trading partners to develop and implement 
standards for the protection of the environment and human health based 
on sound science. 

FTA Commitments: 

In each of these agreements, the parties commit to: 

* not fail to effectively enforce their environmental laws, through a 
sustained or recurring course of action or inaction, in a manner 
affecting trade between the parties; 

* ensure (or strive to ensure, in the case of Jordan) that their laws 
provide for high levels of environmental protection, and strive to 
continue to improve these laws while recognizing the right of each 
party to establish its own levels of domestic environmental protection 
and to adopt or modify accordingly its environmental laws; 

* strive to ensure that they do not waive or otherwise derogate from, 
or offer to waive or otherwise derogate from, domestic environmental 
laws in a manner that weakens or reduces the protections afforded in 
those laws as an encouragement for trade or investment with the other 
party (except for the Jordan FTA, in which parties strive to ensure 
that they will not waive or otherwise derogate from, or offer to waive 
or derogate from environmental laws to encourage trade with the other 
party). 

The post-TPA Chile, Singapore, and Morocco FTAs contain provisions on 
environmental cooperation, opportunities for public participation, and 
environmental consultations, among others, that are absent from the 
Jordan FTA. 

FTA-Related Environmental Cooperation Commitments: 
After all four of these FTAs were concluded, the partners reached 
separate agreements on environmental cooperation. 

[End of table] 

Some of the partners have demonstrated significant progress in 
improving the environment since the FTAs were signed. For example, 
Singapore reports that, since 2002, air quality has surpassed the 
"good" range under the pollutant standards indexed, recycling rates 
improved from 45 percent in 2002 to 49 percent in 2005, and penalties 
for illegal trafficking of endangered species increased from $5,000 
and/or a 1-year jail term to $50,000 and/or a 2-year term. 

Nevertheless, three of the four FTA partners reported ongoing 
challenges to enforcing environmental laws. In each of these four 
agreements, each party commits to not "fail to effectively enforce its 
environmental laws through a sustained or recurring course of action or 
inaction, in a manner affecting trade between the Parties." As will be 
discussed later in this section, it is difficult to assess the level of 
partner's compliance with this commitment because of lack of U.S. 
monitoring and the absence of a reliable baseline. However, officials 
at the Ministry of the Environment in Jordan, Chile's National 
Commission for Environmental Cooperation (CONAMA), and the Ministry of 
Energy, Mines, Water, and Environment in Morocco said the 
implementation of environmental laws in their respective countries 
continues to be a challenge. Some of the challenges described were 
common across these partners, such as weaknesses in their government 
institutions in implementing environmental laws and regulations. 
Singaporean officials at the Ministry of the Environment, on the other 
hand, said Singapore has historically had a strong environmental legal 
system and enforcement of these laws has been strict, even before the 
FTA was signed; environmental nongovernmental organizations that we 
spoke with agreed that this was the case. 

Examples of laws passed and enforcement challenges are discussed in the 
following sections: 

Jordan: 

According to an EPA report, in Jordan, the Environmental Protection Law 
of 2003 created the Ministry of the Environment, which is responsible 
for environmental protection and is the central body for all 
environmental protection matters in Jordan. In addition, Jordan 
established the Royal Rangers (formerly known as the Environmental 
Rangers) to enforce environmental laws and regulations in the areas of 
pollution and natural resources. 

However, Jordan still faces enforcement challenges, according to the 
partner officials we interviewed. Officials at the Ministry of 
Environment said the ministry has only been established for about 5 
years and is still working to build its capacity to enforce 
environmental laws. Among the challenges Jordan faces in implementing 
environmental laws is that it has only 25 inspectors in the country, 
who are responsible for agricultural, construction, and industrial 
sectors throughout the 34,400 square miles of national territory. 
Another challenge that the ministry is working to correct is the 
limited experience and training of judges in adjudicating environmental 
cases. Ministry officials said that judges often adjudicate 
environmental cases under laws that are less strict in guarding the 
environment, such as agricultural laws. In response, the government of 
Jordan has trained some judges in cooperation with U.S. agencies. 

Chile: 

U.S. and Chilean officials told us that Chile also made some 
improvements in its environmental laws. According to CONAMA officials, 
in March 2007, a law was passed to create the position of the Minister 
of the Environment, which initiates the process of elevating CONAMA to 
a ministry status with new enforcement authorities. Additionally, it 
has made progress encouraging public participation in environmental 
decision-making. 

The pre-FTA USTR environmental review reported that environmental 
concerns in Chile relate to major natural resource and extractive 
industries that are central to Chile's economy, including mining, 
fishing, forestry, and agriculture and environmental law enforcement. 
The environment chapter of the FTA does not prescribe the work plan for 
the Joint Commission on Cooperation[Footnote 49] and the Commission's 
biannual work plans do not include any of these natural resource 
sectors as areas of priority for cooperation. The areas of cooperation 
do include, however, strengthening effective implementation and 
enforcement of environmental practices and technologies, promoting 
sustainable development and management of environmental resources, 
including wild fauna and flora and protected wild areas, and 
facilitating civil society participation in the environmental decision- 
making process. Of the eight projects outlined in the Environmental 
Cooperation Annex of the environment chapter of the FTA, two relate to 
issues in Chile's major export industries, reducing mining pollution 
and improving agricultural practices. On mining, the United States 
committed to assist Chile in reducing contamination and pollution 
resulting from past mining practices by working together to identify 
sources of pollution and explore cost-effective remediation methods. In 
agriculture, the parties agreed to adapt and implement a training 
program for Chilean farmers and other workers to promote appropriate 
handling of chemical pesticides and fertilizers, and promote 
sustainable agricultural practices to help reduce pollution from 
agricultural practices. Under the Environmental Cooperation Annex, the 
parties recognized that the funding, scope, and duration of the eight 
projects would be undertaken in accordance with the parties' personnel 
and financial resources. However, after initial implementation 
workshops and information sessions, little has been done in these 
areas. 

One of the major problems in implementing environmental laws reported 
to us in Chile is that CONAMA does not have enforcement authority. 
According to a CONAMA official, the committee must coordinate with 13 
ministries to address environmental issues. CONAMA officials expected 
that the creation of a Ministry of Environment will resolve many of 
these challenges. 

Singapore: 

Singapore continues to strengthen its environmental laws. According to 
officials at the Ministry of Environment and a nongovernmental 
organization (NGO) following changes to environmental law, in January 
2006, the Singapore Endangered Species (Import and Export) Act was 
amended. This is Singapore's national legislation that gives effect to 
the Convention on International Trade in Endangered Species of Wild 
Fauna and Flora (CITES) to control import and export of endangered 
species in Singapore. The reform implemented more severe penalties for 
violations and was deemed a positive step by environmental 
spokespersons of two environmental NGOs we met with there. Moreover, 
the NGO spokespersons said U.S. encouragement appears to have played 
some role in its passage. 

The USTR review reported that most environmental issues of concern 
relate to Singapore's role as a significant transit center for 
environmentally sensitive trade: wildlife and wildlife products, 
including endangered species; ozone depleting substances; timber and 
wood products; and live fish for consumption and aquarium. Based on the 
areas of possible cooperation listed in the U.S.-Singapore memorandum 
of intent on environmental cooperation, the biannual plan of action set 
three main goals: (1) further improving capacity to implement and 
enforce environmental law, including further enhancing efforts of 
countries in the region to combat illegal trade in environmentally 
sensitive goods (e.g., wildlife, ozone-depleting substances, and forest 
products) through bilateral and regional cooperative activities; (2) 
encouraging the bilateral and regional use of innovative and climate 
friendly environmental technology and pollution management techniques; 
(3) participating in regional initiatives on environmentally 
sustainable cities and sustainable management and trade in sustainable 
managed resources, such as fisheries and forests. The plan of action 
also states that implementation of project ideas described therein is 
subject to the availability of funds. According to U.S. embassy staff 
in Singapore, with the exception of two workshops and other informative 
activities, most of the projects on the work plan have not 
materialized. Efforts and communication on these and other issues 
continue. 

Morocco: 

Morocco passed environmental laws in anticipation of the FTA, and 
additional reforms were passed after the agreement was enacted. 
According to documentation provided by the U.S. embassy in Morocco, in 
January 2003, the Moroccan parliament approved three important 
environmental laws: a general framework law on environmental 
protection, a law requiring environmental impact assessments, and an 
air pollution law. Also, a bill concerning waste management and 
disposal practices was published and implemented in December 2006. 
According to an embassy report, there are also a number of additional 
laws just passed or under development within the Ministry of 
Environment, including laws concerning management of coastal zones. 
Even though some of these changes in Morocco were initiated before the 
FTA was enacted, they are largely perceived by the United States as a 
reflection of the commitment made to improve environmental protection 
in the FTA. 

Officials from the Ministry of Environment said inconsistency on how 
environmental laws are enforced creates several challenges. They 
explained that enforcement of laws is left to the local and regional 
governments and that, at the national level, jurisdiction for 
environmental laws lies across several agencies or law enforcement 
entities. The officials said that there is no consistency on how local 
governments or law enforcement agencies implement the laws. 

FTA Environmental Provisions and Associated U.S. Processes Lack Some 
Elements that Would Facilitate U.S. Agency Monitoring, Oversight, and 
Measurement of Progress: 

Monitoring and oversight of the environmental provisions and 
cooperation mechanisms by U.S. agencies is complicated by the lack of 
certain elements in these four FTAs. U.S. government officials, FTA 
partner government officials, and other experts we interviewed agreed 
that the environmental provisions in the four FTAs are general and 
broad in nature. The general principles of these agreements include the 
commitment that partners must ensure, or strive to ensure, that their 
laws provide high levels of environmental protection and strive to 
improve those levels. The Chile, Singapore, and Morocco agreements 
contain cooperation provisions that reflect the TPA goals of 
strengthening partner's capacity to protect the environment and 
partners agree to cooperate to do so. NGO representatives and an 
academic we interviewed said the inclusion of the environmental 
provisions and cooperation mechanisms has had little direct impact in 
providing higher levels of environmental protection, strengthening the 
capacity of trading partners to protect the environment, or addressing 
environmental problems targeted in cooperation mechanisms. Some foreign 
government officials agreed, but most FTA partner government officials 
told us they understood the nature and principles of the environmental 
provisions and cooperation agreements and did not expect that the 
United States would resolve their environmental problems. 

U.S. government officials responsible for the implementation of the 
agreements and cooperation mechanisms indicated that the absence of 
several elements in the four selected FTAs or associated U.S. processes 
(some of which are included in more recent trade agreements, such as 
CAFTA-DR or the Peru Trade Promotion Agreement) affects their approach 
to monitoring and overseeing partners' progress under FTA environmental 
provisions and cooperation agreements. Moreover, in GAO's experience, 
the lack of these elements in these FTAs impedes assessing what impact 
environmental steps (whether taken by partners alone or through 
cooperation projects) have had in assuring FTA and FTA commitments and 
goals are met and identifying areas for improvement. 

Some of the elements mentioned include the following: 

* An internationally recognized baseline for assessment does not exist. 
In each of these agreements, partners commit to ensure, or strive to 
ensure, that their laws provide for high levels of environmental 
protection and strive to improve those levels.[Footnote 50] However, 
unlike with labor provisions in which commitments are made to "strive 
to ensure" that the labor principles and internationally recognized 
labor rights as enumerated in the respective FTAs are recognized in 
domestic legislation, no similar agreed international benchmarks were 
set or identified for FTA partners' environmental laws in these four 
FTAs.[Footnote 51] 

* An environmental assessment that serves as a base and road map to 
evaluate the impact of cooperation in trade partner countries does not 
exist. TPA requires an environmental review of future trade and 
investment agreements consistent with Executive Order 13141. Under 
Executive Order 13141, "the focus of environmental reviews will be 
impacts in the United States." However, Executive Order 13141 also 
states that "as appropriate and prudent, reviews may also examine 
global and transboundary impacts." USTR environmental reviews provide 
limited information on trade partner environmental conditions and, as a 
result, cannot serve as a base from which to measure or monitor 
partners' environmental progress. Even though USTR conducted an 
environmental review of these four agreements, as required,[Footnote 
52] the reviews focused on the environmental impacts that the FTAs 
would have on the United States and, as appropriate, focused on global 
and transboundary impacts.[Footnote 53] As a result, U.S. agencies did 
not conduct an assessment of the adequacy and effectiveness of 
partners' environmental laws and enforcement and are not required to do 
so under the TPA. Although not required, some relevant information is 
gathered by USTR and experts within environmental agencies. USTR and 
State officials told us the environmental reviews do include 
information on trade-related environmental concerns that is directly 
relevant to and has helped guide U.S. cooperation with our FTA 
partners. However, the environmental reviews we examined for these FTAs 
do not provide in-depth or comprehensive descriptions of the myriad 
environmental challenges faced by FTA partners. For example, whereas 
the final environmental review for the Chile FTA acknowledges receiving 
public comments of concern related to mining, fishing, forestry, and 
agriculture, there is little discussion of what these were specifically 
and the conditions and extent of environmental issues in these 
industries. 

* Funding for project implementation and oversight was not allocated by 
Congress for these agreements, as in the case of CAFTA-DR. State's OES 
officials explained that part of the funding allocated for 
environmental projects in CAFTA-DR has been used to contract with the 
Organization of American States to monitor and evaluate environmental 
projects. State indicated that since a similar source of funding is 
absent from these four agreements, such oversight has not occurred. 

Officials of USTR and State's OES explained that the FTA provisions and 
cooperation mechanisms are directional and "aspirational" commitments. 
As a result, several of these U.S. officials told us that they seek to 
do no harm and possibly do some good. They explained that the 
environmental challenges facing FTA partners are enormous and that they 
are often systemic, long-term, and evolving in nature. In all four 
countries, a number of the environmental problems identified during the 
FTA negotiations remain a concern and, according to NGOs, in some 
cases, have intensified since the agreement was enacted. For example, 
in Chile, aquaculture was identified as an environmental area of 
concern during the negotiations, and in the summer of 2008, NGOs and 
the media brought attention to increased contamination from increased 
salmon farming for export. In Jordan, one of the main environmental 
concerns during the negotiations was shortage of water, as the country 
is considered the fourth most dry in the world. NGOs expressed concern 
that an industry that has grown the most since the FTA was enacted is 
the manufacturing of certain garments, such as blue jeans, which is 
very water-intensive and further depletes the much-needed resource. 
Nevertheless, U.S. officials pointed to visible signs of improvement in 
certain FTA partners and said that they perceive FTA related 
environmental cooperation as having a positive impact. They stressed it 
is important to consider that some of the partners are coming from 
situation with nascent environmental regimes and limited experience in 
seeking public input to having more laws, institutions, and outreach 
efforts. While there have been limited resources in most cases, 
cooperation activities have forged relationships, provided expertise 
and underwritten projects that have been helpful. For example, in 
Chile, the U.S. EPA provided technical and financial support to design 
a proposal to create a Pollutant Release and Transfer Register for 
potentially hazardous chemicals. 

Agencies Did Not Create Systematic Mechanisms for Monitoring and 
Management: 

A reliable, well-functioning monitoring and enforcement effort helps 
sustain congressional and public confidence in the President's trade 
strategy and fosters support for continued trade liberalization. In 
addition to the absence of certain elements in the FTAs, we found that 
U.S. agencies responsible for the implementation of the environmental 
provisions and cooperation mechanisms lacked key steps in monitoring 
and enforcing trade agreements (1) identifying problems, (2) setting 
priorities, (3) gathering and analyzing information, (4) developing 
responses, and (5) taking enforcement action. USTR is the agency 
responsible for overseeing the overall implementation of FTAs, and 
State's OES is responsible for negotiating the environmental side 
agreements under the FTAs and implementing cooperative environmental 
projects. We found that USTR does not proactively monitor the 
implementation of environmental provisions and that OES lacks a 
structure to manage and monitor implementation of environmental 
projects. As summarized in the boxed text on FTA commitments above, all 
four FTAs contain commitments by parties to strive to ensure or to 
ensure that their domestic environmental laws provide for high levels 
of environmental protection. Furthermore, the parties committed to not 
fail to effectively enforce its laws through a sustained or recurring 
course of action or inaction, in a manner affecting trade between the 
parties. Moreover, reports by the Trade and Environment Policy Advisory 
Committee (TEPAC, the official advisory committee to USTR on trade and 
environmental policy) for the Chile, Singapore, and Morocco FTAs 
suggest a need for ongoing monitoring. The reports indicate the 
majority of TEPAC members believe that, while trade agreements can 
create opportunities to enhance environmental protection by increasing 
wealth and creating political will in favor of such protection, trade 
can create and amplify adverse environmental externalities that require 
enhanced regulatory oversight. This was one reason the TEPAC Chairman 
emphasized to us the importance of a commitment by U.S. agencies to 
monitor partner's implementation of the FTA core commitments. 

USTR indicated that they have yearly meetings with FTA partners and 
that, unlike labor, implementation of the FTA's environment chapter is 
regularly on the agenda of those meetings. In addition, where an FTA 
establishes an Environmental Cooperation Committee or Environmental 
Affairs Council, the council meets annually to review implementation of 
the chapter. These meetings are led by State, but USTR is part of the 
meetings and often reports on implementation matters, as do officials 
from trade partner governments. Finally, USTR told us that they 
sometimes obtain input about environmental concerns in FTA partners 
through official environmental advisors or environmental NGOs. However, 
we did not see further evidence that proactive monitoring of the 
environmental commitments occurs through this process. For example, 
only a handful of reporting cables on environment were produced in 
response to our document requests. Moreover, in the context of 
providing their perspective on progress, USTR officials told us absent 
baselines and better information and analytic tools, it does not know 
how it realistically could assess if FTA partner countries are 
complying with general commitments to maintain strong protections or 
are implementing their own laws, as agreed upon in the FTAs. [Footnote 
54] 

Table: U.S. Agency Responsibilities on FTA Environmental Commitments: 

USTR has responsibility for the implementation of the FTAs and is the 
designated contact point for FTA environmental provisions. State leads 
the negotiation and implementation of FTA environmental cooperation 
mechanisms, which usually take the form of environmental cooperation 
agreements or memoranda of understanding or joint statements on the 
environment. State is also responsible for overseeing ongoing 
cooperation with FTA partners, notably developing work plans and 
conducting periodic meetings to discuss progress. Under TPA, the 
Secretary of State, in consultation with USTR and other relevant 
agencies, is responsible for seeking to establish consultative 
mechanisms among parties to trade agreements to strengthen the capacity 
of U.S. trading partners to develop and implement standards for the 
protection of the environment and human health based on sound science. 
More generally, by statute, State has primary responsibility for 
coordination and oversight of all major U.S. science and technology 
agreements with foreign nations, including those on the environment. 
Other agencies are encouraged to support State in this function, "where 
consistent with the foreign policy of the United States, to lend 
appropriate support to initiatives, resolutions, and programs designed 
to maximize international cooperation in anticipating and preventing a 
decline in the quality of mankind's world environment." 

[A] These agreements are: United States-Jordan Joint Statement on 
Environmental Technical Cooperation, The Agreement Between the 
Government of the United States of America and the Government of the 
Republic of Chile on Environmental Cooperation, Memorandum of Intent 
between the Republic of Singapore and the United States of America on 
Cooperation in Environmental Matters, and United States-Morocco Joint 
Statement on Environmental Cooperation. 

[End of table] 

TPA requires that, when the President submits a trade agreement to 
Congress, the President must concurrently submit a plan for 
implementing and enforcing the agreement.[Footnote 55] The plan must 
include agency staffing requirements that contain a description of 
additional personnel required by federal agencies responsible for 
monitoring and implementing the trade agreement, including USTR and 
other agencies as may be necessary.[Footnote 56] Under the plans 
submitted by the Office of Management and Budget (OMB) to implement and 
enforce the FTAs with Chile, Singapore, and Morocco, additional 
personnel to monitor and implement these trade agreements was not 
requested. 

While State has worked with partners to identify priorities, develop 
detailed work plans, and pursue project funding and implementation by 
U.S. agencies, OES does not have mechanisms in place that allow it to 
assess the effectiveness or efficiency of these projects, provide 
reliable and complete financial reporting, or assure compliance with 
applicable commitments, laws, and regulations. OES staff said that 
Environmental Cooperation Commission meetings and other activities are 
organized on an ad hoc basis, with no formal mechanism. Furthermore, 
there is no formal mechanism to monitor or evaluate the projects or to 
track funding. For example, while OES was able to provide information 
on several environmental projects implemented in Jordan, Chile, 
Singapore, and Morocco, the information was compiled at our request, 
and a comprehensive list was not provided. OES did not have information 
on funding for the projects or a clear understanding of the activities 
implemented by partner agencies. For instance, in many cases, OES was 
not able to provide documentation on description of activities, the 
agency implementing and funding the projects, number of participants in 
projects, outcomes, or other steps taken. Often this information lay 
with the implementing agency or was not collected at all. Evaluations 
or impact assessments are not conducted for many of these projects; 
therefore, it is not possible to know with assurance whether they have 
improved the capacity of FTA partners to protect the environment. 
Nevertheless, in some cooperation mechanisms and subsequent work plans, 
such as the recently concluded one with Jordan, parties agreed to 
strive to identify performance indicators and benchmarks to measure 
appropriately the progress made in accomplishing or otherwise 
furthering the goals and objectives of such programs, projects, and 
activities and to facilitate public reporting of that progress. 

U.S. Agencies Did Not Effectively Translate Environmental Commitments 
into Priorities for U.S. Funding: 

The FTAs that we reviewed do not require and agencies did not seek new 
funding to implement FTA environmental cooperation commitments. 
Moreover, little funding has been made available through existing 
sources.[Footnote 57] OES negotiated environmental cooperation 
agreements in all four of these agreements, which included the 
implementation of cooperation projects and, with the exception of 
Jordan, contained the parties' agreement that the cooperative 
activities would be subject to the availability of funds; however, OES 
was not required to and did not make systematic requests for funding 
through the appropriations process for their implementation. 
Furthermore, as the agency responsible for preparing the President's 
plan for implementation and enforcement of the agreements negotiated 
under TPA, OMB was not required[Footnote 58] and did not identify 
resources needed to implement environmental cooperation projects made 
in the Chile, Singapore, and Morocco environmental cooperation 
agreements. OMB did not take advantage of the opportunity to inform 
Congress of the funding needed to adequately implement environmental 
cooperation agreements associated with these FTAs. The U.S.-Chile 
environmental cooperation agreement, the U.S.-Singapore Memorandum of 
Intent on Environment Cooperation, and the U.S.-Morocco Statement of 
Environmental Cooperation state that all cooperative activities agreed 
upon in the respective documents are subject to the availability of 
funds and to the applicable laws and regulations in their respective 
country. 

USTR officials said that, while there is no commitment under the 
agreements that the United States should provide funding for 
environmental projects, that is the underlying expectation of several 
FTA partners and of some in the United States. USTR officials said that 
this can create complications, since funding is not always available. 
For example, in Morocco, government officials said it was their 
understanding that funding would be provided by U.S. agencies to 
implement activities. In Chile and Jordan, even though specific funding 
was not allocated to implement any of the projects or activities under 
the environmental cooperation mechanisms, almost all of the funding for 
these projects has been provided by U.S. agencies, out of their regular 
budgets. 

Instead of asking Congress to appropriate funds for the implementation 
of environmental cooperation projects, State's OES has attempted to 
obtain funding through an interagency coordination process. OES works 
with other U.S. government agencies such as the EPA, the USAID, and the 
Departments of Interior, Agriculture, Commerce, Justice, and Health and 
Human Services, among others. The agencies discuss cooperation projects 
and attempt to cover some of the projects with funds under their 
regular budgets. In 2004, USTR, in coordination with State undertook a 
review of FTA negotiating experience. During this review the agencies 
agreed that these cooperation mechanisms should serve two primary 
purposes: strengthen existing capacity building efforts on 
environmental matters and identify new priorities while marshaling new 
resources for these expanded efforts. A high priority was to improve 
interagency coordination on funding for these mechanisms, particularly 
given high expectations that their implementation would lead to 
increased funding for environmental capacity building. USTR requested 
that all other relevant agencies, particularly USAID, coordinate 
closely with State in the implementation of these cooperation 
mechanisms. Despite this joint USTR-State effort to encourage agencies 
to coordinate, in the fall of 2008, OES officials described its process 
for coordinating with agencies on funding as a labor-intensive, 
frustrating one of "shaking the trees." In practice, they said it has 
been very difficult to obtain adequate resources to implement all of 
the projects outlined under the commitments made under the 
environmental cooperation agreements and associated work plans. 
Meanwhile, officials at key environmental agencies suggested that State 
could do more to involve them in FTA work. 

Environmental Projects Essential to Meet FTA Environmental Objectives: 

Lack of funding is seen by many experts as the greatest challenge to 
implementing cooperation projects and in turn to achieving the general 
principles on environment under the FTAs. 

In the environmental cooperation agreements, the parties agreed that 
the activities outlined therein are subject to the availability of 
funds. Overall, in Jordan and Chile, activities for most projects 
outlined in the work plans have been implemented, while in Singapore 
and Morocco only a few activities have been completed from those agreed 
upon. Jordan has received some funding for environmental projects from 
USAID, but Chile, Singapore, and Morocco have received very little 
assistance. The largest aid recipient, Jordan, was both satisfied with 
the assistance U.S. agencies provided and able to point to concrete 
results. U.S. and Chilean officials agreed cooperative activities had 
been of some benefit, but some believe that the limited amount of 
funding narrowed the impact of environmental projects. In part, the 
extent of assistance provided by U.S. agencies is influenced by the 
level of development in the country. For example, Singapore is a 
developed country with little need for assistance. On the other hand, 
Morocco is a developing country and has identified the need for 
assistance. A brief overview follows: 

Jordan: 

In Jordan, USAID assistance has contributed to the implementation of 
multiple environmental areas listed under the United States-Jordan 
Joint Statement on Environmental Cooperation. USAID officials in Jordan 
explained that USAID has had a presence in the country for over 50 
years and that environmental issues have been a part of its portfolio 
since before the FTA was passed. Jordan is one of the largest 
recipients of USAID assistance, receiving an annual average of $250 
million since 1996. They explained that the areas of cooperation under 
the U.S.-Jordan Joint Statement on Environmental Technical Cooperation 
are areas that USAID already covered; therefore, they have been able to 
work to address most of the issues in these cooperation mechanisms. 
Even though USAID does not plan its projects based on the commitments 
under the joint statement, they said the agreement provided a platform 
for additional cooperation on the environment in Jordan. Overall, USAID 
has earmarked or spent over $30 million for environmental projects in 
Jordan since 2004. Among other things, USAID said they have helped 
Jordan establish a Ministry of Environment, create a 400-person strong 
Environmental Police Department, known as the Rangers, enact an 
environmental law and by-laws, improve biodiversity conservation, and 
take initial steps to improve wastewater treatment and disposal in 
light of the significant impact of export-related apparel production on 
Jordan's scarce water resources. In addition, EPA reported a $600,000 
allocation for 2008-2009 for environmental projects. State indicated 
that EPA has hosted a study tour of the United States for Jordanian 
environmental officials and is now training the Rangers to conduct 
investigations of environmental crimes. Interior is also working with 
key partners to strengthen Jordan's ability to meet its CITES 
obligations.[Footnote 59] 

Chile: 

In Chile, multiple environmental projects have been implemented, but 
lack of funding has limited their impact, and major environmental 
problems have not been addressed. The Chile FTA is the only one that 
includes environmental projects in the associated annex to the text of 
the environmental chapter and that established an Environmental Affairs 
Council (EAC). There are eight projects outlined in the environmental 
cooperation annex, and activities have been implemented in each of 
these areas. Several relate to issues in Chile's major export 
industries, namely those related to reducing mining pollution and 
improving agricultural practices. However, according to EPA officials, 
the projects' impact has been limited by the lack of funding to 
continue the cooperation. They explained that the eight projects were 
expected to work as a "launching pad" for additional projects and 
cooperation. These projects consisted mostly of high level information 
exchange and workshops and guidance for pilot projects, and little was 
done after these initial steps were taken. The EAC's Joint Commission 
for Environmental Cooperation has developed two biannual work plans for 
2005-2006 and 2007-2008. These contain five areas of priorities, and 
OES provided summaries of activities implemented in each of these areas 
for the 2005-2006 work plan. OES estimates that $1.165 million has been 
provided to fund these projects. 

Singapore: 

In Singapore, environmental assistance under the FTA has been limited 
because Singapore has a strong environmental record according to 
government officials, and little need for assistance. However, the 
United States and Singapore signed a memorandum of intent to cooperate 
on environmental matters, under which two biannual work plans were 
developed for 2005-2007 and 2008-2010. U.S. officials did not assess 
the cost of these activities, as they were done as part of normal 
bilateral cooperation. According to State's officials, the two 
countries have conducted three workshops and a study tour since the FTA 
was signed. Included have been a binational workshop in Singapore to 
train regional port inspectors and customs authorities to identify 
ramin wood, a training workshop on wildlife trade regulation, a 
workshop on terrain decontamination sponsored by EPA, and consultations 
by the Singapore Agri-Food and Veterinary Authority, with the U.S. Fish 
and Wildlife Service and various other U.S. agencies to exchange 
information on law enforcement methods and CITES implementation 
practices and systems. 

Morocco: 

Environmental cooperation under the Morocco FTA did not meet the 
expectations of the government of Morocco because few projects have 
been funded. While there was no commitment to fund environmental 
projects by the United States, Moroccan government officials said that 
their expectation was that projects would be financed by U.S. 
government agencies. Moroccan government officials from the Ministry of 
Foreign Affairs said that the level of cooperation on environmental 
projects under the U.S.-Morocco Joint Statement of Environmental 
Cooperation has not been satisfactory. Moroccan government officials 
said that, out of the 24 projects in the work plan, only 8 have been 
implemented. They said that the projects consisted mostly of workshops 
and training sessions that were informative but have had limited impact 
in achieving the objectives in the work plan. 

Officials at State, however, assessed collaboration with Morocco on 
environmental issues differently. They pointed out that in addition to 
EPA's involvement in the delivery of 8 trainings, various other U.S. 
agencies including USAID, The Department of the Interior, the U.S. 
Trade and Development Agency, and The National Oceanic and Atmospheric 
Administration's (NAOAA) National Ocean Service had all engaged with 
Morocco in efforts to help it preserve and protect the environment 
since the 2006 entry-into-force of the FTA. 

Nevertheless, officials at State said that environmental assistance to 
Morocco amounted to only $350,000 funded from the Middle East 
Partnership Initiative program, which is administered by EPA, and about 
$50,000 from Interior. While USAID has a presence in Morocco, unlike 
Jordan, they have not chosen to fund environmental projects developed 
under the FTA. USAID officials explained that in Morocco there is a 
great need to help small-and medium-sized businesses become better 
prepared to export; therefore, much of agency funding related to the 
FTA has been used for that purpose. 

Conclusions: 

Success in achieving U.S. goals among the four FTAs we examined has 
been mixed. For the most part, commercial results have been very 
positive, as expansion of trade in goods and services since the 
agreements took effect rose sharply since the period immediately prior 
to the agreements. Total two-way trade, U.S. exports, and partner 
country exports for the four selected FTAs all rose, ranging from 42 
percent for the FTA with Singapore to 259 percent for the FTA with 
Jordan. We also observed higher annual average rates of growth for top 
product categories in the period directly following each FTA for both 
U.S. exports and partner country imports than in a similar period prior 
to the agreements. In addition, and consistent with TPA objectives, a 
large percentage of goods became duty-free immediately after FTA 
implementation. This was a significant gain for the United States, as 
prior to FTA implementation, partner countries had enjoyed practically 
duty-free access to the United States, while U.S. exports faced high 
tariffs that in some cases were as high as 70 and 90 percent. Overall, 
increases in U.S. exports ranged from 72 percent (for Singapore) to 365 
percent (for Chile) since implementation. In two partner countries, 
Singapore and Chile, trade in services increased as did the stocks of 
FDI and the sales of foreign affiliates of U.S.-based companies. 
Representatives of a broad range of U.S. industries generally expressed 
satisfaction with FTA results. 

Some important progress on strengthening partners' laws and 
institutions on labor the environment has also been attained as a 
result of these FTAs. Our review showed that each of the four partners 
had taken steps consistent with their commitments in FTAs to "strive to 
improve their laws" and enforcement thereof. Moreover, some helpful 
progress appears to be been achieved as a result or with the assistance 
of FTA-related cooperative projects. Nevertheless, the President 
delegated to USTR and USTR redelegated to OMB the responsibility to 
submit a plan to implement and enforce the agreements. Given the broad 
nature of the labor and environmental obligations, significant and 
sometimes worsening systemic deficiencies in certain partner nations, 
and limited U.S. resources, a plan that clearly indicated the executive 
branch's analytic approach and likely priorities would have been 
especially useful. In practice, the oversight USTR and other agencies 
put in place--whether in response to statutory requirements or at 
agencies' discretion--has been ad hoc and lacks key elements critical 
to long-term success. For example, U.S. agencies have yet to update and 
bolster their original 2 page plans for implementing and monitoring 
these agreements, despite acknowledging that present approaches, 
baseline information, staff levels and expertise, and financial 
resources do not enable them to assure meaningful or lasting results. 
Agencies did not seek requisite funding until 2009, and in several 
cases funding was eliminated. Regarding the labor agreements, the 
United States and partner countries lost opportunities to pursue issues 
of interest as mechanisms created in the FTAs for cooperation were not 
utilized by Labor. Finally, the agreements established a number of 
environmental cooperation mechanisms and projects, yet key elements 
such as State's ability to marshal funding and leverage other agencies' 
expertise, gather information on the actual activities by implementing 
agencies, or provide oversight of these projects' effectiveness, cost, 
and compliance were lacking. Little information was available to 
Congress and other stakeholders regarding these cooperative activities 
and the extent to which they improve partner capacity or otherwise 
advance FTA objectives. As a result, a more robust U.S. approach is 
needed to assure Congress that FTA partners' can provide and enforce 
strong protections. 

Recommendations for Executive Action: 

To reflect the evolving U.S. experience with FTAs and better ensure 
progress in achieving stated U.S. objectives related to labor and the 
environment, we recommend that USTR, in cooperation with other 
agencies, as appropriate, prepare updated plans to implement, enforce, 
monitor, and report on compliance with and progress under the FTAs' 
labor and environmental provisions. To facilitate oversight and input, 
these plans should reflect ongoing trade developments, be provided to 
Congress, and summarized in USTR's annual trade agreements report. 

We recommend that the Secretary of Labor direct ILAB, in consultation 
with other agencies as appropriate, take the following action: 

* Reinvigorate its implementation and cooperation responsibilities 
under the FTAs by initiating regular contact with all FTA partners' 
ministries of labor to review implementation of FTA labor provisions 
and to develop ongoing priorities and plans for technical cooperation 
on labor matters, as guided by the labor cooperation annexes and the 
partners' common interests and needs. The Department of Labor should 
consider, identify, and if necessary request appropriate resources such 
as new funding to undertake such contact and cooperation, including by 
coordinating with other agencies that can facilitate or assist these 
efforts. 

We recommend that the Secretary of State take the following two 
actions: 

* Direct OES to work with other agencies to develop a more structured 
approach to manage and monitor the implementation of environmental 
cooperation mechanisms and projects. This should enable State to more 
readily track progress and include information such as number and 
nature of activities, source and amount of funding, and, to the extent 
practical, performance indicators and benchmarks to measure 
appropriately the progress made in accomplishing or otherwise 
furthering the goals and objectives of such programs, projects, and 
activities and public reporting of that progress. 

* Direct OES to use this information to publicly report to Congress on 
cooperative activities and projects with FTA partners and their 
outcomes, as well as their role in furthering U.S. trade policy goals 
and FTA and FTA-related cooperation objectives. 

Agency Comments and Our Evaluation: 

The three agencies to which GAO directed recommendations said they 
planned to pursue them. Labor concurred with our report and its 
recommendation, indicating that the lack of priority given to assuring 
that workers share in the benefits of trade was a source of concern it 
intended to redress. State and USTR indicated that they would improve 
monitoring and enforcement of the labor and environmental aspects of 
FTAs, but sought greater precision in GAO's recommendation that 
agencies revisit and strengthen implementation plans for FTA-related 
labor and environmental cooperation. Nevertheless, State and USTR took 
issue with the basis and balance of some of our findings. GAO has made 
some adjustments in response, but continues to believe more robust 
plans are needed to assure progress in meeting the important challenges 
to labor and environmental protection that remain. 

State said GAO had not given partner governments and U.S. agencies 
sufficient credit for the progress made through the FTAs in improving 
structural and institutional capacity to protect the environment and 
labor rights. State highlighted several examples of partner progress as 
particularly meaningful achievements. Nevertheless, State acknowledged 
that it has been severely hampered in undertaking FTA-related labor and 
environmental cooperation work with partner governments by a lack of 
human and financial resources. GAO recognizes that some important 
progress in strengthening partner capacity to protect workers and the 
environment has been achieved through FTAs. We recognize FTAs have 
resulted in or supported some important progress in these areas, 
notably in Jordan, the country whose FTA has been in effect longest and 
with the most sizeable U.S. foreign assistance. We reviewed and revised 
the report to ensure this progress is captured. 

However, GAO believes more progress was likely possible and remains 
desirable, given rapid growth in two-way trade and partners' 
acknowledged difficulties in enforcement. As GAO already notes in this 
report, the few human and financial resources available for FTA 
cooperation limited progress toward meeting agreed cooperation plans. 
Yet GAO also shows U.S. agencies did not utilize the opportunity that 
existed in TPA or in ensuing budgets to make the case that more 
resources were necessary to assure progress. Our work also showed 
agencies may not be taking full advantage of the resources already 
expended. Specifically, the report notes that U.S. agencies missed 
opportunities to use the general FTA or specific FTA mechanisms they 
created on labor to engage with FTA partners and encourage improvement. 
GAO also shows agencies did not optimize their current monitoring 
efforts, such as by updating ongoing reports on human rights to address 
partners' compliance with FTA commitments. 

USTR said that in some instances GAO had portrayed an inaccurate and 
potentially misleading picture of U.S. agency responsibilities, 
partners' actions, and outstanding challenges. In response, GAO made 
several technical corrections and ensured the criteria we used were 
cited. In the revisions we made, we also sought to make clearer 
distinctions between requirements for U.S. agencies under TPA, FTA 
chapters, and associated cooperation mechanism agreements, versus more 
general expectations for U.S. agencies based on USTR's overall 
responsibilities for the operation of the U.S. trade agreements 
program, leading and guiding U.S. trade policy, and monitoring and 
enforcing trade agreements. We acknowledge that evaluation of the 
progress attained was based, in part, on interviews with responsible 
foreign and U.S. government officials and selected private sector 
interests and experts. USTR also indicated that GAO should have given 
more prominence to the FTA commitment that an FTA partner not fail to 
enforce its environmental and labor laws through a sustained or 
recurring course of action or inaction, in a manner affecting trade 
between the parties (USTR's underlining for emphasis retained). GAO 
already distinguishes between this binding FTA obligation and other, 
more "aspirational" commitments, such as to strive to strengthen 
environmental laws. Weaknesses in laws and enforcement we report 
involve key and rapidly-growing sectors of trade, such as apparel from 
Jordan, and forestry and fishery products from Chile. GAO was struck by 
U.S. agencies' inattention or inaction on abuses in QIZs during a time 
when Jordan's apparel exports to the U.S. rose from $43 million to 
$1.253 billion. 

However, we believe that by definition all of the FTA commitments on 
labor and the environment are trade-related, because they are contained 
in a trade agreement, and thus appropriate for inclusion within the 
scope of our review of progress attained as result or since the entry 
into force of these FTAs. Moreover, some FTA commitments and FTA 
cooperative goals are broad or generally applicable, rather than being 
limited to traded sectors. Nevertheless, we did review the report to 
remove any inappropriate references to non-traded sectors. 

Labor, USTR, State, and EPA also provided several technical comments, 
which we incorporated or addressed as appropriate. For example, State 
termed our statement that agencies did not commit the bulk of funding 
for the Better Work Jordan project until more than a year after 
problems in the QIZs were publicly exposed as an "unfortunate 
oversimplification," and provided details on the steps that were 
undertaken in the intervening year. GAO included this new information. 
However, GAO believes the time State shows was required for diagnosing, 
designing, and delivering cooperative assistance to such FTA partners 
only underlines the importance of U.S. agencies having up-to-date plans 
and more reliable oversight, evaluation, and reporting mechanisms. 

As agreed with your office, unless you publicly announce the content of 
this report earlier, we plan no further distribution until 30 days from 
the report date. At that time, we will send copies to the U.S. Trade 
Representative; and the Secretaries of Commerce, Labor, and State, as 
well as the Administrator of EPA, and other interested parties. The 
report also will be available at no extra 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 at (202) 512-4347 or yagerl@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs can be found on 
the last page of this report. GAO staff who made major contributions to 
this report are listed in appendix X. 

Sincerely yours, 

Signed by: 

Loren Yager: 
Director, International Affairs and Trade: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

In this report, we assess the progress that has been made through free 
trade agreements (FTA) in (1) advancing U.S. economic and commercial 
interests, (2) strengthening labor laws and enforcement in partner 
nations, and (3) strengthening partners' capacity to strengthen and 
enforce their environmental laws. We focused on pre-FTA versus post-FTA 
progress. For the purposes of this report, we chose to concentrate on 
four FTA partners so that we could examine the unique set of 
circumstances for each country with some specificity. The four partners 
on which we chose to focus--Jordan, Singapore, Chile, and Morocco-- 
represent a cross section of FTA partners' country characteristics, 
have FTAs in force the longest, and the represent regional dispersion 
of U.S. FTAs across Asia, Latin America, and the Middle East. In 
addition, we examined U.S. agency responsibilities and performance 
associated with the FTAs. 

In gathering information for all the above objectives, we engaged in 
three types of activities: (1) obtaining information and analysis from 
legal and secondary literature sources, (2) obtaining information and 
perspectives of U.S. government and private sector officials and 
experts, (3) obtaining information through partner country visits. In 
addition, for the analysis of the commercial and economic results of 
the FTAs, we gathered and analyzed data on international and bilateral 
trade and investment. We conducted this performance audit work from 
April 2008 to June 2009 in accordance with generally accepted 
government auditing standards. 

We obtained, reviewed, and analyzed documents from a variety of sources 
including the four FTAs and their associated annexes, Trade Promotion 
Authority (TPA) and other relevant laws, regulations, orders, Federal 
Register notices, and congressional guidance setting forth requirements 
or expectations for U.S. agencies related to the FTAs, the operation of 
the U.S. trade agreements program, and international environmental 
cooperation. We also reviewed reports submitted to Congress in response 
to TPA requirements, including those submitted in conjunction with FTA 
implementing legislation, such as Presidential statements on how the 
FTAs advance U.S. commercial interests, and applicable TPA goals and 
Statements of Administrative Action. We also reviewed pertinent 
academic literature and authoritative reports from government and 
private sector sources. The information on foreign law in this report 
does not reflect our independent legal analysis, but it is based on 
interviews and secondary sources. This report was not designed to 
assess legal compliance by the United States or its partners with FTAs 
or other requirements. 

We also interviewed U.S. officials responsible for international trade 
policy at the Office of the Office of the U.S. Trade Representative 
(USTR); the Departments of State, Commerce, and Labor; the 
Environmental Protection Agency, as well as officials of the Department 
of Homeland Security--Bureau of Customs and Border Protection. We also 
obtained comment and perspective from a range of subject matter experts 
and economists. 

To assess the extent of progress in each area, we analyzed available 
data and documents on post-FTA developments and testimonial 
characterizations of progress in the post-FTA period compared to what 
was known or reported about the pre-FTA period. We also compared the 
progress to official expectations, including officially agreed 
expectations as set forth in the FTAs and FTA cooperative agreements 
and associated action or work plans, official reports about FTA 
effects, U.S. TPA objectives, and the expectations of cognizant 
officials in the United States and partner governments. Where 
perspectives on progress differ, the various views and their basis are 
reported. Finally, where material gaps in agency documentation and 
internal controls became evident in the course of GAO's efforts to 
establish and evaluate FTA-related progress, consistent with generally 
accepted government auditing standards, we report on these 
deficiencies. Key limitations of our work are that the findings are 
largely limited to the partners, private sector representatives, time 
period, and information reviewed. While we considered data on trends 
after FTA implementation and opinions on FTA-induced effects, we did 
not seek to quantitatively isolate FTA-induced effects. Although we 
gathered information through December 2008, the data and foreign 
interviews do not generally capture the full impact of the 
deterioration in trade that ensued as a result of the global financial 
crisis and economic downturn occurring during 2008-2009. 

During the 1-week trips to each of the four trade partner countries we 
focused on, we included meetings with in-country U.S. officials, 
foreign government officials responsible for specific areas of the FTA 
and its implementation, umbrella groups of business groups, such as 
chambers of commerce and industry, officials of international 
organizations such as the ILO, as well as trade union and environmental 
groups, academics, and other subject matter experts. 

Given the complex interactions of the trade agreements themselves and 
data requirements, we did not empirically isolate the exact effects of 
the trade agreements themselves on exports or imports. Instead, we used 
a more indirect, but indicative method to examine the commercial/ 
economic effects of the selected FTAs. As a first approximation, we 
used trade data for the United States and the selected FTA countries to 
examine the trends in trade, at the country level and at a more 
disaggregate, sectoral level, both before and after implementation of 
the Agreements. As a complement to the data analyses on the commercial 
impacts, we also gathered anecdotal evidence (views) about the four 
selected FTAs effects through the fieldwork described above, from U.S. 
and partner officials, and from private sector groups. 

We solicited views from stakeholders including various members of the 
U.S. Trade Advisory Committee System[Footnote 60] and obtained 
responses from about 30 associations and representatives in response. 
Notably, we heard from the Chairman of the Advisory Committee on Trade 
Policy and Negotiations (ACTPN) and several ACTPN members, the chairman 
and several members of the Intergovernmental Policy Advisory Committee 
(IGPAC), the chairman and several liaisons of the Trade and Environment 
Policy Advisory Committee (TEPAC), several liaisons to the Labor 
Advisory Committee, and a variety of members of the agriculture and 
industry committees, many on behalf of trade associations. 
Specifically, executive branch agencies arranged for GAO to send a 
letter to all members of the system seeking concrete evidence from the 
U.S. private sector about their experiences to date with the FTAs that 
have entered into force since 2001. Topics explored included: 

* FTAs in force of most significance to your sector: 

* Trade and investment changes and causes; role of FTAs vs. other 
factors: 

* Nature of FTA Effects on Industry or Product Sector: 

* Examples of FTA Effects on Industry or Product Sector: 

* Satisfaction with FTA Economic/Commercial Results to Date: 

* Areas for Improvement: 

Upon receiving responses from a cross-section of members, GAO initiated 
contact and conducted interviews with certain industry groups or firms 
(e.g., the American Chemistry Council, and AdvaMed and the National 
Council of Textile Organizations) in situations where trade had 
expanded and we had not received a response or where we had been told 
of specific benefits (e.g., Lucas Films) or concerns (e.g., regarding 
public health and access to medicines). We acknowledge that this input 
may not be comprehensive or reflective of the U.S. economy as a whole. 
GAO did not independently verify the views and information provided. 

To examine the commercial and economic results of the four selected 
FTAs, our analysis focused on data for three broad trade-related 
elements: merchandise trade, trade in services, and foreign direct 
investment. Within these elements, we also focused on determining 
results and trends in bilateral trade for key industry sectors. We 
analyzed data for the time period before the FTA was implemented and 
compared results with the period after FTA implementation. 

For merchandise trade, we used data from the U.S. International Trade 
Commission's (ITC) Interactive Tariff and Trade Database from 1994 to 
2008 in order to calculate two-way trade, bilateral trade, and overall 
and product category level growth rates between the United States and 
our trade partners.[Footnote 61] Using this data, we first calculated 
the total growth in exports and imports from the year just prior to the 
implementation of each FTA up to 2008. To calculate average yearly 
growth rates overall and for product categories, we also calculated the 
annual average rate of growth in U.S. exports and imports with each 
partner country for several years prior to and after the implementation 
of the FTAs to ascertain the differences between the periods. For 
Jordan, we selected the pre-and post-FTA periods, from 1996 to 2001, 
and from 2002 to 2008, respectively.[Footnote 62] For Chile and 
Singapore, we selected the 5-year pre-FTA period from 1999 to 2003 and 
the 5-year post-FTA period from 2004 to 2008. For Morocco, we selected 
the 2003 to 2005 pre-FTA period and 2006 to 2008 post-FTA period. 
Second, for the product category analysis, we obtained end use data at 
the 5-digit aggregation from the ITC's Interactive Tariff and Trade 
Dataweb. We selected the top 25 U.S. exports and imports by value with 
each partner country to ascertain that these categories were of 
significance in the country's total trade.[Footnote 63] Third, we 
adjusted these series for inflation using the Gross Domestic Product's 
Implicit Price Deflator from the Bureau of Economic Analysis (BEA). 
Fourth, for our product category data analysis, we calculated average 
annual growth rates for each partner-country series by fitting a 
logarithmic trend line through the inflation-adjusted data for each pre-
and post-FTA period. We did not use the average of annual growth rates 
for the category data because the averages can be skewed by occasional 
large changes in trade. Fifth, we then subtracted the pre-FTA average 
annual growth rate from the post-FTA growth rate and sorted these 
differences in descending order for each product category.[Footnote 64] 
For our overall growth rate analysis by country, we took the annual 
average growth rates for total U.S. domestic imports for consumption 
and total U.S. domestic exports with each selected FTA country using 
U.S. ITC Interactive Tariff and Trade Dataweb data and compared these 
growth rates with U.S. growth rates of trade for similar time periods 
with the world (see appendix VI). For our market share analysis by 
country, we used data from the Global Trade Atlas and World Trade Atlas 
as well as the International Monetary Fund's Direction of Trade 
statistics to determine how market share changed for the United States 
and top exporters in partner-country markets. 

For trade in services and foreign direct investment (FDI), we relied 
mostly on data from the BEA, which publishes data on these elements in 
the Survey of Current Business and on its Web site.[Footnote 65] We 
also reviewed data on services, published by the United Nations 
(UN),[Footnote 66] and FDI, published by the United Nations Conference 
on Trade and Development, mainly to gain insight into worldwide and 
partner country trends. We also obtained and reviewed data from partner 
countries. 

For trade in services, we analyzed bilateral imports and exports from 
the partner countries and reviewed data for service sector categories. 
Data on services trade by country were not available for Jordan and 
Morocco and, in a few cases, complete data by service industry sector 
were not available due to limitations on the disclosure of proprietary 
information. For foreign direct investment, we focused on the stock of 
foreign direct investment for partner countries, which represents the 
book value of holdings. We also examined data by sector where 
available, and some of this data were also limited for disclosure 
purposes. In examining the pre-and post-FTA results, we generally 
compared the most recent available data (usually 2007) with the average 
of the 3-year period prior to the implementation of the respective FTA. 
In keeping with the methodology employed in prior work,[Footnote 67] 
FDI stocks and services data are reported in nominal dollars. 

For each of the data sets we used for U.S. and partner-country trade 
and investment, we assessed their relative strengths and limitations 
through interviews with cognizant parties, reviews of the available 
documentation, and performing basic logic checks and found them 
sufficiently reliable for the purposes of this report. We did not 
assess the reliability of data that we obtained directly from partner 
countries, as these data are used only to provide supplementary 
background and context for our analysis. 

To document and assess labor progress under FTAs, we examined FTA 
provisions in the labor chapters and their annexes for the FTAs with 
Jordan, Chile, Singapore, and Morocco. These FTAs include both "best 
effort" commitments, as well as commitments subject to dispute 
settlement procedures that could lead to the imposition of trade 
measures. For example, the FTA partners commit to "strive to ensure" 
that their domestic laws provide for labor standards consistent with 
internationally recognized labor rights set forth in their respective 
labor chapters[Footnote 68] are recognized and protected by domestic 
law (a "best effort" or aspirational commitment) as well as to "not 
fail to effectively enforce its labor laws, through a sustained or 
recurring course of action or inaction, in a manner affecting trade 
between the parties" (a commitment subject to dispute settlement 
procedures). GAO considered all the FTA labor provisions to be trade- 
related commitments, even though only some of them specifically mention 
trade and others are more general in nature. 

We looked for evidence that partners were making efforts to meet these 
FTA obligations, such as passing or amending laws or taking steps to 
improve enforcement of laws. Principal sources of information included 
U.S. government reports submitted in connection with TPA and the FTAs 
and U.S. government reports on human rights, child labor, and human 
trafficking, which are not specifically designed to assess compliance 
with the FTAs but do include analysis on the extent to which partners 
provide the five internationally recognized labor rights that are cited 
in U.S. FTAs. In addition, GAO obtained information and analysis on 
labor law from U.S. embassies, partner governments, and international 
organizations such as the International Labor Organization (ILO), the 
Organization for Economic Cooperation and Development, and the 
International Trade Union Confederation. We relied on these sources for 
the description of legal changes and ongoing challenges and did not 
independently assess them. 

GAO also sought perspectives on the extent of labor progress during 
fieldwork to the FTA partners, where we typically met with U.S. embassy 
labor officers, partner government labor officials, local labor union 
representatives, and international organizations such as the ILO. 
Regarding labor cooperation, we asked U.S. and partner government 
officials for documentation and oral reports about bilateral contacts, 
joint planning and prioritization, and cooperative work on labor 
matters after the FTAs' entry into force. Where the partner government 
reported that they had had no contact or were disappointed with the 
level of engagement, we report this information but also sought and 
report reaction from U.S. agencies. Although we did not learn of any 
overall joint plans for labor cooperation, we sought information from 
U.S. government agencies and FTA partners about any cooperative 
activities or capacity building projects on labor conducted with the 
partners since the FTAs' entry into force. We compiled this information 
and analyzed how it compared to U.S. descriptions of labor rights 
weaknesses in the partner, such as the U.S. government's pre-FTA 
reports on labor rights. GAO considers these efforts to represent labor 
progress even if they did not occur because of the FTA. GAO also 
consulted with selected experts and interest groups in the United 
States, notably several academics or experts who had written about 
efforts to tie labor standards to trade programs or agreements, members 
and liaisons of the Labor Advisory Committee (an official advisory body 
to USTR and Labor on trade agreements), representatives of the AFL-CIO 
and Unite Here, the Solidarity Center, the International Labor Rights 
Forum, and the National Labor Committee, the nongovernmental 
organization that exposed problems in Jordan's QIZs. 

To assess U.S. agency performance on labor matters, we analyzed agency 
responsibilities based on TPA, the FTAs, U.S. trade laws, associated 
Executive Orders and Federal Register notices, and other agency 
guidelines. We also compared what happened after FTA implementation 
with what appeared to be officially expected or enabled in the FTAs 
(i.e., FTAs negotiated after TPA created a labor cooperation 
mechanism), and with key steps for monitoring and enforcement of trade 
agreements, which GAO has established in prior reports. 

To document and assess environmental progress under FTAs, we examined 
FTA provisions, as well as those in environmental cooperation 
agreements and mechanisms. We also analyzed associated U.S.-FTA partner 
agreed documents, such as plans of action and work plans, and press 
releases and other reports on joint meetings and workshops. We relied 
on secondary sources that identified changes in environmental laws and 
enforcement capacity made by partner governments and sought 
authoritative summaries of these. We did not conduct an independent 
analysis of these laws, but relied instead on solicited views and 
analyses of these changes from partner government and U.S. agency 
officials, as well as selected academics and other experts and 
environmental groups. We requested documentation and other information 
from U.S. agencies on each partner country's environmental regimes, 
trade-related environmental challenges and how they had changed since 
the FTA's entry into effect, and trade-related cooperative activities, 
those done both in connection with agreed work plans and in connection 
with U.S. foreign assistance or environmental cooperation generally. We 
solicited views on the extent of progress associated with the FTA, FTA 
cooperative mechanisms and cooperative projects, and other activities, 
including foreign and U.S. officials' satisfaction with and assessments 
of the results to date of their impact. To establish and assess U.S. 
agency roles, responsibilities, and management of FTA-related 
functions, we relied on FTAs and FTA cooperative agreements, TPA, other 
laws, executive orders, and associated notices or reports, and informal 
oral or written agency descriptions by USTR and the Department of 
State. We compiled data and other information about cooperative 
projects and compared what was done relative to agreed plans or 
expectations. We also solicited assessments of significance from U.S. 
and partner government officials, as well as selected experts such as 
international environmental officials and experts at the United Nations 
Environment Programme and the North American Agreement on Environmental 
Cooperation, George Washington University Law School, and TEPAC members 
in their individual capacity. 

[End of section] 

Appendix II: Commercial/Economic Results of the Jordan FTA: 

The Jordan FTA entered into force on December 17, 2001. Jordan is a 
lower-middle income country, and was the first Arab country to sign an 
FTA with the United States. Following the implementation of the Jordan 
FTA and the designation of Qualifying Industrial Zones (QIZ) and 
Jordan's accession to the World Trade Organization (WTO) in 2000, 
Jordanian merchandise goods and services exports increased markedly. 
Moreover, the FTA and other previous investment agreements between 
Jordan and the United States provided a framework for greater 
investment activity in Jordan. 

Jordan's Economy and International Trade: 

Jordan's gross domestic product (GDP) in 2008 was estimated at $30.8 
billion (purchasing power parity, PPP) and per capita GDP is estimated 
at $5,000 (PPP). Jordan's official unemployment rate for 2008 was 
estimated to be 12.9 percent, although unofficial estimates range up to 
30 percent. While about 86.3 percent of Jordan's GDP is from the 
services sector, such as tourism, 3.6 percent is from agriculture, and 
about 10.1 percent is from other industries including apparel and 
clothing, phosphate mining, fertilizers, and pharmaceuticals. 

The World Bank's 2009 Doing Business report shows that Jordan ranked 
101 out of 181 countries in the overall ranking of ease of doing 
business. The American Chamber of Commerce (AmCham) in Jordan noted 
that, according to the World Economic Forum's Global Competitiveness 
Report for 2007-2008, businesses in Jordan face challenges due to tax 
regulations, inefficient government bureaucracy, and tax rates. At the 
same time, the 2009 Doing Business in the Arab World report shows that 
it has improved in certain areas in terms of regulatory reform, notably 
in regard to starting a business and trading across borders. 

In addition to its signing the FTA with the United States and its 
acceding to the WTO in 2000, Jordan is becoming increasingly open to 
international trade, having signed several other bilateral and regional 
trade agreements. These include the Greater Arab Free Trade Area, the 
Jordan-European Union (EU) Association Agreement, the Jordan-European 
Free Trade Agreement, the Jordan-Singapore Agreement, and the Agadir 
Agreement. QIZs are created by their designation as such by the United 
States under authority established by the United States-Israel Free 
Trade Area Implementation Act.[Footnote 69] The QIZ program provides 
duty-free, quota-free access to the U.S. market for certain goods 
imported directly from or wholly created in areas designated by the 
Jordanian and Israeli authorities and approved by the U.S. government. 
[Footnote 70] Currently, there are 13 QIZs in Jordan with over 50 
factories that produce mainly apparel. 

Jordan is one of the U.S.'s smaller trading partners, ranked 84th 
overall in 2008. In that year, Jordan had an overall trade deficit with 
the rest of the world of about $9.1 billion, with total exports of $6.5 
billion and total imports of $15.7 billion. Jordan's major export 
destination in 2007 was the United States, with 22 percent of exports, 
with other export partners consisting of Iraq, India, the United Arab 
Emirates, Saudi Arabia, and Syria. Similarly, Jordan's major import 
partners that year were from the EU (25 percent), Saudi Arabia (21 
percent), China (9.8 percent), the United States (4.7 percent), and 
Egypt (4.4 percent). While Jordan has proximity and cultural ties with 
Europe and the Middle East, it is adept at doing business in English, 
which is its second language after its official language, Arabic. 
Export commodities include apparel; fertilizers; potash, phosphates, 
pharmaceutical products, and vegetables; imports consist of crude oil, 
machinery, transport equipment, iron, and cereals. 

Key Market Access and Other Commercial and Regulatory Issues: 

The U.S.-Jordan FTA was aimed at supporting the economic reform efforts 
of a key regional partner for U.S. efforts in the Middle East peace 
process. The agreement provided for significant and extensive 
liberalization across a wide spectrum of trade issues, such as in 
eliminating all tariffs on industrial and agricultural goods within 10 
years, and in areas related to trade in services and foreign 
investment. 

Prior to the FTA, the United States had a mean unweighted tariff rate 
of 6 percent, while Jordan had a mean unweighted tariff rate of 16 
percent.[Footnote 71] The agreement provides for a scheduled 
elimination of import tariffs: a 10-year transitional period over which 
nearly all trade barriers in goods and services will be phased out 
using staged tariff elimination categories. Under these categories, 
initial tariffs of less than 5 percent would be phased out in 2 years, 
those between 5 and 10 percent eliminated in 4 years, those between 10 
and 20 percent eliminated within 5 years, and those above 20 percent 
eliminated within 10 years. There are some exceptions to these 
categories on both sides due to tariff elimination pursuant to WTO 
commitments, those covered by the Generalized System of Preferences, 
and some goods that are sensitive for both parties. By 2005, almost 96 
percent of all tariff elimination was implemented from the U.S. side, 
and over 60 percent of tariffs were eliminated from the Jordanian side. 
For U.S. imports, the remaining 4 percent of goods include apparel, 
footwear, and agricultural products. Tobacco and tobacco products are 
excluded from the agreement, while alcoholic beverages are subject to 
tariff reduction arrangements. One study estimates that, in 2006, after 
6 years of the agreement, the United States' average unweighted tariff 
rate for Jordan's exports was 0.2 percent. By 2010, goods will be 
virtually duty free in almost all consumer and industrial products 
between the two countries. 

Because a number of Jordanian goods are subject to tariff-rate quotas 
when exported to the U.S. market, such as certain dairy products, 
sugar, and chocolate products, the United States will provide 
increasingly larger quantities of these goods over the 10-year period. 
At the end of 10 years, the quota will be eliminated altogether. 

Jordan has provided for similar liberalization in the services sector 
to encourage greater U.S. investment in sectors such as finance, 
business and engineering, tourism, telecommunications, and distribution 
services. The agreement also includes provisions to enhance protection 
of intellectual property rights, particularly in relation to 
trademarks, patents, unfair competition, and trade secrets. In 
addition, it includes provisions on electronic commerce that seek to 
avoid imposing customs duties on electronic transmissions. 

Observed Results of the FTA in Merchandise Trade, Services, and FDI: 

Merchandise Trade: 

Since the FTA was implemented, the trade balance for the United States 
went from a trade surplus of $110 million in 2001 to a trade deficit of 
$234 million in 2008. Two-way trade between the two countries went from 
$568 million in 2001 to $2 billion in 2008, a 259 percent increase in 
total trade. While U.S. exports increased by 167 percent from 2001 to 
2008, total imports from Jordan after the agreement shot up by 397 
percent. 

In 2008, the highest U.S. export end use categories by value were 
passenger cars, new and used; parts and special category; rice and 
other food grains; parts, special category; other oilseeds and food 
oils; and aluminum and alumina. Top valued U.S. import categories from 
Jordan in 2008 included apparel and household goods-cotton; apparel and 
household goods-other textiles; jewelry; apparel and household goods- 
wool; sporting and camping apparel; and medicinal, dental, and 
pharmaceutical preparations. 

Overall U.S. market share in the Jordanian market since implementation 
of the FTA has decreased somewhat and, because of their proximity and 
trade agreements, the EU was the principal exporter into this market in 
2007 (see figure 5). Overall, in 2007 the United States had a market 
share of about 5 percent in Jordan, while the EU had a market share of 
24 percent. Also, the second largest exporter to this market, Saudi 
Arabia, had a market share of about 21 percent in 2007. China has 
doubled its market share, going from 5 percent in 2001 to 10 percent in 
2007. However, U.S. market share has increased in several important 
products/sectors, such as in agriculture products of corn, wheat, rice, 
and edible fruits and nuts, as well as manufactured goods such as 
automobiles. For example, the U.S. market share of Jordan's corn 
imports grew from 3 percent in 2001, when a 5 percent import tariff on 
feed grains was removed, to 77 percent in 2007. 

Figure 5: Market Share of the Top Five Exporting Countries to Jordan, 
1999-2007: 

[Refer to PDF for image: multiple line graph] 

Year: 1999; 
Percentage of market share, EU: 31.8%; 
Percentage of market share, Saudi Arabia: 4.08%; 
Percentage of market share, China: 3.19%; 
Percentage of market share, Egypt: 1.11%; 
Percentage of market share, United States: 9.89%. 

Year: 2000; 
Percentage of market share, EU: 34.27%; 
Percentage of market share, Saudi Arabia: 3.54%; 
Percentage of market share, China: 4.19%; 
Percentage of market share, Egypt: 1.03%; 
Percentage of market share, United States: 10.73%. 

Year: 2001 U.S.-Jordan FTA signed); 
Percentage of market share, EU: 29.62%; 
Percentage of market share, Saudi Arabia: 3.29%; 
Percentage of market share, China: 5%; 
Percentage of market share, Egypt: 1.09%; 
Percentage of market share, United States: 8.32%. 

Year: 2002; 
Percentage of market share, EU: 27.55%; 
Percentage of market share, Saudi Arabia: 2.65%; 
Percentage of market share, China: 6.13%; 
Percentage of market share, Egypt: 1.4%; 
Percentage of market share, United States: 7.22%. 

Year: 2003; 
Percentage of market share, EU: 22.92%; 
Percentage of market share, Saudi Arabia: 9.71%; 
Percentage of market share, China: 6.81%; 
Percentage of market share, Egypt: 1.77%; 
Percentage of market share, United States: 5.84%. 

Year: 2004; 
Percentage of market share, EU: 20.04%; 
Percentage of market share, Saudi Arabia: 16.87%; 
Percentage of market share, China: 7.18%; 
Percentage of market share, Egypt: 3.16%; 
Percentage of market share, United States: 5.76%. 

Year: 2005; 
Percentage of market share, EU: 23.78%; 
Percentage of market share, Saudi Arabia: 23.26%; 
Percentage of market share, China: 9.08%; 
Percentage of market share, Egypt: 3.45%; 
Percentage of market share, United States: 5.51%; 

Year: 2006; 
Percentage of market share, EU: 22.46%; 
Percentage of market share, Saudi Arabia: 24.64%; 
Percentage of market share, China: 10.19%; 
Percentage of market share, Egypt: 4.1%; 
Percentage of market share, United States: 4.66%. 

Year: 2007; 
Percentage of market share, EU: 23.8%; 
Percentage of market share, Saudi Arabia: 20.67%; 
Percentage of market share, China: 9.5%; 
Percentage of market share, Egypt: 4.29%; 
Percentage of market share, United States: 4.57%. 

Source: GAO analysis using data from the International Monetary Fund’s 
(IMF) Direction of Trade (DOT). 

[End of figure] 

Across product categories, we also calculated the differences between 
pre-and post-FTA average annual growth rates for the top 25 U.S. 
exports and imports in value with Jordan. Tables 2 and 3 display the 
top 25 end use categories for U.S. export and import categories for 
Jordan including their description ranked by growth rate, their dollar 
value, their rank by dollar value, their pre-FTA and post-FTA average 
annual growth rates, and change in growth between the two periods. 
About 64 percent or 16 out of the top 25 leading U.S. export product 
categories saw higher post-FTA export growth over the pre-FTA period 
(see table 2). For the top 25 U.S. imports from Jordan, table 3 shows 
that 40 percent had a higher rate of growth after the FTA was 
implemented (for a more detailed discussion of the methodology of this 
analysis, see appendix I). 

Table 2: U.S. Exports to Jordan: Top 25 Categories by Value, Pre-and 
Post-FTA Average Annual Growth Rates, and Change in Growth Rates 
between Periods (Dollars in thousands): 

End use category description-top 25 categories ranked by largest 
percentage change in growth rate: 

End use category description: Parts; special category goods, not 
elsewhere classified; 
Dollar value 2008: $41,582; 
Rank by value 2008: 3; 
Pre-FTA growth rate 1996-2001: -54%; 
Post-FTA growth rate 2002-2008: 53%; 
Change in growth rates: 107%. 

End use category description: Aluminum and alumina; 
Dollar value 2008: $20,602; 
Rank by value 2008: 6; 
Pre-FTA growth rate 1996-2001: -18%; 
Post-FTA growth rate 2002-2008: 88%; 
Change in growth rates: 105%. 

End use category description: Rice and other food grains; 
Dollar value 2008: $58,367; 
Rank by value 2008: 2; 
Pre-FTA growth rate 1996-2001: -36%; 
Post-FTA growth rate 2002-2008: 55%; 
Change in growth rates: 9%2. 

End use category description: Passenger cars, new and used; 
Dollar value 2008: $215,262; 
Rank by value 2008: 1; 
Pre-FTA growth rate 1996-2001: -16%; 
Post-FTA growth rate 2002-2008: 70%; 
Change in growth rates: 86%. 

End use category description: Materials handling equipment; 
Dollar value 2008: $18,453; 
Rank by value 2008: 9; 
Pre-FTA growth rate 1996-2001: -38%; 
Post-FTA growth rate 2002-2008: 41%; 
Change in growth rates: 80%. 

End use category description: Laboratory testing and control 
instruments; 
Dollar value 2008: $9,597; 
Rank by value 2008: 21; 
Pre-FTA growth rate 1996-2001: -10%; 
Post-FTA growth rate 2002-2008: 42%; 
Change in growth rates: 52%. 

End use category description: Excavating, paving, and construction 
machinery; 
Dollar value 2008: $18,624; 
Rank by value 2008: 8; 
Pre-FTA growth rate 1996-2001: -24%; 
Post-FTA growth rate 2002-2008: 27%; 
Change in growth rates: 51%. 

End use category description: Miscellaneous domestic exports and 
special transactions; 
Dollar value 2008: $27,387; 
Rank by value 2008: 4; 
Pre-FTA growth rate 1996-2001: -28%; 
Post-FTA growth rate 2002-2008: 19%; 
Change in growth rates: 47%. 

End use category description: Meat, poultry, and other edible animals; 
Dollar value 2008: $12,911; 
Rank by value 2008: 17; 
Pre-FTA growth rate 1996-2001: -17%; 
Post-FTA growth rate 2002-2008: 24%; 
Change in growth rates: 41%. 

End use category description: Other industrial machinery; 
Dollar value 2008: $15,216; 
Rank by value 2008: 16; 
Pre-FTA growth rate 1996-2001: -7%; 
Post-FTA growth rate 2002-2008: 12%; 
Change in growth rates: 20%. 

End use category description: Minimum value shipments; 
Dollar value 2008: $16,575; 
Rank by value 2008: 12; 
Pre-FTA growth rate 1996-2001: -5%; 
Post-FTA growth rate 2002-2008: 11%; 
Change in growth rates: 17%. 

End use category description: Paper base stocks-pulpwood and woodpulp; 
Dollar value 2008: $15,801; 
Rank by value 2008: 14; 
Pre-FTA growth rate 1996-2001: 4%; 
Post-FTA growth rate 2002-2008: 13%; 
Change in growth rates: 9%. 

End use category description: Other-manufactured and unmanufactured; 
Dollar value 2008: $9,001; 
Rank by value 2008: 23; 
Pre-FTA growth rate 1996-2001: 3%; 
Post-FTA growth rate 2002-2008: 10%; 
Change in growth rates: 7%. 

End use category description: Electric apparatus and parts, not 
elsewhere classified; 
Dollar value 2008: $9,044; 
Rank by value 2008: 22; 
Pre-FTA growth rate 1996-2001: -7%; 
Post-FTA growth rate 2002-2008: -1%; 
Change in growth rates: 6%. 

End use category description: Medicinal, dental, and pharmaceutical 
preparations, including vitamins; 
Dollar value 2008: $20,075; 
Rank by value 2008: 7; 
Pre-FTA growth rate 1996-2001: 16%; 
Post-FTA growth rate 2002-2008: 22%; 
Change in growth rates: 6%. 

End use category description: Other oilseeds and food oils; 
Dollar value 2008: $22,332; 
Rank by value 2008: 5; 
Pre-FTA growth rate 1996-2001: -11%; 
Post-FTA growth rate 2002-2008: -9%; 
Change in growth rates: 3%. 

End use category description: Household and kitchen appliances; 
Dollar value 2008: $8,984; 
Rank by value 2008: 24; 
Pre-FTA growth rate 1996-2001: 9%; 
Post-FTA growth rate 2002-2008: 9%; 
Change in growth rates: 0. 

End use category description: Other foods (lard, soft beverages, 
spices, etc.); 
Dollar value 2008: $10,326; 
Rank by value 2008: 18; 
Pre-FTA growth rate 1996-2001: 12%; 
Post-FTA growth rate 2002-2008: %; 
Change in growth rates: -6%. 

End use category description: Other scientific, hospital, and medical 
equipment; 
Dollar value 2008: $15,633; 
Rank by value 2008: 15; 
Pre-FTA growth rate 1996-2001: 2%; 
Post-FTA growth rate 2002-2008: -6%; 
Change in growth rates: -7%. 

End use category description: Measuring, testing, and control 
instruments; 
Dollar value 2008: $8,593; 
Rank by value 2008: 25; 
Pre-FTA growth rate 1996-2001: 30%; 
Post-FTA growth rate 2002-2008: 19%; 
Change in growth rates: -11%. 

End use category description: Tanks, artillery, missiles, rockets, 
guns, and ammunition; 
Dollar value 2008: $18,369; 
Rank by value 2008: 10; 
Pre-FTA growth rate 1996-2001: 5%; 
Post-FTA growth rate 2002-2008: -12%; 
Change in growth rates: -16%. 

End use category description: Telecommunications equipment; 
Dollar value 2008: $17,863; 
Rank by value 2008: 11; 
Pre-FTA growth rate 1996-2001: 11%; 
Post-FTA growth rate 2002-2008: -7%; 
Change in growth rates: -17%. 

End use category description: Parts for civilian aircraft; 
Dollar value 2008: $16,113; 
Rank by value 2008: 13; 
Pre-FTA growth rate 1996-2001: 15%; 
Post-FTA growth rate 2002-2008: -8%; 
Change in growth rates: -23%. 

End use category description: Industrial organic chemicals; 
Dollar value 2008: $9,973; 
Rank by value 2008: 20; 
Pre-FTA growth rate 1996-2001: 28%; 
Post-FTA growth rate 2002-2008: 4%; 
Change in growth rates: -24%. 

End use category description: Nuts and preparations; 
Dollar value 2008: $10,225; 
Rank by value 2008: 19; 
Pre-FTA growth rate 1996-2001: 42%; 
Post-FTA growth rate 2002-2008: 18%; 
Change in growth rates: -24%. 

Sources: GAO analysis using end use data from the U.S. Department of 
Commerce (Commerce) and ITC. 

[End of table] 

Table 3: U.S. Imports from Jordan: Top 25 Categories by Value, Pre-and 
Post-FTA Average Annual Growth Rates, and Change in Growth Rates 
between Periods (Dollars in thousands): 

End use category description-top 25 categories ranked by largest 
percentage change in growth rate: 

End use category description: Industrial inorganic chemicals; 
Dollar value 2008: $3,516; 
Rank by value 2007: 9; 
Pre-FTA growth rate 1996-2001: -7%; 
Post-FTA growth rate 2002-2008: 227%; 
Change in growth rates: 234%. 

End use category description: Bauxite and aluminum; 
Dollar value 2008: $1,311; 
Rank by value 2007: 18; 
Pre-FTA growth rate 1996-2001: -27%; 
Post-FTA growth rate 2002-2008: 103%; 
Change in growth rates: 130%. 

End use category description: Furniture, household items, baskets; 
Dollar value 2008: $567; 
Rank by value 2007: 25; 
Pre-FTA growth rate 1996-2001: 14%; 
Post-FTA growth rate 2002-2008: 88%; 
Change in growth rates: 74%. 

End use category description: Finished textile industrial supplies 
(labels, braids, buttons, etc.); 
Dollar value 2008: $1,407; 
Rank by value 2007: 16; 
Pre-FTA growth rate 1996-2001: -30%; 
Post-FTA growth rate 2002-2008: 35%; 
Change in growth rates: 65%. 

End use category description: Machine tools, metal working, molding, 
and rolling mill machinery; 
Dollar value 2008: $617; 
Rank by value 2007: 24; 
Pre-FTA growth rate 1996-2001: 17%; 
Post-FTA growth rate 2002-2008: 73%; 
Change in growth rates: 57%. 

End use category description: U.S. goods returned and reimports; 
Dollar value 2008: $48,915; 
Rank by value 2007: 4; 
Pre-FTA growth rate 1996-2001: -6%;
Post-FTA growth rate 2002-2008: 38%; 
Change in growth rates: 44%. 

End use category description: Other industrial machinery; 
Dollar value 2008: $1,504; 
Rank by value 2007: 14; 
Pre-FTA growth rate 1996-2001: -30%; 
Post-FTA growth rate 2002-2008: 8%; 
Change in growth rates: 39%. 

End use category description: Other (boxes, belting, glass, abrasives, 
etc.); 
Dollar value 2008: $2,885; 
Rank by value 2007: 11; 
Pre-FTA growth rate 1996-2001: 12%; 
Post-FTA growth rate 2002-2008: 29%; 
Change in growth rates: 17%. 

End use category description: Vegetables and preparations; 
Dollar value 2008: $1,551; 
Rank by value 2007: 13; 
Pre-FTA growth rate 1996-2001: 54%; 
Post-FTA growth rate 2002-2008: 70%; 
Change in growth rates: 16%. 

End use category description: Other precious metals; 
Dollar value 2008: $1,379; 
Rank by value 2007: 17; 
Pre-FTA growth rate 1996-2001: 32%; 
Post-FTA growth rate 2002-2008: 37%; 
Change in growth rates: 6%. 

End use category description: Jewelry (watches, rings, etc.); 
Dollar value 2008: $73,704; 
Rank by value 2007: 3; 
Pre-FTA growth rate 1996-2001: 33%; 
Post-FTA growth rate 2002-2008: 26%; 
Change in growth rates: -7%. 

End use category description: Other (soft beverages, processed coffee, 
etc.);
Dollar value 2008: $1,297;
Rank by value 2007: 19; 
Pre-FTA growth rate 1996-2001: 20%; 
Post-FTA growth rate 2002-2008: 12%; 
Change in growth rates: -8%. 

End use category description: Stone, sand, cement, and lime; 
Dollar value 2008: $1,196; 
Rank by value 2007: 21; 
Pre-FTA growth rate 1996-2001: 32%; 
Post-FTA growth rate 2002-2008: 23%; 
Change in growth rates: -10%. 

End use category description: Minimum value shipments; 
Dollar value 2008: $3,170; 
Rank by value 2007: 10; 
Pre-FTA growth rate 1996-2001: 33%; 
Post-FTA growth rate 2002-2008: 23%; 
Change in growth rates: -10%. 

End use category description: Household and kitchen appliances; 
Dollar value 2008: $5,681; 
Rank by value 2007: 8; 
Pre-FTA growth rate 1996-2001: 48%; 
Post-FTA growth rate 2002-2008: 36%; 
Change in growth rates: -12%. 

End use category description: Books, magazines, and other printed 
matter; 
Dollar value 2008: $1,968; 
Rank by value 2007: 12; 
Pre-FTA growth rate 1996-2001: 51%; 
Post-FTA growth rate 2002-2008: 14%; 
Change in growth rates: -37%. 

End use category description: Other products (notions, writing and art 
supplies, tobacco products, etc.); 
Dollar value 2008: $1,467; 
Rank by value 2007: 15; 
Pre-FTA growth rate 1996-2001: 78%; 
Post-FTA growth rate 2002-2008: 31%; 
Change in growth rates: -47%. 

End use category description: Sporting and camping apparel, footwear, 
and gear; 
Dollar value 2008: $6,284; 
Rank by value 2007: 6; 
Pre-FTA growth rate 1996-2001: 71%; 
Post-FTA growth rate 2002-2008: 6%; 
Change in growth rates: -64%. 

End use category description: Apparel and household goods-cotton; 
Dollar value 2008: $525,907; 
Rank by value 2007: 1; 
Pre-FTA growth rate 1996-2001: 74%; 
Post-FTA growth rate 2002-2008: 9%; 
Change in growth rates: -65%. 

End use category description: Medicinal, dental, and pharmaceutical 
preparations, including vitamins; 
Dollar value 2008: $6,046; 
Rank by value 2007: 7; 
Pre-FTA growth rate 1996-2001: 101%; 
Post-FTA growth rate 2002-2008: 31%; 
Change in growth rates: -69%. 

End use category description: Toiletries and cosmetics; 
Dollar value 2008: $670; 
Rank by value 2007: 23; 
Pre-FTA growth rate 1996-2001: 68%; 
Post-FTA growth rate 2002-2008: -8%; 
Change in growth rates: -76%. 

End use category description: Apparel and household goods-other 
textiles; 
Dollar value 2008: $412,280; 
Rank by value 2007: 2; 
Pre-FTA growth rate 1996-2001: 106%; 
Post-FTA growth rate 2002-2008: 25%; 
Change in growth rates: -81%. 

End use category description: Apparel and household goods-wool; 
Dollar value 2008: $28,015; 
Rank by value 2007: 5; 
Pre-FTA growth rate 1996-2001: 90%; 
Post-FTA growth rate 2002-2008: 7%; 
Change in growth rates: -83%. 

End use category description: Artwork, antiques, stamps, and other 
collectibles; 
Dollar value 2008: $1,200; 
Rank by value 2007: 20; 
Pre-FTA growth rate 1996-2001: 102%; 
Post-FTA growth rate 2002-2008: 11%; 
Change in growth rates: -91%. 

End use category description: Other parts and accessories; 
Dollar value 2008: $727; 
Rank by value 2007: 22; 
Pre-FTA growth rate 1996-2001: 165%; 
Post-FTA growth rate 2002-2008: 2%; 
Change in growth rates: -162%. 

Sources: GAO analysis using end use data from Commerce and ITC. 

[End of table] 

In contrast with the Chile and Singapore FTAs, the Jordan FTA's entry 
into force did not coincide with an increase in growth rates in most of 
its leading product categories. However, this finding is very sensitive 
to our use of 2002 as the start of the post-FTA period. (The FTA 
entered into effect in December 2001.) In fact, if this year (2001) is 
placed in the post-FTA period, a majority of the product categories, or 
60 percent, have a higher average annual growth in this period. The 
findings are also driven by the textiles and apparel category, which 
dominates the leading U.S. import categories from Jordan and averaged 
about 87 percent of total imports from 2002 to 2008. Apparel 
experienced extremely high annual average rates of growth with the 
advent of the QIZ program in 1996. Nevertheless, the year-to-year value 
of Jordanian exports in the apparel categories after the FTA was in the 
hundreds of millions of dollars, compared with the pre-FTA period when 
the yearly value was in the tens of millions of dollars.[Footnote 72] 

Trade in Services: 

Commerce notes that the Jordan FTA opened up trade in services, giving 
American service providers opportunities in Jordan's financial, 
education, audio-visual, courier and other services. Unfortunately, 
data on U.S. bilateral trade in services with Jordan are not available 
from BEA, and other data are limited, but the UN does provide 
sufficient data to gain some picture of Jordan's services trade with 
the world by service sector category. 

For 2007, the UN estimates that total (world) service exports by Jordan 
reached a level of $2.9 billion in current dollars. This represents 
growth of 96 percent compared with the 2001 level. An industry 
breakdown, based on 2006 data, shows that 66 percent of service exports 
were in the travel sector and 21 percent were in the transport sector. 
The remaining 13 percent of service exports were in "other services," 
and within the "other services" category, "other business services" was 
the dominant category." 

The UN estimates that, in 2007, Jordan's service imports (world) 
totaled almost $3.1 billion. This level represents growth of over 78 
percent between 2001 and 2007. An industry breakdown, based on 2006 
data, shows that almost 55 percent of service imports were in the 
transport sector, and 23 percent were in the travel sector. The 
remaining 22 percent of service imports were in "other services," 
notably, insurance, "other business services," and government services. 
[Footnote 73] 

FDI: 

The United States has a bilateral investment treaty with Jordan and, as 
a result, the U.S.-Jordan FTA did not include an investment chapter. 
The available data from BEA for U.S. FDI with Jordan is rather sparse, 
while some aggregate data is available from the United Nations 
Conference on Trade and Development (UNCTAD). [Footnote 74] 

The most recent BEA figures show that, as of 2007, U.S. outward FDI in 
Jordan was only $119 million. This figure is up from $39 million in 
2006. The 2007 level of FDI represents a minuscule share of total U.S. 
outward FDI (at 0.004 percent). Data for most other years are 
suppressed to prevent disclosure of individual company information. As 
a result, it is not possible to review pre-and post-FTA results using 
BEA data. Regarding inward investment in the U.S. by Jordanian 
entities, BEA data is mostly suppressed for disclosure purposes. The 
last entry is for 2001 (the last year before the FTA) and totaled only 
$9 million. 

Some UNCTAD FDI data is available for Jordan, which helps put U.S. FDI 
in perspective. Total inward FDI from all countries (including the 
United States) reached $14.5 billion in 2007--a substantial sum. Inward 
FDI has been growing steadily since the mid-1990s, and from 2002 to 
2007 grew from about $4 billion to over $14.5 billion, or more than 
tripling. This period has coincided with the FTA being in force. 
However, comparing the level of inward FDI from the UNCTAD data to the 
level of U.S. FDI from the BEA data suggests that U.S. FDI has not 
played a substantial role in the growth of FDI in Jordan. 

U.S. and Jordanian Perspectives on Issues Relating to the FTA: 

AmCham in Jordan noted that they have seen increased levels of imports 
coming from the United States, and it believed there would be more 
exports from the United States in the future, especially with the 
weaker dollar. At the present, many businesses pay no customs duty on 
various products such as in the automotive or spare parts industries, 
so they believe that there are some really big advantages since the 
FTA. According to an AmCham official, Jordanian importers are flocking 
to the United States and with the FTA, they will witness greater 
imports. The U.S. textiles and apparel sector noted that the Jordan FTA 
was one of the most important FTAs to their industry, although their 
views were divided on the issue. The apparel manufacturers and 
importers were more in favor of the Jordan FTA, since they favored the 
Jordanian FTA's less burdensome rules of origin, while the textile 
manufacturers explained that the increased imports cause them 
production, jobs, and exports. 

From a Jordanian perspective, some officials and business people have 
expressed concerns including: (1) difficulty in meeting export 
standards, especially SPS standards for agricultural products and only 
one Animal and Plant Health Inspection Service person in Middle East 
and North Africa; (2) complex customs procedures; (3) lack of knowledge 
on technical labeling issues that affect exports; (4) a firm's need for 
an agent, especially in the food sector, in the United States; (5) a 
tendency to believe that the FTA is only for large firms to export 
under; and (6) a lack of knowledge of logistics in the United States 
and of handling and transportation fees. 

As far as IPR, the majority of Jordanian pharmaceutical businesses 
manufacture generic medicines, and there are concerns that the IPR 
provisions of the FTA are hurting the generic industry. One 
pharmaceutical business person in Jordan, whose company specializes 
primarily in generic medicines, noted some frustration that there were 
issues with IPR related to data exclusivity that dealt with a lack of 
transparency in rights and obligations. According to a 2007 study by 
Oxfam on Jordan's pharmaceutical industry, because of the "TRIPS plus" 
provisions of the WTO and the Jordan FTA, many Jordanian pharmaceutical 
firm's generic medicines are precluded from the market through an 
acceptance procedure called "data exclusivity." Through data 
exclusivity, drug regulatory agencies are prevented for a period of 5 
years from using the clinical trial data developed by the originator 
company to establish the safety and efficacy of the medicine for market 
approval of a generic drug that had already been shown to be equivalent 
to the original one. These delays, according to Oxfam, impede or 
prevent generic competition and can lead to higher prices than would 
otherwise be the case.[Footnote 75] In contrast, the U.S. 
pharmaceutical industry, represented by the Pharmaceutical Research and 
Manufacturers of America (PhRMA), noted that Jordan is using FTA- 
related enhancements in IPR to help them attract investment in 
pharmaceutical production.[Footnote 76], [Footnote 77] 

There are some USAID commercial/economic programs that led up to and 
currently support the FTA. For example, the Tijara Initiative, funded 
by USAID, is a private-public sector partnership to strengthen two-way 
trade between Jordan and the United States, promote inward investment, 
raise public awareness about the U.S.-Jordan FTA and communicate 
opportunities, and enhance public-private cooperation to create a 
business environment conducive to trade. Also, an initiative called 
Tatweer, an economic development project funded by USAID and managed by 
the Jordan Business Development Center, has conducted workshops for 
small and medium-sized businesses on how to export under the FTA. 

[End of section] 

Appendix III: Commercial/Economic Results of the Singapore FTA: 

The Singapore FTA, which entered into force on January 1, 2004, 
represented an agreement with an already well-established U.S. trading 
partner and an economically advanced nation. While it is a 
geographically small island city-state, Singapore is a high-income 
country that is one of the most open and competitive in the world in 
terms of international trade and foreign investment. The FTA appears to 
have helped increase bilateral merchandise trade, as well as improved 
the market access for services and the climate for foreign direct 
investment. Enhanced intellectual property rights protections also 
appear to have had a positive impact on commerce and investment and are 
providing a model for other agreements. 

Singapore's Economy and International Trade: 

Openness to trade has long been a hallmark of Singapore's economy. 
Recently, total trade in goods and services has accounted for about 
four times the GDP. Singapore has historically maintained very few 
trade barriers, and according to World Trade Indicators the country 
ranks first in the world in trade openness, ease of doing business, and 
trade facilitation. At the same time, as a small nation, Singapore is 
subject to external market fluctuations and, as a result, strives to 
maintain its competitiveness by implementing policies that develop and 
diversify its economy. Since recovering from recession in the early 
2000s, Singapore has shown strong GDP growth through 2008. Its per 
capita gross national income (GNI) places it on a par with other high- 
income countries; on a purchasing power basis, its rank is equivalent 
to that of the United States. It has maintained strong economic 
fundamentals and prudent macroeconomic policies that have kept 
unemployment and inflation low, although current worldwide economic 
conditions are presenting challenges. In addition to the FTA with the 
United States, Singapore has been aggressive in signing FTAs with a 
number of countries including the Association of Southeast Asian 
Nations (ASEAN), New Zealand, Japan, Europe, Australia, India, and most 
recently, China. 

The United States has been an important bilateral partner for 
Singapore. While regional partners have come to encompass a greater 
share of trade, as of 2005, the United States was still Singapore's 
second largest export market, and the United States remains Singapore's 
second ranked source of imports, behind Malaysia and just ahead of 
China. In 2008, Singapore was the United States' 12th largest export 
market and the 27th largest importer to the United States. 

Key Market Access and Other Commercial and Regulatory Issues: 

As Singapore[Footnote 78] was already an open economy for U.S. products 
(99 percent duty-free), the FTA removed the few remaining tariffs on 
U.S. exports--on products such as alcoholic beverages. Meanwhile, the 
United States agreed to remove tariffs on most (about 92 percent) 
Singapore goods. The remaining U.S. tariffs are to be phased out over 3-
10 years. A provision extending preferences to a limited amount of 
textile and apparel imports made without U.S. or Singapore yarn, for a 
limited time, was also included. 

With trade in goods already open, a key focus of the Singapore FTA was 
providing greater access in the market for services and an even more 
favorable investment climate. Substantial access was provided across a 
wide spectrum of services, using a "negative list" approach,[Footnote 
79] and this process was to be facilitated by commitments on 
nondiscriminatory treatment and regulatory transparency. Market access 
commitments in services span a range of sectors. Some of the more 
significant service sectors benefiting from the FTA include the 
following: 

* banking, with lifting the ban on new banking licenses, expansion of 
locations, and access to ATM networks; 

* insurance, with the ability to establish a market presence, offer 
marine, aviation and transport insurance (MAT), and expand the 
provision of insurance services in many lines; 

* securities and related financial services, with the ability to 
establish a market presence and offer expanded pension and portfolio 
management services; 

* express delivery services; 

* professional services in a number of areas; and: 

* telecommunications, with the ability to compete on nondiscriminatory 
basis in access to networks and providing services, along with improved 
regulatory transparency. 

According to USTR, the FTA contained cutting-edge provisions on 
electronic commerce. The parties agreed not to discriminate on digital 
products delivered electronically (via Internet) and not to charge 
customs duties on such products. These commitments apply as well to 
services, such as financial services, provided electronically. 

With the United States already a large investor in Singapore, the FTA 
has provisions to improve the investment climate and provide further 
protections. The agreement assures legal protections for all forms of 
investment in Singapore, and national treatment, except for those 
sectors specifically exempted via a "negative list" approach. Also, a 
transparent dispute settlement process is provided. 

In submitting the agreement to Congress, the President noted that the 
FTA provided for a very high level of IPR protection including state- 
of-the-art protections for trademarks and digital copyrights, as well 
as expanded protection of patents and proprietary information. The 
agreement also provides for strong enforcement and tough penalties, 
including the establishment of actual damages for violations. 

The FTA contains a number of provisions in other areas such as 
competition policy, government procurement, customs procedures, 
regulatory transparency, visas for professionals, labor and 
environmental provisions, and dispute settlement. These provisions are 
noteworthy in part due to the relatively large role played by the state 
and state-linked corporations in Singapore. 

Observed Results of the FTA in Merchandise Trade, Services, and Foreign 
Direct Investment: 

While many factors affect the commercial and economic results in the 
post-FTA period (2004-2008), observed results show greater overall 
trade and investment, and growth in trade in a number of sectors 
following the implementation of the FTA. 

Merchandise Trade: 

Overall two-way trade (import plus exports) between the United States 
and Singapore was $41.4 billion in 2008, an increase of 42 percent over 
2003, the year prior to FTA implementation. U.S. trade with Singapore 
prior to the FTA was in deficit or close balance, but after the FTA, 
U.S. exports to Singapore grew more than U.S. imports, leading to a 
positive net trade balance. 

The U.S. trade surplus with Singapore increased about five times during 
the first year of FTA implementation, reaching $3 billion in 2004, $3.6 
billion in 2005, $4.2 billion in 2006, 4.5 billion in 2007, and $9.9 
billion in 2008. The level of U.S. exports increased to $25.7 billion 
in 2008, an increase 9 percent over 2007, and a 72 percent increase 
over 2003. U.S. imports from Singapore grew to a level of $15.7 billion 
in 2008, an increase of 10 percent over 2003, but a decrease of almost 
18 percent since 2007. This dramatic decline in Singapore's trade 
reflects the global financial downturn and the substantial role of 
trade in Singapore's economy. 

As figure 6 shows, the U.S. share of total world exports to Singapore 
has declined since 1999, from 17 to 12 percent, as the trend has 
continued into the post-FTA period. However, this trend has also 
characterized some of Singapore's other major trading partners, such as 
Malaysia and Japan. China's exports to Singapore, however, have grown 
since 1999, from 5 to 12 percent in 2007, dropping to 11 percent in 
2008. 

Figure 6: Market Share of the Top Five Exporting Countries to 
Singapore, 1999-2008: 

[Refer to PDF for image: multiple line graph] 

Year: 1999; 
Percentage of market share, China: 5.1%; 
Percentage of market share, EU: 13.4%; 
Percentage of market share, Malaysia: 15.6%; 
Percentage of market share, Japan: 16.6%; 
Percentage of market share, United States: 17.0%. 

Year: 2000; 
Percentage of market share, China: 5.3%; 
Percentage of market share, EU: 120.%; 
Percentage of market share, Malaysia: 17.0%; 
Percentage of market share, Japan: 17.2%; 
Percentage of market share, United States: 14.9%. 

Year: 2001; 
Percentage of market share, China: 6.2%; 
Percentage of market share, EU: 12.3%; 
Percentage of market share, Malaysia: 17.3%; 
Percentage of market share, Japan: 13.9%; 
Percentage of market share, United States: 16.4%; 

Year: 2002; 
Percentage of market share, China: 7.6%; 
Percentage of market share, EU: 12.5%; 
Percentage of market share, Malaysia: 18.2%; 
Percentage of market share, Japan: 12.5%; 
Percentage of market share, United States: 14.2%. 

Year: 2003U.S.-Singapore FTA signed); 
Percentage of market share, China: 8.1%; 
Percentage of market share, EU: 12.4%; 
Percentage of market share, Malaysia: 15.8%; 
Percentage of market share, Japan: 11.3%; 
Percentage of market share, United States: 13.1%. 

Year: 2004; 
Percentage of market share, China: 9.3%; 
Percentage of market share, EU: 12.8%; 
Percentage of market share, Malaysia: 14.4%; 
Percentage of market share, Japan: 11.0%; 
Percentage of market share, United States: 11.8%. 

Year: 2005; 
Percentage of market share, China: 10.3%; 
Percentage of market share, EU: 11.6%; 
Percentage of market share, Malaysia: 13.7%; 
Percentage of market share, Japan: 9.6%; 
Percentage of market share, United States: 11.6%. 

Year: 2006; 
Percentage of market share, China: 11.4%; 
Percentage of market share, EU: 11.4%; 
Percentage of market share, Malaysia: 13.1%; 
Percentage of market share, Japan: 8.3%; 
Percentage of market share, United States: 12.5%. 

Year: 2007; 
Percentage of market share, China: 12.1%; 
Percentage of market share, EU: 12.4%; 
Percentage of market share, Malaysia: 13.1%; 
Percentage of market share, Japan: 8.2%; 
Percentage of market share, United States: 12.3%. 

Year: 2008; 
Percentage of market share, China: 10.5%; 
Percentage of market share, EU: 12.3%; 
Percentage of market share, Malaysia: 11.9%; 
Percentage of market share, Japan: 8.1%; 
Percentage of market share, United States: 11.7%. 

Sources: GAO analysis using data from the World Trade Atlas, Global 
Trade Information Service (GTIS), in cooperation with the Economic 
Research Service, U.S. Department of Agriculture (USDA). 

[End of figure] 

Despite the overall decline in share of exports going into Singapore, 
the United States remains a strong presence, despite several other 
major trade agreements by Singapore with key trading partners, such as 
China, Malaysia, and Japan. 

By value for 2008, the top U.S. exports to Singapore were 
semiconductors and related devices; fuel oil; civilian aircraft; other 
industrial machinery; and drilling and oil field equipment. Top valued 
U.S. imports from Singapore in 2008 included computer accessories; 
medicinal, dental, and pharmaceutical preparations; semiconductors and 
related devices; industrial organic chemicals; and other scientific, 
medical, and hospital equipment. 

Across product categories, we also calculated the differences between 
pre-and post-FTA average annual growth rates for the top 25 U.S. 
exports and imports in value with Singapore. Tables 4 and 5 display the 
top 25 end use categories for U.S. export and import categories with 
Singapore: their description ranked by growth rate, their dollar value, 
their rank by dollar value, their pre-FTA growth rate, post-FTA growth 
rate, and change in growth between the two periods. As table 4 shows, 
we found that 23 out of the top 25 export categories by value, or 92 
percent, had grown faster after the FTA came into force. For U.S. 
imports from Singapore, table 5 shows that 64 percent of the top 
product categories experienced higher annual average growth after the 
FTA came into force (for a more detailed discussion of the methodology 
of this analysis, see appendix I). 

Table 4: U.S. Exports to Singapore: Top 25 Categories by Value, Pre-and 
Post-FTA Average Annual Growth Rates, and Change in Growth Rates 
between Periods (Dollars in thousands): 

End use category description-top 25 categories ranked by largest 
percentage change in growth rate: 

End use category description: Drilling and oil field equipment includes 
rigs and platforms; 
Dollar value: 2008: $1,448,294; 
Rank by value 2008: 5; 
Pre-FTA growth Rate 1999-2003: 7%; 
Post-FTA growth rate 2004-2008: 37%; 
Change in growth rates: 30%. 

End use category description: Generators, transformers, and 
accessories; 
Dollar value: 2008: $305,038; 
Rank by value 2008: 20; 
Pre-FTA growth Rate 1999-2003: -4%; 
Post-FTA growth rate 2004-2008: 21%; 
Change in growth rates: 25%. 

End use category description: Fuel oil; 
Dollar value: 2008: $1,986,344; 
Rank by value 2008: 2; 
Pre-FTA growth Rate 1999-2003: 15%; 
Post-FTA growth rate 2004-2008: 35%; 
Change in growth rates: 20%. 

End use category description: Semiconductors and related devices; 
Dollar value: 2008: $2,434,835; 
Rank by value 2008: 1; 
Pre-FTA growth Rate 1999-2003: -17%; 
Post-FTA growth rate 2004-2008: 3%; 
Change in growth rates: 20%. 

End use category description: Industrial engines, pumps, compressors, 
and generators; 
Dollar value: 2008: $623,417; 
Rank by value 2008: 14; 
Pre-FTA growth Rate 1999-2003: 1%; 
Post-FTA growth rate 2004-2008: 19%; 
Change in growth rates: 18%. 

End use category description: Industrial organic chemicals; 
Dollar value: 2008: $887,873; 
Rank by value 2008: 9; 
Pre-FTA growth Rate 1999-2003: -2%; 
Post-FTA growth rate 2004-2008: 14%; 
Change in growth rates: 16%. 

End use category description: Other industrial machinery; 
Dollar value: 2008: $1,590,274; 
Rank by value 2008: 4; 
Pre-FTA growth Rate 1999-2003: -10%; 
Post-FTA growth rate 2004-2008: 6%; 
Change in growth rates: 16%. 

End use category description: Excavating, paving and construction 
machinery; 
Dollar value: 2008: $267,728; 
Rank by value 2008: 22; 
Pre-FTA growth Rate 1999-2003: -4%; 
Post-FTA growth rate 2004-2008: 11%; 
Change in growth rates: 15%. 

End use category description: Laboratory testing and control 
instruments; 
Dollar value: 2008: $248,713; 
Rank by value 2008: 24; 
Pre-FTA growth Rate 1999-2003: 5%; 
Post-FTA growth rate 2004-2008: 20%; 
Change in growth rates: 15%. 

End use category description: Plastic materials; 
Dollar value: 2008: $822,127; 
Rank by value 2008: 10; 
Pre-FTA growth Rate 1999-2003: -1%; 
Post-FTA growth rate 2004-2008: 14%; 
Change in growth rates: 14%. 

End use category description: Minimum value shipments; 
Dollar value: 2008: $672,591; 
Rank by value 2008: 12; 
Pre-FTA growth Rate 1999-2003: -5%; 
Post-FTA growth rate 2004-2008: 8%; 
Change in growth rates: 14%. 

End use category description: Other-manufactured and unmanufactured; 
Dollar value: 2008: $430,149; 
Rank by value 2008: 18; 
Pre-FTA growth Rate 1999-2003: -3%; 
Post-FTA growth rate 2004-2008: 9%; 
Change in growth rates: 12%. 

End use category description: Parts for civilian aircraft; 
Dollar value: 2008: $987,122; 
Rank by value 2008: 8; 
Pre-FTA growth Rate 1999-2003: 1%; 
Post-FTA growth rate 2004-2008: 11%; 
Change in growth rates: 10%. 

End use category description: Other chemicals (coloring agents, 
photographic chemicals, printing inks, paint); 
Dollar value: 2008: $656,976; 
Rank by value 2008: 13; 
Pre-FTA growth Rate 1999-2003: 1%; 
Post-FTA growth rate 2004-2008: 11%; 
Change in growth rates: 10%. 

End use category description: Materials handling equipment; 
Dollar value: 2008: $252,546; 
Rank by value 2008: 23; 
Pre-FTA growth Rate 1999-2003: -3%; 
Post-FTA growth rate 2004-2008: 7%; 
Change in growth rates: 10%. 

End use category description: Electric apparatus and parts, n.e.c.; 
Dollar value: 2008: $619,950; 
Rank by value 2008: 15; 
Pre-FTA growth Rate 1999-2003: -10%; 
Post-FTA growth rate 2004-2008: -4%; 
Change in growth rates: 5%. 

End use category description: Finished metal shapes and advanced metal 
mfgrs, incl. advanced steel; 
Dollar value: 2008: $275,503;
Rank by value 2008: 21; 
Pre-FTA growth Rate 1999-2003: 11%; 
Post-FTA growth rate 2004-2008: 16%; 
Change in growth rates: 5%. 

End use category description: Measuring, testing, and control 
instruments; 
Dollar value: 2008: $801,269; 
Rank by value 2008: 11; 
Pre-FTA growth Rate 1999-2003: -5%; 
Post-FTA growth rate 2004-2008: -1%; 
Change in growth rates: 4%. 

End use category description: Miscellaneous domestic exports and 
special transactions; 
Dollar value: 2008: $215,543; 
Rank by value 2008: 25; 
Pre-FTA growth Rate 1999-2003: 4%; 
Post-FTA growth rate 2004-2008: 8%; 
Change in growth rates: 4%. 

End use category description: Other scientific, hospital and medical 
equipment; 
Dollar value: 2008: $361,593; 
Rank by value 2008: 19; 
Pre-FTA growth Rate 1999-2003: -1%; 
Post-FTA growth rate 2004-2008: 3%; 
Change in growth rates: 4%. 

End use category description: Telecommunications equipment; 
Dollar value: 2008: $570,442; 
Rank by value 2008: 17; 
Pre-FTA growth Rate 1999-2003: -2%; 
Post-FTA growth rate 2004-2008: 1%; 
Change in growth rates: 4%. 

End use category description: Engines for civilian aircraft; 
Dollar value: 2008: $1,398,740; 
Rank by value 2008: 6; 
Pre-FTA growth Rate 1999-2003: 7%; 
Post-FTA growth rate 2004-2008: 8%; 
Change in growth rates: 1%. 

End use category description: Computer accessories, peripherals and 
parts; 
Dollar value: 2008: $1,052,448; 
Rank by value 2008: 7; 
Pre-FTA growth Rate 1999-2003: -8%; 
Post-FTA growth rate 2004-2008: -8%; 
Change in growth rates: 0%. 

End use category description: Other petroleum products; 
Dollar value: 2008: $595,732; 
Rank by value 2008: 16; 
Pre-FTA growth Rate 1999-2003: 11%; 
Post-FTA growth rate 2004-2008: 9%; 
Change in growth rates: -3%. 

End use category description: Civilian aircraft, complete-all types; 
Dollar value: 2008: $1,916,489; 
Rank by value 2008: 3; 
Pre-FTA growth Rate 1999-2003: 34%; 
Post-FTA growth rate 2004-2008: 6%; 
Change in growth rates: -28%. 

Sources: GAO analysis using end use data from Commerce and ITC. 

[End of table] 

Table 5: U.S. Imports from Singapore: Top 25 Categories by Value, Pre- 
and Post-FTA Average Annual Growth Rates, and Change in Growth Rates 
between Periods (Dollars in thousands): 

End use category description-top 25 categories ranked by largest 
percentage change in growth rate: 

End use category description: Woodworking, glass working, and plastic 
and rubber molding machinery; 
Dollar value 2008: $139,798; 
Rank by value 2007: 16; 
Pre-FTA growth rate 1999-2003: -18%; 
Post-FTA growth rate 2004-2008: 111%; 
Change in growth rates: 129%. 

End use category description: Industrial organic chemicals; 
Dollar value 2008: $1,017,728; 
Rank by value 2007: 5; 
Pre-FTA growth rate 1999-2003: 12%; 
Post-FTA growth rate 2004-2008: 105%; 
Change in growth rates: 93%. 

End use category description: Other chemicals (coloring agents, 
photographic chemicals, printing inks, paint); 
Dollar value 2008: $73,873; 
Rank by value 2007: 25; 
Pre-FTA growth rate 1999-2003: -13%; 
Post-FTA growth rate 2004-2008: 68%; 
Change in growth rates: 81%. 

End use category description: Other parts and accessories; 
Dollar value 2008: $240,198; 
Rank by value 2007: 11; 
Pre-FTA growth rate 1999-2003: -14%; 
Post-FTA growth rate 2004-2008: 27%; 
Change in growth rates: 41%. 

End use category description: Computers; 
Dollar value 2008: $160,647; 
Rank by value 2007: 15; 
Pre-FTA growth rate 1999-2003: -33%; 
Post-FTA growth rate 2004-2008: -11%; 
Change in growth rates: 22%. 

End use category description: Household and kitchen appliances; 
Dollar value 2008: $111,544; 
Rank by value 2007: 20; 
Pre-FTA growth rate 1999-2003: -9%; 
Post-FTA growth rate 2004-2008: 12%; 
Change in growth rates: 21%. 

End use category description: Photo and service industry machinery and 
trade tools; 
Dollar value 2008: $281,030; 
Rank by value 2007: 10; 
Pre-FTA growth rate 1999-2003: -6%; 
Post-FTA growth rate 2004-2008: 15%; 
Change in growth rates: 21%. 

End use category description: Laboratory testing and control 
instruments; 
Dollar value 2008: $122,878; 
Rank by value 2007: 19; 
Pre-FTA growth rate 1999-2003: 10%; 
Post-FTA growth rate 2004-2008: 29%; 
Change in growth rates: 19%. 

End use category description: Semiconductors and related devices; 
Dollar value 2008: $1,361,468; 
Rank by value 2007: 3; 
Pre-FTA growth rate 1999-2003: -19%; 
Post-FTA growth rate 2004-2008: -2%; 
Change in growth rates: 17%. 

End use category description: Telecommunications equipment; 
Dollar value 2008: $544,550; 
Rank by value 2007: 7; 
Pre-FTA growth rate 1999-2003: 1%; 
Post-FTA growth rate 2004-2008: 13%; 
Change in growth rates: 12%. 

End use category description: Parts for civilian aircraft; 
Dollar value 2008: $110,859; 
Rank by value 2007: 21; 
Pre-FTA growth rate 1999-2003: 1%; 
Post-FTA growth rate 2004-2008: 12%; 
Change in growth rates: 11%. 

End use category description: U.S. goods returned, and reimports; 
Dollar value 2008: $1,342,962; 
Rank by value 2007: 4; 
Pre-FTA growth rate 1999-2003: -5%; 
Post-FTA growth rate 2004-2008: 5%; 
Change in growth rates: 10%. 

End use category description: Electric apparatus and parts; 
Dollar value 2008: $323,875; 
Rank by value 2007: 9; 
Pre-FTA growth rate 1999-2003: -8%; 
Post-FTA growth rate 2004-2008: 1%; 
Change in growth rates: 9%. 

End use category description: Minimum value shipments; 
Dollar value 2008: $96,407; 
Rank by value 2007: 23; 
Pre-FTA growth rate 1999-2003: -8%; 
Post-FTA growth rate 2004-2008: 0; 
Change in growth rates: 8%. 

End use category description: Engines for civilian aircraft; 
Dollar value 2008: $229,404; 
Rank by value 2007: 12; 
Pre-FTA growth rate 1999-2003: 25%; 
Post-FTA growth rate 2004-2008: 28%; 
Change in growth rates: 4v. 

End use category description: Other scientific, medical and hospital 
equipment; 
Dollar value 2008: $574,365; 
Rank by value 2007: 6; 
Pre-FTA growth rate 1999-2003: 5%; 
Post-FTA growth rate 2004-2008: 7%; 
Change in growth rates: 3%. 

End use category description: Computer accessories, peripherals and 
parts; 
Dollar value 2008: $4,276,149; 
Rank by value 2007: 1; 
Pre-FTA growth rate 1999-2003: -12%; 
Post-FTA growth rate 2004-2008: -12%; 
Change in growth rates: 0. 

End use category description: Other (clocks, portable typewriters, 
other household goods); 
Dollar value 2008: $526,541; 
Rank by value 2007: 8; 
Pre-FTA growth rate 1999-2003: 8%; 
Post-FTA growth rate 2004-2008: 7%; 
Change in growth rates: -1%. 

End use category description: Books, magazines, and other printed 
matter; 
Dollar value 2008: $132,821;
Rank by value 2007: 18; 
Pre-FTA growth rate 1999-2003: -1%; 
Post-FTA growth rate 2004-2008: -3%; 
Change in growth rates: -2%. 

End use category description: Measuring, testing, and control 
instruments; 
Dollar value 2008: $183,510; 
Rank by value 2007: 13; 
Pre-FTA growth rate 1999-2003: 1%; 
Post-FTA growth rate 2004-2008: -5%; 
Change in growth rates: -6%. 

End use category description: Radios, phonographs, tape decks, and 
other stereo equipment and parts; 
Dollar value 2008: $101,451; 
Rank by value 2007: 22; 
Pre-FTA growth rate 1999-2003: -9%; 
Post-FTA growth rate 2004-2008: -16%; 
Change in growth rates: -7%. 

End use category description: Other industrial machinery; 
Dollar value 2008: $137,826; 
Rank by value 2007: 17; 
Pre-FTA growth rate 1999-2003: 5%; 
Post-FTA growth rate 2004-2008: -3%; 
Change in growth rates: -8%. 

End use category description: Other (boxes, belting, glass, abrasives, 
etc.); 
Dollar value 2008: $90,738; 
Rank by value 2007: 24; 
Pre-FTA growth rate 1999-2003: 12%; 
Post-FTA growth rate 2004-2008: 0; 
Change in growth rates: -12%. 

End use category description: Medicinal, dental and pharmaceutical 
preparations, including vitamins; 
Dollar value 2008: $2,391,790; 
Rank by value 2007: 2; 
Pre-FTA growth rate 1999-2003: 27%; 
Post-FTA growth rate 2004-2008: 15%; 
Change in growth rates: -12%. 

End use category description: Plastic materials; 
Dollar value 2008: $178,816; 
Rank by value 2007: 14; 
Pre-FTA growth rate 1999-2003: 51%; 
Post-FTA growth rate 2004-2008: 9%; 
Change in growth rates: -43%. 

Sources: GAO analysis using end use data from Commerce and IYC. 

[End of table] 

Factors other than the FTA were important in trade between the United 
States and Singapore during this period including other bilateral and 
regional trade, for instance the fact that Singapore is a market 
platform for many countries, competition by other Asian suppliers in 
the U.S. market, and growth, among other market dynamics. For example, 
Singapore is part of many Asian regional trade agreements such as the 
ASEAN Free Trade Area, which could affect the level of trade with other 
more distant trading partners such as the United States.[Footnote 80] 
Also however, the United States and Singapore have similar degrees of 
openness prior to the U.S.-Singapore FTA, which could suggest an even 
greater amount of trade between the countries following the agreement. 

Trade in Services: 

The United States traditionally has maintained a positive trade balance 
in services, both overall and with Singapore specifically. Furthermore, 
the United States has experienced strong growth in its overall services 
trade since 2004, a period that happens to coincide with the 
implementation of the Singapore FTA. To assess the growth of services 
trade overall, and in the context of the FTA, we took an average of the 
levels in 2001 through 2003, the 3 years prior to the FTA, and compared 
it with 2007 levels. The total (all countries) U.S. exports of services 
are almost 71 percent higher, and U.S. imports of services have grown 
61 percent. The overall U.S. trade surplus in services in 2007 was 
nearly $139 billion. 

U.S. exports of services to Singapore have grown in the post-FTA period 
and were about 24 percent higher in 2007 compared with the pre-FTA 
period (2001-03). This represents a decline, however, in the share of 
total U.S. exports going to Singapore, as overall U.S. service export 
growth has been more rapid than that with Singapore. However, most 
major service sectors (categories) of exports to Singapore have shown 
strong growth in the post-FTA period. In particular, the "other private 
services" category has almost quadrupled, and within this group, 
"business, professional and technical services" is up over 800 percent. 
Royalties and license fees had exhibited strong growth through 2006, 
although 2007 has shown a decline from the 2006 level. 

U.S. imports of services from Singapore, in contrast with exports, have 
grown significantly in the post-FTA period, up 90 percent in 2007 
compared with the pre-FTA period level. This represents an increase in 
Singapore's share of all U.S. service imports, although its share in 
2007 was still a modest 1.1 percent. All the major categories of 
services imports from Singapore have grown; in particular, "other 
private services" are up almost 800 percent and, within that category, 
"business, professional and technical services" are over 12 times 
higher in the post-FTA period. The "royalties and licensure fees" 
category was almost 140 percent higher. 

FDI: 

Overall, total (all countries) U.S. FDI (both outward and inward) has 
shown strong growth in the period since 2004. Total outward U.S. FDI 
stocks reached a level of almost $2.8 trillion in 2007. Comparing this 
2007 level with the average of the 3-year period 2001-2003 shows that 
U.S. outward FDI was 73 percent higher. As for FDI in the United States 
(inward), in 2007, it reached a level of almost $2.1 trillion. 
Comparing 2007 to the average of the 2001-2003 period, FDI in the 
United States is 54 percent higher. 

In 2007, the U.S. stock of FDI in Singapore (outward) reached a level 
of over $82 billion. Compared with the period prior to the FTA (2001- 
2003), this level is 73 percent higher. Since this growth rate 
corresponds to that of overall U.S. FDI, it implies that Singapore's 
share of U.S. FDI has remained stable at about 3 percent of total. U.S. 
FDI in Singapore is concentrated in financial services and 
manufacturing. Recently released data from BEA show that, in 2007, over 
62 percent of the total U.S. stock of FDI in Singapore was in holding 
companies.[Footnote 81] This figure may reflect the role of Singapore 
as a base for investment, not only in Singapore, but throughout the 
region. Including banking and finance with the holding company figure, 
the total financial sector-related U.S. FDI constitutes about 70 
percent of the U.S. total in Singapore. About 17 percent of U.S. FDI in 
Singapore is in the manufacturing sector. Breaking down the 
manufacturing U.S. FDI category, the computer and electronics category 
constitutes 60 percent of total manufacturing FDI; transportation 
equipment, chemicals, and machinery each constitute about 10 percent of 
total FDI. 

While Singapore's share of foreign investment in the United States 
(inward FDI) was less than 0.5 percent in 2007, the level of FDI in the 
United States by Singaporean firms has grown over 370 percent since 
2003 (the year before the FTA was implemented). While BEA sector data 
do not provide a complete breakdown (disclosure limited), Singapore 
government data suggest that their FDI in the United States is 
concentrated in financial and insurance services, and also in 
manufacturing. 

A useful indicator of greater economic integration is the growth in 
sales by majority-owned foreign affiliates (MOFA) of U.S. multinational 
corporations (MNC). These sales can be viewed as a complement to FDI in 
so far as the investment in foreign affiliates leads to greater access 
to the domestic market. In fact, sales by foreign affiliates can exceed 
the amount of cross-border trade in goods and services. Data for sales 
by U.S. MOFAs in Singapore in 2006 totaled over $193 billion, of which 
$182 billion was in goods and over $9.3 billion was in services. 
Compared with the 3-year average prior to the FTA (2001-2003), total 
U.S. affiliate sales grew 117 percent, with sales of goods growing 123 
percent, and services, growing 48 percent. 

U.S. and Singaporean Perspectives on FTA Results: 

Overall, U.S. and Singaporean officials, market participants, and 
experts are very positive about the trade and commercial results of the 
Singapore FTA. Singaporean trade officials cited export increases 
associated with lowering of U.S. tariffs, and U.S. government officials 
and private sector market participants have noted the sizable U.S. 
export increases to Singapore. 

Officials of both governments also noted substantial market openings in 
services trade and foreign direct investment resulting from the FTA. 
For example, a significant market opening has taken place in the 
financial services area, where Citibank has been able to substantially 
expand its operations by building a retail banking network. In 
addition, U.S. mutual fund and securities firms have expanded their 
asset management services in the Singapore market. In the FDI area, 
some increases in investment in manufacturing have occurred, but 
notable effects have been associated with a more favorable investment 
climate and enhancements in intellectual property rights (IPR) 
protection. These changes, in particular in IPR, appear to have had an 
impact across the board in merchandise trade, services and FDI. For 
example, the expanded IPR protection has been a factor for Lucas Films 
in making an investment in Singapore, where they are doing 
postproduction film work and conducting business development 
activities. Microsoft established a new software development center in 
Singapore. The pharmaceutical industry is also an excellent example of 
the interaction of a number of factors. IPR protection makes direct 
investment in Singapore more attractive for U.S. pharmaceutical firms. 
The incentives to invest are further enhanced by the efforts of the 
Singapore government and private sector to develop Singapore as a 
pharmaceutical manufacturing hub. As pharmaceutical firms develop their 
manufacturing capabilities in Singapore, this leads to increased 
exports (machinery and materials) from the United States with 
subsequent export activity (finished products) from Singapore, much of 
it back to the U.S. market. The professional services market may 
benefit as well from these activities. 

[End of section] 

Appendix IV: Commercial/Economic Results of the Chile FTA: 

The Chile FTA entered into force on January 1, 2004. Chile, a small 
upper-middle income country with an open economy and liberal trading 
regime, has rapidly increased trade with the United States and the 
world. The Chile FTA appears to have increased trade between the two 
countries, strengthened the regulatory framework for services and 
investment, and provided a template for other trade agreements between 
Chile and other countries. 

Chile's Economy and International Trade: 

Chile's economy has had dramatic growth in GDP over the last two 
decades with reductions in poverty while its government has taken steps 
to stabilize its macroeconomy, perform structural reforms, and increase 
competitiveness. For 2008, Chile's GDP was estimated at $245 billion 
(PPP) and GDP per capita at $14,900 (PPP) with a growth rate at 4 
percent supported primarily by copper and other export earnings. Copper 
earnings have typically been about 10 percent of Chile's total income. 
More recently however, with the global economic downturn, copper prices 
have fallen from highs of $4 per pound in 2008 to $1.50 per pound in 
early 2009, with the value of Chilean copper exports down 66 percent in 
March 2009 compared with a year earlier. Since copper prices have been 
volatile over the years, the government has established a 
countercyclical macroeconomic policy accumulating surpluses in a 
sovereign wealth fund in years of higher copper prices, and only 
allowing deficit spending in years of lower copper prices. Also, 
according to the Organization for Economic Co-operation and Development 
(OECD), years of sustained growth has caused the poverty rate to 
decline precipitously from 38.6 percent of the population in 1990 to 
13.7 percent in 2006.[Footnote 82] At the same time, while there was 
some improvement between 2003 and 2006, Chile's level of income 
inequality has remained relatively high by Latin American and 
international standards.[Footnote 83] 

Chile's principal export destinations in 2007 included China, the 
United States, and Japan, and its principal import partners included 
the United States, China, and Brazil. Overall, in 2008 Chile was the 
United States' 24th largest export market, up from 35th in 2003. In 
addition to the United States, Chile has signed FTAs with numerous 
countries, including the Mercosur countries, Canada, Mexico, Central 
America, the EU, South Korea, the European Free Trade Association 
countries, China, Singapore, New Zealand, Brunei, India, Panama, Peru, 
Columbia, and Japan. In the world market, Chile's exports include 
copper, fruit, fish products, pulp and paper, chemicals, and wine; its 
imports include petroleum, chemicals, electrical and telecommunication 
equipment, industrial machinery, vehicles, and natural gas. In 
agricultural products, because of opposite growing seasons, trade 
between the United States and Chile is complementary. The World Bank's 
2009 Doing Business report ranked Chile 40th out of 181 economies in 
its global overall rank of "ease of doing business." 

Key Market Access and Other Commercial and Regulatory Issues: 

The U.S.-Chile FTA is aimed at improving market access to one of South 
America's most important economies and "leveling the playing field" for 
U.S. products. Chile had already entered FTAs with Canada, Mexico, and 
the EU, leaving many U.S. products at a disadvantage in the Chilean 
market because of existing tariffs. 

Prior to the FTA, Chile had remained a small trading partner with the 
United States over a long period. The United States was subject to a 
uniform 6 percent average most favored nation applied tariff rate, 
along with certain nontariff barriers on agricultural products. 
Nevertheless, Chile faced varying levels of tariffs on the U.S. side, 
although some products entered duty-free. The Chile FTA eliminates 
tariffs through five product-specific staging categories over a 
transition period that extends up to 12 years, from 2004 to 2016. For 
the United States, the agreement allows for 85 percent of all consumer 
and industrial goods to be duty-free immediately, with about 75 percent 
of all agricultural products duty-free within 4 years, and the rest 
eligible for duty-free status over time. For Chile, it allows for 
market access for 95 percent of all consumer and industrial goods 
immediately with 1.2 percent falling into the 12-year period. Access to 
each country's market was immediate for certain products such as pork, 
some fruits and vegetables, and tree nuts while tariffs to beef, 
poultry, and some processed vegetables are eliminated in schedules over 
4 to 12 years. 

In addition to reducing and eliminating tariffs, the agreement also 
contains provisions aimed at establishing a better, more transparent 
climate to foster trade and investment. The agreement restricts the 
application of nontariff barriers, provides broadened coverage for U.S. 
service providers, improves access to the Chilean government 
procurement market, and provides for easier entry and exit of business 
persons. For example, the FTA addresses certain nontariff barriers 
through the recognition of U.S. food standards, the recognition of the 
U.S. meat inspection system, and the elimination of "price bands" for 
wheat and other agricultural imports, a system Chile has used to 
maintain prices of certain grain and vegetable oil products. Other 
commitments on merchandise goods in the FTA include an elimination of 
the luxury tax on automobiles over 4 years, as well as provisions for 
customs administration procedures. The agreement also uses a "negative 
list" approach to trade in services opening access to service markets 
such as financial services, telecommunications, insurance, and express 
delivery services. According to the 2003 Bush administration, the 
agreement also establishes a more secure, predictable legal framework 
for U.S. investors in Chile, including dispute settlement procedures. 
Moreover, the legal framework was to include higher standards and 
enforcement of intellectual property protections, building on the 
standards set in the WTO Agreement on Trade-Related Aspects of 
Intellectual Property Rights. It recognized the evolution and 
development of digital products and included provisions for their 
protection that were a breakthrough for the South American region. 

Observed Results of the FTA in Merchandise Trade, Services, and FDI: 

Merchandise Trade: 

After implementation of the FTA, total U.S. exports to Chile increased 
by 365 percent, from $2.4 billion to $11.4 billion from 2003 to 2008. 
During the same time period, Chile's imports from the United States 
rose from $4 billion to $8.2 billion, or by 106 percent. Two-way trade 
between the countries increased from $6.4 billion in 2003 to $19.5 
billion in 2008 or by 204 percent between 2003 and 2008. The balance of 
trade showed a somewhat widening trade deficit for the United States 
from 1999 to 2007, which then turned into a trade surplus of $3.2 
billion in 2008. 

During the period after the agreement came into force, the United 
States regained its overall market share in the Chilean market that it 
had lost before the agreement. Figure 7 shows that following the FTA, 
the United States regained market share that it had lost to Argentina 
in that market prior to 2004.[Footnote 84] U.S. market share, which had 
been at 24 percent in 1998, had fallen to 15 percent in 2003. After the 
FTA, the United States regained its market share, which rose to 19 
percent in 2008. 

Figure 7: Market Share of the Top Five Exporting Countries to Chile, 
1998 to 2008: 

[Refer to PDF for image: multiple line graph] 

Year: 1998; 
China: 4.4%; 
Brazil: 6.5%; 
Argentina: 10.9%; 
South Korea: 3.1%; 
United States: 23.8%. 

Year: 1999; 
China: 4.7%; 
Brazil: 6.9%; 
Argentina: 14.2%; 
South Korea: 2.8%; 
United States: 21.8%. 

Year: 2000; 
China: 5.7%; 
Brazil: 8.0%; 
Argentina: 17.1%; 
South Korea: 3.2%; 
United States: 20.1%. 

Year: 2001; 
China: 6.3%; 
Brazil: 9.3%; 
Argentina: 18.7%; 
United States: 18.2%; 

Year: 2002; 
China: 7.2%; 
Brazil: 10.3%; 
Argentina: 19.4%; 
South Korea: 2.8%; 
United States: 16.6%; 

Year: 2003 (U.S.-Chile FTA signed); 
China: 7.3%; 
Brazil: 11.8%; 
Argentina: 21.3%; 
South Korea: 3.0%; 
United States: 14.5%. 

Year: 2004; 
China: 8.3%; 
Brazil: 12.4%; 
Argentina: 18.5%; 
South Korea: 3.1%; 
United States: 15.1%. 

Year: 2005; 
China: 8.5%; 
Brazil: 12.7%; 
Argentina: 16.1%; 
South Korea: 3.6%; 
United States: 15.8%. 

Year: 2006; 
China: 10.0%; 
Brazil: 12.2%; 
Argentina: 13.0%; 
South Korea: 4.7%; 
United States: 16.0%; 

Year: 2007; 
China: 11.4%; 
Brazil: 10.5%; 
Argentina: 10.1%; 
South Korea: 7.2%; 
United States: 17.0%. 

Year: 2008; 
China: 12.0%; 
Brazil: 9.3%; 
Argentina: 8.9%; 
South Korea: 5.6%; 
United States: 19.4%. 

Sources: GAO analysis using data from the World Trade Atlas, GTIS, in 
cooperation with the Economic Research Service, U.S. Department of 
Agriculture (USDA). 

[End of figure] 

For U.S. exports to Chile, the highest end use categories by value for 
2008 were fuel oil, other petroleum products, civilian aircraft, 
materials handling equipment, and excavating, paving, and construction 
machinery. Looking at broader sectors, after the FTA came into force, 
Chile's official trade statistics show that U.S. agricultural exports 
to Chile, including agricultural commodities, horticultural products, 
and livestock grew tenfold, from $25 million in 2004 to $256 million in 
2007, representing growth from 6 percent to 26 percent during this 
period.[Footnote 85] Top valued U.S. import categories from Chile 
included copper, fruits and preparations, fish and shellfish, 
nonmonetary gold, and steelmaking and ferroalloying materials. 

Across product categories, we also calculated the differences between 
pre-and post-FTA average annual growth rates for the top 25 U.S. 
exports and imports in value with Chile. Tables 6 and 7 display the top 
25 end use categories for U.S. export and import categories with Chile: 
their description ranked by growth rate, their dollar value, their rank 
by dollar value, their average annual pre-FTA and post-FTA growth 
rates, and change in growth between the two periods. Table 6 shows that 
post-FTA growth rates were higher than pre-FTA growth rates for all, or 
100 percent of the top 25 U.S. export categories to Chile, while table 
7 shows that of the top 25 U.S. import categories from Chile, 52 
percent were higher in the post-FTA than the pre-FTA period (for a more 
detailed discussion of the methodology of this analysis, see appendix 
I). 

Table 6: U.S. Exports to Chile: Top 25 Categories by Value, Pre-and 
Post-FTA Average Annual Growth Rates, and Change in Growth Rates 
between Periods (Dollars in thousands): 

End use category description-top 25 categories ranked by largest 
percentage change in growth rate: 

End use category description: Civilian aircraft, complete-all types; 
Dollar value: 2008: $630,343; 
Rank by value 2008: 3; 
Pre-FTA growth rate 1999-2003: -56%; 
Post-FTA growth rate 2004-2008: 99%; 
Change in growth rates: 155%. 

End use category description: Wheat; 
Dollar value: 2008: $132,056; 
Rank by value 2008: 19; 
Pre-FTA growth rate 1999-2003: 6%;
Post-FTA growth rate 2004-2008: 128%; 
Change in growth rates: 122%. 

End use category description: Fuel oil; 
Dollar value: 2008: $2,844,925; 
Rank by value 2008: 1; 
Pre-FTA growth rate 1999-2003: -12%; 
Post-FTA growth rate 2004-2008: 103%; 
Change in growth rates: 115%. 

End use category description: Corn; 
Dollar value: 2008: $107,652; 
Rank by value 2008: 24; 
Pre-FTA growth rate 1999-2003: -20%; 
Post-FTA growth rate 2004-2008: 57%; 
Change in growth rates: 77%. 

End use category description: Generators, transformers, and 
accessories; 
Dollar value: 2008: $128,546; 
Rank by value 2008: 20; 
Pre-FTA growth rate 1999-2003: -25%; 
Post-FTA growth rate 2004-2008: 31%; 
Change in growth rates: 56%. 

End use category description: Passenger cars, new and used; 
Dollar value: 2008: $261,197; 
Rank by value 2008: 8; 
Pre-FTA growth rate 1999-2003: 3%; 
Post-FTA growth rate 2004-2008: 56%; 
Change in growth rates: 53%. 

End use category description: Telecommunications equipment; 
Dollar value: 2008: $203,520; 
Rank by value 2008: 11; 
Pre-FTA growth rate 1999-2003: -19%; 
Post-FTA growth rate 2004-2008: 20%; 
Change in growth rates: 40%. 

End use category description: Minimum value shipments; 
Dollar value: 2008: $434,783; 
Rank by value 2008: 6; 
Pre-FTA growth rate 1999-2003: -8%; 
Post-FTA growth rate 2004-2008: 30%; 
Change in growth rates: 38%. 

End use category description: Materials handling equipment; 
Dollar value: 2008: $539,980; 
Rank by value 2008: 4; 
Pre-FTA growth rate 1999-2003: 1%; 
Post-FTA growth rate 2004-2008: 37%; 
Change in growth rates: 36%. 

End use category description: Plastic materials; 
Dollar value: 2008: $366,887; 
Rank by value 2008: 7; 
Pre-FTA growth rate 1999-2003: -2%; 
Post-FTA growth rate 2004-2008: 34%; 
Change in growth rates: 36%. 

End use category description: Newsprint and other paper products; 
Dollar value: 2008: $109,192; 
Rank by value 2008: 22; 
Pre-FTA growth rate 1999-2003: -10%; 
Post-FTA growth rate 2004-2008: 26%; 
Change in growth rates: 35%. 

End use category description: Industrial inorganic chemicals; 
Dollar value: 2008: $192,547; 
Rank by value 2008: 13; 
Pre-FTA growth rate 1999-2003: 1%; 
Post-FTA growth rate 2004-2008: 31%; 
Change in growth rates: 30%. 

End use category description: Industrial organic chemicals; 
Dollar value: 2008: $250,710; 
Rank by value 2008: 9; 
Pre-FTA growth rate 1999-2003: 0%; 
Post-FTA growth rate 2004-2008: 30%; 
Change in growth rates: 30%. 

End use category description: Excavating, paving, and construction 
machinery; 
Dollar value: 2008: $525,030; 
Rank by value 2008: 5; 
Pre-FTA growth rate 1999-2003: -8%; 
Post-FTA growth rate 2004-2008: 19%; 
Change in growth rates: 26%. 

End use category description: Other petroleum products; 
Dollar value: 2008: $724,890; 
Rank by value 2008: 2; 
Pre-FTA growth rate 1999-2003: 1%; 
Post-FTA growth rate 2004-2008: 27%; 
Change in growth rates: 26%. 

End use category description: Photo and service industry machinery and 
trade tools; 
Dollar value: 2008: $105,856; 
Rank by value 2008: 25; 
Pre-FTA growth rate 1999-2003: 2%; 
Post-FTA growth rate 2004-2008: 27%; 
Change in growth rates: 25%. 

End use category description: Computers; 
Dollar value: 2008: $139,838; 
Rank by value 2008: 18; 
Pre-FTA growth rate 1999-2003: -4%; 
Post-FTA growth rate 2004-2008: 21%; 
Change in growth rates: 25%. 

End use category description: Fertilizers, pesticides, and 
insecticides; 
Dollar value: 2008: $230,725; 
Rank by value 2008: 10; 
Pre-FTA growth rate 1999-2003: 5%; 
Post-FTA growth rate 2004-2008: 29%; 
Change in growth rates: 24%. 

End use category description: Other chemicals (coloring agents, 
photographic chemicals, printing inks, paint); 
Dollar value: 2008: $189,247; 
Rank by value 2008: 14; 
Pre-FTA growth rate 1999-2003: -3%; 
Post-FTA growth rate 2004-2008: 18%; 
Change in growth rates: 21%. 

End use category description: Trucks, buses, and special purpose 
vehicles; 
Dollar value: 2008: $184,155; 
Rank by value 2008: 15; 
Pre-FTA growth rate 1999-2003: 1%; 
Post-FTA growth rate 2004-2008: 21%; 
Change in growth rates: 21%. 

End use category description: Other parts and accessories; 
Dollar value: 2008: $126,254; 
Rank by value 2008: 21; 
Pre-FTA growth rate 1999-2003: 1%; 
Post-FTA growth rate 2004-2008: 21%; 
Change in growth rates: 20%. 

End use category description: Other-manufactured and unmanufactured; 
Dollar value: 2008: $107,675; 
Rank by value 2008: 23; 
Pre-FTA growth rate 1999-2003: -8%; 
Post-FTA growth rate 2004-2008: 8%; 
Change in growth rates: 17%. 

End use category description: Industrial engines, pumps, compressors, 
and generators; 
Dollar value: 2008: $170,035; 
Rank by value 2008: 16; 
Pre-FTA growth rate 1999-2003: -2%; 
Post-FTA growth rate 2004-2008: 12%; 
Change in growth rates: 14%. 

End use category description: Computer accessories, peripherals, and 
parts; 
Dollar value: 2008: $158,089; 
Rank by value 2008: 17; 
Pre-FTA growth rate 1999-2003: -14%; 
Post-FTA growth rate 2004-2008: -1%; 
Change in growth rates: 13%. 

End use category description: Other industrial machinery; 
Dollar value: 2008: $198,889; 
Rank by value 2008: 12; 
Pre-FTA growth rate 1999-2003: 0%; 
Post-FTA growth rate 2004-2008: 12%; 
Change in growth rates: 12%. 

Source: GAO analysis using end use data from Commerce and ITC. 

[End of table] 

Table 7: U.S. Imports from Chile: Top 25 Categories by Value, Pre-and 
Post-FTA Average Annual Growth Rates, and Change in Growth Rates 
between Periods (Dollars in thousands): 

End use category description-top 25 categories ranked by largest 
percentage change in growth rate: 

End use category description: Other precious metals; 
Dollar value 2008: $162,079; 
Rank by value 2008: 11; 
Pre-FTA growth rate 1999-2003: -31%; 
Post-FTA growth rate 2004-2008: 78%; 
Change in growth rates: 110%. 

End use category description: Pulpwood and woodpulp; 
Dollar value 2008: $30,461; 
Rank by value 2008: 23; 
Pre-FTA growth rate 1999-2003: -29%; 
Post-FTA growth rate 2004-2008: 22%; 
Change in growth rates: 52%. 

End use category description: Finished metal shapes and advanced 
manufactures, except steel; 
Dollar value 2008: $66,091; 
Rank by value 2008: 15; 
Pre-FTA growth rate 1999-2003: -9%; 
Post-FTA growth rate 2004-2008: 32%; 
Change in growth rates: 41%. 

End use category description: Miscellaneous nonferrous metals (cobalt, 
mercury, antimony, etc.); 
Dollar value 2008: $55,896; 
Rank by value 2008: 16; 
Pre-FTA growth rate 1999-2003: 5%; 
Post-FTA growth rate 2004-2008: 36%; 
Change in growth rates: 30%. 

End use category description: Nonmonetary gold; 
Dollar value 2008: $379,228; 
Rank by value 2008: 4; 
Pre-FTA growth rate 1999-2003: -5%; 
Post-FTA growth rate 2004-2008: 25%; 
Change in growth rates: 30%. 

End use category description: U.S. goods returned, and reimports; 
Dollar value 2008: $92,066; 
Rank by value 2008: 13; 
Pre-FTA growth rate 1999-2003: -8%; 
Post-FTA growth rate 2004-2008: 21%; 
Change in growth rates: 28%. 

End use category description: Copper; 
Dollar value 2008: $2,695,147; 
Rank by value 2008: 1; 
Pre-FTA growth rate 1999-2003: 6%; 
Post-FTA growth rate 2004-2008: 26%; 
Change in growth rates: 21%. 

End use category description: Industrial inorganic chemicals; 
Dollar value 2008: $277,213; 
Rank by value 2008: 7; 
Pre-FTA growth rate 1999-2003: -2%; 
Post-FTA growth rate 2004-2008: 19%; 
Change in growth rates: 20%. 

End use category description: Vegetables and preparations; 
Dollar value 2008: $40,978; 
Rank by value 2008: 18; 
Pre-FTA growth rate 1999-2003: -13%; 
Post-FTA growth rate 2004-2008: 7%; 
Change in growth rates: 20%. 

End use category description: Farming materials, including farm animals 
and animals for breeding; 
Dollar value 2008: $174,353; 
Rank by value 2008: 10; 
Pre-FTA growth rate 1999-2003: 0; 
Post-FTA growth rate 2004-2008: 14%; 
Change in growth rates: 14%. 

End use category description: Other (tobacco, waxes, nonfood oils, 
fatty acids, natural materials used in the preparation of medicines, 
dyes, and perfumes); 
Dollar value 2008: $27,717; 
Rank by value 2008: 25; 
Pre-FTA growth rate 1999-2003: -2v; 
Post-FTA growth rate 2004-2008: 11%; 
Change in growth rates: 13%. 

End use category description: Minimum value shipments; 
Dollar value 2008: $34,644; 
Rank by value 2008: 22; 
Pre-FTA growth rate 1999-2003: 4%; 
Post-FTA growth rate 2004-2008: 14%; 
Change in growth rates: 10%. 

End use category description: Wine and related products; 
Dollar value 2008: $223,817; 
Rank by value 2008: 8; 
Pre-FTA growth rate 1999-2003: 2%; 
Post-FTA growth rate 2004-2008: 8%; 
Change in growth rates: 6%. 

End use category description: Other (soft beverages, processed coffee, 
etc.); 
Dollar value 2008: $30,202; 
Rank by value 2008: 24; 
Pre-FTA growth rate 1999-2003: 36%; 
Post-FTA growth rate 2004-2008: 35%; 
Change in growth rates: -1%. 

End use category description: Fruits and preparations, including frozen 
juices; 
Dollar value 2008: $1,493,268; 
Rank by value 2008: 2; 
Pre-FTA growth rate 1999-2003: 8%; 
Post-FTA growth rate 2004-2008: 7%; 
Change in growth rates: -1%. 

End use category description: Fish and shellfish; 
Dollar value 2008: $985,523; 
Rank by value 2008: 3; 
Pre-FTA growth rate 1999-2003: 10%; 
Post-FTA growth rate 2004-2008: 8%;
Change in growth rates: -2%. 

End use category description: Other (boxes, belting, glass, abrasives, 
etc.); 
Dollar value 2008: $35,297; 
Rank by value 2008: 21; 
Pre-FTA growth rate 1999-2003: 4%; 
Post-FTA growth rate 2004-2008: 2%; 
Change in growth rates: -2%. 

End use category description: Fertilizers, pesticides, and 
insecticides; 
Dollar value 2008: $37,940; 
Rank by value 2008: 19; 
Pre-FTA growth rate 1999-2003: -1%; 
Post-FTA growth rate 2004-2008: -4%; 
Change in growth rates: -3%. 

End use category description: Other nonagricultural foods and food 
additives; 
Dollar value 2008: $70,490; 
Rank by value 2008: 14; 
Pre-FTA growth rate 1999-2003: 11%; 
Post-FTA growth rate 2004-2008: 7%; 
Change in growth rates: -4%. 

End use category description: Steelmaking and ferroalloying materials-
unmanufactured; 
Dollar value 2008: $305,604; 
Rank by value 2008: 6; 
Pre-FTA growth rate 1999-2003: 25%; 
Post-FTA growth rate 2004-2008: 18%; 
Change in growth rates: -7%. 

End use category description: Lumber and wood in the rough; 
Dollar value 2008: $191,926; 
Rank by value 2008: 9; 
Pre-FTA growth rate 1999-2003: 3%; 
Post-FTA growth rate 2004-2008: -12%; 
Change in growth rates: -15%. 

End use category description: Automotive tires and tubes; 
Dollar value 2008: $37,064; 
Rank by value 2008: 20; 
Pre-FTA growth rate 1999-2003: 4%; 
Post-FTA growth rate 2004-2008: -11%; 
Change in growth rates: -16%. 

End use category description: Other-finished (shingles, molding, 
wallboard, etc.); 
Dollar value 2008: $361,415; 
Rank by value 2008: 5; 
Pre-FTA growth rate 1999-2003: 9%; 
Post-FTA growth rate 2004-2008: -13%; 
Change in growth rates: -21%. 

End use category description: Plywood and veneers; 
Dollar value 2008: $104,289; 
Rank by value 2008: 12; 
Pre-FTA growth rate 1999-2003: 29%; 
Post-FTA growth rate 2004-2008: 7%; 
Change in growth rates: -22%. 

End use category description: Industrial organic chemicals; 
Dollar value 2008: $41,470; 
Rank by value 2008: 17; 
Pre-FTA growth rate 1999-2003: 20%; 
Post-FTA growth rate 2004-2008: -18%; 
Change in growth rates: -38%. 

Sources: GAO analysis using end use data from Commerce and ITC. 

[End of table] 

Factors other than the FTA were important in trade between the United 
States and Chile during this period including high commodity prices, 
exchange rates, other bilateral and regional trade and growth, among 
other dynamics of the market. For example, U.S. grain prices, as well 
as Chilean copper prices, reached record levels in 2008, which affected 
the value of imports and exports. However, the dramatic decline in both 
grain and copper prices in the later half of 2008, has also affected 
export earnings for both countries. Also, while in Chile, we were told 
that the lower value of the U.S. dollar relative to the Chilean peso 
made Chilean exports to the United States more expensive and U.S. 
imports relatively inexpensive. One Chilean academic noted that, with 
the low value of the U.S. dollar, the retail industry and construction 
in Chile have been thriving, partly due to cheaper U.S. imports. 

Trade in Services: 

Commerce notes that the Chile FTA provided new market access for 
service industries, including groundbreaking transparency rules to 
ensure that service regulators operate fairly. Some of the key sectors 
expected to benefit from the agreement are computer and related 
services, telecommunications services, financial services, construction 
and engineering, express delivery, professional services (e.g., 
architects, engineers, accountants, legal services), and distribution 
services (e.g., wholesaling, retailing, franchising). 

Recently revised data from the BEA show that U.S. services exports to 
Chile in 2007 were about $1.76 billion, less than one-tenth of 1 
percent of the total. Comparing the 2007 figure with the 3-year average 
prior to the FTA, 2001-2003, exports to Chile were about 47 percent 
higher. This represents substantial growth and, given the very strong 
growth of overall U.S. services exports, it represents only a slight 
decline in the share of the U.S. total going to Chile. Of U.S. services 
exports to Chile, "other private services" represents the largest 
category at about 44 percent in 2007. The next largest services sector 
category is "travel" at about 25 percent with "other transportation" 
representing almost 16 percent. Comparing 2007 with the 3-year average 
prior to the FTA, the "other private services" category has grown over 
100 percent, and the subcategory "business, professional and technical 
services," which constitutes over one-half of the "other private 
services" category, has grown about 168 percent. This strong growth 
seems consistent with the improved market access provided in the FTA. 
Financial services also are garnering a sizable share of "other private 
services" U.S. exports. In addition, the "royalties and licensure fees" 
category has grown over 140 percent, with computer and information 
services representing a sizable share of this category. 

We can infer whether the U.S. share of the Chilean services market has 
risen or fallen by looking at UN services data. These data show that 
total Chilean services imports from all partners totaled $9.95 billion 
in 2007. Comparing this figure with the 3-year average prior to the FTA 
(2001-2003), we find that Chilean service imports grew 89 percent. If 
we compare this figure with BEA data on U.S. exports to Chile, we see 
that U.S. exports grew only 47 percent. So, given the sizable Chilean 
growth in worldwide service imports, we can infer that the U.S. share 
of Chilean imports has likely fallen in the post-FTA period. 
Nonetheless, the services market openings provided by the FTA seem to 
have shown some positive results. 

U.S. services imports from Chile in 2007 were only about $868 million, 
which is a very small percentage of overall U.S. service imports. 
Comparing the 2007 figure with the pre-FTA 3-year average, 2001-2003, 
service imports from Chile were about 19 percent higher. This modest 
increase, given the strong growth in U.S. services imports overall, 
suggests that services imports from Chile have declined as a share of 
the U.S. total. Travel, "other transportation," and "other private 
services" represent 32 percent, 24 percent, and 29 percent, 
respectively, of total U.S. service imports from Chile. "Other private 
services" has increased about 162 percent in the post-FTA period, and 
the largest sectors are education services and business services and 
professional and technical services, the latter of which has grown 
almost 700 percent in the post-FTA period. 

FDI: 

The Chile FTA has helped to consolidate Chile's status as a secure 
location for foreign investment, according to Commerce. All forms of 
investment are covered by the FTA, including direct ownership of 
companies, real estate, intellectual property rights, government 
concessions and debt instruments. The IPR provisions of the FTA build 
on existing international standards, with emphasis on new and emerging 
technologies. The FTA includes state-of-the-art protection for 
trademarks and copyrights, expands protections for patents and 
undisclosed information, and calls for strong enforcement mechanisms. 

In 2007, BEA data showed that the U.S. stock of outward FDI in Chile 
totaled $12.6 billion. This level represents less than 1 percent (0.45) 
of total U.S. outward FDI. Since 1998, Chile's share of U.S. outward 
FDI has been under 1 percent of total and has shown a slow secular 
decline since before the FTA. Despite this secular decline, there has 
been growth in U.S. FDI since the FTA. A comparison of the 2007 level 
of FDI with the 3-year average prior to the FTA shows that U.S. FDI in 
Chile has increased 33 percent. This is based on growth of 20 percent 
in 2004 and 11 percent in 2007, while growth in 2005 and 2006 was 3 
percent and 2 percent, respectively. Chilean government data show that 
historically, the United States and Spain have been the major foreign 
investors in Chile. However, more recent data (2007) show that Canada, 
the United States, and Colombia are now the largest foreign investors. 

U.S. FDI in Chile is distributed across several sectors, with no one 
sector strongly dominating U.S. FDI. The breakdown is as follows: 
finance and insurance (22 percent); manufacturing (17 percent); other 
industries (16.5 percent); mining (11.5 percent); depository 
institutions (11.5 percent); wholesale trade (7 percent); and holding 
companies (7 percent). A breakdown of the manufacturing category (17 
percent of total) excludes some categories for disclosure purposes, but 
available data show that chemicals comprise about 31 percent of U.S. 
FDI in manufacturing. 

As for FDI by Chilean firms into the United States in 2007, the BEA 
reports a negative $430 million inward FDI.[Footnote 86] Inward FDI had 
shown some growth in 2005 and 2006, reaching a positive $288 million in 
2006. 

Data for sales by MOFAs of U.S. MNCs in Chile totaled about $14.8 
billion in 2006, based on preliminary BEA data. Of this total, two- 
thirds (67 percent) is sales of goods. Compared with the 3-year average 
prior to the FTA, total U.S. affiliate sales in Chile grew 72 percent, 
with sales of goods growing faster than sales of services. This 
suggests that U.S. MNCs are integrating well into the Chilean domestic 
market. 

U.S. and Chilean Perspectives on FTA Results: 

Overall, Chilean officials and experts that we spoke with were very 
positive about the trade and commercial results of the FTA. One 
official, who was one of the major negotiators of the agreement, said 
that he thought the FTA provided an improved regulatory framework 
through which trade and investment can occur. The FTA was important on 
the cooperation side, in making changes in domestic legislation and 
diffusing this information to small-and-medium-sized enterprises and 
poorer regions in Chile. He explained that exports and imports between 
the United States and Chile had been increasing very fast, and trade 
with China and the EU also have increased. But the trade with China 
could be about 95 percent explained by copper and cellulosic goods. 
However, trade with the United States is much more diversified, and 
this is very important because it creates more employment within Chile. 
In agriculture, a representative of Chilean fruit and vegetable 
exporters provided examples of diversification of exports into new 
areas such as clementines, cranberries, and avocadoes. Also, according 
to AmCham in Chile, American firms have been particularly successful in 
exporting mining equipment and heavy machinery, as well as 
technological products such as computers. Here Chile's 6 percent tariff 
was not trivial and the fact that the United States' main competitors 
in the EU already had duty-free access meant they had been gaining 
market share at U.S. expense; since the FTA, U.S. firms have won most 
of this back. 

From a U.S. perspective, however, there is disappointment in Chile's 
implementing its IPR obligations in the FTA. In 2007, Chile was moved 
from the WTO's Watch List to the Priority Watch List because of 
inadequate protection in IPR.[Footnote 87] While noting concerns, there 
is some agreement by Chilean officials that they were actually making 
"a bit of progress" in these areas. Specifically, they cited recent 
progress in protecting copyrights, especially in the area of computer 
software. However, they acknowledged the IPR issues surrounding the 
presence of Chile's large generic pharmaceutical industry. All in all, 
they felt that with more knowledge, more direction, and better 
infrastructure within Chile for determining clear-cut authority, they 
will move in the right direction toward strengthening IPR protection. 
However, U.S. officials and others believe that while Chile is working 
on this issue, they still have not gone far enough and are not fully 
committed to meeting the IPR provisions provided in the FTA. For 
example, representatives of AmCham in Chile noted that this was proving 
to be a problem for many U.S. businesses in that they were not only 
losing opportunities and sales, but also losing time and money in 
bringing law suits against firms that infringed upon their patent 
rights. 

From the Chilean side, several important issues remain outstanding. For 
instance, several officials that we spoke with hadn't seen any 
improvement with trade on the services side, and moreover there was a 
general dissatisfaction with the level of U.S. investment in Chile 
since the FTA came into force. Some officials in Chile blamed this on 
the fact that the United States and Chile have not agreed on a 
bilateral tax treaty.[Footnote 88] Others say that there are other 
reasons for this, including geography, the small size of their market, 
and that the fact that the United States is concentrating on other 
markets, in particular China and the "new" Europe. 

[End of section] 

Appendix V: Commercial/Economic Results of the Morocco FTA: 

The Morocco FTA entered into force on January 1, 2006, and was the 
second agreement, after Jordan, signed by the United States with an 
Arab country. Morocco, a lower-middle-income country in Northwest 
Africa, has experienced a gradual improvement in living standards and 
increased per capita income in recent years, through sound 
macroeconomic policies and sustained structural reforms. Three years 
after implementation of the FTA with the United States there have been 
increases in trade and investment for both partners, as well as 
strengthened regulatory and IPR laws. 

Morocco's Economy and International Trade: 

Morocco had a GDP estimated at $137.3 billion (Purchasing Power Parity, 
PPP) in 2008 ($75 billion in 2007) with a GDP per capita income 
estimated at $4,000 (PPP). While mining, textiles, tourism, and 
construction are important sectors in Morocco's economy, the 
agricultural sector is also significant, accounting for about 15-20 
percent of total GDP and about 40-45 percent of the total workforce. 
However, the country is highly vulnerable to dry weather events. It 
suffered a severe drought in 2007, causing an 18 percent drop in 
agricultural production--real GDP growth fell significantly from 7.8 
percent in 2006 to 2.7 percent in 2007. Morocco's unemployment rate was 
estimated at about 10 percent in 2008. 

While certain business and trade indicators reveal Morocco is making 
reforms and moving forward, others show some competitive challenges 
remain. The World Bank's 2009 Doing Business report shows that Morocco 
has made progress in improving administrative procedures and has 
introduced major reforms, such as credit verification and reducing the 
tax rate from 35 to 30 percent, but it still remains relatively lower 
ranked in indicators such as the labor code, collateral law, and 
commercial courts functioning. In addition, using revealed comparative 
advantage indicators, the International Monetary Fund (IMF) 
demonstrated some competitiveness challenges in the Moroccan goods 
market, although it has gained market share in the services sector. 
Specifically, this analysis suggested losses in comparative advantage 
in sectors such as clothing and fresh food and some increases in 
processed foods, leather products, and electronic goods. According to 
their analysis, some new emerging sectors included basic manufacturing 
and transportation equipment. A comprehensive trade indicator, the 
Trade Performance Index, revealed that, among other regional economies 
that export to the EU market, Morocco ranks at best third among similar 
exporters in fresh and processed food trade in that market. 

In external trade, Morocco's overall trade deficit with the rest of the 
world was estimated at about $18.3 billion or close to 13 percent of 
GDP in 2008. In addition to joining the WTO in 1995, and entering into 
the FTA with the United States, it has entered into several bilateral 
and regional trade and economic agreements with other Middle East and 
North African countries, as well as European countries. These include 
an Association Agreement with the EU (2000), an FTA with Turkey (2006), 
and the Agadir Agreement between Morocco, Tunisia, Egypt, and Jordan 
(2006). Morocco's merchandise trade is mainly focused on the EU, with 
France the largest trading partner. Morocco has proximity, cultural, 
and language ties with Europe, and with France in particular, which 
makes it a natural trading partner. In 2008, Morocco was the 80th 
largest trading partner with the United States. 

Key Market Access and Other Regulatory Issues: 

The U.S.-Morocco FTA aimed to create a preferential regime across a 
negotiated range of goods and services and included commitments 
covering other trade-related matters. The agreement would phase out 
tariffs on certain goods over periods of up to 18 years, but it would 
neither cover every aspect of bilateral trade nor all goods under any 
tariff category. Some tariff benefits would be limited during a 
transition period. The aim of the FTA was to strengthen the bilateral 
partnership, raise living standards in both countries, improve the 
business climate and competitiveness of firms, provide predictable 
rules, and build on the commitments to the WTO. Also, the U.S.-Morocco 
FTA was part of an overall effort by the United States to create a 
Middle East Free Trade Agreement (MEFTA). 

Prior to the FTA, the United States was subject to an average tariff on 
all industrial goods exported to Morocco of 28 percent, with duties on 
certain products as high as 50 percent. There were also numerous 
nontariff barriers that restricted trade. After the FTA, many key U.S. 
export sectors became duty free immediately and others would gain 
access within 9 years benefiting industries such as information 
technology, machinery, construction equipment, and chemicals. 
Originating textile and apparel goods receive preferential duty 
treatment according to a 10-year tariff reduction schedule. 

For most agricultural goods, duty-free access was immediate over a 
period of years, although some remain exposed to tariffs. All tariffs 
on U.S. agricultural products are phased out within 15 years. Tariffs 
on feed grains, soybeans and soybean products, and nuts and processed 
food products were cut significantly or removed immediately. Because of 
the size, sensitivity, and importance of the wheat sector to Morocco, a 
complex arrangement of tariff-rate quotas was negotiated for durum and 
common wheat. Some U.S. agricultural commodities have long phase-out 
periods or are subject to indefinite border protection in the agreement 
including wheat, beef, and chicken leg quarters and wings. Similarly, 
some Moroccan agricultural exports to the United States would face long 
tariff phase-out periods including dairy products, preserved tomato 
products, and dried onions. Notably, the FTA includes a supplier 
preference clause that guarantees the United States the best market 
access afforded any other subsequent supplier should Morocco negotiate 
future trade agreements. 

The FTA includes intellectual property protections and led Morocco to 
strengthen its own IPR laws. Specifically, it includes antipiracy 
provisions and the right for authorities to seize counterfeit and 
pirated goods. Test data and trade secrets for the purpose of product 
approval are protected against unfair commercial use for 5 years for 
pharmaceuticals and 10 years for agricultural chemicals. 

The FTA contains investment provisions that protect all forms of 
investment such as enterprises, debt, concessions, contracts, and 
intellectual property. 

Observed Results of the FTA in Merchandise Trade, Services, and FDI: 

Merchandise Trade: 

Unlike the period prior to the FTA, in 2006, 2007, and 2008, the United 
States held a trade surplus with Morocco. Although much of this 
increase can be attributed to an increase in Moroccan agricultural 
imports due to the drought and high commodity prices, our growth 
analysis shows that other U.S. product categories, such as plastic 
materials, excavating, paving, and construction machinery, and 
industrial organic chemicals also have benefited since the FTA was 
implemented. 

The United States had a merchandise goods trade surplus with Morocco of 
$626 million in 2008. Since 2005, the year before the FTA was 
implemented, total U.S. exports to Morocco increased by 190 percent, 
and imports from Morocco grew by 87 percent. Also, from 2007 to 2008, 
U.S. exports to Morocco grew by 13 percent, while Moroccan exports to 
the U.S. were 41 percent higher. Two-way trade, the sum of exports to 
and imports from Morocco, has more than doubled from about $988 million 
in 2005 to $2.39 billion in 2008. 

Overall, U.S. market share in the Moroccan market since implementation 
of FTA has increased marginally, but overall trade in this market is 
still dominated by EU trade (see figure 8). While the EU had a 63 
percent market share in 2007, the U.S. market share was only about 5 
percent, with China's market share at 8 percent in the Moroccan market. 
However, U.S. market share has increased in several important 
products/sectors, mostly in agriculture products. In cereals, for 
instance, in 2007, the U.S. market share in the Moroccan market was 
about 30 percent, up from 14 percent prior to the FTA. This was 
compared with the EU in this market of about 41 percent in 2007, 
although they accounted for about 42 percent prior to the agreement. 

Figure 8: Market Share of the Top Five Exporting Countries to Morocco, 
1999-2007: 

[Refer to PDF for image: multiple line graph] 

Year: 1999; 
Percentage of market share, China: 2.8%; 
Percentage of market share, EU: 80%; 
Percentage of market share, Saudi Arabia: 3.4%; 
Percentage of market share, Iran: 0; 
Percentage of market share, United States: 5.9%. 

Year: 2000; 
Percentage of market share, China: 2.4%; 
Percentage of market share, EU: 61.4%; 
Percentage of market share, Saudi Arabia: 5.2%; 
Percentage of market share, Iran: 3.2%; 
Percentage of market share, United States: 5.8%. 

Year: 2001; 
Percentage of market share, China: 2.6%; 
Percentage of market share, EU: 60.5%; 
Percentage of market share, Saudi Arabia: 5.0%; 
Percentage of market share, Iran: 2.7%; 
Percentage of market share, United States: 3.9%. 

Year: 2002; 
Percentage of market share, China: 2.9%; 
Percentage of market share, EU: 58.0%; 
Percentage of market share, Saudi Arabia: 5.9%; 
Percentage of market share, Iran: 2.5%; 
Percentage of market share, United States: 4.3%. 

Year: 2003; 
Percentage of market share, China: 3.6%; 
Percentage of market share, EU: 62.6%; 
Percentage of market share, Saudi Arabia: 5.3%; 
Percentage of market share, Iran: 0.3%; 
Percentage of market share, United States: 4.2%. 

Year: 2004; 
Percentage of market share, China: 4.3%; 
Percentage of market share, EU: 58.3%; 
Percentage of market share, Saudi Arabia: 5.6%; 
Percentage of market share, Iran: 1.6%; 
Percentage of market share, United States: 4.3%. 

Year: 2005; 
Percentage of market share, China: 4.7%; 
Percentage of market share, EU: 47.1%; 
Percentage of market share, Saudi Arabia: 6.1%; 
Percentage of market share, Iran: 2.5%; 
Percentage of market share, United States: 3.0%. 

Year: 2006; 
Percentage of market share, China: 7.7%; 
Percentage of market share, EU: 63.6%; 
Percentage of market share, Saudi Arabia: 7.7%; 
Percentage of market share, Iran: 3.1%; 
Percentage of market share, United States: 4.3%. 

Year: 2007; 
Percentage of market share, China: 8.1%; 
Percentage of market share, EU: 62.9%; 
Percentage of market share, Saudi Arabia: 7.1%; 
Percentage of market share, Iran: 2.9%; 
Percentage of market share, United States: 5.0%. 

Source: GAO analysis using data from IMF’s DOT. 

[End of figure] 

By product category, for U.S. exports to Morocco, the highest-valued 
end use categories for 2008 were civilian aircraft, coal and related 
fuels, oilseeds and food oils, corn, and dairy products and eggs. Top 
valued U.S. import categories from Morocco included sulfur and 
nonmetallic minerals, semiconductors and related devices, fertilizers, 
pesticides, and insecticides, vegetables and preparations, and cotton 
apparel and household goods. 

Across product categories, we also calculated the differences between 
pre-and post-FTA average annual growth rates for the top 25 U.S. 
exports and imports in value with Morocco. Tables 8 and 9 display the 
top 25 end use categories for U.S. export and import categories with 
Morocco including their description ranked by growth rate, their dollar 
value, their rank by dollar value, their average annual pre-FTA and 
post-FTA growth rates, and change in growth between the two periods. 
For the 25 largest U.S. export categories to Morocco, 60 percent had 
higher post-FTA annual average growth rates than pre-FTA growth rates 
(see table 8). As table 9 shows, post-FTA growth rates were higher in 
40 percent of the largest 25 categories of U.S. imports from Morocco 
over pre-FTA growth rates (for a more detailed discussion of the 
methodology of this analysis, see appendix I). 

Table 8: U.S. Exports to Morocco: Top 25 Categories by Value, Pre-and 
Post-FTA Average Annual Growth Rates, and Change in Growth Rates 
between Periods (Dollars in thousands): 

End use category description-top 25 categories ranked by largest 
percentage change in growth rate: 

End use category description: Steelmaking and ferro-alloying materials; 
Dollar value 2008: $18,700; 
Rank by value 2008: 16; 
Pre-FTA growth rate 2002-2005: -85%; 
Post-FTA growth rate 2006-2008: 13,575%; 
Change in growth rates: 13,660%. 

End use category description: Iron and steel mill products; 
Dollar value 2008: $27,223; 
Rank by value 2008: 13; 
Pre-FTA growth rate 2002-2005: -86%; 
Post-FTA growth rate 2006-2008: 546%; 
Change in growth rates: 632%. 

End use category description: Dairy products and eggs; 
Dollar value 2008: $77,774; 
Rank by value 2008: 5; 
Pre-FTA growth rate 2002-2005: 9%; 
Post-FTA growth rate 2006-2008: 320%; 
Change in growth rates: 311%. 

End use category description: Other coal and related fuels; 
Dollar value 2008: $146,836; 
Rank by value 2008: 2; 
Pre-FTA growth rate 2002-2005: -32%; 
Post-FTA growth rate 2006-2008: 235%; 
Change in growth rates: 267%. 

End use category description: Industrial organic chemicals; 
Dollar value 2008: $15,197; 
Rank by value 2008: 20; 
Pre-FTA growth rate 2002-2005: -35%; 
Post-FTA growth rate 2006-2008: 213%; 
Change in growth rates: 247%. 

End use category description: Other oilseeds and food oils; 
Dollar value 2008: $122,598; 
Rank by value 2008: 3; 
Pre-FTA growth rate 2002-2005: -92%; 
Post-FTA growth rate 2006-2008: 153%; 
Change in growth rates: 245%. 

End use category description: Wheat; Dollar value 2008: 59,886; 
Rank by value 2008: $7; 
Pre-FTA growth rate 2002-2005: -74v; 
Post-FTA growth rate 2006-2008: 26%; 
Change in growth rates: 100%. 

End use category description: Other chemicals (coloring agents, 
photographic chemicals, printing inks, paint); 
Dollar value 2008: $17,981; 
Rank by value 2008: 19; 
Pre-FTA growth rate 2002-2005: 16%; 
Post-FTA growth rate 2006-2008: 101%; 
Change in growth rates: 86%. 

End use category description: Other petroleum products; 
Dollar value 2008: $66,911; 
Rank by value 2008: 6; 
Pre-FTA growth rate 2002-2005: 6%; 
Post-FTA growth rate 2006-2008: 80%; 
Change in growth rates: 74%. 

End use category description: Plastic materials; 
Dollar value 2008: $58,912; 
Rank by value 2008: 8; 
Pre-FTA growth rate 2002-2005: -43%; 
Post-FTA growth rate 2006-2008: 12%; 
Change in growth rates: 55%. 

End use category description: Excavating, paving, and construction 
machinery; 
Dollar value 2008: $26,497; 
Rank by value 2008: 14; 
Pre-FTA growth rate 2002-2005: -5%; 
Post-FTA growth rate 2006-2008: 36%; 
Change in growth rates: 41%. 

End use category description: Industrial engines, pumps, compressors, 
and generators; 
Dollar value 2008: $31,558; 
Rank by value 2008: 12; 
Pre-FTA growth rate 2002-2005: 59%; 
Post-FTA growth rate 2006-2008: 98%; 
Change in growth rates: 38%. 

End use category description: Other industrial machinery; 
Dollar value 2008: $13,053; 
Rank by value 2008: 24; 
Pre-FTA growth rate 2002-2005: -16%; 
Post-FTA growth rate 2006-2008: 6%; 
Change in growth rates: 22%. 

End use category description: Telecommunications equipment; 
Dollar value 2008: $18,875; 
Rank by value 2008: 15; 
Pre-FTA growth rate 2002-2005: 0; 
Post-FTA growth rate 2006-2008: 4%; 
Change in growth rates: 4%. 

End use category description: Miscellaneous domestic exports and 
special transactions; 
Dollar value 2008: $13,977; 
Rank by value 2008: 21; 
Pre-FTA growth rate 2002-2005: -2%; 
Post-FTA growth rate 2006-2008: 1%; 
Change in growth rates: 4%. 

End use category description: Newsprint and other paper products; 
Dollar value 2008: $18,426; 
Rank by value 2008: 17; 
Pre-FTA growth rate 2002-2005: 12%; 
Post-FTA growth rate 2006-2008: 9%; 
Change in growth rates: -3%. 

End use category description: Civilian aircraft, complete-all types; 
Dollar value 2008: $233,432; 
Rank by value 2008: 1; 
Pre-FTA growth rate 2002-2005: 8%; 
Post-FTA growth rate 2006-2008: -2%; 
Change in growth rates: -9%. 

End use category description: Soybeans; 
Dollar value 2008: 48,231; 
Rank by value 2008: $10; 
Pre-FTA growth rate 2002-2005: 2%; 
Post-FTA growth rate 2006-2008: -19%; 
Change in growth rates: -21%. 

End use category description: Passenger cars, new and used; 
Dollar value 2008: $13,182; 
Rank by value 2008: 22; 
Pre-FTA growth rate 2002-2005: 70%; 
Post-FTA growth rate 2006-2008: 47%; 
Change in growth rates: -23%. 

End use category description: Other agricultural materials for industry-
unmanufactured; 
Dollar value 2008: $35,013; 
Rank by value 2008: 11; 
Pre-FTA growth rate 2002-2005: 86%; 
Post-FTA growth rate 2006-2008: 52%; 
Change in growth rates: -34%. 

End use category description: Parts for civilian aircraft; 
Dollar value 2008: $18,256; 
Rank by value 2008: 18; 
Pre-FTA growth rate 2002-2005: 63%; 
Post-FTA growth rate 2006-2008: 24%; 
Change in growth rates: -39%. 

End use category description: Corn; 
Dollar value 2008: $90,094; 
Rank by value 2008: 4; 
Pre-FTA growth rate 2002-2005: 45%; 
Post-FTA growth rate 2006-2008: -18%; 
Change in growth rates: -62%. 

End use category description: Electric apparatus and parts, not 
elsewhere classified; 
Dollar value 2008: $11,543; 
Rank by value 2008: 25; 
Pre-FTA growth rate 2002-2005: 99%; 
Post-FTA growth rate 2006-2008: -13%; 
Change in growth rates: -112%. 

End use category description: Nonfarm tractors and parts; 
Dollar value 2008: $13,106; 
Rank by value 2008: 23; 
Pre-FTA growth rate 2002-2005: 396%; 
Post-FTA growth rate 2006-2008: 268%; 
Change in growth rates: -128%. 

End use category description: Other animal feeds, not elsewhere 
classified; 
Dollar value 2008: $54,258; 
Rank by value 2008: 9; 
Pre-FTA growth rate 2002-2005: 313%; 
Post-FTA growth rate 2006-2008: 75%; 
Change in growth rates: -238%. 

Sources: GAO analysis using end use data from Commerce and ITC. 

[End of table] 

Table 9: U.S. Imports from Morocco: Top 25 Categories by Value, Pre-and 
Post-FTA Average Annual Growth Rates, and Change in Growth Rates 
between Periods (Dollars in thousands): 

End use category description-top 25 categories ranked by largest 
percentage change in growth rate: 

End use category description: Fertilizers, pesticides, and 
insecticides; 
Dollar value 2008: $65,213; 
Rank by value 2007: 3; 
Pre-FTA growth Rate 2002-2005: -86%; 
Post-FTA Growth Rate 2006-2008: 5,620%; 
Change in growth rates: 5,705%. 

End use category description: Fruits and preparations, including frozen 
juices; 
Dollar value 2008: $26,721; 
Rank by value 2007: 9; 
Pre-FTA growth Rate 2002-2005: -56%; 
Post-FTA Growth Rate 2006-2008: 53%; 
Change in growth rates: 109%. 

End use category description: Generators, transformers, and 
accessories; 
Dollar value 2008: $2,802; 
Rank by value 2007: 23; 
Pre-FTA growth Rate 2002-2005: -39%; 
Post-FTA Growth Rate 2006-2008: 41%; 
Change in growth rates: 80%. 

End use category description: Sulfur and nonmetallic minerals; 
Dollar value 2008: $368,788; 
Rank by value 2007: 1; 
Pre-FTA growth Rate 2002-2005: 13%; 
Post-FTA Growth Rate 2006-2008: 83%; 
Change in growth rates: 70%. 

End use category description: U.S. goods returned, and reimports; 
Dollar value 2008: $4,172; 
Rank by value 2007: 20; 
Pre-FTA growth Rate 2002-2005: -49%; 
Post-FTA Growth Rate 2006-2008: 5%; 
Change in growth rates: 55%. 

End use category description: Sporting and camping apparel, footwear, 
and gear; 
Dollar value 2008: $4,569; 
Rank by value 2007: 19; 
Pre-FTA growth Rate 2002-2005: 18%; 
Post-FTA Growth Rate 2006-2008: 55%; 
Change in growth rates: 37%. 

End use category description: Apparel and household goods-cotton; 
Dollar value 2008: $43,992; 
Rank by value 2007: 5; 
Pre-FTA growth Rate 2002-2005: -23%; 
Post-FTA Growth Rate 2006-2008: 12%; 
Change in growth rates: 35%. 

End use category description: Minimum value shipments; 
Dollar value 2008: $5,130; 
Rank by value 2007: 18; 
Pre-FTA growth Rate 2002-2005: 6%; 
Post-FTA Growth Rate 2006-2008: 34%; 
Change in growth rates: 28%. 

End use category description: Vegetables and preparations; 
Dollar value 2008: $53,299; 
Rank by value 2007: 4; 
Pre-FTA growth Rate 2002-2005: 1%; 
Post-FTA Growth Rate 2006-2008: 20%; 
Change in growth rates: 20%. 

End use category description: Fish and shellfish; 
Dollar value 2008: $29,961; 
Rank by value 2007: 8; 
Pre-FTA growth Rate 2002-2005: -1%;
Post-FTA Growth Rate 2006-2008: 11%; 
Change in growth rates: 12%. 

End use category description: Apparel and household goods-other 
textiles; 
Dollar value 2008: $29,994; 
Rank by value 2007: 7; 
Pre-FTA growth Rate 2002-2005: -21%; 
Post-FTA Growth Rate 2006-2008: -24%; 
Change in growth rates: -3%. 

End use category description: Other (clocks, portable typewriters, 
other household goods); 
Dollar value 2008: $3,002; 
Rank by value 2007: 22; 
Pre-FTA growth Rate 2002-2005: 5%; 
Post-FTA Growth Rate 2006-2008: 2%; 
Change in growth rates: -3%. 

End use category description: Other (tobacco, waxes, nonfood oils, 
fatty acids, natural materials used in the preparation of medicines, 
dyes, and perfumes); 
Dollar value 2008: $12,006; 
Rank by value 2007: 12; 
Pre-FTA growth Rate 2002-2005: 5%; 
Post-FTA Growth Rate 2006-2008: -2%; 
Change in growth rates: -7%. 

End use category description: Semiconductors and related devices; 
Dollar value 2008: $92,390; 
Rank by value 2007: 2; 
Pre-FTA growth Rate 2002-2005: 1%; 
Post-FTA Growth Rate 2006-2008: -16%; 
Change in growth rates: -17%. 

End use category description: Tea, spices, and preparations; 
Dollar value 2008: $8,898; 
Rank by value 2007: 15; 
Pre-FTA growth Rate 2002-2005: 38%; 
Post-FTA Growth Rate 2006-2008: 21%; 
Change in growth rates: -18%. 

End use category description: Artwork, antiques, stamps, and other 
collectibles; 
Dollar value 2008: $1,990; 
Rank by value 2007: 24; 
Pre-FTA growth Rate 2002-2005: 6%; 
Post-FTA Growth Rate 2006-2008: -48%; 
Change in growth rates: -53%. 

End use category description: Apparel and household goods-wool; 
Dollar value 2008: $13,716; 
Rank by value 2007: 11; 
Pre-FTA growth Rate 2002-2005: 42%; 
Post-FTA Growth Rate 2006-2008: -12%; 
Change in growth rates: -54%. 

End use category description: Toiletries and cosmetics; 
Dollar value 2008: $8,680; 
Rank by value 2007: 16; 
Pre-FTA growth Rate 2002-2005: 89%; 
Post-FTA Growth Rate 2006-2008: 11%; 
Change in growth rates: -79%. 

End use category description: Footwear of leather, rubber, or other 
materials; 
Dollar value 2008: $9,290; 
Rank by value 2007: 14; 
Pre-FTA growth Rate 2002-2005: 67%; 
Post-FTA Growth Rate 2006-2008: -14%; 
Change in growth rates: -82%. 

End use category description: Other parts and accessories; 
Dollar value 2008: $16,023; 
Rank by value 2007: 10; 
Pre-FTA growth Rate 2002-2005: 125%; 
Post-FTA Growth Rate 2006-2008: -4%; 
Change in growth rates: -129%. 

End use category description: Electric apparatus and parts, not 
elsewhere classified; 
Dollar value 2008: $1,871; 
Rank by value 2007: 25; 
Pre-FTA growth Rate 2002-2005: 134%; 
Post-FTA Growth Rate 2006-2008: -19%; 
Change in growth rates: -154%. 

End use category description: Liquified petroleum gases; 
Dollar value 2008: $3,953; 
Rank by value 2007: 21; 
Pre-FTA growth Rate 2002-2005: 236%; 
Post-FTA Growth Rate 2006-2008: 20%; 
Change in growth rates: -216%. 

End use category description: Food oils and oilseeds; 
Dollar value 2008: $9,672; 
Rank by value 2007: 13; 
Pre-FTA growth Rate 2002-2005: 288v; 
Post-FTA Growth Rate 2006-2008: -21%; 
Change in growth rates: -309%. 

End use category description: Miscellaneous nonferrous metals (cobalt, 
mercury, antimony, etc.); 
Dollar value 2008: $32,312; 
Rank by value 2007: 6; 
Pre-FTA growth Rate 2002-2005: 504%; 
Post-FTA Growth Rate 2006-2008: 103%; 
Change in growth rates: -401%. 

End use category description: Industrial organic chemicals; 
Dollar value 2008: $8,667; 
Rank by value 2007: 17; 
Pre-FTA growth Rate 2002-2005: 495%; 
Post-FTA Growth Rate 2006-2008: -18%; 
Change in growth rates: -514%. 

Sources: GAO analysis using end use data from Commerce and ITC. 

[End of table] 

Factors other than the FTA were very important in trade between the 
United States and Morocco during this period including weather, 
exchange rates, high commodity prices, and growth, among other dynamics 
of the market. For example, Moroccan officials noted that factors such 
as competition with Asian producers, the expiration of the multifiber 
agreement, and the exchange rate hampered Morocco's export sales to the 
United States of textiles and apparel. U.S. apparel importers, however, 
told us that the strict rules of origin, combined with concerns over 
whether Moroccan suppliers could meet associated customs documentation 
and accounting requirements, were also factors dampening buyer's 
initial enthusiasm in Moroccan apparel suppliers after the FTA, despite 
their reputation for fashion. 

Trade in Services: 

Commerce notes that services (mainly tourism) represent about 54 
percent of Morocco's GDP. The FTA helps reinforce the ongoing 
development of Morocco's legal and regulatory reforms and development 
plans for a number of sectors that are of interest to U.S. service 
providers in areas such as telecommunications, e-commerce, and various 
professional services areas. The FTA has also helped to enhance 
transparency in Morocco's regulatory framework. Unfortunately, data on 
U.S. bilateral trade in services with Morocco are not available from 
the BEA, and other data are limited, but the UN does provide sufficient 
data to give some picture of Morocco's services trade with the world by 
service category. 

For 2007, the UN estimates that Morocco's total service exports to the 
world reached $13.4 billion, representing growth of over 230 percent 
since 2001. Based on 2006 data, about 61 percent of services exports 
was in travel, 15 percent was in transport, and 24 percent was in 
"other services." Over half of the "other services" category was 
composed of "other business services," and government services and 
communications also represented sizable shares. 

The UN estimates that Morocco's total services imports from the world 
attained a level of $5.97 billion, representing growth of 181 percent 
since 2001. Based on 2006 data, about 45 percent of services imports 
were in "other services," 39 percent were in transport, and almost 16 
percent were in travel. Within the "other services" category, most was 
in either "other business services" or government services.[Footnote 
89] 

FDI: 

Some data on FDI for Morocco are available from BEA, and they can be 
supplemented with data from UNCTAD and other sources. [Footnote 90] 
Regarding U.S. (outward) FDI in Morocco, the most recent figures show 
that, as of 2007, the stock of U.S. FDI in Morocco was only $238 
million. This level of FDI represents a minuscule share of total U.S. 
outward FDI (0.008 percent). Although the small level of FDI represents 
a large increase over the level in 2006, the first year of the FTA, the 
level of U.S. outward FDI in 2007 is still lower than total U.S. 
outward FDI during the period 2001-2003. 

UNCTAD data provide figures for total inward FDI in Morocco, including 
FDI by the United States, that helps put these figures into 
perspective. Total inward FDI has been growing steadily, reaching $32.5 
billion in 2007. In fact, between 2000 and 2007, inward FDI in Morocco 
had an annual average growth rate of over 50 percent. Comparing the 
level of inward FDI from the UNCTAD data with the level of U.S. FDI 
into Morocco from the BEA data suggests that U.S. FDI has not played a 
significant role in the growth of investment in Morocco.[Footnote 91] 

Turning to outward FDI, UNCTAD data show that Morocco's FDI appears to 
have been growing steadily, reaching $2.0 billion in 2007. The major 
countries in which Morocco invests include France, Canada, and 
Mauritania. By industry, Moroccan FDI is in mining and services 
(specifically, finance and business services). BEA data on inward U.S. 
FDI from Morocco shows a level of only $5 million, which did not change 
over the period 2004-2007. 

U.S. and Moroccan Perspectives on Issues Related to the FTA: 

Although the Moroccan FTA has only been in force since 2006, from the 
U.S. perspective, there have been some promising commercial trends. For 
instance, the American Farm Bureau Federation (AFBF) told us that, 
since the FTA came into force in 2006, U.S. agricultural exports to 
Morocco have grown exponentially, and Morocco's rank as a U.S. export 
destination for agriculture rose from 38th to 24th.[Footnote 92] Most 
of this gain has been the result of grain exports; however, some 
horticultural products have also expanded trade. For instance, the 
apple industry began exporting to Morocco as a result of the duty-free 
tariff rate quota established under the U.S.-Morocco FTA. Until that 
FTA was implemented, the 50 percent tariff served as a very effective 
barrier to trade, according to the AFBF. On the investment side, an 
official of AmCham in Morocco noted that many U.S. businesses have 
interests in Morocco, including Pfizer and Coca Cola. As far as the 
textile industries, AmCham explained that Fruit of the Loom recently 
invested $166 million in a new business in Morocco that was linked to 
the U.S.-Morocco FTA. AmCham added that they invested because of the 
lower customs duties brought about by the FTA. 

From the Moroccan perspective, some government officials noted that so 
far they had not benefited from the agreement as they had hoped. 
Moroccan trade concerns included trade statistics discrepancies, the 
lack of sanitary and phytosanitary (SPS) certification issues for 
tomatoes; customs obstacles; and a request for early phasing out of 
U.S. tariffs on certain Moroccan goods, which was not accepted. 
[Footnote 93]Also, a private association of businesses in Morocco 
stated that "since Moroccan firms conduct business in French, the 
barrier to obtaining information about the rules, the U.S. market, and 
promotion is language." Logistics was also cited as a problem. Some 
officials noted that there is no direct shipping line between Morocco 
and the United States, thereby increasing the costs for Moroccan firms. 
Currently, this business association envisions the port in Tangier 
(Tangier-Med) to act as a hub. Other Moroccan officials stated that the 
benefits of the agreement lie in the future. Other Moroccan officials 
stated that the benefits of the agreement lie in the future. For 
instance, one Moroccan academician agreed with this view and stated 
that one should not only look at the FTA's impact on trade but also at 
the "spillover effects" of the agreement including technological 
changes, government institutions, and reforms. 

There are several trade and regulatory capacity building programs 
associated with the U.S.-Morocco FTA. Commerce's Commercial Law 
Development Program (CLDP) Team works with developing countries in 
adjusting their laws relating to investments and regulatory policy to 
conform with new trade agreements. Along with the United States Agency 
for International Development, they helped Morocco institute commercial 
laws and arbitration laws, as well as insurance laws and pharmaceutical 
laws, without which firms could not invest previously. The Morocco New 
Business Opportunities (NBO) program was initiated in response to the 
FTA in 2006 and is a 4-year program financed by USAID in partnership 
with the Ministry of Commerce, Industry and Economic Upgrading. The 
main objective of the NBO is to assist Moroccan enterprises in the 
manufacturing sector to take advantage of exporting opportunities to 
the U.S. The two priority sectors that are part of their national 
strategy to build capacity to develop and maintain long-term, 
commercial partnerships with U.S. companies are the textile and garment 
industry and the leather industry. Specifically, the NBO program 
provides technical support, training, and business contacts to Moroccan 
exporters in order for them to successfully promote their products in 
the U.S. market. 

[End of section] 

Appendix VI: Average Annual Growth Rates of Bilateral Trade with FTA 
Partner Countries Compared with Overall U.S. Trade: 

For each of the four selected FTAs, we examined the average annual 
growth in bilateral trade for several years prior to the agreements and 
compared that with growth rates after the agreements for a similar 
period of years (see table 10). Across partner countries, we found that 
post-FTA average annual growth rates for U.S. exports were all higher 
than pre-FTA growth rates and, in some instances, average growth went 
from negative to positive. For U.S. imports, we found that average 
annual growth rates were higher in three out of the four partner 
countries, all except for Jordan, which had a high rate of growth pre- 
FTA. Also, except for Singapore, the average annual growth rates for 
U.S. exports and imports with the partner countries were all higher in 
the post-FTA period than those for similar time periods for total U.S. 
exports and imports with the rest of the world. 

Methodology and Data Used: 

First, to calculate average annual growth rates for U.S. exports and 
imports with the partner countries, we selected an equal number of 
years both before and after the selected FTAs came into force. For 
example, since both the Singapore FTA and Chile FTA came into force in 
2004, we calculated an average annual growth rate of bilateral trade 
for a pre-FTA period of 5 years before 2004 and a post-FTA period of 5 
years after implementation. For the Morocco FTA, which came into force 
in 2006, we calculated equal periods of 3 years before and after the 
agreement. Similarly, for Jordan, which came into force on December 
2001, we calculated estimates of growth based on equal 7-year periods 
before and after the agreement came into force. Second, we obtained 
trade data for the United States and the partner countries from the ITC 
Interactive Tariff and Trade Dataweb for the appropriate years. Third, 
we adjusted the export or import series for inflation using the GDP's 
Implicit Price Deflator. Fourth, we calculated year-to-year growth 
rates for the series and then took an average growth rate for each pre- 
and post-FTA period. Fifth, we then subtracted the pre-FTA average 
annual growth rate from the post-FTA growth rate and sorted these 
differences in descending order for each product category. Finally, for 
comparison, we also calculated the average annual growth rates of U.S. 
trade with the world for the same periods as for each of the FTAs. 
[Footnote 94] 

Table 10: Average Annual Growth Rates of Bilateral Trade with Partner 
Countries Pre-and Post-FTA and U.S. Growth in Trade with the World for 
Similar Time Periods: 

Bilateral FTA partner country: Singapore (5-year average period): U.S. 
exports to Singapore; 
Average annual growth rates of bilateral trade with partner countries: 
Pre-FTA period: -0.9%; 
Average annual growth rates of bilateral trade with partner countries: 
Post-FTA period: 8.6%; 
U.S. exports and imports with world: U.S. exports; 
Average annual growth rates for U.S. trade for similar time periods as 
FTA: Pre-FTA period: -1.2%; 
Average annual growth rates for U.S. trade for similar time periods as 
FTA: Post-FTA period: 9.3%. 

Bilateral FTA partner country: Singapore (5-year average period): 
Imports from Singapore to United States; 
Average annual growth rates of bilateral trade with partner countries: 
Pre-FTA period: -6.1%; 
Average annual growth rates of bilateral trade with partner countries: 
Post-FTA period: -0.3%; 
U.S. exports and imports with world: U.S. imports; 
Average annual growth rates for U.S. trade for similar time periods as 
FTA: Pre-FTA period: 4.9%; 
Average annual growth rates for U.S. trade for similar time periods as 
FTA: Post-FTA period: 7.8%. 

Bilateral FTA partner country: Chile (5-year average period): U.S. 
exports to Chile; 
Average annual growth rates of bilateral trade with partner countries: 
Pre-FTA period: -9.1%; 
Average annual growth rates of bilateral trade with partner countries: 
Post-FTA period: 32.6%; 
U.S. exports and imports with world: U.S. exports; 
Average annual growth rates for U.S. trade for similar time periods as 
FTA: Pre-FTA period: -1.2%; 
Average annual growth rates for U.S. trade for similar time periods as 
FTA: Post-FTA period: 9.3%. 

Bilateral FTA partner country: Chile (5-year average period): Imports 
from Chile to United States; 
Average annual growth rates of bilateral trade with partner countries: 
Pre-FTA period: 9.3%; 
Average annual growth rates of bilateral trade with partner countries: 
Post-FTA period: 14.1%; 
U.S. exports and imports with world: U.S. imports; 
Average annual growth rates for U.S. trade for similar time periods as 
FTA: Pre-FTA period: 4.9%; 
Average annual growth rates for U.S. trade for similar time periods as 
FTA: Post-FTA period: 7.8%. 

Bilateral FTA partner country: Morocco (3-year average period): U.S. 
exports to Morocco; 
Average annual growth rates of bilateral trade with partner countries: 
Pre-FTA period: -4.5%; 
Average annual growth rates of bilateral trade with partner countries: 
Post-FTA period: 40.8%; 
U.S. exports and imports with world: U.S. exports; 
Average annual growth rates for U.S. trade for similar time periods as 
FTA: Pre-FTA period: 5.6%; 
Average annual growth rates for U.S. trade for similar time periods as 
FTA: Post-FTA period: 10.3%. 

Bilateral FTA partner country: Morocco (3-year average period): Imports 
from Morocco to United States; 
Average annual growth rates of bilateral trade with partner countries: 
Pre-FTA period: 4.0%; 
Average annual growth rates of bilateral trade with partner countries: 
Post-FTA period: 20.6%; 
U.S. exports and imports with world: U.S. imports; 
Average annual growth rates for U.S. trade for similar time periods as 
FTA: Pre-FTA period: 9.9%; 
Average annual growth rates for U.S. trade for similar time periods as 
FTA: Post-FTA period: 5.1%. 

Bilateral FTA partner country: Jordan (7-year average period): U.S. 
exports to Jordan; 
Average annual growth rates of bilateral trade with partner countries: 
Pre-FTA period: 1.6%; 
Average annual growth rates of bilateral trade with partner countries: 
Post-FTA period: 12.5%; 
U.S. exports and imports with world: U.S. exports; 
Average annual growth rates for U.S. trade for similar time periods as 
FTA: Pre-FTA period: 3.1%; 
Average annual growth rates for U.S. trade for similar time periods as 
FTA: Post-FTA period: 5.8%. 

Bilateral FTA partner country: Jordan (7-year average period): Imports 
from Jordan to United States; 
Average annual growth rates of bilateral trade with partner countries: 
Pre-FTA period: 52.9%; 
Average annual growth rates of bilateral trade with partner countries: 
Post-FTA period: 27.2%; 
U.S. exports and imports with world: U.S. imports; 
Average annual growth rates for U.S. trade for similar time periods as 
FTA: Pre-FTA period: 6.4%; 
Average annual growth rates for U.S. trade for similar time periods as 
FTA: Post-FTA period: 6.5%. 

Sources: GAO analysis using data from Commerce and ITC, years 1994 
through 2008. 

[End of table] 

Results of Overall Growth Rates for Trade with Partner Countries Pre- 
and Post-FTAs: 

Across partner countries, we found that post-FTA average annual growth 
rates for U.S. exports were all higher than pre-FTA growth rates, and 
for Singapore, Chile, and Morocco, average growth went from negative to 
positive. Also, except for Singapore, these growth rates with partner 
countries for U.S. exports were also higher than average annual growth 
rates of all U.S. exports during the same time periods. For the Chilean 
and Moroccan FTAs, the post-FTA annual growth rates for U.S. exports 
were considerably higher than the pre-FTA period growth rates, 
increasing from -9.1 percent to 32.6 percent, and from -4.5 percent to 
40.8 percent, respectively. The growth in U.S. exports to Jordan and 
Singapore were more modest, increasing to 12.5 percent and 8.6 percent, 
respectively. U.S. import growth rates for the four partner countries 
were larger or less negative in the post-FTA period than the pre-FTA 
period for Singapore, Chile, and Morocco, but less for Jordan. The 
result for Jordan, in which overall growth goes from 52.9 percent in 
the pre-FTA period to 27.2 percent in the post-FTA period, coincides 
with our analysis for the product categories where less than half of 
the top 25 U.S. import categories from for Jordan experienced growth in 
the post-FTA period (see appendix II for an analysis of pre-and post-
FTA growth rates of U.S. imports from Jordan by product category). 
However, this result is likely due to the fact that the QIZ program 
spurred such huge rates of growth prior to the Jordan FTA, especially 
in the apparel categories. However, the growth rates of U.S. imports 
from Jordan following the FTA and their value were quite sizeable also, 
but just not as large as pre-FTA levels. Notably, except for Singapore, 
the average annual growth rates of U.S. exports and imports with the 
partner countries were all higher in the post-FTA period than those for 
similar time periods for total U.S. exports and imports with the rest 
of the world. 

[End of section] 

Appendix VII: Comments from the Department of Labor: 

U.S. Department of Labor: 
Deputy under secretary for International Affairs: 
Washington, D.C. 20210: 

May 18, 2009: 

Dr. Loren Yager: 
Director, International Affairs and Trade: 
U.S. Government Accountability Office: 
Washington, D.C. 20548: 

Dear Dr. Yager: 

Thank you for the opportunity to review the draft GAO report, 
International Trade: Selected Free Trade Agreements Have Resulted in 
Commercial Benefits, but Progress on Labor and Environment Has Been 
Limited. One of the overall findings of your report--that provisions in 
these agreements designed to ensure that workers share in the benefits 
of trade has not been given the same attention as the commercial 
obligations--is an important concern of mine and of the Department of 
Labor. 

While the United States has focused resources and attention on ensuring 
that commitments made by our trading partners to open their markets are 
upheld, the same has not been true for the labor provisions of these 
agreements. In line with Administration priorities, the Department of 
Labor will be placing a new emphasis on ensuring that all aspects of 
our trade agreements-including the labor provisions-are fully respected 
and enforced. We will work with our trading partners to help bring the 
opportunities of trade to both their workers and ours. 

In order to reinvigorate the labor cooperation process and enforcement 
mechanisms envisioned in our free trade agreements, the President's 
Fiscal Year 2010 budget for the Department of Labor includes additional 
funds for staff and resources in the International Labor Affairs Bureau 
(ILAB). This additional support will allow ILAB to significantly 
improve its ability to monitor labor issues in FTA countries, provide a 
strengthened mechanism for enforcement of trade agreements, develop 
cooperative activities with FTA partners, and research facts relating 
to specific labor situations and submissions. This increase will allow 
ILAB to be more proactive in monitoring and addressing these issues, 
with the opportunity to work with FTA countries prior to labor 
incidents which warrant the filing of a submission. 

The Department of Labor looks forward to working towards building a 
trading system that respects the rights of workers and expands 
opportunities for all workers and their families. Our efforts to 
improve the administration and enforcement of our free trade agreements 
are an important component of this work. 

Sincerely, 

Signed by: 

Sandra Polaski: 
Deputy Under Secretary: 

[End of section] 

Appendix VIII: Comments from the Department of State: 

Note: GAO comments supplementing those in the report text appear at the 
end of this appendix. 

United States Department of State: 
Washington, D.C. 20520: 

MAY 18 2009: 

Ms. Jacquelyn Williams-Bridgers: 
Managing Director: 
International Affairs and Trade: 
Government Accountability Office: 
441 G Street, N.W. 
Washington, D.C. 20548-0001: 

Dear Ms. Williams-Bridgers: 

We appreciate the opportunity to review your draft report, 
"International Trade: Selected Free Trade Agreements Have Resulted in 
Commercial Benefits, but Progress on Labor and Environment Has Been 
Limited," GAO Job Code 320544. 

The enclosed Department of State comments are provided for 
incorporation with this letter as an appendix to the final report. 

If you have any questions concerning this response, please contact 
Steve Rhee, Labor and Environment Officer, Bureau of Economic, Energy 
and Business Affairs at (202) 647-4367. 

Sincerely, 

Signed by: 

James L. Millette: 

cc: 
GAO - Kim Frankena: 
EEB- David D. Nelson (Acting): 
State/OIG - Mark Duda: 

[End of letter] 

Department of State Comments on GAO Draft Report: 

International Trade: Selected FTAs Have Resulted in Commercial 
Benefits, but Progress and U.S. Oversight on Labor and Environment Have 
Been Limited (GAO-09-439 GAO Code 320544): 

Thank you for the opportunity to respond to the GAO draft report 
"International Trade: Selected FTAs Have Resulted in Commercial 
Benefits, but Progress and U.S. Oversight on Labor and Environment Have 
Been Limited." 

Overall comments: 

We believe that the meaningful structural and institutional reforms 
enacted as a result of the FTA process in Morocco, Chile and Jordan are 
significant achievements not adequately recognized by the study. 
Establishment of environmental ministries (Jordan) and overhaul of 
Jordan's environmental and Morocco's labor codes represent significant 
enhancements for environmental and labor protection regimes. Chile is 
in the process of creating an environmental ministry. The study 
undervalues these accomplishments. The real question for this study 
should be whether the free trade agreements led to significant 
improvements in labor and environmental standards. We believe that this 
answer to this question is an unqualified yes. [See comment 1] 

The report should highlight how the FTAs and environmental and labor 
cooperation mechanisms have made environmental and labor protection a 
higher priority in these countries. While perhaps not yet perfect, 
these countries have made significant progress in strengthening and 
enforcing their laws that they likely would not have made without the 
FTAs and cooperation mechanisms. 

State believes that the report should distinguish more clearly between 
FTA environment/labor chapters and environmental/labor cooperation 
mechanisms. When a government signs an FTA, it agrees to comply with 
the provisions in the labor and environment chapters. Once the FTA 
enters into force, it has a duty to comply with those provisions 
whether or not the U.S. provides support through cooperation. If one of 
our FTA partner governments is not meeting these obligations, then the 
U.S. has the discretion to decide whether to address the noncompliance 
through mechanisms in the FTA. [See comment 2] 

General Labor and Environment Comments: 

Labor and environmental cooperation with our FTA partner governments is 
(and has been) a high priority for the State Department. State 
negotiates labor and environmental cooperation mechanisms, negotiates 
work plans for implementing the mechanisms, coordinates activities that 
occur under the work plans, and attempts to find funding sources for 
implementing activities or facilitate activities that require little 
funding but still have significant impacts. State continually strives 
to improve effective coordination with our partners in the interagency 
and internationally and to achieve measurable results on the ground. 

However, State has been severely hampered by the lack of human and 
financial resources to undertake this work. For example, until now, 
Congress has not dedicated any funding for FTA-related environmental 
cooperation with Chile, Jordan, Morocco, or Singapore. Where Congress 
has provided funds for FTA implementation, as with CAFTA-DR, our 
technical cooperation has been robust, and we have had significant 
impact for a relatively small amount of investment. In the face of very 
limited funding, State has tried to identify other funding sources and 
connect those sources to other agencies for implementation. State has 
also tried to be creative by holding DVCs, undertaking exchanges, and 
pursuing other relatively low-cost capacity building with our partners. 
In 2009, consistent with the President's budget request, Congress did 
appropriate $3 million for FTA-related environmental cooperation (non-
CAFTA-DR). So, we anticipate more robust cooperation with some of these 
countries. 

State has had a measure of success on these fronts. For example, State 
connected the Environmental Protection Agency (EPA) and the Department 
of Interior (DOI) with the Middle East Partnership Initiative (MEPI) 
program. As a result, EPA and DOI conducted environmental projects in 
Morocco with MEPI funding. State also has worked collaboratively with 
USAID Jordan to fund activities in the Jordan - U.S. Work Program. 
State has held low cost DVCs with officials from Singapore and Chile on 
energy efficiency in government buildings and clean laboratories, as 
well as between US and Chilean labor experts. State has worked with the 
Department of Labor to identify alternate sources of funding to 
implement labor programs, such as an OAS-funded exchange on labor 
hotlines between US and Chilean experts. 

In general, the report seems to set an unrealistic standard for 
determining successful implementation of Environment Chapters of FTAs 
and Environmental Cooperation Mechanisms. The report describes that 
three of the four partners reported ongoing challenges to enforcing 
environmental laws. However, every government has challenges enforcing 
its environmental laws. In State's view, the standard for whether an 
FTA or Environmental Cooperation Mechanism (ECM) is successful should 
not be whether, after three, five, or even 10 years, a government no 
longer has "challenges" in enforcing its environmental laws. [See 
comment 3] 

Rather, the relevant question is whether that government has made 
substantial progress in improving its laws and enforcement since the 
FTA and ECM entered into force. Some of these countries started with 
almost no environmental infrastructure. The FTAs and ECMs have 
increased environmental protection as a priority in these countries, 
but they cannot be expected to solve all environmental problems in a 
few years. At least now, environmental protection is a focus of 
national attention, as evidenced by the report's descriptions of the 
many improvements that the governments have made to their environmental 
laws and enforcement. 

Similarly, while State appreciates the attention to detail regarding 
the evolution of the labor situations in the four FTA partner 
countries, several statements are incorrect or unclear, and some 
mischaracterize the underlying situation. One example is an unfortunate 
oversimplification of the process by which the interagency helped 
develop and support the Better Work Jordan Program. 

On the other hand, environmental cooperation generally is geared toward 
promoting conservation and protection of the environment, such as the 
prevention of pollution and the degradation of natural resources and 
ecosystems in support of sustainable development. With our FTA 
partners, the U.S. works to strengthen their environmental institutions 
and laws, improve enforcement, and provide opportunities for civil 
society engagement in environmental decision-making and enforcement. 

In the end, however, even if we provide a partner government a 
significant amount of support through labor and environment 
cooperation, it is still up to that government to ensure that it is 
meeting its FTA obligations. We continually stress this with our 
trading partners. 

Jordan and Environmental Issues Comments: 

The report understates the progress Jordan has made regarding 
environmental protection. Since the FTA entered into force and we 
issued our Joint Statement on Environmental Technical Cooperation, 
Jordan has made tremendous strides to strengthen its environmental 
institutions and improve environmental enforcement. Jordan has, among 
other things, created an Environment Ministry with responsibility for 
all environmental protection matters in Jordan and established the 
Royal Rangers (formerly the Environmental Rangers) to enforce 
environmental laws and regulations in the areas of pollution and 
natural resources. The U.S. Government provided Jordan assistance to 
accomplish these things. Now, EPA is training the Rangers to conduct 
investigations of environmental crimes. In October 2008, EPA hosted a 
very successful study tour of the United States' Environmental 
Enforcement and Compliance System for officials from Jordan's Ministry 
of Environment, the Royal Rangers, and the Royal Society for the 
Conservation of Nature. The Department of Interior is working with the 
Royal Society for the Conservation of Nature and other key partners to 
strengthen their ability to meet obligations in the Convention on 
International Trade in Endangered Species of Wild Flora and Fauna 
(CITES) and improve visitor services in protected areas. USAID is 
implementing a broad spectrum of environmental projects, including on 
water conservation, waste and waste water management, and biodiversity 
conservation. [See comment 4] 

Chile and Environmental Issues Comments: 

Chile deserves much credit for progress it has made in strengthening 
its environmental institutions and encouraging public participation in 
environmental decision-making. Chile has an environment minister and is 
in the process of changing its national environmental authority into a 
full Environment Ministry. Chile also recently sought input and views 
from environmental groups when developing its national strategies and 
other initiatives, such as the launch of its national climate change 
action plan. The report states that the United States missed an 
opportunity to use the FTA to cooperate with Chile to address problems 
in its salmon and forestry industries because U.S. agencies did not 
engage with Chile. However, USDA and FDA have conducted activities 
related to salmon and the 2009-2010 US Embassy Work Plan includes 
forestry projects. Moreover, State organized a major meeting in 
Washington, D.C. on U.S.-Chile parks cooperation in fall 2008. 

The GAO seems to confuse the Environmental Affairs Council (EAC) with 
the Joint Commission on Environmental Cooperation (JCEC). Although 
there are project areas listed in the FTA environment chapter, the EAC 
does not have its own work plan. In its 2007-2008 Work Plan, the JCEC, 
included the following Activities: "Building Capacity for Assuring 
Compliance with Environmental Laws, and Regulations," "Reducing 
Environmental Impacts of Mining," "Improving Agricultural Practices," 
"Building Capacity for Protected Area Management," "Marine Protected 
Areas," and "Marine Science and Fisheries." If funding becomes 
available, State hopes to pursue activities in these areas. 

Singapore and Environmental Issues Comments: 

As the report notes, Singapore has an excellent record of environmental 
protection. State has nevertheless pursued environmental cooperation 
with Singapore in a number of areas. For example, Singapore is a large 
transshipment point. We have worked with Singapore to try and curb 
illegal logging and wildlife trade. The United States and Singapore 
cohosted a workshop from October 30 to November 2, 2007, in Singapore 
to train regional port inspectors and customs authorities to identify 
ramin wood. This training program reflects an important commitment by 
key government agencies from the United States, Singapore, Malaysia, 
Indonesia, and China to work together in an effort to curb illegal 
traffic in this endangered species of timber. TRAFFIC Southeast Asia 
conducted a training workshop on Wildlife Trade Regulation from July 29-
30, 2008 for checkpoints and CITES officers, which featured basic 
techniques in handling live specimens of wild fauna and case studies of 
the illegal freshwater turtle and tortoise trade in Southeast Asia and 
the python trade in Singapore. During a study tour in September 2008, 
two officials from the Singapore Agri-Food and Veterinary Authority 
(AVA)--the CITES Management Authority of Singapore--consulted with the 
Fish and Wildlife Service and various other U.S. agencies that 
implement CITES and exchanged information on law enforcement methods 
and CITES implementation practices and systems. 

Morocco and Environmental Issues Comments: 

Morocco also has made strides in its efforts to preserve and protect 
the environment since the 2006 entry-into-force of the FTA. State 
believes, however, that the report undervalues the cooperative 
environmental work undertaken with Morocco. EPA has completed at least 
eight trainings. EPA also is working to help Morocco implement a 
program for enforcing environmental rules and regulations in its 
textile sector, as well as to assist Morocco in developing industry 
partnerships that will address compliance assistance and pollution 
prevention issues. The Department of Interior worked with USAID to 
develop sustainable tourism in three regions of Morocco, promoting 
environmental conservation and generating income for rural communities. 
The U.S. Trade and Development Agency awarded a grant to a Moroccan 
agency for managing the detritus and waste water from olive oil 
factories. The grantee will partner with a U.S. company to do a 
feasibility study for a treatment plant in the Sebou River basin. 
NOAA's National Ocean Service will implement a UNEP/National Plan of 
Action project to update the baseline data needed for science-based 
decision making in protecting the ecosystems in three of Morocco's 
protected areas. This project should also help develop integrated 
watershed management for these regions. The United States was able to 
undertake these activities even though there has been no dedicated 
funding for environmental cooperation with Morocco. 

State also appreciates and welcomes Moroccan officials' desire 
reflected in the report-to step up our environmental cooperation 
program. Provided funding becomes available, State looks forward to 
deepening and strengthening our program in the near future. 

GAO Recommendation: 

We recommend that the Secretary of State direct the Bureau of Oceans, 
Environment and Science (OES) to develop a structured approach to 
manage and monitor the implementation of environmental cooperation 
mechanisms and projects. This should include information such as number 
and nature of activities, source and amount of funding, and impact 
evaluations. Furthermore, OES should use this information to publicly 
report to Congress assessing the outcomes of projects as well as their 
compliance with applicable U.S. trade policy goals. 

The State Department appreciates GAO's recommendation to develop a 
structured approach to manage and monitor the implementation of 
environmental cooperation mechanisms and projects. 

State is not entirely clear what GAO means by "structured approach." 
State currently employs a number of approaches to manage and monitor 
implementation of environmental cooperation mechanisms and projects. 
State regularly holds interagency meetings to receive updates on Work 
Plan and project implementation, as well as high level meetings to 
discuss projects and progress in meeting objectives in the 
environmental cooperation mechanisms. State also maintains a database 
in an effort to keep track of activities in each country. Without 
dedicated funding, however, it has proven to be very difficult to track 
funding associated with our cooperative environmental work. In many 
cases, State has used very little or no foreign assistance funds to 
undertake activities. For example, State has facilitated digital video 
conferences (DVCs) with environment officials from Chile and the United 
States that required a significant amount of staff time. It is 
difficult to put a dollar value on these kinds of activities, yet 
failing to take them into account would undervalue the amount that 
State contributes to environmental cooperation. [See comment 5] 

Moreover, State continually strives to improve the management and 
monitoring of this work. For example, in the Central America Free Trade 
Agreement (CAFTA-DR) region, State has provided a grant to the 
Organization of American States to independently monitor and evaluate 
our work there. State has not had funding to do anything similar with 
other countries such as Jordan, Chile, Singapore, or Morocco. But, 
again, we believe that robust monitoring and evaluation of this work is 
very important, and we are always looking for ways to improve. 

State also welcomes the recommendation of publicly reporting to 
Congress on assessing the outcomes of projects and overall success of 
environmental cooperation. 

The following are GAO's comments on the Departments of State's letter 
dated May 19, 2009. 

GAO Comments: 

1. GAO agrees that some important progress in strengthening 
environmental and labor protection has been achieved in FTA partners, 
notably in putting in place structures and institutions that had been 
absent in some countries, such as the Ministry of Environment in 
Jordan. As a result, we changed the title of our report from "Selected 
FTAs Resulted in Commercial Benefits, but Progress on Labor and the 
Environment Has Been Limited" to "Four FTAs GAO Reviewed Resulted in 
Commercial Benefits, but Challenges on Labor the Environment Remain." 
We reviewed the body to ensure these positive steps and U.S. officials' 
perspectives on progress are given due weight. For example, we added 
new information on environmental cooperation projects such as 
Interior's help to Jordan on CITES and noted Chile's nascent steps to 
allow civil society input into environmental decision making. In 
addition we recognize that the existence of FTA obligations may have 
been a factor in influencing partner action. The labor law improvements 
Morocco enacted had been long-pending prior to the FTA. The QIZ program 
does not require adherence to core labor standards, but the Jordan FTA 
requires partners to strive to ensure that labor principles and 
internationally recognized labor rights set forth in the FTA are 
recognized and protected by domestic law. Under the Jordan FTA, parties 
also commit to not fail to enforce its laws, through a sustained or 
recurring course of action or inaction, in a manner affecting trade 
between the parties. 

2. GAO has revised the report to more clearly distinguish between FTA 
environmental chapters and environmental cooperation mechanisms and 
recognize the partners' are obligated by their FTA commitments. 

3. State suggests GAO's report sets an unrealistic standard for 
determining success on the environment. GAO disagrees. 

First, GAO's standards for judging FTA success in producing 
environmental progress are grounded in TPA goals and FTA requirements, 
and ensuing, related commitments or agreed goals on environmental 
cooperation. For example a principal negotiating objective under TPA is 
to strengthen the capacity of United States trading partners to protect 
the environment through the promotion of sustainable development. An 
FTA requirement on the environment call for parties to "strive to 
ensure" or "ensure" that their laws provide for high levels of 
environmental protection and to continue to improve those laws as well 
as to "not fail to effectively enforce its environmental laws, through 
a sustained or recurring course of action or inaction, in a manner 
affecting trade between the parties." As State notes, some of these are 
FTA requirements are quite broad. 

Second, GAO's judgments are based on the evidence made available to it 
about post-FTA developments and their significance. While the evidence 
we gathered has certain limitations, it nonetheless is authoritative 
and sufficient in the sense that it truly represents what can and 
cannot be said about FTA partners' "progress to date." In terms of 
evidence, GAO appreciates State's call for us to "determine whether 
there has been substantial progress by partners in improving 
environmental laws and enforcement." Indeed we had hoped to do just 
that. Unfortunately, the information made available to us by U.S. 
agencies about partners' laws and enforcement did not permit such an 
evaluation by GAO. As noted in the report, a baseline assessment of the 
partners' laws and enforcement is not included in any depth in the 
environmental review prepared by USTR. Though some partners reportedly 
did prepare them, agencies produced no such documents in response to 
our request for background on partner environmental regimes. Our 
interviews with EPA indicated that they may informally review or 
comment on partners' environmental regimes, but that no template or 
check list of what a strong environmental regime should include is 
used. EPA officials rather stressed that a lot depended on the 
country's legal context and its institutional and technical starting 
point. Moreover, State, USTR, and EPA told us they do not routinely 
monitor or report on changes in partners' environmental regimes. These 
agencies' responses to our document requests bore this out and did not 
surface much information. 

Absent agreed or available baseline documentation and ongoing 
monitoring reports, GAO undertook efforts to identify on its own legal 
and institutional changes that had occurred in conjunction with or 
after the FTA's entry into effect, as well as FTA-related cooperative 
projects. This was done by searching secondary sources of foreign laws 
and soliciting documentation from U.S. agencies such as State and Labor 
in Washington, and U.S. Embassies abroad during fieldwork. However, we 
did not independently assess or evaluate the foreign laws. We sought to 
compare the project-related information to agreed plans and priorities, 
but this often proved difficult to match in practice. In the case of 
labor, there were no articulated priorities or plans, though there 
usually were project evaluations. In the case of the environment, there 
were agreed priorities and plans, but their general nature made it 
difficult to match projects, determine their significance, or assess 
the extent to which they satisfied expectations. The particulars of 
what a project involved in terms of funding or activities conducted 
often did not exist, nor were project evaluations available. 

We also solicited partners' and U.S. officials' own assessment of this 
progress and the significance of their remaining challenges. U.S. 
officials' for example noted that due to the directional and 
aspirational nature of FTA commitments, they seek to "do no harm" and 
"do good works" and pointed to visible signs of improvement in certain 
partners, notably Jordan. We supplemented this information from 
official sources on partner developments versus expectations with 
feedback from selected experts and environmental stakeholders. For 
example, we spoke with an expert at the NAFTA Environmental Commission 
involved in a 10-year retrospective on progress under that cooperative 
arrangement, with ECLAC and ILO officials in Chile, with the chair and 
several liaisons to the Trade and Environment Policy Advisory 
Committee, and with in-country environmental groups identified and 
arranged by our State Embassy control officers. We relied on, report, 
and attribute the information we were able to gather. We have expanded 
the discussion of these sources and their limitations in the scope and 
methodology sections of the report. 

Third, GAO took steps to assure a fair and balanced assessment of the 
extent of progress. On environment, for example, U.S. and partner 
government officials both told GAO that the FTAs were not intended to 
resolve all environmental problems and we now highlight this in the 
report. GAO had already noted in the background that differences in 
country context and the length of time FTAs have been in effect likely 
are important factors in the extent of observable progress. We 
reiterate this now in the conclusion. While the evidence we obtained 
led GAO to conclude that there has been some progress to date in 
improving partners' capacity to protect the environment, we do not 
suggest that FTAs fix all of the partners' environmental problems in a 
few years. GAO also includes information provided by agency officials 
intended to place these four FTAs in the broader context of progress 
over time and with more experience and resources. 

4. State highlights, by partner, examples of environmental progress. We 
have supplemented somewhat our treatment of these developments in the 
report. 

5. GAO has expanded its description of the gaps and clarified its 
recommendation for a "more structured approach" in response to State's 
request for a better explanation of what is missing and would be 
helpful. 

[End of section] 

Appendix IX: Comments from the Office of the United States Trade 
Representative: 

Note: GAO comments supplementing those in the report text appear at the 
end of this appendix. 

Executive Office Of The President: 
Office Of The United States Trade Representative: 
Washington, DC 20508: 

June 9, 2009: 

Dr. Loren Yager: 
Director, International Affairs and Trade: 
U.S. Government Accountability Office: 
Washington, D.C. 20548 

Dear Dr. Yager: 

We appreciate the opportunity to review and comment on the draft of the 
General Accountability Office's (GAO) report, International Trade: Four 
FTAs GAO Reviewed Resulted in Commercial Benefits, but Challenges on 
Labor and Environment Remain (Report). The Office of the U.S Trade 
Representative (USTR) appreciates the GAO's recognition that each of 
the four free trade agreements (FTAs) that the GAO examined produced 
commercial benefits at home and in the partner country. We are 
confident that we can continue to build on the record of reaping 
commercial benefits from all of our FTAs, and ensuring that our FTAs 
also provide, fully consistent with their terms, for protection of core 
labor standards for workers and enhanced protection of the environment. 

USTR is reviewing our current FTAs and formulating new policies on 
implementing, monitoring and enforcing our agreements. The 
Congressional-Executive Agreement of May 2007, which added key 
commitments on labor standards and environmental protections to our 
recent FTAs, is a touchstone for future work. Ensuring that all 
provisions of our FTAs, including labor standards and environmental 
protections, are fully implemented and enforced is a priority as we go 
forward for USTR and other agencies. 

USTR's work in recent months with Peru to address concerns related to 
environmental protection and Panama on labor standards issues 
demonstrates the Obama Administration's commitment to address 
environmental protection and labor issues vigorously and proactively. 
In the case of Peru, USTR and other agencies have been engaged 
continually over the past two years with the Government of Peru on 
implementation of our FTA, including the Forrest Sector Annex to the 
Agreement. Last month, President Obama established an interagency 
committee with responsibility for overseeing the implementation of that 
Annex. Moreover, the United States and Peru have met under the 
Environmental Cooperation Agreement and are developing a work plan and 
proposed projects. With regard to Panama, USTR and other agencies have 
been working to address concerns expressed about implementation of core 
labor standards. That work has already resulted in the Government of 
Panama issuing three Decrees to address important aspects of these 
labor issues. 

While we agree that we need to ensure that each of our FTAs benefits 
Americans and achieves fully the labor and environment goals that each 
sets out, the GAO staff's reporting on and analysis of what agencies 
have done on FTA labor standards and environmental protection issues 
and what agencies are called on to do gives, in some respects, an 
inaccurate picture of the situation. This inaccurate depiction may 
result in misunderstanding of or confusion about future work and 
cooperative efforts with our FTA partners on labor standards and 
protection of the environment. This failure to focus on actions that 
are required under our FTAs and the Trade Act of 2002 (2002 Act) can 
give the impression that FTA obligations or the requirements of the 
2002 Act are not being met. This lack of precision also applies to the 
Report's description of our FTA partners' actions and the challenges 
they face on labor standards and improving environmental protection. 
Further, the Report's analysis often ignores a key element of the 
commitments on labor standards and environmental protection--that an 
FTA partner not "fail to effectively enforce its [environmental]/ 
[labor] laws, through a sustained or recurring course of action or 
inaction, in a manner affecting trade between the Parties." [See 
comment 1] 

We recognize that more can be done on monitoring and enforcing the 
labor and environment provisions of our FTAs. Going forward, the Report 
will be useful in evaluating and prioritizing resource needs, as well 
as in the event we identify additional resource needs for monitoring 
and enforcement of our FTAs, in particular with regard to those 
provisions relating to labor standards and environmental protections. 

This Administration is working to ensure that our FTAs benefit 
Americans through improved conditions for trade that expand 
opportunities for workers and their families, farmers, ranchers, and 
businesses, improved implementation of core labor standards, and 
enhanced environmental protections. We hope that we can have a common 
understanding of the guidance and direction that Congress has provided 
and those that this Administration will set. 

Sincerely, 

Signed by: 

Timothy M. Keif: 
General Counsel: 

The following are GAO's comments on the Office of the United States 
Trade Representative's letter dated June 9, 2009. 

GAO Comments: 

1. USTR said in some instances GAO had portrayed an inaccurate and 
potentially misleading picture of U.S. agency responsibilities, 
partner's actions, and outstanding challenges. In response, GAO made 
several technical corrections and ensured criteria were cited. In the 
revisions we made, we also sought to make clearer distinctions between 
requirements for U.S. agencies under TPA, FTA chapters, and associated 
cooperation mechanism agreements, versus more general expectations for 
U.S. agencies based on USTR's overall responsibilities for the 
operation of the U.S. trade agreements program, leading and guiding 
U.S. trade policy, and monitoring and enforcing trade agreements. We 
acknowledge that evaluation of the progress attained was based, in 
part, on interviews with responsible foreign and U.S. government 
officials and selected private sector interests and experts. USTR also 
indicated that GAO should have given more prominence to the FTA 
commitment that an FTA partner not fail to enforce its environmental 
and labor laws through a sustained or recurring course of action or 
inaction, in a manner affecting trade between the parties (USTR's 
underlining for emphasis retained). GAO already distinguishes between 
this binding FTA obligation and other, more "aspirational"commitments. 
However, we believe that by definition all of the FTA commitments on 
labor and the environment are trade-related, because they are contained 
in a trade agreement, and thus appropriate for inclusion within the 
scope of our review of progress attained as result or since the entry 
into force of these FTAs. Moreover, some FTA commitments and FTA 
cooperative goals are broad or generally applicable, rather than being 
limited to traded sectors. 

In each of the four FTAs and associated annexes we reviewed, partners 
recognize that cooperation provides enhanced opportunities to improve 
labor standards and strive to ensure their laws provide for high levels 
of environmental protection. Moreover, in contesting the Labor Advisory 
Committee's criticisms of the Chile and Singapore FTAs, we note that 
USTR itself stated that FTA labor provisions "create a forum to in 
which disputes regarding any labor-related matter of concern may be 
raised" and "create cooperative mechanisms to improve worker 
rights."[Footnote 95] USTR added that "the U.S. Department of Labor had 
already embarked upon a cooperative program with Chile to improve the 
administration of its labor laws and enhance labor justice." Finally, 
while GAO relied on the information available to document partner 
progress on labor, we reviewed the report to eliminate references to 
lack of protections for workers in non-traded sectors.[Footnote 96] GAO 
notes that some of the FTA-related cooperative plans and projects 
address labor and environmental matters that are more general in 
nature, versus being strictly trade-related. For example, one of the 
agreed areas of focus for cooperation in the U.S.-Chile FTA is 
increasing the use of cleaner fuels, and one of the associated 
environmental cooperation projects State documented in Chile pertains 
to diesel bus emissions in Santiago. We continue to include this among 
the FTA-related progress reported. 

[End of section] 

Appendix X: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Loren Yager, (202) 512-4347 or yagerl@gao.gov: 

Staff Acknowledgments: 

In addition to the individual named above, Kim Frankena, Assistant 
Director; Venecia Kenah, Analyst-in-Charge; Ann Baker; Kenneth Bombara; 
Barbara El Osta; Francisco Enriquez; Leyla Kazaz; Karen Deans; Etana 
Finkler; and Grace Lui contributed to this report. Expert advice was 
provided by Martin DeAlteriis, Mike Hix, and Revae Moran. 

[End of section] 

Footnotes: 

[1] Trade Act of 2002, Pub. L. No. 107-210, Title XXI, 116 Stat. 933, 
993. 

[2] See GAO, International Trade: Further Improvements Needed to Handle 
Growing Workload for Monitoring and Enforcing Trade Agreements, 
[hyperlink, http://www.gao.gov/products/GAO-05-537] (June 30, 2005); 
GAO, International Trade: Strategy Needed to Better Monitor and Enforce 
Trade Agreements, [hyperlink, 
http://www.gao.gov/products/GAO/NSIAD-00-76] (Mar. 14, 2000); GAO, 
International Trade: Intensifying Free Trade Negotiating Agenda Calls 
for Better Allocation of Staff and Resources, [hyperlink, 
http://www.gao.gov/products/GAO-04-233] (Jan. 12, 2004); and GAO, 
International Trade: An Analysis of Free Trade Agreements and Private 
Sector Consultations under Trade Promotion Authority, [hyperlink, 
http://www.gao.gov/products/GAO-08-59] (Nov. 7, 2007). 

[3] For the purposes of this report, we use the term "environmental 
cooperation agreements" to refer to the U.S.-Jordan Joint Statement on 
Environmental Technical Cooperation, Washington, Oct. 24, 2000; the 
Environmental Cooperation Agreement between the Government of the 
United States of America and the Government of Chile, Santiago, June 
17, 2003; the Memorandum of Intent between the Republic of Singapore 
and the United States of America on Cooperation in Environmental 
Matters, Washington, June 13, 2003; Morocco's Joint Statement on 
Environmental Cooperation, Rabat, June 28, 2004; and the Memorandum of 
Intent between the Republic of Singapore and the United States of 
America on Cooperation in Environmental Matters. 

[4] Pub. L. No. 107-210. TPA is authority periodically given by 
Congress to the President. It establishes conditions and procedures 
under which the President can submit legislation approving and 
implementing trade agreements such as FTAs that Congress can approve or 
disapprove but cannot amend or filibuster. Previously known as "fast 
track" negotiating authority, it was in effect from 1975 to 1994 and is 
considered critical to congressional passage of FTAs and global trade 
agreements. For a further discussion of Congress' decision to launch a 
reciprocal trade agreements program in 1934 and to enact "fast track" 
in 1974 and periodically thereafter, despite its fundamental authority 
under the Constitution for regulating international trade, see 
Committee on Ways and Means, U.S. House of Representatives, Overview 
and Compilation of U.S. Trade Statutes, iv-v. 

[5] According to USTR, the United States had the following FTAs in 
effect in 2008: Israel, Canada, Mexico, Jordan, Chile, Singapore, 
Australia, Morocco, the Dominican Republic, El Salvador, Guatemala, 
Honduras, Nicaragua, and Bahrain. Three of these entered into force 
prior to 2001 (Israel, Canada, and Mexico). President Bush proclaimed 
the entry into force of FTAs with Costa Rica, Peru, and Oman effective 
February 1, 2009, in the closing months of his administration. 

[6] Those with Colombia, Panama, and Korea. 

[7] See [hyperlink, http://www.gao.gov/products/GAO-08-59]. 

[8] A bipartisan trade deal reached between Congress and the executive 
branch in May 2007 resulted in a new trade policy template that created 
a more detailed delineation (beyond TPA) of FTA provisions on labor and 
the environment, as well as clarifications intended to assure proper 
balance between commercial and other societal goals in the areas of 
intellectual property, investment, government procurement, and port 
services. For example, FTA partners are to maintain in their law and 
practice five basic internationally recognized labor principles, and 
the FTAs incorporate specified multilateral environmental agreements. 
FTA obligations on labor and environment also became fully enforceable 
on par with commercial provisions. This new guidance was applied to the 
Peru, Colombia, Panama, and Korea FTAs; Peru has since been approved 
and has entered into effect. 

[9] After the parties entered into the U.S.-Jordan FTA, the parties 
entered into the United States-Jordan Joint Statement on Environmental 
Technical Cooperation which created a Joint Forum on Environmental 
Technical Cooperation to broaden and deepen effective cooperation on 
technical environmental issues. After the parties entered into the U.S.-
Chile FTA, the parties entered into the Agreement Between the 
Government of the United States of America and the Government of the 
Republic of Chile on Environmental Cooperation to establish a framework 
for cooperation between the Parties to promote the conservation and 
protection of the environment, the prevention of pollution and 
degradation of natural resources and ecosystems, and the rational use 
of natural resources, in support of sustainable development. After the 
parties entered into the U.S.-Singapore FTA, the parties entered into 
the Memorandum of Intent between the Republic of Singapore and the 
United States of America on Cooperation in Environmental Matters to 
identify environmental issues of mutual interest to the two 
governments, and to establish a mechanism through which the two 
governments can pursue cooperative efforts in those areas. After the 
parties entered into the U.S.-Morocco FTA, the parties entered into the 
U.S.-Morocco Joint Statement on Environmental Cooperation which 
established a Working Group on Environmental Cooperation to broaden and 
deepen effective cooperation on environmental issues. 

[10] Ongoing reporting on the Dominican Republic-Central America Free 
Trade Agreement was required as part of its implementing legislation. 
See Dominican Republic-Central America-United States Free Trade 
Agreement Implementation Act, Pub. L. No. 109-53, §403, 119 Stat. 462, 
496 (2005). 

[11] Generally, the trade agreements program includes all activities 
consisting of, or related to, the negotiation or administration of 
international agreements that primarily concern trade and that are 
concluded pursuant to the authority vested in the President by the 
Constitution, 19 U.S.C. 1351, the Trade Expansion Act of 1962, and the 
Trade Act of 1974, as amended. 

[12] Statement of Warren Maruyama, General Counsel, Office of the 
United States Trade Representative before the Senate Finance Committee, 
May 22, 2008. 

[13] See, for example, [hyperlink, 
http://www.gao.gov/products/GAO-05-537], [hyperlink, 
http://www.gao.gov/products/GAO/NSIAD-00-76], especially 15-16 and 
appendix II, and GAO, International Trade: Improvements Needed to Track 
and Archive Trade Agreements, GAO NSIAD-00-24 (Dec. 14, 1999). 

[14] See 19 U.S.C. § 3808 and Notice of Redelegation of Authority and 
Further Assignment of Functions, 67 Fed. Reg. 71,606 (Dec. 2, 2002). 

[15] Among other things, the office serves as a point of contact with 
agencies of the U.S. government, other FTA parties, the public, 
governmental groups, business representatives, labor organizations, and 
other nongovernmental organizations. 

[16] Unlike post TPA agreements, however, the Jordan FTA does not 
include an investment chapter due to the preexistence of a Bilateral 
Investment Treaty with Jordan. 

[17] This tariff rate represents the Permanent Normal Trade Relations 
rate (referred to as the Most-Favored Nation [MFN] rate in other 
countries) to all countries at that time and does not include any 
preferences programs. 

[18] For example, for products entering the United States from Chile, 
the only significant duties were on agricultural products and food; 
most manufacturing products had tariffs that averaged below 2 percent. 

[19] Given the number of factors that affected trade between the United 
States and these nations, we did not attempt to isolate the effects of 
FTAs. Instead, we analyzed trends in descriptive trade and investment 
data and provided statistical and graphic summaries of the changes in 
trade before and after the FTAs. 

[20] Studies referenced are: ITC, U.S.-Morocco Free Trade Agreement: 
Potential Economywide and Selected Sectoral Effects (Washington, D.C.: 
ITC Pub. No. 3704, June 2004); ITC, U.S.-Chile Free Trade Agreement: 
Potential Economywide and Selected Sectoral Effects (Washington, D.C.: 
ITC Pub. No. 3605, June 2003); U.S.-Singapore Free Trade Agreement: 
Potential Economywide and Selected Sectoral Effects (Washington, D.C.: 
ITC Pub. No. 3603, June 2003); ITC, Economic Impact on the United 
States of a U.S.-Jordan Free Trade Agreement (Washington, D.C.: ITC 
Pub. No. 3340, September 2000). 

[21] For a discussion of how different studies on trade agreement 
effects compare and differ, see ITC, "The Effects of Fast-Track Trade 
Agreements on the U.S. Economy," USITC International Economic Review, 
USITC Pub. 3638, September/October 2003. 

[22] For example, since the Singapore FTA was implemented in 2004, we 
calculated an average growth rate of bilateral trade for a pre-FTA 
period of 5 years before and 5 years after implementation. For 
comparison, we also calculated the average annual growth rate of U.S. 
trade with the world for the same periods--5 years before 2004 and 5 
years after. We calculated the same periods for the Chile FTA; for the 
Morocco FTA, 3 years before and 3 years after; and 7 years before and 7 
after for the Jordan FTA. 

[23] 19 U.S.C. § 2112 note. Under the United States-Israel Free Trade 
Area Implementation Act of 1985, a qualifying industrial zone is an 
area that "(1) encompasses portions of the territory of Israel and 
Jordan or Israel and Egypt; (2) has been designated by local 
authorities as an enclave where merchandise may enter without payment 
of duty or excise taxes; and (3) has been specified by the President as 
a qualifying industrial zone." In relation to the QIZs, for an article 
to receive an elimination or modification of duties it must be: (1) 
wholly the growth, product, or manufacture of the West Bank, the Gaza 
Strip, or a qualifying industrial zone or is a new or different article 
of commerce that has been grown, produced, or manufactured in the West 
Bank, the Gaza Strip, or a qualifying industrial zone; (2) imported 
directly from the West Bank, the Gaza Strip, Israel, or a qualifying 
industrial zone; and (3) the sum of the cost or value of the materials 
produced in the West Bank, the Gaza Strip, Israel, or a qualifying 
industrial zone, plus the direct costs of processing operations 
performed in the West Bank, the Gaza Strip, Israel, or a qualifying 
industrial zone is not less than 35 percent of the appraised value of 
the product at the time it is entered into the United States. 

[24] The countries that make up the Mercosur regional trade agreement 
include Brazil, Argentina, Uruguay, Paraguay, and Venezuela; Chile, 
Bolivia, Columbia, Ecuador, and Peru are associate members. 

[25] Using ITC data for the top 25 export and import product categories 
by value of the United States and the partner countries, we subtracted 
annual average pre-FTA growth rates from post-FTA growth rates for the 
same number of years before and after the agreements. We then ranked 
the differences in growth between the pre and post-FTA periods in 
descending order to determine which categories grew the most since the 
FTAs came into force. 

[26] In this analysis, U.S. import product categories from both Jordan 
and Morocco had greater post-FTA growth rates in 40 percent of their 
top 25 product categories. For Singapore and Chile, 64 and 52 percent 
of product categories, respectively, had higher annual average rates of 
growth after the FTAs came into force. 

[27] Recently revised BEA data show that 62 percent of the total U.S. 
stock of FDI in Singapore is in holding companies, and total financial- 
related FDI (including banking and finance) is about 70 percent. About 
17 percent of U.S. FDI is in manufacturing, and computers and 
electronics constitute 60 percent of manufacturing. 

[28] Of the $193 billion in U.S. affiliate sales, $182 billion was in 
goods, and over $9.3 billion was in services. Compared with the pre-FTA 
period, sales of goods grew 123 percent, and services grew almost 48 
percent. 

[29] BEA data on sales by MOFAs of U.S. multinational corporations is 
not available for Jordan and Morocco. 

[30] While Jordan does not maintain official detailed statistics of 
FDI, aggregate inflows of registered capital tracked by the Central 
Bank indicate that the main source countries for foreign investment are 
Middle Eastern (Iraq, Kuwait, United Arab Emirates, Saudi Arabia, 
Egypt, and Bahrain) or European (Denmark, Belgium, and the United 
Kingdom). 

[31] "Special 301" (as added by Section 1303 of Omnibus Trade and 
Competitiveness Act of 1988, Pub. L. No. 100-418, to the Trade Act of 
1974 (19 U.S.C. §2242) is designed to enhance the United States' 
ability to negotiate improvements in foreign intellectual property 
regimes. USTR is required to conduct an annual review to identify 
foreign countries that deny "adequate and effective" protection of IPR 
or "fair and equitable market access" to U.S. persons relying upon IPR 
protection. Countries may be placed on "priority watch" or "watch" 
lists if their intellectual property laws or enforcement practices are 
of major concern to the United States. 

[32] Cumulation provisions are provisions within a trade agreement that 
allow for the import of inputs from "third countries" in other regions 
or trade agreements to count toward a country's content rule of its 
rules of origin. Trade agreements with cumulation provisions are 
considered to be more flexible than those without them because a 
country can potentially source inputs from multiple countries. See, 
Paul Brenton, "Rules of Origin in Free Trade Agreements" (Washington, 
D.C.: The World Bank Group, International Trade Department, Trade Note 
4, May 29, 2003). 

[33] Concerning the issue with the Moroccan trade statistical 
discrepancies, the two countries are having ongoing consultations among 
participants from the U.S. Census and USTR, and the Moroccan Office des 
Changes (Foreign Exchange Office) to resolve these issues. U.S. 
officials explained that, after an examination of this issue by both 
countries, it was found that Moroccan statistics had failed to fully 
account for exports sent to the United States via third countries which 
resulted in U.S. import statistics showing a higher volume of imports 
from Morocco than Moroccan statistics show as being exported to the 
United States. Concerning partner countries meeting U.S. standards, 
including sanitary and phytosanitary standards, U.S. officials 
commented that it often takes many years for the Animal and Plant 
Health Inspection Service (APHIS) of the U.S. Department of 
Agriculture, to certify products. For Moroccan tomatoes, we were told 
that APHIS has published a draft regulation, which is the first step in 
the process. 

[34] During the negotiations for the U.S.-Singapore FTA, USTR announced 
an "integrated sourcing initiative" in which information technology 
products, manufactured on two Indonesian islands off the Singapore 
coast and by a number of other Association of Southeast Asian Nations 
countries in the region and shipped from Singapore, would be considered 
to be of Singapore origin. The initiative was limited to information 
technology products (100 or more types), which do not involve a 
sensitive sector in the U.S, and would receive tariff-free treatment. 
This initiative was expected to be a boon to the economy, as 
electronics is a major industrial output sector for Singapore. 
Subsequently, during congressional deliberations over the FTA, 
provisions of the integrated sourcing initiative were modified. 

[35] The assessment involved visits to 70 of 111 garment factories 
operating in the QIZs at that time; of these, 63 employed migrant 
workers. 

[36] Ministry officials said subcontracting is a widespread practice in 
Chile that enables firms to employ workers through temporary contracts, 
often for substantially lower wages and with less safety protection 
than direct employees who work alongside them. 

[37] 19 U.S.C. § 3802(c)(8). 

[38] 19 U.S.C. § 3802(c)(7). 

[39] See Chile FTA Annex 18.5, para. 4, Singapore FTA Annex 17A, para. 
3, and Morocco FTA Annex 16-A, para. 4. 

[40] Of the $3.072 million, State's Middle East Partnership Initiative 
provided nearly $100,000 to add a gender equity component to ILAB's 
labor relations project. 

[41] Under the Chile FTA, this body is called the Free Trade 
Commission. 

[42] Under the Singapore and Morocco FTAs, the Joint Committee is 
required to meet annually unless the parties agree otherwise. 

[43] The Chile FTA required the establishment of a similar entity, the 
Labor Affairs Council. Under the Singapore and Morocco FTAs, the Joint 
Committees could choose to establish labor affairs subcommittees. The 
Jordan FTA did not mention such an entity. 

[44] However, as the most recently implemented FTA among these four, 
Morocco has only had one Joint Committee meeting, in March 2008. 

[45] The revised public submission process faced its first test through 
this submission--a complaint filed by the AFL-CIO and six Guatemalan 
labor unions in April 2008 concerning alleged FTA labor violations in 
Guatemala, including the murders of two union leaders. ILAB reviewed 
the submission and issued its findings and recommendations in January 
2009, in which it confirmed a number of violations but declined to 
recommend consultations, stating that the Guatemalan government had 
cooperated with ILAB's review and made efforts to address some of the 
issues raised. ILAB recommended a series of corrective actions by 
Guatemala and committed to reassess the situation within 6 months. 

[46] The labor chapter of the U.S.-Chile FTA details the establishment 
of a Labor Affairs Council to oversee implementation of and review 
progress under the labor chapter. The council is required to meet 
within the first year after the date of entry into force of the FTA and 
thereafter as the Council considers necessary. Chile FTA, Art. 18.4. 

[47] Government of Chile, Direccion del Trabajo, Division de Estudios, 
"Los Derechos Laborales del Tratado de Libre Comercio Chile-Estados 
Unidos en la Industria Forestal y en la Industria del Salmón," 
Cuadernos de Investigacion 32, December 2007. [hyperlink, 
http://www.dt.gob.cl/documentacion/1612/article-95495.html], accessed 
on Jan. 27, 2009. GAO had informal translations of key sections of the 
report done for this engagement. 

[48] Under the U.S.-Singapore FTA, the Joint Committee is required to 
meet annually unless the parties agree otherwise. 

[49] Under the U.S.-Chile FTA, the parties established an Environmental 
Affairs Council to discuss the implementation of, and progress under, 
the environment chapter. The parties also agreed to undertake 
cooperative environmental activities including by negotiating a United 
States-Chile Environmental Cooperation Agreement (ECA). Under the ECA, 
the parties established a Joint Commission for Environmental 
Cooperation to establish and develop programs of work resulting from 
the ECA which takes into account the views and recommendations of the 
Environment Affairs Council established by the FTA. 

[50] Jordan FTA, Article 5.2; Singapore FTA, Article 18.1; Chile FTA, 
Article 19.1; Morocco FTA, Article 17.1. 

[51] Jordan FTA, Article 5.2; Singapore FTA, Article 18.1; Chile FTA, 
Article 19.1; Morocco FTA, Article 17.1. 

[52] The environmental review of the Jordan FTA was required under 
Executive Order 13141, and the environmental reviews of the Singapore, 
Chile, and Morocco FTAs were required by TPA section 2102(c)(4). 

[53] TPA section 2102(c)(4), codified at 19 U.S.C. § 3802(c)(4), 
specifies that the required environmental reviews are to be consistent 
with Executive Order 13141 and its relevant guidelines. 

[54] GAO's understanding is that in practice, the TPA required 
environmental review is based, in part, on economic models that predict 
trade-agreement impacts, versus oriented towards how non-FTA induced 
trade growth generally might influence production and potentially 
affect the environment. Yet, in Jordan's case, it had a very small 
apparel sector at the time the FTA was modeled by the ITC. Situations 
such as salmon with Chile show that post-FTA trade growth has occurred 
in sectors with relatively low pre-FTA barriers. Ongoing monitoring of 
such trade is not routine. 

[55] 19 U.S.C. § 3808. USTR redelegated this function to OMB. 67 Fed. 
Reg. 71,606 (Dec. 2, 2002). 

[56] 19 U.S.C. § 3808. 

[57] OES made a request for the first time to obtain funds to implement 
cooperation activities in fiscal year 2009. 

[58] Under 19 U.S.C. § 3808, an implementation and enforcement plan is 
required to be submitted for each FTA when it is submitted to Congress 
for approval. The plan shall include: (1) border personnel requirements 
- a description of additional personnel required at border entry 
points, including a list of additional customs and agricultural 
inspectors, (2) agency staffing requirements - a description of 
additional personnel required by federal agencies responsible for 
monitoring and implementing the trade agreement, (3) customs 
infrastructure requirements - a description of additional equipment and 
facilities needed by the United States Customs Service, (4) impact on 
state and local governments - a description of the impact the trade 
agreement will have on state and local governments as a result of 
increases in trade, and (5) cost analysis - an analysis of the costs 
associated with each of the items listed in (1)-(4). 

[59] CITES stands for the Convention on International Trade in 
Endangered Species of Wild Flora and Fauna, a multilateral 
environmental agreement. 

[60] In 1974, Congress mandated creation of a private sector advisory 
system to ensure that representatives from private business and other 
groups with a stake in trade policy could provide input as negotiations 
unfolded. See Trade Act of 1974, Pub. L. No. 93-618, 88 Stat. 1996, 
codified at 19 U.S.C. § 2155. A three-tier structure of committees 
advises the President on overall U.S. trade policy, general policy 
areas, and technical aspects of trade agreements. GAO reviewed this 
structure in 2002, see GAO, International Trade: Advisory Committee 
System Should Be Updated to Better Serve U.S. Policy Needs. GAO-02-876 
(Washington, D.C.: Sept. 24, 2002). Note that in obtaining comment and 
perspective, members were asked to do so in their individual capacity, 
rather than in their capacity as advisors. The views GAO obtained may 
not necessarily reflect the views of either other participants in the 
committee system, or of those outside the system. 

[61] See the U.S. ITC Interactive Tariff and Trade DataWeb. [hyperlink 
http://dataweb.usitc.gov/]. 

[62] For Jordan, in both the overall and the product category analysis, 
we did not consider the year 2001 as "post-FTA" period, as the Jordan 
FTA came into force in December of 2001. Also, for Jordan, for the 
"overall" comparison of growth rates, we used data from 1994/1995 to 
2000/2001 for the pre-FTA period and 2001/2002 to 2007/2008 for the 
post-period or 7 years for each period. For the product category 
comparison, since this was more data intensive and we used a different 
methodology, we drew only the "current" data from the ITC data web 
which starts in 1996. Therefore, for this analysis, for the pre-FTA 
categories for Jordan, we used data from 1996 through 2001 (6 years) 
and 2002 through 2008 (7 years) for the post-FTA period. 

[63] For U.S. exports to these FTA partners, the top 25 end use 
categories represented 75 percent for Jordan, 80 percent for Chile, 83 
percent for Singapore, and 84 percent for Morocco of the total value of 
U.S. exports to these partner countries in 2008. For U.S. imports from 
these partner countries, the top 25 product categories accounted for 
99.5 percent for Jordan, 97 percent for Chile, 94 percent for 
Singapore, and 97 percent for Morocco of the total value of imports in 
2008. 

[64] The results of the growth rate analysis by product category for 
each FTA partner country are in appendixes II through V. 

[65] [hyperlink, http://www.bea.gov]. 

[65] [hyperlink, http://unstats.un.org/unsd/servicetrade/default.aspx]. 

[66] [hyperlink, http://www.gao.gov/products/GAO-08-59]. 

[67] The Jordan FTA states this commitment as "strive to ensure that 
such labor principles and the internationally recognized labor rights 
set forth in paragraph 6 are recognized and protected by domestic law." 

[68] 19 U.S.C. 2112 note. 

[70] 19 U.S.C. 2112 note. Under the United States-Israel Free Trade 
Area Implementation Act of 1985, a qualifying industrial zone is an 
area that "(1) encompasses portions of the territory of Israel and 
Jordan or Israel and Egypt; (2) has been designated by local 
authorities as an enclave where merchandise may enter without payment 
of duty or excise taxes; and (3) has been specified by the President as 
a qualifying industrial zone." In relation to the QIZs, for an article 
to receive an elimination or modification of duties it must be: (1) 
wholly the growth, product, or manufacture of the West Bank, the Gaza 
Strip, or a qualifying industrial zone or is a new or different article 
of commerce that has been grown, produced, or manufactured in the West 
Bank, the Gaza Strip, or a qualifying industrial zone; (2) imported 
directly from the West Bank, the Gaza Strip, Israel, or a qualifying 
industrial zone; and (3) the sum of the cost or value of the materials 
produced in the West Bank, the Gaza Strip, Israel, or a qualifying 
industrial zone, plus the direct costs of processing operations 
performed in the West Bank, the Gaza Strip, Israel, or a qualifying 
industrial zone is not less than 35 percent of the appraised value of 
the product at the time it is entered into the United States. 

[71] This tariff rate represents the Most-Favored Nation (MFN) rate to 
all countries at that time and does not include any preferences 
programs. 

[72] We also performed a similar analysis grouping apparel and 
nonapparel categories separately using the same pre-and post-FTA time 
periods. Here we found that the "apparel" results all had greater 
annual average rates of growth in the pre-FTA period, while a majority 
of the "nonapparel" categories, 52 percent, had greater growth rates in 
the post-FTA period. We believe that this result is due to the 
influence of the QIZs, which came about in the pre-FTA period and 
affected mostly the apparel industries. Unlike the apparel categories, 
the textile category, however, had greater growth in the post-FTA 
period. 

[73] Note that the available data do not tell us the U.S. share of 
these service exports and imports. 

[74] Note that BEA data on sales by affiliates of U.S. multinational 
corporations (MNC) (majority-owned funding affiliates, MOFA) is not 
available for Jordan. 

[75] Oxfam, "All Costs, No Benefits: How TRIPS-Plus Intellectual 
Property Rules in the US-Jordan FTA Affect Access to Medicines," Oxfam 
Briefing Paper, March 2007. 

[76] For evidence of this, PhRMA cites a paper by Michael Ryan, 
"Intellectual Property Reforms, Pharmaceuticals, and the Health 
Competitiveness in Jordan: Misunderstanding and Misinformation from 
Oxfam International," Creative & Innovative Economy Center, George 
Washington University Law Center (Washington, D.C.: 2007). 

[77] For more information on IPR and international trade policy and 
public health policy, see GAO, Intellectual Property: U.S. Trade Policy 
Guidance on WTO Declaration on Access to Medicines May Need 
Clarification, [hyperlink, http://www.gao.gov/products/GAO-07-1198] 
(Sept. 28, 2007). 

[78] For more detailed description of the Singapore FTA and other 
information see: The United States-Singapore Free Trade Agreement: 
Message from the President of the United States transmitting a draft of 
proposed legislation and supporting documents to implement the United 
States-Singapore Free Trade Agreement (FTA), pursuant to 19 U.S.C. 
3805(a)(1)(A) and (B) 108th Congress, 1st Session, House Document 108- 
100, July 16, 2003; Dick K. Nanto, The U.S.-Singapore Free Trade 
Agreement: Effects After Three Years (Washington, D.C.: Congressional 
Research Service, RL34315, Jan. 7, 2008); Dick K. Nanto, The U.S.- 
Singapore Free Trade Agreement (Washington, D.C.: Congressional 
Research Service, RL31789, June 15, 2004). 

[79] The comprehensive inclusion of all service sectors, unless 
otherwise specified in the list of reservations, under the specific 
disciplines of the services chapter and the general disciplines of the 
trade agreement. A "negative list" approach requires that 
discriminatory measures affecting all included sectors be liberalized 
unless specific measures are set out in the list of reservations. This 
contrasts with the "positive list" approach, which involves the 
voluntary inclusion of a designated number of sectors in a national 
schedule indicating what type of access and what type of treatment for 
each sector and for each mode of supply a country is prepared to 
contractually offer service suppliers from other countries. [hyperlink, 
http://www.sice.oas.org/Dictionary/SV_e.asp]. 

[80] The Association of Southeast Asian Nations or ASEAN was 
established in 1967 in Bangkok by the five original member countries, 
Indonesia, Malaysia, Philippines, Singapore, and Thailand. Brunei 
Darussalam joined on 1984, Vietnam on 1995, Lao PDR and Myanmar on 
1997, and Cambodia on 1999. Launched in 1992, the ASEAN Free Trade Area 
aims to promote the region's competitive advantage as a single 
production unit. The elimination of tariff and nontariff barriers among 
member countries is expected to promote greater economic efficiency, 
productivity, and competitiveness. 

[81] A holding company is a corporation that limits its business to the 
ownership of stock in and the supervision of management of other 
corporations. 

[82] Organization of Cooperation and Development, OECD Reviews of 
Labour Markets and Social Policy - Chile, 2009. 

[83] In 2007, the World Bank estimated Chile's Gini coefficient, an 
index of income inequality, was at 54.9 percent, which is high by Latin 
American and world standards. The OECD estimated that the Gini 
coefficient for Chile was 53 percent during the mid-2000s, while the 
OECD average is at 0.31. The values of the Gini coefficient range 
between 0, "perfect equality" (everyone has the same income) and 1, 
which represents "perfect inequality" (or all income goes to one 
person). 

[84] Argentina is a member of Mercosur, a regional trade agreement 
including Brazil, Argentina, Paraguay, Uruguay, and Venezuela that 
Chile entered into as an associate member in 1996. 

[85] Central Bank of Chile. 

[86] A negative position for the stock of FDI seems odd but can occur 
due to a number of valuation adjustments to historical-cost positions, 
as discussed in Jeffrey H. Lowe, "Direct Investment, 2004-2007: 
Detailed Historical-Cost Positions and Related Capital and Income 
Flows," Survey of Current Business (2008) 38. 

[87] More specifically, this was due to concerns about inadequate 
protection against unfair commercial use for data generated to obtain 
marketing approval; insufficient coordination between Chile's health 
and patent authorities to prevent the issuance of marketing approvals 
for patent-infringing pharmaceutical products (commonly known as 
"linkage"); continuing copyright piracy and trademark counterfeiting; 
and the need for greater efforts to meet standards set out in the TRIPS 
Agreement of the U.S.-Chile FTA and other international agreements. 

[88] The main objective of a bilateral tax treaty is to avoid double 
taxation. Countries enter into bilateral income tax treaties to 
allocate taxing rights on cross-border income between the source and 
residence state, thus avoiding excessive taxation that could otherwise 
result if both countries applied the full force of domestic law. In 
addition, tax treaties mitigate differences between two tax systems by 
coordinating definitions and practices of taxation, and establish 
methods of cooperation in tax administration. 

[89] Again, note that the available data do not tell us the U.S. share 
of these service exports and imports. 

[90] Note that BEA data on sales by affiliates of U.S. MNCs (MOFAs) are 
not available for Morocco. 

[91] Secondary source data (AmCham) indicate that France constitutes 75 
percent of FDI in Morocco, followed by Spain with 5 percent, while the 
United States has less than 1 percent (apparently consistent with BEA 
data). AmCham indicates that almost 60 percent of inward FDI is in 
telecommunications, and almost 12 percent is in tourism. 

[92] The American Farm Bureau also noted that while these trends were 
promising, they were likely aided by recent global trade trends, such 
as the increases in global commodity prices. 

[93] Concerning the issue with the Moroccan trade statistical 
discrepancies, the two countries are having ongoing consultations among 
participants from the U.S. Census and USTR, and the Moroccan Office des 
Changes (Foreign Exchange Office) to resolve these issues. U.S. 
officials explained that after an examination of this issue by both 
countries, it was found that Moroccan statistics had failed to fully 
account for exports sent to the United States via third countries which 
resulted in U.S. import statistics showing a higher volume of imports 
from Morocco than Moroccan statistics show as being exported to the 
United States. Concerning partner countries meeting U.S. standards, 
including sanitary and phytosanitary standards, U.S. officials 
commented that it often takes many years for the Animal and Plant 
Health Inspection Service (APHIS) of the U.S. Department of 
Agriculture, to certify products. For Moroccan tomatoes, we were told 
that APHIS has published a draft regulation, which is the first step in 
the process. 

[94] Many other factors were also likely affecting trade in both the 
pre-and post-FTA periods, such as commodity price changes, exchange 
rates, and other bilateral and regional trade agreements. As well, FTA 
specific changes such as lowering tariff and nontariff barriers 
increase market access and provide gains from trade. 

[95] See Office of the United States Trade Representative, Response to 
the Labor Advisory Committee Report on the Proposed Chile and Singapore 
FTAs, pp. 2-3. 

[96] For example, State issues annual reports and human rights which 
include descriptions of whether trade partners' provide the 5 core ILO 
labor rights in law and practice and the International Trade Union 
Confederation regularly issues reports on countries' compliance with 
these core labor standards in conjunction with WTO Trade Policy 
Reviews. 

[97] Chile FTA, Annex 19.3, para. 1 (h). 

[End of section] 

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