Abstract: Trade agreements have a clear impact on Supply Chain security as they determine the countries with whom we trade. NAFTA and GATT are two important trade arrangements the U.S. has entered into.
Trade legislation plays an important role in Homeland Security, as it determines where products coming to the U.S. are coming from. Increasingly, trade boundaries between countries are being dissolved, as a greater number of trade agreements are put into place. Many of these agreements remove or lower tariffs and quotas that were once deterrents to international commerce. Two key legislative actions from the U.S. standpoint have been the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT), which established the World Trade Organization (WTO).
NAFTA became law on December 8, 1993. The U.S. trading partners affected by this law were Canada and Mexico. Initially, NAFTA removed non-tariff barriers to trade between the U.S. and Mexico. The earlier United States – Canada Free Trade Agreement Implementation Act of 1988 had already begun to liberalize trade with our northern neighbor. An additional aspect of NAFTA was the phasing-out of tariffs on other products over a 15-year window, creating the world’s largest Free Trade Zone (1). One of the measures put into place to protect Homeland Security while continuing the free flow of trade amongst NAFTA partners has been the Free and Secure Trade (FAST) program.
The U.S. was one of twenty-three founding members of GATT in 1948, in Havana, Cuba. GATT was initially a provisional measure to multilaterally govern international trade. For most of its existence, GATT served primarily to lower tariffs between member nations. On December 8, 1994, President Clinton signed GATT 1994 into law. This endorsement followed the ratification of the agreement by 124 member countries in April of that year (2). This established the World Trade Organization (WTO) as of January 1, 1995. One of the hallmarks of the WTO agreement is the removal of quotas in trade. As of January 1, 2005, remaining quotas established by the U.S. have been removed, further opening trade into and out of the country.
Other Legislative Actions
There are free trade agreements in place with countries other than Canada and Mexico though the scope of these arrangements may be more limited. Some other trading partners include: * Chile – As of January 1, 2004, 85% of two-way trade between the U.S. and Chile became duty free. Other non-tariff issues, such as intellectual property rights are part of this arrangement (3).* Israel – An agreement with Israel has been in place since 1985, making it the U.S.’ first free trade agreement (4). * Jordan – This arrangement is effective January 2001 and applies to bilateral trade between the U.S. and Jordan. Again, enforcement of intellectual property is a part of the agreement (5).
*Singapore – To increase trade and transparency of trade between the two nations, free trade was implemented with Singapore in January of 2004 (6).
*Australia – While not fully implemented yet, this removes tariffs on the majority of goods entering Australia (7).
Other Free Trade Agreements awaiting legislative approval include: Morocco, Bahrain and Dominican Republic-Central American (8).
Trade legislation is not restricted to determining tariffs and quotas with other nations. It can also dictate the nations that the U.S. will not participate in Normal Trade Relations (NTR) with. As a result of the conflict in the former Yugoslavian nation, Serbia was denied NTR status. Other nations, such as Libya, Iran and Iraq have NTR, but have had trade embargoes imposed against them (9).
(1) Lipton, Kathryn L. and Pollack, Susan L. Major Agricultural and Trade Legislation, 1933-1996.
(9) Normal Trade Relations (formerly known as Most Favored-Nation status – MFN (last update 4/23/04)