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New Free Trade Agreements Cause Controversy

Published: 20 May 2015 01:05:40 PST

In mid-October, Congress passed three long-awaited free trade agreements—a bipartisan effort aimed at using foreign trade to drive America’s economic growth. With the addition of South Korea, Colombia and Panama in this deal, the United States now has free-trade agreements with 20 countries.

US Free Trade Agreements

The New York Times reported the passage of the trade deals has important foreign policy and political ramifications. The U.S. has now solidified relationships with strategic allies and President Obama claimed a victory for pushing through the first trade agreements to pass Congress since Democrats broke a decade of Republican control in 2007. Proponents also predicted that these free trade zones will reduce prices for American consumers and increase foreign sales of American goods and services. These two snap shots from PIERS show South Korea in particular has a great deal of import/export activity.

US Containerized imports from South Korea Panama ColombiaUS Containerized Exports to Sout Korea Panama Colombia

However, these moves have angered trade unions, which fear job losses to foreign competition, and economists project the overall benefit to the sluggish economy to be marginal.

Further, as PIERS sister company The Journal of Commerce (JOC) reported yesterday, the signing of the free trade agreements has actually caused a 65 percent increase in the Merchandise Processing Fee (MPF), a fee created in the early 1990s to cover Customs and Border Protection’s costs  for import entries. Critics say the fee has never been used for this purpose but instead has helped offset the costs of Medicare in the past. In this case, the fees are being used to cover the costs of the free trade agreement’s passage, the renewal of two other government programs—the Generalized System of Preferences (GSP) and Trade Adjustment Assistance (TAA).

After blindsiding importers with this increase, the industry has no choice but to cope with the new fee. The National Retail Federation’s international trade counsel, Eric Autor, told JOC that importers could reduce their costs by consolidating shipments. But that’s not always possible—a significant number of import entries fall below the new maximum, $140,000 in value (previously $230,000).

With PIERS, you can arm yourself with the right information to put these and other market shifts into perspective. Contact us today to have a PIERS expert provide an online demo.

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